Lec 15 Organizational Structure
What Is Organizational Structure?
In previous chapters, we examined organizational behaviour from the standpoint of individuals and
groups, and some of the processes that occur in organizations.
Another level of analysis involves looking at the organization as a whole.
The focus is the causes and consequences of organizational structure.
Organizational structure refers to how an organization’s individuals and groups are put together or
organized to accomplish work.
Organizational structure intervenes between goals and organizational accomplishments and thus
influences organizational effectiveness.
Structure affects how effectively and efficiently group effort is coordinated.
The Division and Coordination of Labour
Labour must be divided because individuals have physical and intellectual limitations.
There are two basic dimensions to the division of labour:
A vertical dimension
A horizontal dimension
Once labour is divided, it must be coordinated to achieve organizational effectiveness.
Vertical Division of Labour
The vertical division of labour is concerned primarily with apportioning authority for planning and
decision making – Who gets to tell whom what to do?
Key themes that underlie the vertical division of labour:
Autonomy and control
Autonomy and Control
The domain of decision making and authority is reduced as the number of levels in the hierarchy
Managers have less authority over fewer matters.
A flatter hierarchy pushes authority lower and involves people further down the hierarchy in more
As labour is progressively divided vertically, timely communication and coordination can become harder
As the number of levels in the hierarchy increases, filtering is more likely to occur.
Horizontal Division of Labour
The horizontal division of labour groups the basic tasks that must be performed into jobs and then into
Required workflow is the main basis for this division.
Organizations differ in the extent of horizontal division of labour. The horizontal division of labour suggests some specialization on the part of the workforce.
The increased specialization can promote efficiency.
Key themes that underlie the horizontal division of labour:
Suppose that an organization offers a product or service that consists of A work, B work, and C work.
What are the different ways in which the organization might structure these tasks?
What are the implications of each structure for the jobs involved and how they are coordinated?
The horizontal division of labour strongly affects job design and has profound implications for the
degree of coordination necessary.
It also has implications for the vertical division of labour and where control over work processes should
As organizations engage in increased horizontal division of labour, they usually become more and more
Differentiation is the tendency for managers in separate units, functions, or departments to differ in
terms of goals, time spans, and interpersonal styles.
Under high differentiation, various organizational units tend to operate more autonomously.\
A classic case of differentiation is that which often occurs between marketing managers and those in
research and development.
Differentiation is a natural and necessary consequence of the horizontal division of labour and points to
the need for coordination.
The assignment of jobs to departments is called departmentation.
It represents one of the core aspects of the horizontal division of labour.
There are several methods of departmentation and each has strengths and weaknesses.
Methods of departmentation:
1. Functional departmentation
2. Product departmentation
3. Matrix departmentation
4. Geographic departmentation
5. Customer departmentation
6. Hybrid departmentation Functional Departmentation
Employees with closely related skills and responsibilities (functions) are assigned to the same
Employees are grouped according to the kind of resources they contribute to achieving the overall goals
of the organization.
What are the advantages and disadvantages of functional departmentation?
The advantages of functional departmentation:
Enhanced career ladders and training opportunities.
Easier to measure and evaluate performance.
The disadvantages of functional departmentation:
A high degree of differentiation between functional departments.
Poor coordination and slow response to organizational problems.
Conflict between departments.
Department empires built at expense of organizational goals.
Departments are formed on the basis of a particular product, product line, or service.
Each of these departments can operate fairly autonomously because it has its own set of functional
specialists dedicated to the output of that department.
What are the advantages and disadvantages of product departmentation?
The advantages of product departmentation:
Better coordination and communication among functional specialists who work on a particular
Departments can be evaluated as profit centres.
Serves the customer or client better; more timely response to customers.
The disadvantages of product departmentation:
Professional development might suffer.
Economies of scale might suffer.
Inefficiency might occur.
Departments might work at cross purposes.
An attempt to capitalize on the strengths of both functional and product departmentation.
Employees remain members of a functional department while also reporting to a product or project
manager Variations exist but most boil down to what exactly gets crossed with functional areas to form the
matrix and the degree of stability of the matrix relationships.
Besides products, a matrix could be based on geographic regions or projects.
Integrating business in multiple geographic regions is a common stimulus for the matrix design.
Matrix Departmentation (continued)
The advantages of matrix departmentation:
Provides balance between the demands of the product or project and the people who do the
Better communication among the representatives from the various functional areas.
The disadvantages of matrix departmentation:
Conflict between product or project managers and functional managers.
Role conflict and stress because employees must report to a functional manager as well as a
product or project manager.
Managers need to be well trained under matrix structures.
There may be some cultural limitations to the matrix design.
Relatively self-contained units deliver an organization’s products or services in a specific geographic
The advantages of geographic departmentation:
Shortens communication channels.
Caters to regional tastes.
Some local control to clients and customers.
The disadvantages are similar to those for production departmentation.
Relatively self-contained units deliver an organization’s products or services to specific customer groups.
The goal is to provide better service to each customer through specialization.
The advantages and disadvantages parallel those for product departmentation.
A structure based on some mixture of functional, product, geographic, or customer departmentation.
Hybrids attempt to capitalize on the strengths of various structures, while avoiding the weaknesses of
Basic Methods of Coordinating Divided Labour
When the tasks that will help the organization achieve its goals have been divided among individuals
and departments, they must be coordinated.
Coordination is a process of facilitating timing, communication, and feedback among work tasks. There are five basic methods of coordination:
1. Direct Supervision
2. Standardization of Work Processes
3. Standardization of Outputs
4. Standardization of Skills
5. Mutual Adjustment
Working through the chain of command, designated supervisors or managers coordinate the work of
This method of coordination is closely associated with leadership.
Standardization of Work Processes
Some jobs are so routine that the technology itself provides a means of coordination.
Little direct supervision is necessary for these jobs to be coordinated.
Work processes can also be standardized by rules and regulations.
Standardization of Outputs
Ensuring that the work meets certain physical or economic standards.
Standardization of outputs is often used to coordinate the work of separate product or geographic
Budgets are a form of standardizing outputs.
Standardization of Skills
This is very common in the case of technicians and profe