Chapter nine:
Organizational Design and Structure
The essence of organizational design and
structure
Organizational structure clearly
defines how job tasks are formally divided, grouped, and coordinated. It
encompasses the arrangement and interrelationship of the various components and
positions within the organization.
Organizational structure comprises two
dimensions:
1.
Horizontal
Dimension: This dimension identifies departments, units, and divisions that
exist at the same level within the management hierarchy.
2.
Vertical
Dimension: refers to the authority relationships between superiors and
subordinates within the organization. It establishes the hierarchical structure
and the flow of decision-making and control.
Organizational design is the process of selecting, creating, or changing
the structure of an organization.
Ø It involves deliberate decisions and actions taken
by managers to align the structure with the organization's objectives and
requirements.
Managers design the
organization's structure to achieve various objectives, which may include:
1.
Creating a New
Institution
2.
Responding to
Change
3.
Integrating New
Elements
4.
Coordinating the
Components
5.
Encouraging
Flexibility
Element of the organizational structure
A.
Work Specialization (division of
labor) refers to the extent to which tasks within an
organization are divided and assigned to separate jobs.
Ø It involves breaking down an entire activity into
smaller and simpler tasks, with each task being completed by a separate
individual.
1. Benefits
of Increasing Work Specialization:
·
Greater work efficiency: Match
workers to jobs based on their skill levels and allowing them to gain expertise
through repetition.
·
Lower costs: Avoid
the need to pay for higher-level skills that are not required for the job.
·
Greater training efficiency: Easier
and less costly recruitment and training of workers for specific and repetitive
tasks.
·
Encourages specialized equipment: Increase
efficiency and productivity from work specialization can free up capital for
the development of specialized equipment.
2. Costs
of Increasing Work Specialization:
·
When work
specialization is taken to an extreme level, it may lead to negative
consequences such as boredom, fatigue, stress, low productivity, poor quality,
increased absenteeism, and high turnover.
3. Job
Enlargement:
·
In cases where
increased work specialization has resulted in decreased productivity,
organizations have found that adding new tasks or expanding job scopes can
increase productivity.
·
Job enlargement
involves adding more tasks, even to the point of complete work packages, to a
job's scope.
·
When workers
with interchangeable skills are organized into work teams, they often achieve
higher output and increased employee satisfaction.
B. Departmentalization: refers to the grouping of jobs based on a common
basis to facilitate coordination and achieve organizational goals. Here are
various bases of departmentalization:
1.
Functional: Jobs
are grouped based on the functions or activities they perform. This approach
brings together individuals with similar skills and orientations into
functional units.
Ø It promotes economies of scale and specialization
within each function.
2.
Product: Jobs
are organized around specific products or product lines. This allows for
increased accountability for product performance, as all activities related to
a particular product are under the supervision of a single manager or
department.
3.
Geography: Departments
are formed based on geographic locations or territories. This type of
departmentalization is useful when customers are dispersed over a wide
geographic area and have similar needs based on their location.
4.
Process: Each
department specializes in a specific phase or process of production. This form
of departmentalization is suitable when different production phases require
distinct skills and expertise, enabling homogeneous categorization of
activities.
5.
Customer: is
based on different types or groups of customers. The assumption is that
specialized departments for each customer group can better address their
specific problems and needs.
C.
Chain
of Command: represents the formal
line of authority within an organization, extending from the top management to
the lowest levels.
Ø It clarifies reporting relationships and establishes
a hierarchy of authority. Key aspects of the chain of command include:
1.
Authority: It
refers to the legitimate power associated with a managerial position to give
orders, make decisions, and expect compliance.
Ø The level of authority is typically aligned with the
responsibilities of the position.
2.
Unity of Command: This
principle suggests that each employee should have one direct supervisor to whom
they are accountable.
Ø It helps maintain a clear line of authority and
avoids conflicting demands or priorities given to workers.
Ø While this principle is not always strictly followed
in modern organizations, disregarding it can lead to challenges in coordination
and employee performance.
D.
Span of Control: refers
to the number of employees a manager is expected to effectively and efficiently
supervise or directly manage.
Ø It determines the number of levels and managers
within an organization. There are two types of spans of control:
1.
Wide/Large Span of Control: A wide span of control occurs when a manager
supervises a larger number of employees.
Ø This approach is cost-efficient as it reduces the
number of managerial layers and overhead costs.
Ø It also promotes faster decision-making, increased
flexibility, and closer proximity to customers.
Ø However, wider spans of control may reduce
managerial effectiveness and require employees to be more knowledgeable about
their jobs to compensate for reduced managerial oversight.
2.
Narrow/Small Span of Control: occurs
when a manager supervises a smaller number of employees.
Ø This allows for closer control and supervision by
management.
