Organizational Structure

Dr. Meenakshi Khemka

Organizational Structure - Definition

How job tasks are

• formally divided

• grouped and

• coordinated
Organization Structure 2
 Organizational Structure

Key Elements
 Work specialization
 Departmentalization
 Chain of command
 Span of control
 Centralization and decentralization
 Formalization

Organization Structure 3
 Key Design Questions and Answers
The Key Question The Answer Is Provided by

1. To what degree are articles Work specialization

subdivided into separate jobs?
2. On what basis will jobs be grouped Departmentalization
together?
3. To whom do individuals and groups Chain of command
report?
4. How many individuals can a manager Span of control
efficiently and effectively direct?
5. Where does decision-making Centralization
authority lie? and decentralization
6. To what degree will there be rules Formalization
and regulations to direct employees
and managers? Organization Structure 4
 Departmentalization

The basis by which jobs are grouped together

• Function
• Product
• Geography
• Process
• Customer

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Contrasting Spans of Control

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 Common Organization Designs
Simple Structure
A structure characterized by a low degree of departmentalization,
wide spans of control, authority centralized in a single person, and
little formalization

Owner

Sales Sales Sales Sales Sales Cashier

person person person person person

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 Simple Structure

 Strengths
 simplicity: fast, flexible, inexpensive
 Weakness
 works best in small organizations
 can slow down decision-making in larger
organizations
 can be risky as it relies on one person to make all
decisions
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 Bureaucracy

Bureaucracy is characterized by
• highly routine operating tasks achieved
through specialization
• very formalized rules and regulations
• tasks that are grouped into functional
departments
• centralized authority
• narrow spans of control and
• decision making follows chain of command
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 Bureaucracy
 Strengths  Weaknesses
 Functional economies of  Subunit conflicts with
scale
organizational goals
 Minimum duplication of  Obsessive concern with
personnel & equipment
rules and regulations
 Enhanced  Lack of employee
communication
discretion to deal with
 Centralized decision problems
making

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 Matrix Structure

A structure that creates dual lines of authority and combines

functional and product departmentalization

Key
KeyElements
Elements
++Gains
Gainsthe
theadvantages
advantagesofoffunctional
functionaland
andproduct
product
departmentalization
departmentalizationwhile
whileavoiding
avoidingtheir
theirweaknesses
weaknesses
++Facilitates
Facilitatescoordination
coordinationofofcomplex
complexand
andinterdependent
interdependent
activities
activities
––Breaks
Breaksdown
downunity-of-command
unity-of-commandconcept
concept

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Matrix Structure (College of Business
Administration)

(Director)

(Dean) Employee

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 Team Structure

The use of teams as the central device to coordinate

work activities

Characteristics
Characteristics
• •Breaks
Breaksdown
downdepartmental
departmentalbarriers
barriers
• •Decentralizes
Decentralizesdecision
decisionmaking
makingtotothe
theteam
teamlevel
level
• •Requires
Requiresemployees
employeestotobe
begeneralists
generalistsas
aswell
wellas
as
specialists
specialists

Organization Structure 13
 Virtual Organization

• A small, core organization that outsources its major

business functions
• Highly centralized with little or no departmentalization

Concepts
Concepts
Advantage:
Advantage:Provides
Providesmaximum
maximumflexibility
flexibilitywhile
whileconcentrating
concentrating
on
onwhat
whatthe
theorganization
organizationdoes
doesbest
best
Disadvantage:
Disadvantage:Reduced
Reducedcontrol
controlover
overkey
keyparts
partsofofthe
thebusiness
business

Organization Structure 14
A Virtual Organization

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 Boundaryless Organization

An organization that seeks to eliminate the chain of

command, have limitless spans of control, and replace
departments with empowered teams

T-form
T-formConcepts
Concepts
Eliminate
Eliminatevertical
vertical(hierarchical)
(hierarchical)and
andhorizontal
horizontal
(departmental)
(departmental)internal
internalboundaries
boundaries
Breakdown
Breakdownexternal
externalbarriers
barrierstotocustomers
customersand
and
suppliers
suppliers

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 Mechanistic versus Organic Models
The Mechanistic Model The Organic Model

• High specialization • Cross-functional teams

• Rigid departmentalization
• Clear chain of command
• Narrow spans of control
• Centralization
• High formalization
• Cross-hierarchical teams
• Free flow of information
• Wide spans of control
• Decentralization
• Low formalization

Organization Structure
 The Strategy-Structure Relationship
Strategy Structural Option

Innovation Organic: A loose structure; low

specialization, low formalization,
decentralized

Cost minimization Mechanistic: Tight control; extensive

work specialization, high formalization,
high centralization

Imitation Mechanistic and organic: Mix of loose

with tight properties; tight controls over
current activities and looser controls for
new undertakings
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 Why do Structures Differ?

Organization Size

Large organizations typically employing 2000 or

more people tend to have

 more specialization

 more departmentalization

 more vertical levels

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 Why do Structures Differ?

Technology

 Routine tasks are associated with taller, more

departmentalized and centralized structures

 Non-routine tasks would be characterized by

delegated decision making authority

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 Why do Structures Differ?

Environment
 There are three key dimensions of an
organizational environment
 Capacity (Degree to which it can support
growth)
 Complexity (Degree of heterogeneity and
concentration)
 Volatility (Degree of instability)

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 Organization Structure:
Determinants and Outcomes

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 THANK

YOU

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