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MGT 115 Management andOrganisation
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Objectives
By the end of the session students should beable to:
1. A pply organization design concepts
2. Understand span of control
3. Distinguish between tall and flat structures
4. Contrast authority and responsibility
5. Distinguish the Mechanistic and Organic
Structure
6. Understand Contingency Factors that affect2
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Defining Organizational StructureOrganizational Structure
T he for mal ar rangement of jobs within anorganization
Organizational Design A process inv olv ing decisions about six key
elements:
Work specialization
Departmentalization
Chain of commandSpan of control
Centralization and decentralization
Formalization
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Exhibit 9.1 Some Purposes ofOrganizing
Divides work to be done into specific jobs and
departments
Assigns tasks and responsibilities associated withindividual jobs
Coordinates diverse organizational tasks
Clusters jobs into units
Establishes relationships among individuals,
groups, and departments
Establishes formal lines of authority
Allocates and deploys organizational resources
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Organizational StructureWork Specialization
T he degree to which tasks in theorganization are divided into separate
jobs with each step completed by adifferent person
Overspecialization can r es ult in humandiseconomies from boredom, fatigue, stress,poor quality, increased absenteeism, and higherturnover
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Departmentalization by Type
Functional
Grouping jobs by
functions performedProduct
Grouping jobs byproduct line
Geographical
Grouping jobs onthe basis ofterritory orgeography
Process
Grouping jobs on
the basis of productor customer flow
Customer
Grouping jobs bytype of customer
and needs
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Exhibit 9.2a FunctionalDepartmentalization
Plant Manager
Manager,Manufacturing
Manager,Human Resources
Manager,Account ing
Manager,Engineering
Manager,Purchasing
+ Efficiencies from putting together similar specialties and
people with common skills, know ledge, and ori entations
+ Coordination w ithin functional area
+ In-depth specialization Poor communicat ion across functional areas
Limi ted view of organ izat ional goals
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Geographical DepartmentalizationVice President
for Sales
Sales Director,
Central Region
Sales Director,
Prairies Region
Sales Director,
Western Region
Sales Director,
Eastern Region
+ More effective and efficient handl ing of specifi c
regional issues that arise+ Serve needs of unique geographic markets better
Duplication of functions
Can feel isolated from other organizat ional areas
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Exhibit 9.2c Product Departmentalization
+ Allows specialization in particular products and services
+ Managers can become experts in their industry
+ Closer to customers
Duplication of functions
Limi ted view of organizat ional goals
Source: Bombardier Annual Report.
Bombardier, Ltd.
Industrial
Equipment
Division
Recreational and
Utility Vehicles
Sector
Mass Transit
Sector
Rail Products
Sector
Rail and Diesel
Products Division
BombardierRotax
(Gunskirchen)Recreational
Products Division
Logistic
Equipment
Division
Mass Transit
Division
BombardierRotax
(Vienna)
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Exhibit 9.2d ProcessDepartmentalization
+ More efficient flow of work activities
Can only be used w ith certain types of products
Plant
Superintendent
SawingDepartment
Manager
Planing and
Milling
Department
Manager
Assemblin g
Department
Manager
FinishingDepartment
Manager
Inspection andShipping
Department
Manager
Lacquering
and sanding
Department
Manager
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Customer Departmentalization
+ Customers needs and prob lems can be met by specialists
Duplication of functions
Limi ted view of organizat ional goals
Director of Sales
Manager,
Wholesale Accounts
Manager,
Retail Accounts
Manager,
Government Accounts
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Organizational Structure (contd)
A uthority
T he rig hts inherent in a manag erial pos ition to tellpeople what to do and to expect them to do it
Responsibility T he oblig ation or ex pectation to perform. Responsibility
brings with it accountability (the need to report andjustify work to manag ers super iors)
Unity of Command
T he concept that a person should hav e one bos s and
should report only to that person Delegation
T he assig nment of author ity to another person to carryout specific duties
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Organizational Structure (contd)
Line and Staff Authority Line managers are respons ible for the
essential activities of the organization,including production and sales. Linemanagers have the authority to issueorders to those in the chain of command
T he pres ident, the production manager, and thesales manager are examples of line managers
Staff managers have advisory authority ,and cannot issue orders to those in thechain of command (except those in theirown department)
