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Chapter 13

BUS 272 Chapter Notes - Chapter 13: Hierarchical Organization, Work Unit, Railways Act 1921


Department
Business Administration
Course Code
BUS 272
Professor
Sam Thiara
Chapter
13

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Ch13 Designing Organizational Structures
Organizational structure refers to the division of labor as well as the patterns of coordination,
communication, workflow, and formal power that direct organizational activities. Structure
formally dictates what activities receive the most attention as well as financial, power, and
information resources
Organization’s structure is an important instrument in an executive’s toolkit for
organizational change because it establishes new communication patterns and aligns
employee behavior with the corporate vision.
LO1 Division of Labor and Coordination
All organizational structures include two fundamental requirements:
the division of labor into distinct tasks and the coordination of that labor so employees are
able to accomplish common goals.
Division of labour
Division of labour refers to the subdivision of work into separate jobs assigned to different
people.
Subdivided work leads to specialization, because each job now includes a narrow subset of
the tasks necessary to complete the product or service.
- Why do companies divide the work into several jobs?
1. Job specialization increases work efficiency. Job incumbents can master their tasks
quickly because work cycles are shorter.
2. Less time is wasted changing from one task to another.
3. Training costs are reduced because employees require fewer physical and mental
skills to accomplish the assigned work.
4. Finally, job specialization males in easier to match people with specific aptitudes or
skills to the jobs for which they are best suited.
Coordinating Work Activities
People require coordinating mechanisms to ensure that everyone works in concert
when they divide work among themselves.
When an organization divides work beyond its capacity to coordinate that work,
individual effort is wasted due to misalignment, duplication and mistiming of tasks.
Coordination also tends to become more expensive and difficult as the division of
labour increases.
Therefore, companies specialize jobs inly to the point where it isn’t too costly or
challenging to coordinate the people in those jobs.
Every organization uses one or more of the following coordinating mechanisms: informal
communication, formal hierarchy, and standardization. There forms of coordination align the
work of staff within the same department as well as across work units. Also critical when
several organizations work together, such as in joint ventures and humanitarian aid

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programs.
Coordination through informal communication
Vital in non-routine and ambiguous situation, most flexible form of coordination but it can
become chaotic as the number of employees increases.
Liaison Roles: who are expected to communicate and share information with co-workers in
other work units
Integrator Roles: who are responsible for coordinating a work process by encouraging
employees in each work unit to share information and informally coordinate work activities.
They don’t have authority over the people so must rely on persuasion and commitment.
Temporary Team: temporary cross-functional teams give employees more authority and
opportunity to coordinate through informal communication. Common in Vehicle design.
Coordination through formal hierarchy
Problem:
1. Hierarchical organizations are not as agile for coordination in complex and novel
situation. Rarely as fast or accurate as informal communication directly among
employees.
2. Managers are able to closely supervise only a limited number of employees.
3. Today’s workforce demands more autonomy over work and more involvement in
company decisions. Coordination through formal hierarchy tends to limit employee
autonomy and involvement.
Coordination through standardization
3 distinct forms:
Standardized skills: when work activities are too complex to standardize through
processes or output, companies often coordinate work effort by extensively training
employees or hiring people who have learned precise role behaviors from education
programs.
Standardized processes: quality and consistency of a product or service can often be
improved by standardizing work activities through job descriptions and procedures.
Standardized outputs: this form of standardization involves enduring that individuals

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and work units have clearly defined goals and output measures
LO2 Elements of Organizational Structure
Every organization structure consists of four elements: span of control, centralization,
formalization, and departmentalization
Span of Control
Refers to the number of people directly reporting to the next level in the hierarchy. A narrow
span of control exists when very few people report directly to a manager, whereas a wide
span exists when a manager has many direct reports.
Assumes coordination through direct supervision
Wide span of control
Manager and subordinates in close proximity
Manager few responsibility except supervision
Highly competent employees
Few problems arise
Narrow span of control
Superiors and management not close proximity
Manager has many responsibilities
Frequent interactions
Tall versus flat structures
The interconnection of span of control, organizational size, and number of management
layers has important implications for companies.
As organizations grow, they typically employ more people, which means they must widen the
span of control, build a taller hierarchy, or both.
Building a taller hierarchy creates problems
1. Executives in tall structures tend to receive lower-quality and less timely information.
2. Taller structures have higher overhead cost
3. Employees usually feel less empowered and engaged in their work
Centralization and Decentralization
Centralization means that formal decision-making authority is held by a small group of
people, typically those at the top of the organizational hierarchy.
Decentralize: decision-making authority is dispersed throughout the organization.
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