Management by hitt back porter CH07

Chapter 7
Organizational
Structure and
Design
PowerPoint slides by
R. Dennis Middlemist
Colorado State University


Learning Objectives
After studying this chapter, you should be
able to:

2



Explain the concepts of organizational structure and
design.



Explain the concepts of differentiation and
integration and their role in organizational structure
and design.

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Learning Objectives
After studying this chapter, you should be

able to:




3

Describe mechanisms used to achieve
differentiation and integration and balance these
two structural dimensions.
Identify the various structures used by organizations
and describe their strengths and weaknesses.

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Learning Objectives
After studying this chapter, you should be
able to:




4

List the environmental factors that influence
organizational structure.
Determine the appropriate organizational
structure for a firm given a set of internal and
external factors.

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Principles of Organizational
Structure
 Organizational structure

 The sum of ways an organization divides its

labor into distinct, coordinated tasks
 Organizational design

 Assessing the organization’s strategy and

environmental demands
 Determining the appropriate organizational
structure
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Principles of Organizational
Structure
 Organizational charts

 Illustration of relationships
 Units
 Lines of authority among supervisors and

subordinates
 Illustrated by use of labeled boxes and

connecting lines

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Suncor Energy
Organizational Structure
CEO

Executive Vice
President
Oil Sands

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Executive Vice
President
Marketing and
Refining

Executive Vice
President
Natural Gas and

Alternative Energy

Senior Vice
President
Major Projects

Adapted from Exhibit 7.1: Suncor Energy Organizational Structure


Differentiation
 Differentiation

 Division of tasks into subtasks that

are performed by individuals with
specialized skills
 Task differentiation
 Cognitive differentiation

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Integration
 Integration

 Facilitation of cooperation and interaction of

various parts of the organization

 Interdependence
 Pooled
 Sequential
 Reciprocal

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Appropriateness of Rules,
Goals, Values
Level of Appropriateness

High

Low
Low

High
Level of Interdependence
Level of Uncertainty

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Adapted from Exhibit 7.2: Appropriateness of Rules, Goals, Values

Formalization
 Formalization

 the official and defined structures and

systems in decision making, communication,
and control in an organization
 Line

of authority
 Unity of command
 Span of control

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Factors that Influence the
Span of Control
 Job complexity—Jobs that are complicated require more

managerial input and involvement and thus the span of control
tends to be narrower.
 Job similarity—If one manages a group of employees performing
similar jobs, the span of control can be considerably wider than if
the jobs of subordinates are substantially different.
 Geographic proximity of supervised employees—Because
employees who work in one location are more easily supervised
than employees in dispersed locations, physical proximity to

employees tends to allow a wider span of control.
 Amount of coordination—A narrower span of control is
advisable in firms where management expends much time
coordinating tasks performed by subordinates.
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Adapted from Exhibit 7.3: Factors that Influence the Span of Control


Factors that Influence the
Span of Control
 Abilities of employees—Supervisors who manage employees

who are more knowledgeable and capable can have a wider span
of control than supervisors managing less knowledgeable and
capable employees. The greater the abilities of employees, the
less managerial inputs are required and thus a wider span of
control is possible.
 Degree of employee empowerment—Because employees who
are trusted and empowered to make decisions need less
supervision than employees with less autonomy and decisionmaking discretion, supervisors who empower their employees can
have a wider span of control.
 Ability of management—More capable managers can manage
more employees than less competent managers. The abilities of
managers to educate employees and effectively respond to their
questions lessen the need for a narrow span of control.
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Adapted from Exhibit 7.3: Factors that Influence the Span of Control


Factors that Influence the
Span of Control
 Technology—Communication technology, such as mobile

phones, fax, e-mail, workshare software, can allow managers to
effectively supervise employees who are not geographically
proximate, have complex and different jobs, and require significant
coordination.

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Adapted from Exhibit 7.3: Factors that Influence the Span of Control


Exhibit Tall and Flat
Organizational Structures
Tall Organizational Structure

Levels = 4
Span of Control = 3
Total Employees = 40

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Adapted from Exhibit 7.4: Tall and Flat Organization Structures


Exhibit Tall and Flat
Organizational Structures
Flat
Structure
Tall Organizational Structure

Levels = 3
Span of Control = 7
Total Employees = 57

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Adapted from Exhibit 7.4: Tall and Flat Organization Structures


Informalization
 Informal organization

 Unofficial but influential means of
 Communication
 Decision making
 Control

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Centralization and
Decentralization
 Centralized organizations

 Restrict decision making to fewer individuals,

usually at the top of the organization
 Decentralized organizations

 Tend to push decision-making authority

down to the lowest level possible

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Combinations of Formal/Informal
and Centralized/Decentralized

Formal

Informal

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U. S. Military

Philips
Electronics

Mitsubishi

Club Med

Centralized

Decentralized

Adapted from Exhibit 7.5: Combinations of Formal/Informal and Centralized/Decentralized


Functional Structure
CEO

Vice President
Marketing

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Vice President

Sales

Vice President
Manufacturing

Market research

East region

Purchasing

Recruiting

Advertising

South region

Operations

Training

Promotion

West region

Logistics

Compensation

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Vice President
Human Resources

Adapted from Exhibit 7.6: Functional Structure


Functional Structure
Strengths
 Small to medium-sized
firms with limited product
diversification
 Specialization of
functional knowledge
 Less duplication of
functional resources
 Facilitates coordination
within functional areas
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Weaknesses
 Weak coordination across
functional groups
 Restricted view of overall
organizational goals
 Limits customer attention
 Slower response to
market changes

 Burdens chief executives
with decisions


Product Structure
CEO

Vice President
Product A

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Vice President
Product B

Vice President
Product C

Vice President
Product D

Marketing

Marketing

Marketing

Marketing

Operations

Operations

Operations

Operations

Sales

Sales

Sales

Sales

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Adapted from Exhibit 7.7: Product Structure


Product Structure
Strengths
 More focus on products
and customers
 Easier to evaluate
performance of the
product
 Product responsiveness
to market changes
 Less burden on the top

executive in making
operating decisions
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Weaknesses
 Duplication and lack of
economies of scale
 Problems for customers
purchasing across
multiple product groups
 Conflicts between
product group and
corporate objectives
 Conflict between product
groups


Division Structure
CEO

Vice President
Medical systems

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Vice President

Bioscience

Vice President
Clinical

Anesthesia

Labware

Vacutainer

Hypodermic

Cell biology

Diagnostics

Infusion

Immunology

Consulting

Adapted from Exhibit 7.8: Division Structure


Division Structure
Strengths
 Reduced functional
duplication

 Customer focus can
increase
 Cross-product
coordination is eased
 Cross-regional
coordination is often
eased
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Weaknesses
 Most appropriate only for
diversified, large
companies with many
products and product
families
 May inhibit cross-division
coordination
 Coordination difficulties
between division and
corporate objectives