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Organizational Structure (contd)Span of Control
T he number of employ ees who can beeffectively and efficiently supervised by amanager
Width of span is af fected by :
Skil ls and abil i t iesof the manager and the employees
Character ist ics of the w orkbeing done
Similarity of tasks
Complex ity of tasks
Standardization of tasks
Physicalpr ox imityof subordinates
Sophistication of inf ormation syst em
Organizations cul ture
Preferred sty le of the manager
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Exhibit 9.3 Contrasting Spans ofControl
Assuming Span of 4
Span of 4:Employees:Managers (level 16)
= 4096= 1365
Span of 8:Employees:Managers (level 14)
Assuming Span of 8
1
2
3
4
5
6
7
(Highest)
(Lowest)
Members at Each Level
1
4
16
64
256
1024
4096
1
8
64
512
4096
OrganizationalLevel
= 4096= 585
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Organizational Structure (contd)
Centralization
T he degree to which decision making is
concentrated at a single point in the organizationOrganizations in which top managers make all the
decisions and lower - level employees s imply carryout those orders
Decentralization
T he degree to which lower- level employ eesprovide input or actually make decisions
Employ ee Empowerment
Increas ing the decision- making discretion ofemployees
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Figure 9.4a Factors that Influencethe Amount of Centralization
More Centralization Env ir onment is stable Low er- level managers are not as capable or
ex perienced at making decisions as upper- levelmanagers
Low er- level managers do not want to hav e asay in decisions
Decis ions ar e sig nificant Or ganization is facing a cr is is or the risk of
company failure Company is large Effectiv e implementation of company strategies
depends on managers retaining say over whathappens
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Figure 9.4b Factors that Influencethe Amount of Decentralization
More Decentralization Env ir onment is complex , uncertain Low er- level managers are capable and
ex perienced at making decisions Low er- level managers want a voice in decisions Decis ions ar e relatively minor Corpor ate culture is open to allow ing managers
to have a say in what happens Company is geog raphically dispersed
Effectiv e implementation of company strategiesdepends on managers having involvement andflexibility to make decisions
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Organizational Structure (contd)
Formalization
T he degree to which jobs within the
organization are standardized and theextent to which employee behaviour isguided by rules and procedures
Highly formalized jobs offer little discretionover what is to be done
Low f ormalization means few er constraints onhow employees do their work
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Organizational Design Decisions Mechanistic
Organization
A rig id and tightlycontrolled structure
High specialization
Rigiddepartmentalization
Narrow spans ofcontrol
High f ormalization
Limited informationnetwork (mostlydownwardcommunication)
Low decisionparticipation bylower- level
Organic Organization
Highly flex ible andadaptable structure
Nonstandardized jobs
Fluid team- basedstructure
Little directsupervision
Minimal formal rules
Open communication
networkEmpowered
employees
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Exhibit 9.5 Mechanistic VersusOrganic Organization
Mechanistic
High Specialization Rigid Departmentalization Clear Chain of Command Narrow Spans of Control Centralization
High Formalization
Organic
Cross-Functional Teams Cross-Hierarchical Teams Free Flow of Information Wide Spans of Control Decentralization
Low Formalization
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Structural Contingency FactorsStructural decisions are influenced by:
Ov erall str ategy of the or ganization
Organizational structure follows strategy
Size of the or ganizationFirms change from organic to mechanistic
organizations as they grow in size
T echnolog y use by the or ganization
Firms adapt their structure to the technology theyuse
Degree of env ironmental uncertainty
Dynamic environments require organic structures;mechanistic structures need stable environments
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Structural Contingency Factors(contd)
Strategy Framework s: Innovation
Pursuing competitiv e advantage throughmeaningful and unique innovations favours anorg anic structuring
Cost minimizationFocusing on tightly controlling cos ts requires a
mechanistic structure for the organization
ImitationMinimizing risks and max imizing profitability by
copying market leaders requires both organicand mechanistic elements in the organizationsstructure
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Structural Contingency Factors(contd)
Strategy and Structure
A chievement of strategic goals is
facilitated by changes in organizationalstructure that accommodate and supportchange
Size and Structure
A s an organization grow s larger, itsstructure tends to change from organicto mechanistic with increasedspecialization, departmentalization,centralization, and rules and regulations
