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Chapter 3

Chapter 3 BU398.docx

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Wilfrid Laurier University
Shawn Komar

BU398 Chapter 3 – Fundamentals of Organizational Structure Week 2/3 Organizational Structure -Three key components in the definition of organizational structure: 1. Organizational structure designates formal reporting relationships, including the number of levels in the hierarchy and the span of control of managers and supervisors 2. Organizational structure identifies the grouping together of individuals into departments and of departments into the total organization 3. Organizational structure includes the design of systems to ensure effective communication, coordination, and integration of efforts across departments -Pertains to both vertical and horizontal aspects of organizing -Reflected in the organization chart – Ex. City of Orillia job organization chart -An organization chart is the visual representation of a whole set of underlying activities and processes in an organization at a particular point in time -Over the years, organizations have developed other structural designs, many aimed at increasing horizontal coordination and communication and encouraging adaptation to external changes Information-Processing Perspective on Structure -The organization should be designed to provide both vertical and horizontal information flow as necessary to accomplish the organization’s overall goals -While vertical linkages are designed primarily for control, horizontal linkages are designed for coordination and collaboration, which usually means reducing control -Organizations can choose whether to orient toward a more traditional organization designed for efficiency, which emphasizes vertical communication and control, or toward a more contemporary learning organization, which emphasizes horizontal communication and coordination -Emphasis on learning is associated with shared tasks, a horizontal hierarchy, few rules, face- to-face communication, many teams and task forces, and informal decentralized decision making -Decentralized – means decision making authority is pushed down to lower organizational levels Vertical Information Linkages -Vertical linkages – used to coordinate activities between the top and bottom of an organization and are designed primarily for control of the organization Hierarchical Referral -If a problem arises that employees don’t know how to solve, it can be referred up to the next level in the hierarchy -When the problem is solved, the answer is passed back down to lower levels Rules and Plans -Rules provide a standard information source enabling employees to be coordinated without actually communicating about every task -A plan also provides standing information for employees Vertical Information Systems -Include the periodic reports, written information, and computer-based communications distributed to managers Horizontal Information Linkages -Horizontal linkage – refers to the amount of communication and coordination horizontally across organizational departments -Often not drawn on the organization chart, but nevertheless are part of organizational structure BU398 Chapter 3 – Fundamentals of Organizational Structure Week 2/3 Information Systems -Computerized information systems can enable managers or front-line workers throughout the organization to routinely exchange information about problems, opportunities, activities or decisions -Some organizations encourage employees to use the company’s information systems to build relationships all across the organization, aiming to support and enhance ongoing horizontal coordination across projects and geographical boundaries Direct Contact -Liaison role – has the responsibility for communicating and achieving coordination with another department Task Forces -When linkage involves several departments, a more complex device such as a task force is required -Task force – a temporary committee composed of representatives from each organizational unit affected by a problem -Solve problems by direct horizontal coordination and reduce the information load on the vertical hierarchy -Disbanded after their task is accomplished Full-time Integrator -Integrator – located outside the departments and has the responsibility for coordinating several departments -Can also be responsible for an innovation or change project, such as coordinating the design, financing, and marketing of a new product -Integrators need excellent people skills -Have a lot of responsibility but little authority Teams -Teams – permanent task forces and are often used in conjunction with a full-time integrator -When activities among departments require strong coordination over a long period of time, a cross-functional team is often the solution -Virtual cross-functional teams – made up of members from various countries -Virtual team – one that is made up of organizationally or geographically dispersed members who are linked primarily through advanced information and communications technologies Organizational Design Alternatives -Required work activities reporting relationships, and departmental grouping options Required Work Activities -Departments are created to perform tasks considered strategically important to the company -As organizations grow larger and more complex, more and more functions need to be performed Reporting Relationships -Once required work activities and departments are defined, the next question is how these activities and departments should fit together in the organizational hierarchy -Reporting relationships are represented by vertical lines on an organization chart Departmental Grouping Options -Departmental grouping - a structure in which employees share a common supervisor and resources, are jointly responsible for performance, and tend to identify and collaborate with BU398 Chapter 3 – Fundamentals of Organizational Structure Week 2/3 each other -Functional grouping – the placing together of employees who perform similar functions or work processes or who bring similar knowledge and skills to bear on a task -Divisional grouping - a grouping in which people are organized according to what the organization produces -Multifocused grouping – a structure in which an organization embraces structural grouping alternatives simultaneously -Horizontal grouping – the organizing of employees around core work processes rather than by function, product, or geography -Virtual network grouping – organization that is a loosely connected cluster of separate components Functional, Divisional, and Geographical Designs Strengths/Weaknesses Functional Structure -Strengths: -Allows economies of scale within functional departments -Enables in-depth knowledge and skill development -Enables organization to accomplish functional goals -Is best with only one or a few products -Weaknesses: -Slow response time to environmental changes -May cause decisions to pile up, hierarchy overload -Leads to poor horizontal coordination among departments -Results in less innovation -Involves restricted view of organizational goals Divisional Structure -Strengths: -Suited to fast change in unstable environment -Leads to customer satisfaction because product responsibility and contact points are clear -Involves high coordination across functions -Allows units to adapt to differences in products, regions, customers -Best in large organizations with several products -Decentralizes decision making -Weaknesses: -Eliminates economies of scale in functional departments -Leads to poor coordination across product lines -Eliminates in-depth competence and technical specialization -Makes integration and standardization across product lines difficult Geographical Structure -Grouping based on regions within a company -Strengths and weaknesses are the same as divisional structure Matrix Structure -Matrix structure – a strong form of horizontal linkage in which both product and functional structures (horizontal and vertical) are implemented simultaneously -Often the answer when organizations find that functional, divisional, and geographical structures combined with horizontal linkage mechanisms will not work -Strong form of horizontal linkage -Both product division and functional structures are implemented simultaneou
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