Chapter 13: Organizational Structure Flashcards
Organizational structure (def)
structure = the division of labor as well as the patterns of coordination, communication, workflow, and formal power that direct organizational activities.
Two mechanisms in organizational structures (OVERVIEW)
- Division of labor
2. Coordination
- Division of labor (mechanism in organizational structure)
- definition
- 2 types
= subdivision of work into separate jobs assigned to different people. Subdivided work leads to job specialization because each job now includes a narrow subset of tasks.
Two types of division of labor:
a. Horizontal = In terms of areas of expertise (e.g., finance, IT, HR)
b. Vertical = supervision, managing, hierarchy
- Coordination (mechanism in organizational structure)
- definition
- 3 types
= an organization’s ability to divide work among people depends on how well those people can coordinate with each other’s. It becomes more expensive and difficult as the division of labor increases.
Three coordination mechanisms:
a. INFORMAL COMMUNICATION
PROS: it is vital in non-routine and ambiguous situations; it is increasingly possible in large firms through technology, and it is the most flexible form of coordination
CONS: it may become chaotic as the number of employees increases
b. FORMAL HIERARCHY = it assigns legitimate power to individuals, who then use this power to direct work processes and allocate resources. In other words, work is coordinated through direct supervision (chain of command). A formal hierarchy is still important but less popular today.
CONS: it is not agile, a limited number of direct supervisees (can only oversee a certain number of people), and today’s workforce demands more autonomy and more involvement in the company’s DM
c. STANDARDIZATION = involves creating routine patterns of behavior or output. It takes three distinct forms:
i. Standardized processes (e.g., job descriptions) – good for routine and simple tasks, but not for complex or nonroutine tasks
ii. Standardized outputs (e.g., sales targets)
Four elements of organizational structures (OVERVIEW)
- Span of control
- Centralization
- Formalization
- Departmentalization
(all interconnected)!!!)
- Span of control (elements of organizational structures)
= the number of people directly reporting to the next level above in the hierarchy.
Narrow span = when a manager has a few direct reports e.g., top management team, start-up
Wide span = when a manager has many direct reports. This is only possible when there are other coordination mechanisms present, tasks are routine, and employee interdependence is low (e.g., call center operators, plant workers) –> the best performing manufacturing plants have an average of 38 production employees per supervisor (US, 2000)
- Centralization (elements of organizational structures)
= the degree to which formal decision authority is held by a small group of people, typically those at the top of the organizational hierarchy
a. Most organizations begin with centralized structures. Larger organizations typically decentralize
b. Centralization may vary in different areas of the company
e. g., Sales are decentralized, but info systems are centralized (where the red circle in the image is the locus of decision-making authority)
- Formalization (elements of organizational structures)
= the degree to which organizations standardize behaviors through rules, procedures, formal training, and related mechanisms. Formalization can be encouraged by external influences (e.g., legislation such as ISO quality standards for the food industry)
- More formalized organizations are usually older, larger, and more regulated firms.
- Departmentalization (elements of organizational structures) - OVERVIEW (6 types)
- Simple
- Functional
- Divisional (M form)
- Team-based
- Matrix
- Network
Organizational size: TALL vs. FLAT
- problems with hierarchies
- as companies grow
(Hint: link to span of control)
As companies grow, they build taller hierarchies and/or widen the span, increase the division of labor (job specialization) and coordinate with more standardization.
Problems with hierarchies:
o Poorer upward information
o Higher overhead costs
o Undermines employee empowerment and engagement
Advantages and Disadvantages of CENTRALIZATION
ADVANTAGES
- Use the local information without the need to transfer it (efficiency and time savings)
- The top of the hierarchy can focus more on strategic decision making
- Motivation to subjects taking local decisions
- Attracts talent in the periphery
- Increases worker’s engagement
- Increases human capital of employees
DISADVANTAGES
- Coordination
- Duplication of costs (R&D, marketing, etc.)
- Price competition across branches
- Local vs. Global optimum
- Loses in the information from the center
- Agency problems: adverse selection, moral hazard, incentives
Advantages and Disadvantages of FORMALIZATION
ADVANTAGES
Increases efficiency and compliance
DISADVANTAGES
- Less organizational flexibility
- Less organizational learning and creativity
- Lower work efficiency
- Greater job dissatisfaction and work stress
- Attention focusing on rules and procedures, instead of on organizational goals
Mechanistic vs. organic structures
MECHANISTIC = o Narrow span of control o High centralization o High formalization (many rules and procedures, rigid definition of tasks) o Better operate in stable environments
ORGANIC =
o Wide span of control
o Decentralized decisions
o Low formalization (adaptable situations)
o Better operate in rapidly changing environments
o Are more compatible with ORGANIZATIONAL LEARNING and HPWP’s
- Network departmentalization
- definition
- core competency
- advantages and disadvantages
= an alliance of several organizations for the purpose of creating a product or serving a client
It includes a core firm (= hub) and multiple satellite organizations. The core firm orchestrates the network process and provides on/two core competencies.
Core competency = a knowledge base that resides through the organization and provides a strategic advantage.
Increasingly common due to rapidly changing technology and more complex work processes
ADVANTAGES
- Highly flexible
- Not saddled with old facilities, resources
- Potentially more efficient
DISADVANTAGES
- Exposed to market forces
- Less control over subcontractors
- Simple departmentalization
- definition
= Companies having a simple structure employ only a few people and typically offer only one distinct product/service. There is a minimal hierarchy (employees reporting to the owners), and the roles of employees are broadly defined. Examples include restaurant, family-owned bars of barbershops.
