Types of Organizational Structures

Formal versus Informal Structures

Bureaucratic versus Adaptive Structures

In bureaucracies (Weber):•Everyone knows what is expected of them

(specific job descriptions)•Everyone knows to whom they report

(hierarchy of authority)•Everyone has impersonal rules to guide them

(company manuals, procedures etc)

Benefits of BureaucracyBenefits of Bureaucracy

Helps us handle complexity Gives us identityAdds structure and routine to our lives

1. Grouping similar activities together. (Horizontal differentiation) 2. Assigning a manager to each group

(Vertical differentiation)

3. Provide for coordination (Integration)

The Process of Organizing

Type of Activity

1. Departmentation Line

2. Establish Support Units Staff

I. Horizontal Differentiation

Types of Departmentation

1. Functional StructureUses departmentation by function

Advantages Disadvantages- Greater efficiency -As complexity through economies increases,harder of scale to coordinate- Strong control at top -Lack of general

managers

Departmentation and Structural Types

CEO

VP VP VP VP VPDevelop. Finance Sales & Operations Human

Marketing Resources

VP VP VP VPIntellectual Product Research General Property Develop. Counsel

Amgen’s Organizational Structure

2. Divisional Structure

Departmentation by Product

Departmentation by Geography

Departmentation by Customer

Structural Types: continued

Product Structure: Microsoft 2005 Reorganization

CEO

PlatformProducts &Services

BusinessEntertain-ment &Devices

Windows Business XBoxServer & Tools Software VideogamesMSN Mobile Phones

Product Structure: GE 2008 Reorganization

CEO

TechnologyInfrastructure

EnergyInfrastructure

GE Capital NBC Universal

Does not include the consumer and industrial division which GE intends tosell or spin-off.

Product Structure: GE Update 2011

Global Growth &Operations

Energy GE Capital

Home &BusinessSolutions

GEHealthcare

Aviation Transport - ation

CEO

Reflects the sale of NBC and the fact they were unable to sell all of their consumer and Industrial division

1 Prior to restructuring in 2000

CEO

Agri- Beatrice Beef Food- Frozen PoultryProd- Foods Co.s Service Prep. Co. ucts Co. Foods

Grocery Refrig. Trading Swift Products Prepared & Processing & Co. Co.s Foods Co.s

Co.s

Product Structure: ConAgra1

Act II Eckrich Peter PanArmour Fleischman’s Slim JimBanquet Healthy SwiftBlue Bonnet Choice PremiumButterball Hunt’s Swiss MissCountry LaChoy Van CampOrville Reddenbacher’s Wesson

Each generates over $100 million in sales

ConAgra Brands

Geographic Structure: Macy’s

CEO

Macy’sEast

Macy’sFlorida

Macy’sMidWest

Macy’sNorth

Macy’sNW

Macy’sSouth

Macy’sWest

Macy’s.Com

CEO

Food Retail Agricul-Service (Grocery tural(restaurants) stores) Products

Customer Structure: ConAgra after 2000

Advantages Disadvantages

-Profit Centers can be -Less efficient due to used to push responsibility duplication of for profits lower in the org. activities

-More responsive to change -Increased demand for coordination

-Good training for general -Loss of control at managers the top

Divisional Structures

3. Matrix Structure

CEO

Production Finance Marketing

A

B

C

PA FA MA

PB FB MB

PC FC MC

Structural Types: continued

Advantages Disadvantages

-Increased flexibility -Dual reporting & adaptability relationships-Improved coordination -Potential power

struggles-Empowered workforce -Problems

associated with working in groups

Matrix Structures

4. Team Structure

Use of task forces, cross functionalteams

5. Network Structure

Structural Types: continued

Extreme Network Structure: The Virtual Org.

Our Org.

Manufacturing(done by an Asian Co.)

Marketing(done by a

European Co)

Finance(done by anIndian Co.)

Advantages Disadvantages-allows org. to compete -Employee even globally with few morale, resources commitment?

-Flexibility - can add/ -Greater drop subcontractors uncertainty easily due to lack of

hands on control

Network Structure

Structural Types SummaryStructural Types Summary

5 Types of Structures Types of Departmentation

Functional by function

Divisional by productby geographyby customer

Matrix by function & product &/or customer - simultaneously

Team temporary departmentsNetwork by function using other co.s

Summary Slide

Bureaucratic Structures Adaptive Structures

Functional Divisional Matrix Team,Network

***Exact location on this continuum will depend on other structural dimensions

- Departmentation by Time

- Departmentation by Process orEquipment

- Departmentation by Simple Number

- Hybrid Departmentation

Other Forms of Departmentation

Hybrid: Pepsi Cola

PepsiCo Americas Foods

CEO

PepsiCo Americas Beverages

PepsiCo Europe

PepsiCo Asia Middle East & Africa

Quaker Foods North America

Frito-Lay North America

LatinAmerica Food & Snacks

Types of Departmentation: Review

FunctionProductGeographyCustomerTimeProcess/Equip.Simple NumberHybrid Composite

Departmentation can be done by:

1. Service

2. Advise

3. Control

4. Initiation

5. Innovation

Functions of Staff

II. Vertical Differentiation

Deals with 5 authority related issues:

1. How firmly should one adhere to the hierarchy of authority?2. How many subordinates should each manager

have?3. What is the nature of authority in organizations?4. Where should decisions be made in organizations?5. To what degree should authority relationships be written down?

