1. Organizational Structure

Question 1

What is an Organization? (4 Characteristics and the key element)

Answer 1

Organizations are 1. Social-entities that 2. are goal interested, 3. are designed as deliberately structured and coordinated activity systems, 4. and are linked to the external environment (e.g. competitors or legal requirements). The key element of an organization is not a building or a set of policies or procedures; organizations are made up of people and their relationships with one another.

Question 2

Key elements to the organizational structure (6 Elements & the way they work)

Answer 2

Key elements are:

• Work specialization
• Departmentalization
• Span of control
• Chain of command - Centralization and decentralization
• Formalization

→ key elements work like a toolbox, they can be changed to enhance organizational structure (but not arbitrary given complex interdependencies changing an organizational structure can be costly and time consuming)

Question 3

Departmentalization (Definition & type of functions))

Answer 3

= grouping activities and people into departments working as functional unit Type of functions:

• Functional Structure
• Divisional Structure
• Matrix Structures

Question 4

Functional Structure (Definition, 3 Pros & 2 Cons, Works well for whom?)

Answer 4

= An organizational structure composed of all the departments that an organization requires to produce its goods or services.

+ Encourages learning from others doing similar jobs

+ easy for managers to monitor and evaluate workers

+ an efficient use/allocation of resources

• difficult for departments to communicate with others (interface problems between functions)
• preoccupation with own department and losing sight of organizational goals

→ losing track of the big picture Works well for: small and medium sized companies in stable environments, organizations with very few and simple products or services; homogenous markets

Question 5

Divisional Structure (Definition, 2 Pros & 4 Cons, Works well for whom?)

Answer 5

= An organizational structure composed of separate business units within which are the functions that work together to produce a specific product for a specific customer.

+ Quick response to important changes

+ Minimal problems of sharing resources and information across functional departments

• can be dysfunctional competition among divisions
• can be very expensive
• can focus on short-term performance
• duplication

Works well for: Big, multinational companies and conglomerates; different/great variety products or services; heterogenous & fast-moving markets

Question 6

Types of Divisional Structures (3 Types, 1 Example)

Answer 6

• Product structure (CEO → Managers → Product Divisions → Functions) - Geographic structure (CEO → Managers → Geographical Divisions → Functions) - Market structure (CEO → Managers → Market Divisions →Functions) Example: Microsoft used to have a divisional structure - Independent product/solution divisions - Each with separate leadership Later, restructuring and consolidation efforts took place → turned into functional structure

Question 7

Matrix Structures (Definition and 3 Elements, Example)

Answer 7

= An organizational structure that simultaneously groups people and resources by function and product

• results in a complex network of superior-subordinate reporting relationships
• The structure is very flexible and can respond rapidly to the need for change within processes
• Each employee has two bosses (functional manager and product manager) and possibly cannot satisfy both

Example: Apple (→ “organized like a start-up”) - Tries to keep communications ways short and simple - Given ICT market, life cycles are short and thus quick communication is key

Question 8

Span of Control (Definition, dependency & differentiation)

Answer 8

= refers to the number of workers a manager manages → dependent on the complexity and interrelatedness of the subordinates’ tasks

• Small span of control: complex and similar tasks
• Large span of control: routine and similar tasks
  Tade-off: More Managers (higher cost) vs. less control on employee → compromise

Question 9

Chain of Command: Flat Structures (Definition, 1 Pro & 1 Con)

Answer 9

= have fewer levels and wide spans of control → structure results in quick communications but can lead to overworked mangers

+ communication is much faster

• an organization needs way more managers, or the division under each manager is very large

Question 10

Chain of Command: Tall Structures (Definition, 5 Characteristics/Consequences, Effect of a growing company)

Answer 10

= have many levels of authority and narrow spans of control

• As hierarchy levels increase, communication gets difficult creating delays in the time being taken to implement decisions
• Communications can also become garbled as it is repeated through the firm.
• More levels of hierarchy increases the number of managers → less responsibility of the workers reduces motivation.
• Increased bureaucratic costs.

→ usually, the bigger a company gets, the more hierarchy levels develop (most often the corporation will be restructured at some point, as hierarchy structure has become too complex)

Question 11

Centralized vs. Decentralized Authority (Definition, Where it works best, 2 Pros and 2 Cons)

Answer 11

= decentralization puts more authority at lower levels and leads to flatter organizations

→ works best in dynamic, highly competitive environment → very agile

→ stable environment favors centralization of authority

+ another way to keep an organizational hierarchy flat

+ communication and motivation problems can be kept at a minimum

• divisions, functions or teams may start to pursue their own goals at the expense of the organization’s goals
• can cause lack of communication among functions or divisions; this prevents the synergies of cooperation and performance suffers