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Chapter 14


Management (MGH)
Course Code
Samantha Montes

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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
Interest: causes and consequences of organizational structure
How an organizations indiv and groups are put together or organized to accomplish work
To achieve goals, organizations must: 1. Divide labour among members; 2. Coordinate what
has been divided
Contemporary Organization Design
Current Challenges
oGlobal competition
oEthics and social responsibility
oSpeed of responsiveness
oThe digital workplace
The Division and Coordination of Labour
Labour must be divided b/c indiv have physical and intellectual limitations
1. Vertical dimensions
2. Horizontal dimensions
Vertical Division of Labour
Primarily w/ apportioning authority for planning and decision making-who does what
Vice Presidents
Middle Managers
Autonomy and Control
The domain of decision making and authority is reduced as the number of levels in the
hierarchy increases
Managers have less authority over fewer matters
A flatter hierarchy pushes authority lower and involves people further down the hierarchy in
more decisions
As labour is divided vertically. Timely communication and coordination become harder to
As number of levels in the hierarchy increases, filtering is more likely to occur
Horizontal Division of Labour

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As organization grows, horizontal division of labour is more likely, w/ diff employees assigned
to perform each of these tasks
Horizontal division suggests some specialization on the part of the workforce
Increased specialization can promote efficiency
Job Design
Form ABC department in which all workers do ABC work
oProvides enriched jobs which workers can coordinate their A, B, and C work
oReduces the need for supervision and allows for self managed teams
oRequires highly trained workers, could be impossible if A, B and C work are complex
specialties that requires ie. Engineering, accounting and legal skills
Form ABC department which workers specialize in A, B, or C work
oIncreased horizontal division of labour in which employees specialize in tasks and in
which coordination of A, B and C work becomes more critical
oCoordination must be handled by properly designing the head of the departments job
Form separate A, B, and C department
oThe greatest horizontal division of labour b/c A, B C are performed in separate
oProvides great control and accountability for the separate tasks
oSuggests that someone above the department heads will have to get involved in
Horizontal division of labour strongly affects job design
Has profound implications for the degree of coordination necessary
Implications for vertical division of labour and where control over work processes should
logically reside
Differentiation-the tendency for managers in separate units, functions, or departments to
differ in terms of goals, time spans and interpersonal styles
Managers would often develop their own distinct psychological orientations towards the
organization and its products or services
Ie: problems with marketing and research and development
The assignment of jobs to departments
A core aspect of horizontal division of labour
Functional Departmentation
Functional departmentation-employees with closely related skills and responsibilities are
assigned to the same department
Ie. Those w/ skills in sales and advertising are assigned to the marketing department
Employees are groups according to the kind of resources they contribute to achieving the
overall goals of the organization
Work best in small to medium sized firms that offer few product lines or services
Effective for organizing smaller divisions of large corporations
When scale gets bigger and the output of organization gets more complex, more firms
gravitate towards product departmentation
oEFFICIENCY ie. When all the engineers are located in one department rather than
scattered through the org, it is easier to be sure that they are either overloaded nor
underloaded w/ work

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oSupport factors: reference books, specialized software and laboratory spaces can be
allocated more efficiently w/ less duplication
oCommunication: enhanced communication b/c everyone speaks the same language
oCareer ladders and training opportunities within the function enhanced b/c all parties
share same view of career progression
oEasier to measure and evaluate performance of functional specialists when they are
located in same department
Disadvantages-mostly stem from specialization w/I departments that occurs in the functional
oHigh degree of DIFFERENTIATION b/t departments
oLead to poor coordination
oSlow response to organizational problems
oConflict b/t departments
oNeeds of clients and customers ignored
Product Departmentation
Product departmentation-departments are formed on te basis of a particular product,
product line or service
Each departments operate fairly autonomously b/c it has its own set of functional specialists
dedicated to the output of that department
Ie. Shampoo division; cosmetic division, each with its own staff of production people,
marketers, R&D
oBetter coordination among functional specialists who work on a particular product
line b/c their attentions are focused on one product and have fewer functional peers
oFlexibility, since product lines can be added or deleted w/o great implications for the
rest of the organization
oCan be evaluated as profit centres since they have independent control over costs and
Matrix Departmentation
Matrix departmentation-attempt to capitalize simultaneously 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
very flexibleppl can be moved around as project flow dictates
being focused on a particular product or project lead to better communication among the
representatives from various functional areas
ideally, it provides a degree of balance b/t the abstract demands of the product or project and
the people who actually do the work, resulting in better outcome
Problems could arise when product or project managers do not see eye-to-eye with various
functional managers and because employees assigned to a product or project team in essence
report to a functional manager as well as a product or project manager
Ideals provides a balance b/t the abstract demands of the product or project and the people
who actually do the workbetter outcome
Ppl can move around as project flow dictates
oNo guarantee that project/project managers will see eye to eye wit various functional
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