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Ch 13 - Organizational Structure.docx

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Department
Commerce
Course Code
COMM 292
Professor
Leah Sheppard

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What is Organizational Structure? Chapter 13 Organizational structure – defines how job tasks are formally divided, grouped, and coordinated  Tall pyramid vs. relatively flat  More layers vs. few layers  Structure determines the reporting relationships of people  Restructuring – when org.’s change its structure from time to time (often involves layoffs)  Six key elements that managers need to address when they design an organization’s structure: Work Specialization  Aka division of labour – the degree to which tasks in the organization are subdivided into separate jobs  Broken down into a number of steps, each being completed by a different person  Results in specialization: the more one does a task, the better they become at it o Easier and less costly to find and train workers to do specific and repetitive tasks rather than finding someone that can do all tasks well o Increases efficiency o Can lead to boredom, fatigue, stress, absenteeism, high turnover  Solution/balance: put them into teams with interchangeable skills  gives employees a variety of activities to do Individual Responses to Work Specialization  Work specialization contributes to higher employee productivity but reduced job satisfaction  Productivity suffers when human diseconomies (satisfaction) overtake economies of specialization Departmentalization  Departmentalization – the basis on which jobs are grouped together for increased coordination of similar/related tasks  Risk: if they become silos – a separate organization within the organization – disconnected o Protect own turf  poor inter-department interaction  narrow vision with respect to organizational goals Functional Departmentalization  Separated by function  Ex. accounting department, HR department, marketing department  Ex. research department, patient care, accounting  Advantage: obtaining efficiencies from putting people with common skills and orientations together Product Departmentalization  Separated by type of product the organization produces  Ex. fake lashes, blushes, mascara, lipstick  Advantage: increased accountability for product performance  Ex. bank: banking, investment, insurance Geographic Departmentalization  Separated by physical place/territory  Useful in sales function – similar needs based on their location Process Departmentalization  Separated by different steps in a process  Ex. aluminum tubing manufacturer: casting, press, tubing, finishing, inspecting, packing, shipping  Common in manufacturing industry  Homogenous categorizing of activities --. Each process requires different skills Customer Departmentalization  Separated by the type of customer the organization wishes to reach  Ex. office supply firm: wholesale, retail, government customers  Underlying assumption: each department have a common set of problems and needs that can best be met by having specialists for each Organizational Variety in Departmentalization Trends in departmentalization:  Many organizations give greater emphasis to customer departmentalization  Rigid, functional departmentalization is being increasingly complemented by teams that cross over traditional departmental lines Taking departmentalization a step further: Divisions  Separate profit centers Chain of Command  Chain of command – continuous line of authority that extends from upper org levels to the lowest level and clarifies who reports to whom  Delegation – assignment of authority to another person to carry out specific duties, allowing the employee to make some of the decisions o Usually happens because manager does not have enough time to do everything o Ensures that the right people are involved in decision making process o Empowers employees to make decisions that were previously reserved for managers  Self managed and cross functional teams  decreased relevance in chain of command Span of Control  Span of control – the number of employees that report to a manager o Determined by the number of employees a manager can efficiently and effectively direct  The wider/larger the span, the more efficient the organization  Wider spans = lesser management salary costs BUT be careful not to make the span so wide or else employee performance will suffer (no leadership/support)  Narrow spans = manager can maintain close control. Drawbacks: o More costly o Slow down decision making o Isolate upper management o Encourage overly tight supervision, discourage employee autonomy  Trend in recent years: wider spans of control  downsizing, move to teamwork o Reduce costs, cut overhead, speed up decision making, increase flexibility, get closer to customers, empower employees o To make sure performance doesn’t suffer, orgs have been investing heavily in employee training – so they know their jobs/tasks/responsibilities very well  can turn to co-workers when they have minor questions Individual Responses to Span of Control  Research fails to support notion that it leads to higher employee performance  No relationship has been found  Related to contingency theories of leadership  Manager’s job satisfaction increases as the number of employees he or she supervises increases Centralization and Decentralization  Centralization – the degree to which decision making is concentrated at a single point in the organization o Formal authority; rights inherent in one’s position o Top management makes decisions without input from lower level employees  Decentralization – the degree to which decision making is distributed to lower-level employees o Lower level employees provide more input and given discretion to make decisions o Action can be taken more quickly to solve problems o Employees are less likely to feel alienated from those who make the decisions that affect their work life o Easier to address customer concerns o Lower-level managers are “closer to the action”  more detailed knowledge about problems Individual Responses to Centralization  Centralization linked with job satisfaction o Less centralized  greater amount of participation in decision making  positively affects job satisfaction  Decentralization-satisfaction relationship is strongest with employees who have low self esteem o Less confidence in abilities  higher value on shared decision making  not held solely responsible for outcomes Formalization  Formalization – the degree to which jobs within the organization are standardized  Highly formalized – explicit job descriptions, many rules, clearly defined procedures o Expected to handle the same input exactly the same way  consistent and uniform output  Low formalization – more freedom to exercise discretion o Discretion inversely related to the amount of behavior in the job that is preprogrammed  Standardization eliminates the possibilities of employees engaging in alternative behaviors & removes need for employees to consider alternatives Mechanic and Organic Organizations Mechanistic Model  High specialization  Rigid departmentalization  A clear chain of command  Limited information network  Centralization  Ex. government bureaucracies Organic Model  Flat  Uses cross-functional and cross-hierarchal teams  Comprehensive information network  Wide spans of control  Low formalization  Ex. High tech firms – a lot of collaboration Individual Responses to Organizational Structure  Your response to an organization’s structure will depend on: o Experience o Personality o Work task o Cultural differences  High degree of bureaucracy = heavy reliance on higher authority, prefer formalized and specific rules, prefer formal relationships with others o Mechanistic structure  Low degree of bureaucracy = organic structure Traditional Organizational Designs The Simple Structure  Low degree of departmentalization  Wide spans of control  Authority centralized in one person  Little formalization  Flat organization – two or three vertical levels o Loose body of employees + 1 decision-making authority  Widely practiced in small businesses – manager and owner are same person  Strength of structure lies in its simplicity – fast, flexible, inexpensive to maintain and accountability is clear  Weakness: difficult to maintain in anything other than small orgs. o Tends to create info overload at top levels o Must change structure as organization starts to grow in size  otherwise decision making process will slow down significantly  lose momentum o Risky because it all depends on one person The Family Business  70% of Canadian employment, 30% of GDP  Have more complex dynamics than nonfamily businesses because of personal relations vs. management relations  Shareholders = family members  Must manage the conflicts found within families as well as the normal business issues  Needs good governance  helps family manage the conflicts that arise o Sense of direction o Values to live and work by o Well-understood and accepted policies for behavior o Plays key role in CEO succession  tricky because personal and emotional factors determine succession  Pressure to balance business needs and family needs
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