Ch. 14 - Organizational Structure Flashcards
Organizational Structure
Formally dictates how jobs and tasks are divided and coordinated between individuals and groups within the company
True or False: Organizational structure has a significant impact on financial performance and an organization’s ability to manage employees and products.
True
What are the elements of organizational structure?
Work Specialization
Span of Control
Centralization
Formalization
Chain of Command
Work Specialization
The degree to which tasks in an organization are divided into separate jobs
What are the consequences of high work specialization?
Increased productivity
Reduced flexibility in employees since employees cannot practice other skills
Lower motivation/job satisfaction due to lack of variety in tasks
Chain of command
Specifies who reports to whom and formal authority relationships. Helps organizations to attain order, control, and predictable performance
True or False: In a typical organizational structure, employees may not have someone to whom they report.
False
In a typical organizational structure, each employee has one person to whom they report
Span of Control
Represents how many employees each manager in the organization has responsibility for
True or False: Research suggests that a wide span of control yields the highest productivity
False
A moderate span of control is best for an organization’s production
What are the negative consequences of a tall span of control?
Need to hire more managers
Communication becomes more complex
Organization’s ability to make decisions becomes slower (decisions need to be approved at every level)
Centralization
Aspect of structure that dictates where decisions are formally made in organizations. Decisions in highly centralized structures are made exclusively by top managers
Formalization
The degree to which rules and procedures are used to standardize behaviours and decisions in an organization
Mechanistic Organizations
Efficient, rigid, predictable, and standardized organizations that thrive in stable environments (high formalization, high centralization, low flexibility)
Organic Organizations
Flexible, adaptive, outward-focused organizations that thrive in dynamic environments (low work specialization, decentralized, high flexibility)
Organizational Design
The process of creating, selecting, or changing the structure of an organization
Common Organizational Forms
Simple Structure
Bureaucratic Structure (includes functional, multi-divisional, and matrix structures)
What factors impact the organizational design process?
Business Environment
Company Strength
Technology
Company Size
Business Environment (Organizational Design)
Factors external to the firm such as customers, suppliers, and competitors which affect organizational design
Company Strategy (Organizational Design)
An organization’s objectives and goals and how it tries to capitalize on its assets to make money
Low-Cost Producer Strategy
Prioritize efficiency to sell products at the lowest price possible
Differentiation Strategy
Prioritize quality of products (offer features lower price products do not have) to charge higher prices
Technology (Organizational Design)
The method by which an organization transforms inputs to outputs
Company Size (Organizational Design)
The number of employees in a company. Larger companies rely on some combination of specialization, centralization, and formalization to control their activities
Simple Structure
An organizational form that features one person as the central decision-making figure. The most common form of organizational design (more small organizations than large ones)
What are the characteristics of a simple structure?
Usually a small organization
Manager/President/Owner are the same person
Low degree of formalization
Only basic differences in work specialization
Bureaucratic Structure
An organizational form that exhibits many facets of a mechanistic organization. Designed for efficiency and rely on high levels of work specialization, formalization, centralization, rigid chains of command, and narrow spans of control
Functional Structure
An organizational form in which employees are grouped by the functions they perform for the organization.
What are the benefits of using a functional structure?
Extremely efficient when the organization as a whole has a relatively narrow focus, fewer product lines or services, and a stable environment.
What is the biggest weakness of a functional structure?
Employees do not communicate as well across functions as they do within functions
Multi-divisional Structure
An organizational form in which employees are grouped by product, geography, or client
How do multi-divisional structures usually develop?
Multi-divisional structures generally develop from companies with functional structures whose interests and goals become too diverse for a functional structure to handle
Product Structure
An organizational form in which employees are grouped around different products that the company produces. Best used when firms diversify to the point that the products they sell are so different that managing them becomes overwhelming
Geographic Structure
An organizational form in which employees are grouped around the different locations where the company does business
Why might a company choose a geographic structure?
Customers in different regions have different tastes
The size of the locations that need to be covered by different salespeople
Manufacturing and distribution of a product are better served by a geographic breakdown
Client Structure
An organizational form in which employees are organized around serving customers
Matrix Structure
A complex form of organizational structure that combines a functional and multi-divisional grouping. Employees are distributed into teams/projects based on both their functional expertise and the product they are working on
What is the main drawback of a matrix structure
Higher stress levels for employees if demands from one supervisor conflict with demands from the other supervisor (result of two chains of command)
What is the main benefit of a matrix structure
Greater flexibility (enables the organization to adjust more quickly to the environment than a traditional bureaucratic structure)
What is the relationship between restructuring and job performance?
Weak negative relationship
What is the relationship between restructuring and organizational commitment?
Moderate negative relationship
Restructuring
The process of changing an organization’s structure
What is the most common kind of restructuring in recent years
“Flattening” of an organization
How can managers assist a restructuring effort?
Managers can help manage layoff survivors who have a great deal of guilt & remorse. Managers can give layoff survivors a stronger sense of control
