session 3 dimension of org structure
TRANSCRIPT
8/19/2019 Session 3 Dimension of Org Structure
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Dimensions Of OrganizationStructure
Lecture 3
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Session ObjectivesDescribe three components comprising
complexity
Compare functional with social specialization
Ientify bene!ts that accrue fromformalization
Describe the relationship betweencomplexity" formalization" an centralization
Ientify why organization might practiceecentralization
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Dimensions of OrganizationStructure
#$ Complexity
%$ &ormalization
3$ Centralization
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Complexity 'he egree of i(erentiation that exists
within an organization)orizontal Di(erentiation*
Consiers the egree of horizontalseparation between units
+ertical Di(erentiation*
,efers to the egree of epthSpatial Di(erentiation*
'he egree to which the location of anorganization-s facilities an personnel areisperse geographically
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)orizontal Di(erentiation
,efers to the egree of i(erentiation
between units base on the orientation ofmembers" the nature of tas. they perform"their eucation an training
'he larger number of i(erent occupations
with an organization that re/uirespecialize .nowlege an s.ills" the morecomplex the organization
0hy1
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)orizontal Di(erentiationDiverse orientations ma.e it more i2cult
for organizational members tocommunicate an more i2cult formanagement to coorinate their activities
Diversity increases the li.elihoo that they
will have i(erent goal emphasis" timeorientations" i(erent wor. vocabulary
'he most visible evience in organizationsof horizontal i(erentiation is
specialization an epartmentation
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otential con4icting objectives an priorities
resient
5ar.eting
&inance anaccounting
5anufacturing
,esponsibilities
DistributionChannelsCustomer
ServiceInventoryobsolescence
Communications anata processingCarrying inventory
rouction ansupplyalternatives
0are housing
Objectives
5oreinventory
Lessinventory&re/uent short
runs
Lower prouction
runs&ast orerprocessing
Cheaporerprocessing
&astDelivery
Lowest costrouting
&iel
warehousin
Less
warehousinlantwarehousing
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)orizontal Di(erentiation Specialization*
articular grouping of activities performe byan iniviual
It can be achieve through*
#$ &unctional Specialization or ivision of labor
6ob is bro.en own into simple repetitive tas.
%$ Social specialization*
Iniviual is specialize rather than their wor.
7professionals8
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)orizontal Di(erentiation ,easons for ivision of labor*
#$ hysical limitationsIn highly sophisticate an complex jobs" noone can perform all the tas.
%$ 9nowlege an s.ill limitations
3$ ,epresent proper usage resources an s.illslevel
:$ ;2ciency
a$ 'ime saving
b$ 'raining
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)orizontal Di(erentiation Departmentation*
'he way the specialists are groupe togetherDepartmentation is the way in whichorganizations typically coorinate activities thathave been horizontally i(erentiate
Departments coul be create on the basis of*
a$ Simple numbers
b$ &unctions
c$ rouct or service
$ Client
e$ <eography
f$ processes
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&unctionalDepartmentalization
Manager,
Engineering
Manager,
Manufacturing
Manager,
Human Resources
Manager,
Purchasing
Plant Manager
Manager,
Accounting
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rouct Departmentalization
Mass TransitDivision
Bombarier!Rota"#$ienna%
Manager,Retail Accounts
Recreational ProuctsDivision
&ogistic E'ui(mentDivision
)nustrial E'ui(mentDivision
Bombaier!Rota"#*uns+irchen%
Recreational an tilit-$ehicles .ector
Rail Proucts.ector
Bombarier, &t/
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<eographicalDepartmentalization
.ales Director,estern Region
.ales Director,.outhern Region
.ales Director,Eastern Region
$ice Presientfor .ales
.ales Director,Mi1estern Region
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rocess Departmentalization
.a1ing
De(artmentManager
Planing an
MillingDe(artmentManager
Assembling
De(artmentManager
&ac'uering a
.aningDe(artmentManager
inishingDe(artmentManager
Plant .u(erintenent
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)ns(ection
an.hi((ingDe(artment
Manager
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CustomerDepartmentalization
