Lecture 5 - Organizational structure Flashcards
Organizational structure
The way tasks are formally divided, grouped and coordinated
Work specialization
Describes the degree to which tasks in an organiation are subdivided into separate jobs completed by different individuals
Departmentalization
The basis by which jobs are grouped together
- Function
- Product
- Geographic
- Process
- Customer
Chain of command
An unbroken line of formal authority that extends from the top of the organization to the lowest echelon and clarifies who reports to whom
Span of control
The number of subordinates a supervisor oversees
- How wide the organization is
- Flat organization: one person is responsible for more people
Centralization and decentralization
The degree to which decision making is concentrated at a single point in the organiation
- Centralization = decision-making authority is concentrated at the top levels of the organization
- Decentralization = decision-making authority is distributed across various levels of the organization, allowing employees or managers at different levels to make decision tailored to their local needs or areas of responsibility
Formalization
How many rules are there?
High formalization:
- Detailed job descriptions
- Low autonomy
- McDonald’s
Low formalization
- Non-programmed job behaviors
- High autonomy
- Any startup
Typology of 6 common structures
Work specialization
Departmentalization
Chain of command
Span of control
(De)centralization
Formalization
Simple structure
- Low departmentalization: everyone might help with various things
- Low specialization: employees do a mix of tasks
- Short chain of command: CEO directly communicates with the senior managers who, in turn, manage the employees.
- Centralized authority: CEO makes most of the decisions
- Wide span of control: one manager supervises a large number of employees
- Low formalization: minimal rules
Functional structure
- High departmentalization: marketing team handle their own specific tasks
- Wide span of control: CEO manages several department heads
- High specialization: IT department, one person focuses on coding, while another handles tech support
- Short chain of command: a graphic designer reports directly to the marketing manager
- Example: Apple (marketing does marketing, engineers do engineering).
Divisional structure
- Organized by products, regions, or customers.
- High departmentalization: different departments for each subject
- Medium-high specialization: professors in biology department specialize in different areas
- Low formalization: fewer stricter rules in designing own traching methods
- Example: univeristy with distinct departments
Matrix structure
- Functional structure: people are grouped based on what they do best (marketing, finance), which allows for pooling of resources.
- Divisional structure: each product has its own marketing team, finance team etc.
- Employees report to two managers (functional and project).
- Requires excellent communication and stress management.
Example: Google (a coder works in both a tech team and a project team)
You report to two managers - matrix structure
- Functional manager (head of marketing)
- Product manager (person in charge of product X, Y, Z)
Disadvantages of matrix structure
- You as an individual have to deal with multiple forms of power
- Stress resilient
- Management has to communicate really good with each other
- Complex to work with
Team/project structure
The organization is designed around specific projects rather than permanet departments
Creates temporary teams that work together on a specific project and then move on to the next one
Example: Airbnb
Network structure
Different independent companies or organizations working together to creare a product or a service
Each company in the network focuses on what it does best and they all rely on each other to complete the final product
Example: Spotify
Disadvantages - network structure
- Hard to manage: each company is independent
- Dependence on others: companies depend on other companies in the network
Environment drives structure
Simple & Stable: clear rules, few departments, and centralized decision making
- Low formalization: fewer rules
- Low centralization: more decision-making at lower levels
Unstable environments: if things change quickly organizations need to be more flexible, with more departments and less central control
- High formalization: lots of rules
- High centralization: decisions are made at the top
When organizations grow…
More management layers are needed
More departmentalization is needed
More formalization is needed
More specialization is needed
Organization environment, size and strategy
- Simple Environment:
* Size: Small
* Strategy: Stable, single product; optimize and maintain quality. - Stable Medium Environment:
* Size: Medium
* Strategy: Efficiency and quality control; routine operations, tech interdependence within functions. - Stable but Complex Environment:
* Size: Medium
* Strategy: Specialization and innovation; tech interdependence between functions. - Adaptive, Complex Environment”
* Size: Large
* Strategy: Dual focus—customer demands + technical specialization; handles instability and complexity. - Highly Adaptive Environment:
* Size: Medium to large
* Strategy: Self-directed teams, innovation, rapid decisions, specialized in temporary teams. - Very Unstable/Highly Complex:
* Size: Very large, global
* Strategy: Disrupt markets, outsourcing, and leveraging novel technology
Top-down culture change
Leaders decide which parts of the organization need cultural change and how it will happen (top-down, bottom-up, or both).
