Chapter 7 Flashcards
Organizational Structure
How work is coordinated between individuals and teams within an organization.
Building Blocks of Structure
We will interact with structure by examining four basic building blocks regarding how structure can be created. What we will do is examine two opposing ideas and give a visual representation of the types of firms that can emerge out of it. Our blocks exist in terms of degrees - a gradient between the two foundations.
Degree of Centralization
Centralization is the extent to which decision making authority is concentrated at the higher levels in an organization.
- If a firm has a high degree of centralization it means that the majority of the key decisions are made by the high up executives.
- Oppositely, If a firm has a high degree of decentralization, it means that many key decisions are made at the lower level, with line managers and employees.
Benefits of a High Degree of Centralization
- Quick Decision Making
- Clarity of Action Plans
- Simplified Tasks at a lower level
Benefits of a High Degree of Decentralization
- Empowerment
- Organizational learning and creativity
- Agility and Responsive
Degree of Formalization
This is the extent to which the rules, regulations, procedures, policies, job descriptions, and tasks are written and explicitly articulated.
High Degree of Formalization
Creates clear expectations, a high level of predictability in the workplace and places an emphasis on planning ahead.
Low Degree of Formalization
Leads to innovation, Humanization and Higher Discretion.
Building Block of HIerchy
This is the the number of layers that lie between the highest top management and the lowest level of employee
Hierchy - Tall Structure
Characterized as organizations with many different levels of executives that separate the firms top and bottom. Typically tall structures are good at providing employees with clear and concise instructions and job security. Here employees are able to have a lot of communication with management because managers have less employees to manage on average.
Hierchy - Flat Structure
Characterized by organizations with few layers between the firms top and bottom. Typically Flat Structures make employees feel more satisfied and help the better realize their self actualization principles. The downside though is it leads to workplace ambiguity and leaves less room for advancement/promotion.
Functional Structure
Here departments are grouped based on similarity in functions such as having Marketing, Research, Sales, Manufacturing and other unique roles. This form of segmenting is effective when your product line is small or not diverse and when your environment is stable and not diverse.
Divisional Structure
Here departments are grouped based on the unique products, services, customers, or geographic locations the company is serving. This works well when your firm has a big product line or diverse products and when your environment is turbulent and requires agility.
Two Main Types of Structure regarding Organizing Companies
There is Mechanistic Structure and Organic Structure
Mechanistic Structure
Usually this categorization is used for firms with a high degree of centralization and high degree of formalization ( could also include tall levels of hierarchy). These firms are risk averse, and strive for efficiency over innovation.
Organic Structure
flexible and decentralized organizations that can be characterized by a low degree of formalization. (could also include flat levels of hierarchy). These firms are conductive to entrepreneurial behavior and innovativness.
Matrix Structure
Companies that implement both Divisional structures and Functional structures in their company.
Boundaryless Organization
Consists of Modual organization and strategic alliance.
Modual Organization
non essential functions are outsourced to other places such as call centers in India
Strategic Alliances
This is where companies collaborate together in order to create a more profitable synergy. EX: Pepsi and KFC or McDonalds and Coke
The Learning Organization
Consists of ambidexterity and experimentation.
Ambidexterity
Firms that place equal focus on exploring and exploiting new markets
Experimentation
This is when they hired Anthropologists at Xerox just to see how their product is used.
Four Structural Strategies
Concentration
Vertical Integration
Concentric Diversification
Conglomerate Diversification
Concentration
Focus on a single business in a single industry (Such as Second Cup)
Vertical Integration
Expand by acquiring your suppliers or distributors (Such as Ford, or GM they buy their distributors to make things cheaper)
Concentric Diversification
Move into new but related business (Such as Apple making smart watches now)
Conglomerate Diversification
Move into new and unrelated business (Such as Staples buying BMW)