Manager,Retail Accounts
Directorof .ales
Manager,*overnment Accounts
Manager,holesale Accounts
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Discussion =uestionIs it possible for an organization to use all
the six methos of epartmentation$
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+ertical Di(erentiation,efers to the epth in structure
)ow oes vertical i(erentiation increasescomplexity1
'he more levels that exist between topmanagement an operatives" the greater the
potential of communication istortion" the morei2cult it is to coorinate the ecisions ofmanagerial personnel" the more i2cult for topmanagement to oversee the actions of
operatives
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+ertical Di(erentiationCan horizontal i(erentiation an vertical
i(erentiation be construe as inepenent of each
other1+ertical i(erentiation shoul be unerstoo as a
response to horizontal i(erentiation
,eason*
>s specialization expans" it becomes increasinglynecessary to coorinate tas.s$ Since" highi(erentiation that members will have a iversetraining an bac.groun" it may be i2cult for
iniviual units to see how their tas. !ts intogreater whole$ 'he result is a nee for increasecoorination" which shows itself in evelopment ofvertical integration
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+ertical i(erentiation Do organizations with same number of employees nee
to have same egree of vertical i(erentiation1
'he etermining factor is span of control Span of control*
De!nes the number of suborinates that a manager canirect e(ectively
a$ 0ie span*managers woul have large number of suborinatesreporting to them
b$ ?arrow span*
managers woul have less number of suborinatesreporting to them
0ier span of control leas to 4at organization structurewhereas narrow span woul lea to taller organization
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Contrasting Spans Of Control
#
%
3
:
@
A
B
O r g a n i z a
t i o n a l L e v e l
Members at Each &evel
.(an of 34(eratives 5 3,067Managers #levels 8!7% 5 8,97:
.(an of ;4(eratives 5 3,067Managers #levels 8!3% 5 :
#
:
#A
A:
%@A
#"%:
:"A
#
E
A:
@#%
:"A
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+ertical Di(erentiation >vantages of tall organizations*
#$ 'ighter controls%$ Fetter psychological career paths" better
promotion opportunities
Disavantages*
#$ Coorination an communications becomecomplicate
>vantages of &lat Organizations
#$ Shorter an simpler communication chain
Disavantages
#$ Loose controls
%$ ,euce promotion chances
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Spatial Di(erentiation 'he egree to which the location of an
organization-s o2ces" plants" an personnel areisperse geographically
Spatial i(erentiation can be thought as asextene imensions to horizontal an vertical
i(erentiationSpatial i(erentiation tells that even if
horizontal an vertical i(erentiation were toremain the across spatially separate units" the
physical separation itself woul increasecomplexity
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Discussion =uestion
>re three complexity measures interGcorrelate1
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0hy is complexity Important 'he more complex an organization" the greater the
nee for e(ective communication" coorination an
control evices 'he higher the complexity" the greater amount of
attention they must pay to ealing with problems ofcommunication" coorination" an control
Parao" )n the anal-sis of 4rgani<ation anal-sis5anagement-s ecision to increase i(erentiation ismae in the interest of economy an e2ciency$ 'heseecisions create cross pressure to a managerial
personnel to facilitate control" coorination" ancon4ict reuction$ So the economies that complexitycreates may be counterbalance by the increaseburen of .eeping the organization together
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Discussion =uestion
)ow might a manager-s job i(er in anorganization in low complexity comparewith his or her counterpart managing ahighly complex organization1
& li ti
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&ormalization 'he egree to which jobs within the organization are stanarize
In highly formalize jobs" the job incumbent has minimum amountof iscretion over what is to be one" an how he shoul o it$;mployees can be expecte always hanle the same input inexactly the same way" resulting in consistent an uniform output
In jobs with low formalization" employees behavior woul berelatively nonGprogramme by the organization$ Such jobs woul
o(er employees a great eal of freeom to exercise iscretion intheir wor.