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Structural Contingency Factors (contd)Technology and Structure
Organizations adapt their structures totheir technology
Woodwards classif ication of firms basedon the complexity of the technologyemployed:
Unit production of s ingle units or small batches
Mass production of larg e batches of output
Process production in continuous process of
outputs
Routine technolog y = mechanisticorganizations
Nonroutine technolog y = organicor anizations
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Structural Contingency Factors (contd)
Environmental Uncertainty andStructure
Mechanistic organizational structurestend to be most effective in stable andsimple environments
T he flex ibility of organic organizational
structures is better suited for dynamicand complex environments
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Woodwards Findings on Technology,Structure, and Effectiveness
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Common Organizational Designs
T raditional Designs Simple Str ucture
Low departmentalization, wide spans of control,centralized authority, little formalization
Functional StructureDepartmentalization by function
Operations, finance, human res ources, and productresearch and development
Div is ional Str uctureComposed of separate business units or divisions
with limited autonomy under the coordination andcontrol of the parent corporation
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Strengths and Weaknesses of CommonTraditional Organizational Designs
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Organizational Designs (contd)Contemporary Organizational Designs
T eam StructuresT he entire organization is made up of w ork
gr oups or se lf- managed teams of empoweredemployees
Matrix StructuresSpecialists for different functional departments
are assigned to work on projects led by projectmanagers
Matrix participants hav e two managers
Project StructuresEmployees w ork continuously on projects,
moving on to another project as each project iscompleted
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Contemporary Organizational Designs
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Exhibit 9.9 A Matrix Organizationin an Aerospace Firm
Design
EngineeringManufacturing
Contract
Adminis trationPurchasing Accounting
Human
Resources (HR)
DesignGroup
AlphaProject
ManufacturingGroup
ContractGroup
PurchasingGroup
AccountingGroup
HRGroup
Design
Group
Beta
Project
Manufacturing
Group
Contract
Group
Purchasing
Group
Accounting
Group
HR
Group
Design
Group
Gamma
Project
Manufacturing
Group
Contract
Group
Purchasing
Group
Accounting
Group
HR
Group
Design
Group
Omega
Project
Manufacturing
Group
Contract
Group
Purchasing
Group
Accounting
Group
HR
Group
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Organizational Designs (contd)Contemporary Organizational Designs
(contd) Boundaryless Organization
A flex ible and an unstructured org anizationaldesign that is intended to break down externalbarriers between the organization and itscustomers and suppliers
Removes internal (horizontal) boundaries: Eliminates the chain of command
Has limitless spans of contr ol Us es empow ered teams rather than departments
Eliminates ex ter nal boundaries: Us es vir tual, netw ork, and modular
organizational structures to get closer tostakeholders
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Removing Boundaries
V irtual Org anization A n or ganization that consis ts of a small core of
full- time employees and that temporarily hires
specialists to work on opportunities that ariseNetwork Organization
A small core or ganization that outsources itsmajor business functions (e.g., manufacturing) inorder to concentrate on what it does best
Modular Organization
A manufacturing or ganization that uses outsidesuppliers to provide product components for itsfinal assembly operations
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Outsourcing Issues
Problems in Outsourcing
Choos ing the wrong activ ities to outsour ce
Choos ing the wrong vendor Writing a poor contract
Failing to consider personnel issues
Los ing contr ol ov er the activ ity
Ignoring the hidden cos ts
Failing to develop an ex it strategy (for eithermoving to another vendor, or deciding to bringthe activity back in- house)
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Organizational Designs (contd)Learning Organization
A n or ganization that has developed the capacityto continuously learn, adapt, and change throughthe practice of knowledge management byemployees
Characteris tics of a lear ning or ganization:A n open team- based organization design that
empowers employees
Ex tensive and open information sharing
Leadership that provides a shared vision of theorg anizations future; support; and encourag ement
A strong culture of shared values, trust, openness,and a sense of community
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Characteristics of a Learning Organization
Organizational Design
Boundaryless
Teams
Empowerment
Organizational Culture
Strong Mutual Relationships
Sense of Community
Car ing
Trust
Information Sharing
Open
Timely
Accurate
Leadership
Shared Vision
Collaboration
THE LEARNING
ORGANIZATION