Chapter 14 Organizational Structure
1. What is organizational structure?
Organizational structure: The manner in which an organization divides its labor into specific tasks and
achieves coordination among these tasks.
2. The division and coordination of labor:
Vertical division of labor: It is concerned with apportioning authority for planning and decision making.
(Who gets to tell whom what to do?)
Autonomy and control: Holding other factors constant, the domain of decision making and authority is
reduced as the number of levels in the hierarchy increases.
Communication: Coordination between levels. As labor is progressively divided vertically, timely
communication and coordination can become harder to achieve.
Horizontal division of labor: It groups the basic tasks that must be performed into jobs and then into
departments so that the organization can achieve its goals. Required workflow is the main basis for this
division. (Work specialization)
Job design: Horizontal division of labor strongly affects job design; it has profound implications for the
degree of coordination necessary; control over work processes should logically reside (implication for
Differentiation: 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. (Need coordination)
Departmentation: (Several methods of departmentation)
Functional departmentation: Employees with closely related skills and responsibilities are assigned to
the same department.
----Advantage: efficiency (less duplication); communication within departments should be enhanced; career
ladders and training opportunities within the function are enhanced because all parties will share the same
view of career progression; easier to measure and evaluate the performance of functional specialties when they
are all located in the same department.
----Disadvantage: A high degree of differentiation can occur between functional departments. (Poor
coordination or slow response, open conflict)
Product departmentation: Departments are formed on the basis of a particular product, product line, or
----Advantages: Better coordination among the functional specialists who work on a particular product line;
flexibility, products line can be added or deleted without great implication for the rest of the organization;
product-focused departments can be evaluated as profit centers since they have independent control over costs
and revenues; product departmentation often serves the customer or client better (respond customers in a timely
----Disadvantage: Professional development might suffer without a critical mass of professionals working in
the same place at the same time; economies of scale might be threatened and inefficiency might occur if
relatively autonomous product-oriented departments are not coordinated. (Work at cross purposes)
Matrix departmentation: Employees remain members of a functional department while also reporting to
a product or project manager. (Functional & product departmentation)
----There are many variations on matrix design. (Geographical regions or projects, shorter-term projects)
----Advantages: It provides a degree of balance between the abstract demands of the product or project and the
people who actually do the work, resulting in a better outcome; flexible; being focused on a particular product
or project can lead to better communication among the representative from the various functional areas.
----Disadvantage: No guarantee that product or project managers will see eye-to-eye with various functional
managers. This can create conflict; employees assigned to a product or project team repot to two managers, it
can result in role conflict and stress.
Other forms of deparmentation:
Geographic departmentation: Relatively self-contained units deliver an organization’s products or services in
a specific geographic territory.
----It shortens communication channels, allows the organization to cater to regional tastes, and gives some
appearance of local control to clients and customers.
Customer departmentation: Relatively self-contained units deliver an organization’s products or services to
specific customer groups.
Hybrid departmentation: A structured based on some mixture of functional, product, geographic, or
----Capitalize on the strengths of various structures and avoiding the weaknesses of others.
Basic methods of coordinating divided labor:
Coordination: A process of facilitating timing, communication, and feedback among work tasks.
Direct supervision: Working though the chain of command, designated supervisors or managers coordinate
the work of their subordinates.
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 be
standardized by rules and regulations.
Standardization of outputs: To ensure that the work meets certain physical or economic standards. It is
often used to coordinate the work of separate product or geographic divisions. Top management assigns
each division a profit target.
Standardization of skills: This is common in the case of technicians and professionals. Minimal verbal
communication is required because of its high degree of standard training.
Mutual adjustment: Mutual adjustment relies on informal communication to coordinate tasks. It is useful
for coordinating the most simple and the most complicated divisions of labor. People in these jobs are
preoccupied with very nonroutine problems, so standardization would be impossible.
----The methods can be crudely ordered in terms of the degree of discretion they permit in terms of task
performance. (Direct supervision – Standardization of outputs – Mutual adjustment)
----As we move from the left side to the right side, there is greater potential for jobs to be designed in an
enriched manner. An improper coordination strategy can destroy the intrinsic motivation of a job. (The method
of coordination affects the design of jobs)
----The use of methods of coordination tends to vary across different parts of the organization. These
differences in coordination stem from the way labor has been divided.
----Methods of coordination may change as task demands change.
Organizational structure: the manner in which an organization divides its labor into specific tasks and achieves coordination among these tasks. vertical division of labor: it is concerned with apportioning authority for planning and decision making. (who gets to tell whom what to do?) autonomy and control: holding other factors constant, the domain of decision making and authority is reduced as the number of levels in the hierarchy increases. As labor is progressively divided vertically, timely communication and coordination can become harder to achieve. horizontal division of labor: it groups the basic tasks that must be performed into jobs and then into departments so that the organization can achieve its goals. Required workflow is the main basis for this division. (work specialization) Job design: horizontal division of labor strongly affects job design; it has profound implications for the degree of coordination necessary; control over work processes should logically reside (implication for vertical division)