Chapter 6:

Organizing Structure
 Organization Growth and Change

Organization
size

Craft or family Entrepreneurial Professional Time

stage stage management
stage
2
 Factors Affecting
Organization Structure
• Mechanistic Systems
– Rigid delineation of functional duties.
– Fixed authority and responsibility.
– Well-developed organizational hierarchy.
– Information filters up and instructions flow down.
• Organic Systems
– Less formal job descriptions.
– Greater emphasis on adaptability.
– More participation.
– Less fixed authority.
3
 Organization and Technology
Woodward’s findings:
2. The number of levels in an organization increased as technical
complexity increased.
3. The ratio of managers and supervisors to total personnel increased
as technical complexity increased.
4. Organic systems predominate in firms at both ends of the scale of
technical complexity, while mechanistic systems predominated in
firms falling in the middle ranges.
5. No significant relationship existed between technical complexity
and organizational size.
4
 Outsourcing
• Benefits:
– Allowing the organization to emphasize its core
competencies by not spending time on routine areas
that can be outsourced.
– Reducing operating costs by utilizing others who can do
the job more efficiently.
– Accessing top talent and state-of-the-art technology
without having to own it.
– Fewer personnel headaches.
– Improving resource allocation by allowing growth to
take place more quickly.
5
 Outsourcing
• Drawbacks:
– Loss of control and being at the mercy of the
vendor.
– Loss of in-house skills.
– Threat to morale of the workforce if too many
areas are dominated by outside vendors.
– There is no guarantee that it will save money
or provide higher service standards.

6
 Variables Affecting Appropriate
Organization Structure
Differences in
subunits or
organization
Objectives of
organization
Strategy of
organization
Stability of
environment Most Size of organization
appropriate
organization
Technology structure Management
involved approach and style

Characteristics of
National culture
workforce
Age and Communication
tradition technology
7
 Functional Departmentation
President

Vice President, Vice President, Vice President,

Marketing Production Finance

Advertising Engineering Accounting

Manager Manager Manager

Sales Manager Manufacturing Credit

Manager Manager

Market Research Quality Control

Manager Manager
8
 Product Departmentation

XYZ Corporation

Oil and gas Industrial and

Chemical Automotive
technology

9
 Customer Departmentation

Johnson & Johnson

Consumer Professional Pharmaceutical Industrial

group group group group

10
 Simplified Line Structure

President

Vice President, Sales Vice President, Manufacturing

Sales
Advertising Fabrication Assembly
Personnel

11
 Simplified Line
and Staff Structure

Assistant to
President
President

Vice President, Vice President, Vice President,

Personnel Manufacturing Sales

Production
Quality Control Purchasing
Manager

12
 Illustrative Matrix Structure

Division B

Planners
and analysts

Production Engineering Personnel Finance

Project
Manager Production
Engineering Personnel Accounting
Group Group
Project C Group Group

Project Production Accounting

Engineering Personnel
Manager Group Group
Group Group
Project D 13
 Horizontal Structure
Characteristics:
2. The organization is built around three to five core processes, each with an
owner or champion.
3. The hierarchy is flattened to reduce supervision.
4. Teams manage everything, even themselves. They are held accountable
for performance goals.
5. Customers, not stock appreciation or profitability, drive performance.
6. Team performance, not just the individual, is rewarded.
7. Customer contact is maximized with employees.
8. Emphasis is on informing and training all employees.

14
 Virtual Organizations
• Benefits:
• Increased productivity.
• Decreased costs of doing business.
• The ability to hire the best talent regardless of
location.
• Quicker problem solving by dynamic teams.
• Easier leverage of both static and dynamic staff.
• Improved work environment.
• Better balance for professional and personal lives.
• Enhanced competitive advantage.
15
 Virtual Organizations
• Drawbacks:
• Leaders must move from a control model to a trust
model.
• New forms of communication and collaboration are
required.
• Management must enable a learning culture and be
willing to change.
• Staff reeducation may be required.
• Increased difficulty monitoring employee behavior.

16
 Committees and Boards
• Committee
– Organization structure in which a group of
people are formally appointed, organized, and
superimposed on the line or line and staff
structure to consider or decide certain matters.
• Board of Directors
– Carefully selected committee that reviews
major policy and strategy decisions proposed
by top management.
17