Organizational Structure = how job tasks are formally divided, grouped and coordinated.
Must address 6 key elements when designing structure
1) Work specialization – the degree to which activities in the organization are subdivided into separate jobs. Job is divided into a number of steps to be completed by separate individuals who specialize on a small segment as opposed to the entirety.
+ Less time spent in task changing
+ Cheaper to train employees on 1 task
+ High efficiency and productivity – by encouraging inventions and machinery
Over time Human Diseconomies Surfaced
- Low productivity/High absentee/ High Turnover
- Low quality of production
Managers then enlarged scope of job activites as opposed to narrowing – whole/complete jobs done with teams of employees with interchangeable skills higher output increased satisfaction
2) Departmentalization – Divided jobs are grouped so common tasks are coordinated;
+ Efficiency Increases; as like specialists work together
+ Increased Accountability for performance; all activities related to a product = under the direction of 1 manager.
+ When customer base is scattered over large geographic are
+ Processing customers or products
+ Customers in each department have similar issues: phone companies
3) Chain of Command - unbroken line of authority that extends from the top of the organization to the lowest echelon and clarifies who reports to whom.
- Principle of Authority = rights inherited by managers to give orders and be expected to be obeyed.
- Principle of Unity of Command = Person should have only 1 superior who he/she should answer to - if broken, then employees may have conflicting demands and priorities.
HOWEVER as time changes, both principles hold less relevance informal communication within the firm is high
4) Span of Control – How many employees can a manager efficiently and effectively direct?
Narrow control – Manager in charge of 3-5 employees
+ Close control
- Expensive: add levels of management
- Increased complexity in vertical communication
- Increased hierarchy = slow decision making and isolated ends of hierarchy.
5) Centralization and Decentralization – degree to which decision making is concentrated at a single point in the organization.
+ Centralized = top managers make all decisions (formal authority)
+ Decentralized = decision is pushed down to managers closest to the action (more flexible) – more effiecent as close to action more detail, more involved, decision leads to more accurate desired outcome.
6) Formalization – Degree to which jobs within organization are standardized.
+ Highly formalized = consistent/uniform output with explicit job descriptions/rules/defined procedures
+ Low formalization = relatively programmed behavior, increased freedom
Simple Structure – low degree of departmentalization, wide span of control, centralized authority, little formalization.
+ Practiced in small businesses/flat organizations with few levels (owner = manager)
+ Simplisitc; fast, flexible and inexpensive
- Difficult to maintain in large firms
- High centralization = high stress levels with growth as information overload
- Growth BREAKS it down; loses momentum and fails.
The Bureaucracy Structure – highly routine operating tasks achieved through specialization, formalized rules and regulations, functional departments, centralized authority, narrow span of control and chain of command decision making.
+ perform standardized activities
+ highly efficient/no duplication
+ Specialties together in functional departments
- Highly controlling rules
- employees are scrutinized with regulations and procedures
Matrix Structure – functional and product departmentalization