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Essentials of Contemporary Management, 3Ce Copyright (c) 2010 The McGraw-Hill Companies, Inc. All rights reserved.

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ManagingOrganizationalStructure

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1. Identify the factors that influence managers’ choice of an organizational structure.

2. Explain how managers group tasks into jobs that are motivating and satisfying for employees.

3. Explain how jobs are grouped into functional, divisional and networked structures.

4. Explain the ways that managers allocate authority and coordinate activities.

5. Explain the factors that managers consider when deciding on a formal or flexible overall structure.

Learning Objectives


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Designing Organizational StructureOrganizing: the process by which managers establish working relationships among employees to achieve goals.

Organizational Structure: formal system of task & reporting relationships showing how workers use resources to reach organizational goals.Organizational design: the process by which managers make specific choices resulting in a given organizational structure.

Successful organizational design depends on the organization’s unique situation.


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Job Design

Job Design: group tasks into specific jobs.Results in a division of labour between workers that is effective and efficient.

Job simplification: reduction of the tasks each worker performs.

Too much and boredom results.Job enlargement: increase tasks for a given job by changing the division of labour.Job enrichment: increases the degree of responsibility a worker has over a job.

can lead to increased worker involvement.


6-5Grouping Jobs into Functional and

Divisional and Networked StructuresOnce tasks are grouped into jobs, managers must decide how to group jobs together.

Function: people working together with similar skills, tools or techniques to perform their jobs.

Functional structure consists of departments such as marketing, production, and finance.

Workers can learn from others doing similar tasks.Easy for managers to monitor and evaluate workers.

Hard for one department to communicate with others.Managers can become preoccupied with their department and forget the firm.

Pros

Cons


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Divisional StructuresDivisional Structure: An organizational structure composed of separate business units which produce a specific kind of product for a specific kind of customer.

Divisions create smaller, manageable parts of a firm.Divisions develop a business-level strategy to compete.A division has marketing, finance, and other functions.Functional managers report to divisional managers who then

report to corporate management.Product structure: divisions created according to the type of product or service.Geographic structure: divisions based on the area of a country or world served.Market structure: divisions based on the types of customers served.


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Matrix & Product TeamsMatrix structure: managers group people by function and product teams simultaneously.

Results in a complex network of reporting relationships.Very flexible and can respond rapidly to change.Each employee has two bosses which can cause problems.

Functional manager gives different directions than product manager and employee cannot satisfy both.

Product Team Structure: no 2-way reporting and the members are permanently assigned to the team and empowered to bring a product to market.


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Figure 6.2A | Matrix Structure


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Figure 6.2B | Product Team Structure


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Strategic Alliances and Joint Venture

Strategic alliance: a formal agreement committing two or more firms to exchange resources to produce a good.Joint Venture A strategic alliance among two or more companiesNetwork Structure: a series of strategic alliance that organizations create with suppliers manufacturers and distributers to produce and market a product

Created between suppliers, manufacturers, and distributors.Toyota and Honda use many such alliances.

Network structures allow firms to bring resources together in a boundary-less organization.


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Allocating Authority and Coordinating Activities

To ensure sufficient coordination between functions, managers delegate authority.

Authority: the power vested in the manager to make decisions and use resources.

Hierarchy of Authority: describes the relative authority each manager has from top to bottom.

Span of Control: refers to the number of workers a manager manages.


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Tall & Flat OrganizationsTall structures have many levels of authority relative to the organization’s size.

As levels in the hierarchy increase, communication gets difficult.The extra levels result in more time being taken to implement decisions.Communications can also become garbled as it is repeated through the firm.

Flat structures have few levels but wide spans of control.

Results in quick communications but can lead to overworked managers.


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Figure 6.3A | Flat Organizational Hierarchy


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Figure 6.3B | Tall Organizational Hierarchy


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Minimum Chain of CommandManagers should carefully evaluate:

Do they have the right number of middle managers?Can the structure be altered to reduce levels?

Centralized vs. Decentralized

Decentralized operations puts more authority at lower levels and leads to flat organizations.

Workers must be able to reach decisions.Divisions and functions can begin to lose sight of organizational goals and focus only on their small area.


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Figure 6.4 | Mechanistic vs. Organic Organizations


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Figure 6.5 | Factors Affecting Organizational Structure

managing organizational structureaccess.nscc.ca/business/filestore/mgmt2020_1125/... · product...

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