copyright © 2013 pearson education, inc., publishing as prentice hall13-1 managing behavior in...

Copyright © 2013 Pearson Education, Inc., publishing as Prentice Hall 13-1

Managing Behavior In Organizations

Sixth Edition

Jerald Greenberg

Designing Effective Organizations

Chapter Thirteen

Copyright © 2013 Pearson Education, Inc., publishing as Prentice Hall13-3


Learning Objectives DEFINE organizational structure and DISTINGUISH among aspects

of organizational structure that are typically represented in an organization chart

DISTINGUISH among the three types of departmentalization: functional organizations, product organizations, and matrix organizations

DEFINE organizational design and DISTINGUISH between classical and neoclassical approaches to organizational design

DESCRIBE the contingency approach to organizational design

IDENTIFY emerging approaches to organizational design

DISTINGUISH between conglomerates and strategic alliances as two types of interorganizational designs



Three Good Reasons Why You Should Care About . . . Organizational Design1. To understand how organizations

function, you must know about their structural elements - their basic building blocks.

2. The design of organizations has profound effects on how they function.

3. The way organizations are designed has been changing in recent years and promises to continue changing in the years ahead.



Organizational structure - the formal configuration between individuals and groups with respect to the allocation of tasks, responsibilities, and authority within organizations.

Organization charts show the connections between various clusters of functions of which an organization is composed.

Organizational Structure



Hierarchy of authority describes who reports to whom in an organization–Downsizing – eliminating entire

levels of organizational structure

Hierarchy of Authority



Span of control ― number of people formally required to report to each individual manager– Tall ― organizations that have many levels– Flat ― organizations with few levels– Wide span of control ― responsibility for many

individual reports; organization has a flat hierarchy – Narrow span of control ― responsibility for few

individual reports; organization has a tall hierarchy

Span of Control



Division of labor ― tasks to be performed within an organization are divided into specialized jobs– The more specialized are jobs, the narrower

the range incumbents are required to perform

Division of Labor



Line vs. staff positions:– People in line positions have decision-

making power.– People in staff positions cannot make

decisions, but provide advice and recommendations to be used by the line managers.

Line versus Staff Positions



Centralization vs. decentralization– Decentralization is the process of delegating

power from higher to lower levels within organizations

– Centralization is the tendency for just a few powerful individuals or groups to hold most of the decision-making power

Decentralization



DecentralizationVarious benefits are associated with low decentralization (high centralization) and high decentralization (low centralization) within organizations.

Low Decentralization (High Centralization) • Eliminates the additional

responsibility not desired by people performing routine jobs

• Permits crucial decisions to be made by individuals who have the “big picture”

High Decentralization (Low Centralization) • Can eliminate levels of management,

making a leaner organization-one that is better quipped to make changes required to adapt to market demands and opportunities (see Chapter 14).

• Promotes greater opportunities for decision to be made by people closest to problems



Departmentalization - the way in which an organization is broken up into coherent units.

Departmentalization



A departmentalizes functional organization individuals according to the functions they perform.

Most basic approach to departmentalization– As organizations grow in complexity, more

departments are added or deleted as the need arises

– Avoids duplication of effort and takes advantage of economies of scale

– Could cause narrow-mindedness and discourage innovation

Functional Organizations



A product organization departmentalizes individuals by creating self-contained divisions, each of which is responsible for everything to do with a certain product or group of products.– Drawbacks - loss of economies of scale

from the duplication of various departments within operating units

– Problems of coordination across product lines may arise

Product Organizations



A matrix organization combines the function and product forms of departmentalization– Used in complex and uncertain environments and

when there is a need for economies of scale in the use of internal resources.

– Employee is required to report to both a functional manager and a product manager (dual authority).

– Three kinds of bosses: Top leaderMatrix bossesTwo-boss managers

Matrix Organization



Degree of permanence – Permanent overlay – project teams are

kept going after a project is completed– Mature matrix both functional and product

lines are permanent and equally strong in the organization

– Temporary overlay - projects are crossed with functions on a short-term basis

Matrix Organization



Advantages and disadvantages:permit flexible use of human resourcesoffer an efficient means of responding

quickly to a changing, unstable environmentenhance communication among managerscreate frustration and stress as a result of

the dual reporting system

Matrix Organization

Copyright © 2013 Pearson Education, Inc., publishing as Prentice Hall13-1813-18

Organizational design refers to the process of coordinating the structural elements of organizations in the most appropriate manner

Classical organizational theory - effective organizations have a formal hierarchy, a clear set of rules, specialization of labor, highly routine tasks, and a highly impersonal working environment

Neoclassical organizational theory - effective organizations are designed with flat hierarchical structures and a high degree of decentralization

Organizational Design


The contingency approach - the best design for an organization depends on the nature of the environment in which the organization is operating

The external environment – the sum of all the forces impinging on an organization with which it must deal effectively if it is to survive– How stable the environment is (unchanging)– How unstable (turbulent) the environment is

The Contingency Approach


Organizational designs for stable versus turbulent conditions– Mechanistic organization ― people

perform specialized jobs, many rigid rules, authority vested in a few top ranking officials• Effective when environment is stable

– Organic organization ― jobs tend to be very general, few rules, decisions made by low-level employees• Effective when the environment is turbulent

Mechanistic versus Organic


Organizations are composed of five basic elements:1. Operating core – employees who perform the

basic work related to the product or service2. Strategic apex – top-level executives responsible

for running the entire organization3. Middle line – managers who transfer information

between the strategic apex and the operating core4. Technostructure – specialists responsible for

standardizing various aspects of the organization’s activities

5. Support staff – provide indirect support services to the organization

Mintzberg’s Framework


Five specific organizational designs:– Simple structure – power resides at the strategic

apex– Machine bureaucracy – power resides with the

technostructure– Professional bureaucracy – power is at the

operating core– Divisional structure – division managers have

control– Adhocracy – all members have authority to make

decisions that fall within their areas of specialization



GM Reorganization


Vertically integrated organizations - companies that own their own suppliers and/or their own customers who purchase their products– Difficult to balance their resources in the

most effective manner

Vertically Integrated Organization



Intraorganizational designs – the arrangements of units within one organization

Interorganizational designs – plans by which two or more organizations come together

Interorganizational Designs



Team-based organizations – autonomous work teams are organized in parallel fashion such that each performs many different steps in the work process– Design the organization around processes

instead of tasks

Team-Based Organizations



Boundaryless organizations - chains of command are eliminated, spans of control are unlimited, and rigid departments give way to empowered teams

Modular or networked organizations - non-core functions are outsourced to other companies while full strategic control over the core business is retained

Virtual organization - composed of a continually evolving network of companies (e.g., suppliers and customers) that are linked together to share skills, costs, and access to markets




Conglomerates are formed when organizations diversify by adding an entirely unrelated business or product to their organizational design

A strategic alliance - a type of organizational design in which two or more separate firms join their competitive capabilities to operate a specific business– Mutual service consortia– Joint ventures– Value-chain partnerships



Strategic alliances in the global economy arepopular between companies from developed countries and companies from transformingeconomies

– Market access– Exchange technology and manufacturing services– Financial incentives– Marketing benefits– Managerial benefits– Economic development

Alliances in the Global Economy