Ø However, there are potential drawbacks to a narrow
span of control, including increased costs due to additional levels of
management, slower vertical communication, and the potential discouragement of
employee autonomy.
E. Centralization
and Decentralization:
1.
Centralization refers
to the organizational structure where crucial decisions are made at the upper
levels by top management.
Ø Authority and decision-making power are concentrated
in a single point.
2.
Decentralization: In
a decentralized organization, decision-making authority is delegated to the
lowest possible level within the organization.
Ø Decisions are made by individuals or teams closer to
the operational level.
The current trend in organizations is
towards decentralization due to several benefits:
1.
Quicker Problem Solving: Decentralization
allows actions to be taken more swiftly to solve problems as decision-making
authority is closer to the point of action.
2.
Increased Input: Decentralization
involves more people in the decision-making process, allowing for a broader
range of perspectives and expertise to be considered.
3.
Employee Engagement: Decentralization
reduces the likelihood of employees feeling alienated from decision-makers, as
they have more involvement in decisions that affect their work lives.
Decisions regarding the
degree of centralization or decentralization in an organization depend on
various factors such as the organization's size, complexity, industry, and strategic
objectives.
F.
Formalization: refers
to the degree of standardization in job roles within an organization.
Ø It describes the level of discretion that job
incumbents have over their tasks, including what needs to be done, when it
should be done, and how it should be done. There are two types of organizations
based on formalization:
1.
Formal Organizations: In
formal organizations, job roles are highly standardized. Employees have little
discretion and must adhere to explicit job descriptions, organizational rules,
and well-defined procedures.
·
The emphasis is
on consistent and uniform output, ensuring that work is performed in a
structured and predictable manner.
2.
Informal Organizations: In
contrast, informal organizations have less standardized job roles.
·
Employees have
more freedom and discretion to exercise their judgment in performing tasks.
·
This may increase
job motivation, employee satisfaction, and encourage the exploration of
alternative approaches to completing tasks.
Key Organization Design Process /Steps/
1.
Reviewing
Existing Objectives and Strategies
2.
Determining Work
Activities
3.
Classifying and
Grouping Activities
4.
Assigning Work
and Delegating Authority
5.
Designing a
Hierarchy of Relationships:
Types of Organization Structure
1.
The Mechanistic structure: This
model is often associated with bureaucracy. It is characterized by extensive departmentalization,
high levels of formalization, a limited information network primarily focused
on downward communication, and minimal involvement of lower-level members in
decision-making.
2.
The Organic structure: In
contrast to the mechanistic model, the organic model resembles a boundary less
organization. It features a flat structure, utilizes cross-hierarchical and
cross-functional teams, has low levels of formalization, employs a
comprehensive information network that includes lateral, upward, and downward
communication, and encourages high levels of participation in decision-making.
Common organizational design or
structure
1.
Simple Structure: is
characterized by low departmentalization, wide spans of control, centralized
authority in a single person, and minimal formalization.
Ø It is often found in small organizations or during
temporary crises.
Advantages:
·
Simplicity and
flexibility.
·
Fast
decision-making.
·
Clear
accountability.
Disadvantages:
·
Difficult to
maintain for larger organizations.
·
Information
overload as the organization grows.
2. Bureaucracy:
is based on centralized authority,
formal rules and regulations, standardization and features routine tasks,
specialization, functional departments, , narrow spans of control, and
decision-making following the chain of command.
Advantages:
·
Efficient
performance of standardized activities.
·
Economies of
scale and minimum duplication.
·
Clear guidelines
and procedures.
Disadvantages:
·
Subunit
conflicts and departmental focus.
·
Obsession with
rules over adaptability.
·
Lack of
responsiveness to unique situations.
3. Matrix
Structure combines functional and
product departmentalization, breaking the unity-of-command concept.
Ø Employees in a matrix have two bosses: their
functional department manager and their product manager, resulting in a dual
chain of command.
Advantages:
·
Integration of
functional and product expertise.
·
Coordination of
complex and interdependent activities.
·
Better
communication, faster data flow, and flexibility.
·
Effective
allocation of specialists.
Disadvantages:
·
Confusion and
power struggles.
·
Increased
ambiguity and potential for conflict.
·
Stress and
insecurity for individuals.
New organization design
1.
Team Structure: The
team structure breaks down departmental barriers and decentralizes
decision-making to the level of work teams.
Ø In larger organizations, the team structure is often
used alongside the bureaucratic structure. It promotes collaboration, employee
empowerment, and faster decision-making.
2.
Virtual Organization: also
known as a network
or modular
organization, is highly flexible and typically has a small core
organization that outsources major business functions.
Ø It is highly centralized with minimal
departmentalization. This structure allows companies to employ highly skilled
workers as needed, reducing costs and improving quality.