A

B

C

1. Short-Circuiting

Vertical Differentiation: continued

Why it happens:

- Need for speed and accuracy- To prevent executive isolation- To protest unfair supervision

Problems:

Short-Circuiting: continued

- Importance of subject matter

- Nature of contact

- Degree intermediary level is kept informed

Short Circuiting: depends on

II. Vertical Differentiation:continued

Deals with 5 authority related issues:

1. How firmly should one adhere to the hierarchy of authority?2. How many subordinates should each manager

have?3. What is the nature of authority in organizations?4. Where should decisions be made in organizations?5. To what degree should authority relationships be written down?

2. Span of Control (Span of Management)

Depends on:- Nature of the work- Nature of the executive- Nature of the subordinates- Methods of management used

Vertical Differentiation: continued

II. Vertical Differentiation: continued

Deals with 5 authority related issues:

1. How firmly should one adhere to the hierarchy of authority?2. How many subordinates should each manager

have?3. What is the nature of authority in organizations?4. Where should decisions be made in organizations?5. To what degree should authority relationships be written down?

3. Sources of Authority

-Formal Authority Theory-Acceptance Theory of Authority

(Psychological Contract)-Competence Theory of Authority-Charismatic Theory of Authority

Vertical Differentiation: continued

Line Authority

Staff Authority

Functional Authority

R&D

P

A B C

X Y Z

Types of authority in Organizations

II. Vertical Differentiation: continued

Deals with 5 authority related issues:

1. How firmly should one adhere to the hierarchy of authority?2. How many subordinates should each manager

have?3. What is the nature of authority in organizations?4. Where should decisions be made in organizations?5. To what degree should authority relationships be written down?

4. Centralization vs. Decentralization -Costliness of Decisions -Need for uniformity of policies -Growth history -Availability of qualified managers -Environmental influences

5. Formalization

Vertical Differentiation: continued

A. Basic Management Techniques Goal Setting

SOPs Referral up the Hierarchy

III. Integration

Techniques to supplementbasic coordination techniques

Referral up the Hierarchy

A. Basic Management Techniques Goal Setting

SOPs Referral up the Hierarchy

B. Reduce the need to process information

-Create slack resources -Create self contained units

Integration: continued

A. Basic Management Techniques Goal Setting

SOPs Referral up the Hierarchy

B. Reduce the need to C. Increase the capacity process information to process information

-Create slack resources -Invest in vertical-Create self contained information systems units -Establish lateral

relations

Integration: continued

Direct ContactLiaison RolesCommittees/Task ForcesIntegrator RolesMatrix Structure

More Formal,MoreCostly

Types of Lateral Relations

Departmentation Functional Divisional, Team, Network

Use of Staff Large/Diversified Small/ Concentrated

Hierarchy Strict Adherence Short-circuitingSpan of Control Narrow WideSource of Authority Position ExpertiseLocus of Authority Centralized DecentralizedFormalization High LowIntegration Basic Techniques SupplementalJob Design Simple/Repetitive Multi-skilledWork Group Formal Admin. Teams

Unit

Structure SummaryTypes of Structures

Bureaucratic AdaptiveMechanized Organic

It Depends!!!

Depends on what???

Which Type of Structure is Best?

1. Organizational Strategye.g.Strategy Structure

Domain DefenderCost LeaderConcentration

Enthusiastic ProspectorDifferentiationConglomerate Divers.

MoreMechanistic

MoreAdaptive

Contingency Factors of Org. Design

2. The Nature of the EnvironmentStructure

Bureaucratic Adaptive

Environ.

Stable

Dynamic

Poor Fit,Structure tooloose, ineffic.

Poor Fit,Structure tootight, ineffect.

Good Fit,Enhances

effectiveness

Good Fit,Maximizesefficiency

3. Nature of Technology

Type of Technology Structure Why?

Unit/Small Batch Adaptive # Exceptions is high

Mass Production Mechanistic Maximizes efficiency

Continuous Adaptive Consequences Production of an except.

are high.

Joan Woodward

Type of Type of Type ofTechnology Interdependence Coordination

Mediating Pooled Standardization

Long-Linked Sequential Planning

Intensive Reciprocal Mutual Adjustment

James Thompson

1. Recognition of the external environment and its influence.2. Need to match structure with the situation (Contingency factors)3. Recognition that different parts of an organization may face different situations and, therefore, be structured differently.4. Recognition that organizations may choose to alter the situation to fit its structure.

Summary Statements on Structure

Strategy

Environment Structure

Technology

Strategy

Environment Structure

Technology

OR

Downsizing

Restructuring

Reengineering

Popular Structural “Buzzwords”