Basic Elements of Organization Structure

1. LECTURE # 3 & 4 Chapter 9 – Basic Elements of Organization Structure

2. Nature of Organization Structure • If an Organization wishes to survive it should develop a reasonable effective organization structure. • Organizing is important to managers because this way they would be able to match their work with resources so plans and decisions can be made and effectively carried out.

3. Organization Structure & its elements An organizational structure is a hierarchical concept commonly visualized as an orderly system of objects and sub-objects collectively working toward an ultimate goal. 4 elements: • Assignment of tasks and responsibilities defining jobs of individuals and units. • Clustering individual positions into units and further into departments and larger units to form an organization’s hierarchy.

4. Various mechanisms facilitating vertical (top to bottom) co-ordination. • Various mechanisms fostering horizontal (across departments) co-ordination.

5. Organization Design: process of developing an organization structure. • Organization Chart: line diagram showing the broad outlines of an organization’s structure. • Chain of command: unbroken line of authority linking each individual with the top organizational position through a managerial position at each successive layer in between.

6. Departmental Organization Chart

7. Job Design • Work specialization: degree to which work necessary to achieve organizational goals is broken down into various jobs. • Job Design: specification of task activities associated with a particular job. Job design is essential for 2 reasons: • Task activities must be grouped logically. • Jobs should be designed properly.

8. Approaches to Job Design • Job simplification: process of configuring jobs so that each employee has small number of activities to perform. • Job rotation: process of temporarily shifting employees through a set of jobs in a planned sequence.

9. Job enlargement: is the allocation of a wider range of similar tasks to a job in order to make it more challenging. • Job scope: number of different tasks an employee performs in a particular job.

10. Job enrichment: process of up-grading the job-task mix to increase potential for growth, achievement, responsibility and recognition.

11. 5 core job charactertics: • Skill variety: extent to which job involves a number of activities requiring different skills. • Task identity: degree to which job allows completion of a major piece of work. • Task significance: extent to which a worker sees job output as having an important impact on others. • Autonomy: amount of discretion allowed in determining schedules and work methods for achieving required output. • Feedback: degree to which job provides clear, timely information about performance results.

12. Richard Hackman and Greg Oldham (1980) developed a job charactertics model. 3 basic elements: • Job charactertics • Psychological states • Outcomes

13. Managing Diversity Three major alternative work schedules are: • Flexitime: specifies core hours when individual must be on the job but it allows flexible starting and finishing times as long as the required number of hours are worked. • Compressed work-week: work schedule whereby employees work four 10-hour days rather than the usual five 8-hour days.

14. Job sharing: work practice in which two or more employees share a single full-time job.

15. Types of Departmentalization Departmentalization: is grouping individuals into units, and units into departments and larger units to achieve organizational goals. Four common departmentalization patterns are: • Functional • Divisional • Hybrid • Matrix

16. Functional Structure • Functional structure: the employees work in departments based on what they are or what they specialize in i.e. there is an engineering department, maintenance department, finance department, research department, Warehouse department, purchasing department.

18. Advantages • This structure enhances the experience of each function. For example, all the maintenance engineers are working in the same department and thus they will exchange knowledge and support each other. • This structure saves money because of the economies of scale.

19. Disadvantages • It makes the coordination between different department more difficult than other structures. • It also does not allow for flexibility because of the centralization.

20. Divisional Structure • Divisional structure divides the employees based on the product/customer segment/geographical location. For example, each division is responsible for certain product and has its own resources such as finance, marketing, warehouse, maintenance, etc.

22. Advantages • This structures is a decentralized structure and thus allows for flexibility and quick response to environmental changes. • It also enhances innovation and facilitates the promotion of new ideas.

23. Disadvantages • This structure results in duplication of functions at different levels and as a result very high cost of maintaining the management structure.

24. Hybrid Structure • Hybrid structure combine aspects of functional and divisional forms, with some activities grouped by function and others by divisional (products or markets).

26. Matrix Structure • Matrix structure imposes horizontal divisional reporting relationships over an hierarchical functional structure. • This is suitable for Multinational Companies.

28. Organization Structures • An effective organizational structure facilitates working relationships between various entities and improves the working efficiency within the organizational units. • Organizations allow for application of individual skills to enable high flexibility and apply creativity.

29. When a business expands, the chain of command lengthens and the span of control widens. • When an organization comes to age, the flexibility will decrease and the creativity will fatigue. • Therefore organizational structures should be altered from time to time to enable recovery. If such alterations are prevented internally, the final escape will be to turn down the organization or prepare for a re-launch in an entirely new set up.

30. Vertical Co-ordination Vertical co-ordination: linking of activities at the top of the organization with those at the middle and lower to achieve organizational goals.

31. Five ways to achieve vertical co-ordination are: • Formalization: degree to which written policies, rules, procedures, job descriptions and other documents specify what actions are and are not to be taken under given circumstances. 2. Span of control: number of subordinates who report directly to a specific manager. 3. Centralization vs. Decentralization: centralization is the extent to which power and authority are retained at the top organizational level whereas decentralization is the extent to which power and authority are delegated to lower levels.

32. 4. Delegation: means moving decision making authority and responsibility from one organizational level to the next lower level. 5. Line authority: authority following the chain of command established by the formal hierarchy.

33. Levels in the Hierarchy • Tall structure: structure with many hierarchical levels and narrow span of control. • Flat structure: structure with few hierarchical levels and wide span of control. • Downsizing: process of reducing middle management layers, increasing span of control and shrinking workforce size. • Restructuring: process of making a major change in the organization structure.

34. Horizontal Co-ordination • Horizontal co-ordination: linking of activities across departments at similar levels. 3 means for promoting horizontal co-ordination: • Slack resources • Information systems • Lateral relations

35. Slack resources: resources that facilitates adaptation to internal and external pressures. E.g. an extra car or television set. • Information systems: using information systems, mainly computerized ones to co-ordinate parts of the organization. • Lateral relations: co-ordination of efforts through communicating and problem solving with peers in other departments, rather than referring most issues up the hierarchy for resolution.