Ø Large firms often use virtual organizations to
outsource non-core functions. Managers in virtual organizations focus on
coordinating external relations through computer-network links.
3. Boundary
less Organization: also known as
the T-form
organization, aims to eliminate vertical and horizontal boundaries
within the company and external barriers with customers and suppliers.
Ø It relies heavily on technology and seeks to reduce
internal boundaries by eliminating the chain of command, having
cross-functional and cross-hierarchical empowered teams, and limitless spans of
control.
Ø External barriers are removed through globalization,
strategic alliances, customer-organization links, and telecommuting.
Factors affecting the organizational design
1.
Strategy: is
closely linked to its structure, as the structure is designed to help
management achieve its objectives. There are three strategic dimensions that
impact structural design:
A.
Innovation: Organizations
pursuing an innovation strategy aim to introduce new products or services.
Ø They require flexible and organic structures that
foster creativity, adaptability, and collaboration.
B.
Cost Minimization: Organizations
following a cost minimization strategy focus on tightly controlling costs and
avoiding unnecessary expenses.
Ø They prioritize efficiency and stability, often
adopting mechanistic structures.
C.
Imitation: Imitating
organizations seek to capitalize on successful strategies used by others. They
minimize risk while maximizing profit opportunities.
Ø These organizations combine elements of both
mechanistic and organic structures, maintaining tight control and low cost
while creating organic subunits for new ventures.
2.
Organizational Size: significantly
influences its structure. Larger organizations tend to have more mechanistic
structures, characterized by increased specialization, departmentalization,
vertical levels, and rules and regulations.
Ø However, the impact of size on structure diminishes
as the organization grows, reaching a point where further increases in size
have minimal effect on the structure.
3.
Technology: refers
to how an organization transforms inputs into outputs. It can be classified
into routine and nonroutine activities, which shape the organizational
structure accordingly.
A.
Routine Technologies: involve
automated and standardized operations. They are associated with taller and more
departmentalized structures. Routine technologies often require highly
formalized organizations with clear rules, manuals, and job descriptions.
B.
Nonroutine Technologies: are
customized and often associated with more informal or organic structures,
allowing for greater flexibility and adaptability to handle unique and complex
tasks.
4.
Environmental Uncertainty: The
organization's environment plays a significant role in determining its
structure.
A.
Static Environments: In
static environments, there is little uncertainty, with minimal new competitors,
technological breakthroughs, or influence from external factors. Organizations
operating in static environments tend to adopt mechanistic structures.
B.
Dynamic Environments: are
characterized by rapid changes in government regulations, new competitors,
challenges in acquiring resources, and shifting consumer preferences.
Ø These environments create high levels of
uncertainty, requiring organizations to be flexible and adaptive.
Ø Organic structures are often more effective in such
dynamic environments.
ORGANIZATIONAL DESIGNS AND EMPLOYEE
BEHAVIOR:
1.
Work Specialization: involves
dividing tasks into specialized roles, can contribute to higher employee
productivity but may lead to reduced job satisfaction for some individuals.
Ø The point at which the negative effects of
specialized work outweigh the benefits varies among individuals.
Ø While routine labor may be satisfying for some,
professionals with a high need for personal growth and diversity are more
likely to experience negative behavioral outcomes from high specialization.
2.
Span of Control: There
is no clear evidence suggesting a direct relationship between span of control
(the number of subordinates a manager supervises) and employee performance or
satisfaction. Individual differences among employees may confound the results.
Ø Contingency theories suggest that variables such as
employees' experience, abilities, and task structure play a role in determining
when broad or narrow spans of control are more likely to enhance performance
and job satisfaction.
3.
Centralization: There
is relatively strong evidence indicating that the degree of centralization (the
concentration of decision-making authority) is linked to job satisfaction.
Ø Decentralized organizations, which involve greater participative decision-making, are positively associated with job satisfaction. This relationship is particularly pronounced among employees with low self-esteem.
Implications for Managers:
1.
Shaping Attitudes: Organizational
structure plays a role in shaping employee attitudes by reducing ambiguity and
clarifying relationships.
Ø It can contribute to predicting and explaining
employee attitudes, and it has the potential to motivate workers towards higher
levels of performance.
2.
Behavioral Constraints: Organizational
structure constrains employee behaviors by setting limits and controls on their
actions.
Ø Mechanistic structures, characterized by rigid rules
and procedures, significantly restrict acceptable employee behaviors. In
contrast, organic structures provide employees with greater freedom of action
and autonomy.
Technology and job design
The concept of
socio-technical systems in organizational behavior emphasizes the significance
of integrating both people and technology to establish high-performance work
systems.
The following are
concepts that show the relationship between technology and job design.
ü Automation and robotics
ü Flexible manufacturing systems
ü Electronic office
ü The electronic office, or e-office,
ü Work-flow and process reengineering