Since employees behavior is inversely relate to the behavior thatis preprogramme by the organization" the greater thestanarization" the less input the employee has into how hisH her
wor. is to one$ Stanarization not only eliminates employees engaging in
alternative behaviors but also removes the nee for employees to
consier alternatives
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,ange of &ormalization
ns.ille jobs versus professional jobs
9in of wor. being performe 7 prouctionversus sales8
Level in the hierarchy of organization
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0hy is formalizationImportantStanarize behavior reuces variabilityStanarization promotes coorination
Stanarization o(er economiesH coste(ective
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'he J5a.e or FuyK Decision &ormalization can ta.e place on the job or o( the job
#$ On the job " the term externalize behavior is use$ It means
that formalization is external to the employee that is" the rules"proceures" an regulations governing the iniviual-s wor.activity are speci!cally e!ne" coi!e an enforce throughirect management supervision$ 'his characterize uns.illewor.ers$ It is also what is typically meant by formalization
%$ O( the job" creation of internalize behavior through socialspecialization$ Iniviual learn the values" norms" an expectebehavior patterns for the job an the organization of which they
will be a part$ 'his true in hiring professions
5anagement has two ecisions to ma.e
a$0hat egree of stanarization of behavior is esire
b$ 0ill the stanarization be mae J in houseK or JboughtK outsie
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'he J 5a.e or FuyK DecisionIn house variety is emphasize with uns.ille
wor.ers&or professionals !ne tuning will be re/uire
Direct on the job formalization anprofessionalization are basically substitutes for
each other 'he organization can either control employee
behavior either irectly or it can achieve inirectcontrol by hiring uly traine professionals
>s the level of professionalization increases inan organization" the level of formalizationecreases
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&ormalization 'echni/ues
Selection,ole ,e/uirements
,ules" proceures an policies
'raining,ituals
'he ,elationship Fet een
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'he ,elationship Fetween&ormalization an Complexity
)igh horizontal i(erentiation when achieve
through ivision of labor" typically means hiringuns.ille personnel to perform routine anrepetitive tas. tens to be associate with highegree of formalization to facilitate coorination
an control$ 0here high horizontali(erentiation is achieve by hiringprofessionals" formalization tens to be low
'he .ey to unerstaning the complexity M
formalization relationship is to focus on theegree of horizontal i(erentiation an the wayit is achieve
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Discussion =uestion
#$ ;mployee woul prefer high formalizationo you agree or isagree
%$ >n organization that is high in complexitywill be high in formalization$ Do you
agree or isagree
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Centralization 'he egree to which ecision ma.ing is
concentrate at a single point in theorganization
> high concentration implies highcentralization where as a low concentration
inicates low centralization orecentralization
Centralization is concerne with ispersionof authority to ma.e ecisions within the
organization" not geographic ispersion
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Centralization
Issues in Centralization*
#$ Do we loo. only at formal authority
%$ Can policies overrie ecentralization
3$ 0hat oes J concentration at a single point
mean1:$ Does information processing system that
closely monitors ecentralize ecisionsmaintain centralize control
@$ Does the control of information by lowerlevel members result in ecentralization ofwhat appears to be centralize
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Centralization Centralization can be escribe as the egree
to which the formal authority to ma.e
iscretionary choices is concentrate in aniniviual" unit" or level 7usually high inorganization8" thus permitting employees7 usually8 low in the organization minimuminput into their wor.
#$ Centralization is concerne only with formalstructure" not the informal structure
%$ Loo.s at ecision iscretion$ 0here ecisionsare elegate ownwar but extensive
policies exist to constrain the iscretion oflower members" there is increasecentralization
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Centralization3$ Concentration at a single point can refer to
an iniviual" unit" or level" but the singlepoint implies at high level
:$ >n information processing system thatclosely monitors ecentralize ecisions
oes not maintain centralize ecisions@$ 'he control of information input is a form of
e facto ecentralization
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Situation
Informationinput
What can be
done
Interpretationand advice
What should
be done
choice
What is
intended
to be
done
Authorization
What is
authorized
to be done
Action
Execution
What is
actually
done
Organizational Decision Maing !rocess
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0hy is centralization Important,easons for Decentralization
>voiance of information overloa&ast response to changing conitions
Detaile input into ecision ma.ing process
;mployee motivation
'raining opportunity
,easons for Centralization
Choosing action consistent with the best interest
of the organizationSome activities are one more e(ectively
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,elationship of centralization"complexity an formalizationCentralization an complexity*
Inverse relationship with centralization ancomplexity
Increase in number of occupational specialties
means an increase in the expertise an abilityto ma.e ecisions$ 'he more employees haveunergone professional training the more li.elythey woul participate in ecision ma.ing
'he greater the centralization of ecisionma.ing" the less professional training is li.elyto be exhibite by employees
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Centralization an&ormalization,elationship is ambiguous
)igh formalization can be foun couple witheither centralize or ecentralize structure
If employees are preominantly uns.ille onecan expect high formalization an centralizeauthority
0ith professional employees one might preictlow formalization an ecentralization
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Discussion =uestion
Nou are evaluating an organization-sstructure$ Nou !n prouction activitiesare highly formalize" whereas level offormalization of researchGesign is low$Similarly" legal ecisions are highlycentralize" but mar.eting ecisions areecentralize$ )ow o you arrive at
organization wie measures oforganization structure if units within theorganization are not homogenous1