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The aim of this lecture is to
¾ Explore organizational structure.
¾ Explore job design.
¾ Explore departmentalization.
¾ Discuss methods of coordination.
¾ Discuss issues with examples.
For reference:
ZAMAROS, PANAYOTIS (2006), ‘Organizational Structure’, online course lecture extracted from PANAYOTIS
ZAMAROS, Transnational Business Analysis – Workbook, 2nd ed., Lausanne: P. Zamaros, The DrZ Network,
http://www.zamaros.net, date of access.
_________________________________________
A The Nature of Organizational Structure
1 Organizational structure can be seen as the formal pattern of interactions and
coordination designed by management to link the tasks of individuals and groups in
achieving organizational goals.
2 Organizational structure consists mainly of four elements1:
¾ The assignment of tasks and responsibilities that define the jobs of individuals and
units.
¾ The clustering of individual positions into units, of units into departments and larger
units to form an organization’s hierarchy.
¾ The various mechanisms required to facilitate vertical coordination, such as
reporting lines and the degree of delegation of authority.
¾ The various mechanisms needed to foster horizontal coordination such as task forces
and inter departmental teams.
3 The process of developing an organization structure is referred to as organization design2
whose usual representation tool is the organizational chart, a line diagram that depicts
the broad outline of an organization’s structure. Such charts are useful in providing a
visual map of the chain of command i.e. the unbroken line of authority that ultimately
1
Hannagan, 1998.
2
Ball et al., 2004.
ORGANIZATIONAL STRUCTURE
links each individual with the top organizational position through a managerial position
at each successive layer in between.
4 While there is an important connection between strategy and organization structure, the
effectiveness of a particular type of structure is also influenced by certain contingency
factors such as the dominant type of technology used or the organization’s size. Iin
addition, structural methods for promoting innovation can facilitate strategic
implementation and the attainment of strategic organizational goals. Thus if the strategy
is to be or become a global business organization, the structure must be adapted
accordingly.
B Job Design
5 Job design refers to the specification of task activities associated with a particular job3.
6 Different jobs involve different activities, which reflect work specialization i.e. the degree
to which the work necessary to achieve organizational goals is broken down into various
jobs, because it is impossible for each member to have the entire range of skills necessary
to run an organization. Hence the importance of job designs to group activities so as to
maximize work effectiveness, efficiency and economy.
7 Job design is approached in the following ways4:
¾ Job simplification: the process of configuring jobs so that jobholders have only a
small number of narrow activities to perform (scientific management: Taylor). The
jobs involved are simple repetitive tasks where workers are mostly interchangeable,
which makes training relatively easy but does not seem to be conducive to employee
motivation.
¾ Job rotation: the practice of periodically shifting workers through a set of jobs in a
planed sequence. It is often aimed at reducing the boredom of repetitive tasks and to
perform the cross training of workers. It is a successful development tool to increase
employee capabilities, expand job assignment flexibility, and enhance understanding
of the various aspects of the organization as it tends to lead to promotions, better pay
and other career benefits.
¾ Job enlargement: the allocation of a wider variety of similar tasks to a job in order to
make it more challenging. It broadens job scope, the number of different tasks an
3
Baron & Kreps, 1999.
4
Hannagan, 1998.
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employee performs in a particular job but has had limited success in motivating
employees because it does not provide sufficient challenge and stimulation.
¾ Job enrichment: the process of upgrading the job‐task mix in order to increase
significantly the potential for growth, achievement, responsibility and recognition. It
increases job depth – the degree in which individuals can control the work involved
in their jobs around core job considerations.
8 The core job considerations include5:
→ Skill variety: the extent to which the job entails a number of activities that require
different skills.
→ Task identity: the degree to which the job allows the completion of major
identifiable piece of work, rather than just a fragment.
→ Task significance: the extent to which the worker sees the job output has having
an important impact on the others.
→ Autonomy: the amount of discretion allowed in determining schedules and work
methods for achieving the required output.
→ Feedback: the degree to which the job provides for clear, timely information
about performance results.
9 The motivational value of an enriched job stems from three critical psychological states:
→ Feeling the work is meaningful.
→ Knowing that they are responsible for the outcomes.
→ Actually finding out about the results.
10 These states have the following outcomes:
→ Higher internal work motivation.
→ Greater satisfaction of growth needs.
→ Higher general job satisfaction.
→ Increased work effectiveness.
11 Individuals are more likely to feel motivated by job changes if they have the knowledge
and skills to perform well in the redesigned job, if they have growth‐need strength – the
degree to which an individual needs personal growth and development on the job – and
if they are satisfied with other aspects of the job (pay, supervision, co‐workers, job
security.
5
Ibid.
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C Types of Departmentalization
12 Departmentalization refers to the clustering of individuals into units and of units into
departments and larger units in order to facilitate achieving organizational goals.
13 The most commonly used departmentalization patterns are6:
¾ Functional structure: groups positions into units on the basis of similar expertise,
skills and work activities. Functions include several specialties are commonly
associated with functional structures in business organizations (production or
operations, marketing, human resources, finance, research and development,
accounting, legal). An organization developing a functional structure must consider
the specialized areas that are relevant to its own needs.
