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Management (MGH)
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Chapter 14: Organizational Structure
What is Organizational Structure?
Organizational Structure: The manner in which an organization divides its
labour into specific tasks and achieves coordination among these tasks
Vertical Division of Labour
Apportioning authority for planning and decision making who gets to tell who
what to do
Ex. Military has 18 ranks in the chain of command (vertical), companies have
manager-vp-svp-ceo, schools have principal, dean, lecturer
Autonomy and Control
oDomain of decision-making and authority is reduced as the number of levels
in the hierarchy increase, but conversely, flatter hierarchy involves people
further down in more decisions
oAs labour is divided vertically, timely communication becomes harder to
achieve (information filtering)
Horizontal Division of Labour
Groups basic tasks that must be performed into jobs and then into departments so
that the organization can achieve its goals
Job Design
oHorizontal division directly affect job design (autonomy, work communication)
oAlso affects coordination, which in turn affects vertical division of labour
oDifferentiation: The tendency for managers in separate units, functions or
departments to differ in terms of goals, time spans, and interpersonal styles
oOccurs when there is HIGH horizontal division of labour
oEx. Marketing team needs project now to sell, R&D team know its takes time
to develop a good product- prime example
This is the assignment of jobs to departments how to group jobs so they can be
managed effectively
Functional Departmentation
oEmployees with closely related skills and responsibilities are located in the
same department
oAdvantages include efficiency and efficient allocation of resources (research),
increased communication within the department, more effective training
programs, and it makes it easier to evaluate performance of group/sector
oDisadvantages include differentiation due to specialization with the
departments, poor coordination as an organizational whole
oMost effective in small-medium sized firms

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Product Departmentation
oDepartments are formed on the basis of a particular product, product line, or
oEach department can operate autonomously as specialists dedicated to
output of that department only
oAdvantages include better coordination among specialists working on a
product line, flexibility of product lines, and they can be evaluated as profit
oDisadvantage; two different product departments may be working on
resolving the same problem independently, therefore wasting efforts when the
could work as one
Matrix Departmentation
oEmployees remain members of functional departments while also reporting to
a product or project manager cross-functional teams
oProvides a degree of balance between demands of product and the people who
actually do the work, resulting in a better outcome
oLeads to better communication and coordination throughout the organization
oProblems: functional managers and product managers may not see eye-to-eye;
employees report to more than one manager which may cause role conflict
Other Forms of Departmentation
oGeographic Departmentation: Relatively self-contained units deliver an
organizations products or services in a specific geographic territory
shortens communication channels and allows company to adapt to regional
oCustomer Departmentation: Relatively self-contained units deliver an
organizations products or services to specific customer groups provides
better service through specialization
oHybrid Departmentation: A structure based on some mixture of functional,
product, geographic, or customer departmentation
Basic Methods of Coordinating Divided Labour
Direct Supervision: working through chain of command, managers coordinate
work of their subordinates
Standardization of Work Processes: for routine jobs, technology and rules provide
means of coordination little supervision necessary
Standardization of Outputs: concern shifts from how work is done to ensuring
work meets certain physical or economic standards (divisional profit targets)
Standardization of Skills: ex. Interlocking training between hospital operation
team requires minimal communication and supervision as they have been trained
how to work with each other, using procedures as guidelines
Mutual Adjustment: informal communication to coordinate needs and tasks
These factors affect job design and satisfaction directly direct supervision has least
work discretion on products (assembly line) and mutual adjustment has most
discretion (senior management)
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