Organization

Structure

Chapter Eight

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 Learning Objectives
LO 1 Explain how differentiation and integration
influence an organization’s structure.
LO 2 Summarize how authority operates.
LO 3 Define the roles of the board of directors and
the chief executive officer.
LO 4 Discuss how span of control affects structure
and managerial effectiveness.
LO 5 Explain how to delegate effectively.

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 Learning Objectives (cont.)
LO 6 Distinguish between centralized and
decentralized organizations.
LO 7 Summarize the ways organizations can be
structured.
LO 8 Identify the unique challenges of the matrix
organization.
LO 9 Describe important integrative mechanisms.

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 Fundamentals of Organizing

 Organization chart
 The reporting
structure and
division of labor in an
organization

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 Conventional Organization Chart
Figure 8.1

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 Fundamentals of Organizing

 Differentiation  Integration
 the organization is  degree to which
composed of many differentiated work
different units that units work together
work on different and coordinate their
kinds of tasks, using efforts
different skills and
work methods.

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 Differentiation

 Division of labor  Specialization

 The assignment of  A process in which
different tasks to different individuals
different people or and units perform
groups different tasks

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 Integration

Coordination
 The procedures that link the various parts of an
organization for the purpose of achieving the
organization’s overall mission

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 Authority in Organizations

 Authority
 The legitimate right
to make decisions
and to tell other
people what to do.

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 Authority in Organizations
Board of Directors - a body of
elected or appointed members
who jointly oversee the activities
of a company
Chief Executive Officer –
Managing Director
Top Management Team – Senior
Management Team e.g. Senior
Managers 8-10
 Hierarchical Levels

Hierarchy
 The authority levels of the organizational
pyramid
Corporate governance
 The role of a corporation’s executive staff and
board of directors in ensuring that the firm’s
activities meet the goals of the firm’s
stakeholders

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 Span of Control

Span of control
 The number of subordinates who report directly
to an executive or supervisor

Tall, flat

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 Tall and Flat Organizations
Tall structures have many levels of authority
and narrow spans of control.
– As hierarchy levels increase, communication gets
difficult creating delays in the time being taken to
implement decisions.
– Communications can also become distorted as it is
repeated through the firm.
– Can become expensive
Tall Organizations
 Tall and Flat Organizations
Flat structures have fewer levels and wide
spans of control.
– Structure results in quick communications but can
lead to overworked managers.
 Question

What is the assignment of new or additional

responsibilities to a subordinate?

A. Subordination
B. Delegation
C. Designation
D. Allocation

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 Delegation

Delegation
 The assignment of new or additional
responsibilities to a subordinate
Responsibility, Authority,
and Accountability

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 Delegation

Responsibility
 The assignment of a task that an employee is
supposed to carry out
Accountability
 The expectation that employees will perform a
job, take corrective action when necessary, and
report upward on the status and quality of their
performance

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 Advantages of Delegation
 Leverages managers’ energy and talent
 Allows managers to accomplish more than they
could on their own
 Helps develop effective subordinates.
 Promotes a sense of being an important,
contributing member of the organization, so
employees tend to feel a stronger commitment,
perform their tasks better, and engage in more
innovation
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 Steps in Effective Delegation
Figure 8.2

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 Decentralization

 Centralized  Decentralized
organization organization
 An organization in  An organization in
which high-level which lower-level
executives make managers make
most decisions and important decisions
pass them down to
lower levels for
implementation

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 The Horizontal Structure

 Line departments  Staff departments

 Units that deal  Units that support
directly with the line departments
organization’s  E.g. HR, Marketing,
primary goods and Accounting depts
services
 E.g. Production &
customer service

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 The Functional Organization

 Functional
organization
 Departmentalization
around specialized
activities such as
production,
marketing, and
human resources.

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 The Functional Organization
Figure 8.3

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 Advantages of Functional
Organizations
1. Economies of scale can be realized
2. Monitoring of the environment is more effective
3. Performance standards better maintained
4. Greater opportunity for specialized training and skill
development
5. People have greater opportunity for specialized
training and in-depth skill Development
6. Decision making and lines of communication are
simple and clearly understood
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 The Divisional Organization

 Divisional
organization
 Departmentalization
that groups units
around products,
customers, or
geographic regions.

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The Divisional Organization

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 Class Activity

Draw a simple organisational divisional layout

for TAR UC
Which divisional structure is TAR UC using?
Name one example of geographic division.
Name one example of product division.
Name one example of customer division.

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© 2014 by McGraw-Hill Education. 28
 The Matrix Organization

Matrix organization
 An organization composed of dual reporting
relationships in which some managers report to
two superiors—a functional manager and a
divisional manager

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 Matrix Organizational Structure
Figure 8.5

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 Advantages of a Matrix Design
Table 8.2

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 Disadvantages of a Matrix Design
Table 8.2

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Product Team Structure
 Advantages of the
Product Approach (Product Team)
1. Information needs are managed more easily
2. People have a full-time commitment to a
particular product line
3. Task responsibilities are clear
4. People receive broader training

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 The Network Organization

Network organization
 A collection of independent, mostly single-
function firms that collaborate on a good or
service

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 A Network Organization
Figure 8.7

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 The Network Organization

 Dynamic network  Broker

 Temporary  A person who
arrangements among assembles and
partners that can be coordinates
assembled and participants in a
reassembled to network
adapt to the
environment

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 Question

___________ is establishing common routines

and procedures that apply uniformly to
everyone.
A. Coordination by standardization
B. Coordination by plan
C. Coordination by mutual adjustment
D. Coordination by service

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 Coordination by Standardization

 Standardization  Formalization
 Establishing common  The presence of rules
routines and and regulations
procedures that governing how
apply uniformly to people in the
everyone. organization interact.
 E.g. dress code,
attendance etc

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 Coordination by Plan

Coordination by plan
 Interdependent units are required to meet
deadlines and objectives that contribute to a
common goal e.g. authors, editors and marketing
staff working for a text book plan, they need to
meet deadlines and reach common goals

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 Coordination by Mutual Adjustment

 Coordination by
mutual adjustment
 Units interact with
one another to make
accommodations to
achieve flexible
coordination

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 Reducing the Need for Information
 Slack resources  Creating self-contained
 extra resources on which
organizations can rely in
a pinch so that if they
get caught off guard,
they can still adjust.
 Extra resources (i.e.
information) are like
stocks/inventory, they
are not used unless
needed
tasks
 changing from a
functional organization
to a product or project
organization and giving
each unit the resources
it needs to perform its
task
 i.e. information needed
is based on the
product/project
therefore reducing extra
info
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 Increasing Information-Processing
Capability
1. Direct contact among managers who share a problem
2. Liaison roles to handle communication between two
departments
3. Task forces brought together temporarily to solve a
common problem
4. Teams, or permanent interdepartmental decision-
making groups (horizontal)
5. Product, program, or project managers –coordination
role
6. Matrix organizations
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 Managing High Information-
Processing Demands
Figure 8.8

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