Uses: the functional form of departmentalization is most used in small and medium
size organizations that are too large to coordinate their activities without some type
of formal structure but are not so large as to make coordination across functions
difficult. It may also be useful in large or more diverse organizations that normally
operate in a relatively stable environment in which change occurs at a slow rate for
the various functions to coordinate their efforts. It is also chosen by large
organizations when considerable coordination is required among products.
¾ Divisional structure: groups positions into units according to the similarity of
products or markets. Divisions include products divisions (created to concentrate on
a single product or service or at least a relatively homogeneous set of products or
services), geographic divisions (divisions created to serve different geographic areas)
and customer divisions (created to service particular types of clients or customers).
Uses: divisional structures are likely to be used in fairly large organizations in which
there is substantial difference among the product or service, the geographical area or
the customers served. It is sometimes not feasible to organize into self contained
units if the nature of the organization makes it necessary to share common resources,
such as expensive manufacturing equipment.
¾ Hybrid structure: combines aspects of both of the above.
Uses: hybrid structures tend to be used in organizations that face considerable
environment uncertainty that can best be met through divisional structure, but also
require functional expertise and/or efficiency. They are reserved to medium size to
large organizations that have sufficient resources to justify divisions as well as some
functional departmentalization.
¾ Matrix structure: superimposes a horizontal set of divisional reporting relationships
onto a hierarchical functional structure.
6
Hannagan, 1998; Ball et al., 2004.
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Uses: matrix structures tend to be used in organizations where there are numerous
areas of responsibility.
14 Multinational corporations typically use a hybrid structure with the exception of high
tech firms that use the matrix structure.
D Methods of Vertical Coordination
15 Vertical coordination refers to the linking of activities at the top of the organization with
those at the middle and lower levels in order to achieve organizational goals.
16 Six particularly important means of achieving effective vertical coordination are7:
¾ Formalization: the degree to which written policies, rules, procedures, job
descriptions, and other documents specify what actions are (or are not) to be taken
under a certain set of circumstances. It helps vertical coordination by specifying
expected behaviors in advance; most organizations rely on at least some means of
formalization; a disadvantage is that extensive rules and procedures can discourage
change and innovation.
¾ Span of management or span of control: the number of subordinates who report
directly to a specific Manager. It is very important to vertical coordination because it
has a direct bearing on the degree to which managers can interact with and supervise
subordinates; factors influencing the widening of the span of control include:
→ Low interaction requirements: when employees are able to operate without
frequent interaction with each other or with their superiors, managers can
supervise more individuals.
→ High competence levels: high job related skills and abilities make it possible to
handle more employees.
→ Work similarity: when employees do similar work, it is easier for managers to
maintain adequate supervision than when tasks vary widely.
→ Low problem frequency and seriousness: when problems, and particularly
serious ones, are less frequent there is less need for managerial attention.
→ Physical proximity: when the employees are located within close proximity from
one another the managers can coordinate activities more easily.
→ Few non supervisory duties of manager: when managers have few non
supervisory duties to perform, such as doing part of the subordinate’s work.
→ Considerable available assistance: when they have assistant or secretarial
support, managers can supervise more employees.
7
Hannagan, 1998.
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→ High motivational possibilities of work: when the work itself offers a high
challenge, employees are more likely to increase their performance levels,
because of opportunities to exercise discretion, making it less necessary for
continual managerial involvement.
¾ Levels in the hierarchy: span of management for various managerial positions
directly influence the number of hierarchical levels in the organization. A tall
structure has many hierarchical levels and narrow span of control; a flat structure has
few hierarchical levels and wide span of control. Very tall organizations raise
administrative overheads, slow communication and decision making, make it more
difficult to pinpoint responsibility, and encourage routine jobs. All structures can
change by downsizing and restructuring.
¾ Centralization: the extent to which power and authority are retained at the top
organizational levels. The extent of decentralization affects vertical coordination by
influencing the amount of decision making at the upper and lower levels;
centralization promotes strong leadership.
¾ Decentralization: the extent to which power and authority are delegated to lower
levels; among the advantages of decentralization includes encouraging decision
making at lower levels, thus freeing executives to focus on major issues, enriching
jobs of lower level employees, and faster decision making at lower levels. It very
often leads to the establishment of relatively independent units.
¾ Delegation: the assignment of part of a manager’s work to others, along with both the
authority and responsibility necessary to achieve expected results; delegation is
important to vertical coordination because it allows the hierarchy to be more efficient
and more effective by enabling work to be done at the lowest possible level. It
facilitates subordinates’ development.
Reference:
BALL, DONALD et al. (2004), International Business: the Challenge of Global Competition, 9th edition, New York: McGraw‐
Hill
BARON, JAMES & KREPS, DAVID (1999), Strategic Human Resources: Frameworks for General Managers, New York:
John Wiley & Sons
HANNAGAN, TIM (1998), ‘Management Control’, in TIM HANNAGAN, Management: Concepts and Practices, 2nd edition,
London: FT‐Pitman Publishing
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