Essentials of Organizational Behavior
Fourteenth Edition
Chapter 15
Foundations of
Organizational Structure
Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved.
After studying this chapter you should be
able to:
1. Identify the seven elements of an organization’s structure.
2. Identify the characteristics of the functional structure, the
divisional structure, and the matrix structure.
3. Identify the characteristics of the virtual structure, the
team structure, and the circular structure.
4. Describe the effects of downsizing on organizational
structures and employees.
5. Contrast the reasons for mechanistic and organic
structural models.
6. Analyze the behavioral implications of different
organizational designs.
Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved.
What Is Organization Structure?
• Organizational Structure:
Defines how job tasks are formally divided,
grouped, and coordinated
– Key elements:
1.
2.
3.
4.
5.
6.
7.
Work specialization
Departmentalization
Chain of command
Span of control
Centralization and decentralization
Formalization
Boundary spanning
Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved.
Key Questions and Answers
Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved.
Work Specialization
• Work specialization:
Describes the degree to which activities in the
organization are subdivided into separate jobs
– Also known as division of labor
– Benefits
▪ Greater efficiency and lower costs
– Costs
▪ Human costs when carried too far
▪ Job enlargement as a solution
Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved.
Work Specialization Economies
Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved.
Departmentalization
• Departmentalization:
Basis by which jobs are grouped together so that
common tasks can be coordinated
• Common bases:
–
–
–
–
Functional
Product or service
Geography
Process and customer
Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved.
Chain of Command
• 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
– Authority: positional rights
– Unity of command: one boss
• Fewer organizations find this is relevant
Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved.
Span of Control
• Span of control:
The number of employees a manager is expected
to effectively and efficiently direct
– Determines the number of levels and managers an
organization has
▪ Trend is toward wider spans of control
▪ Wider span depends on knowledgeable employees
▪ Affects speed of communication and decision making
Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved.
Contrasting Spans of Control
Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved.
Centralization and Decentralization
• Centralization:
Degree to which decision making is concentrated
at a single point in the organization
– Only includes formal authority: positional rights
– Highly centralized when top managers make all the
decisions
– Decentralized when front line employees and
supervisors make decisions
– Trend is toward increased decentralization
Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved.
Formalization
• Formalization:
Degree to which jobs within the organization are
standardized
– Formal: minimum discretion over what is to be done,
when it is done, and how
– Informal: freedom to act is necessary
Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved.
Boundary Spanning
• Boundary spanning:
When individuals form relationships outside their
formally assigned groups
– Liaison roles
– Development activities
▪ Job rotations
– Organizational goals and shared identity
Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved.
Common Organizational Designs
• Three common organizational frameworks:
1. Simple structure
2. Bureaucracy
3. Matrix structure
Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved.
Simple Structure
• Low degree of departmentalization
• Wide spans of control
• Authority centralized in a single person
• Little formalization
• Difficult to maintain in anything other than small
organizations
Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved.
Bureaucracy
• Highly routine operating tasks achieved through
specialization
–
–
–
–
–
Formal rules and regulations
Centralized authority
Narrow spans of control
Tasks grouped by functional departments
Decision making follows the chain of command
Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved.
Functional and Divisional Structures
• Functional structure: groups employees by their
similar specialties, roles, or tasks
• Divisional structure: groups employees into
units by product, service, customer, or geographic
market area
Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved.
Matrix Structure
• Combines two forms of departmentalization
– Functional
– Product
• Dual chain of command
• Advantages:
– Facilitates coordination and efficient allocation of
specialists
• Disadvantages:
– Possible confusion, fosters power struggles, stress
Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved.
Matrix Structure for a College of Business
Administration
Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved.
New Design Options
• Virtual Organization:
A small core organization that outsources its major
business functions
– Highly centralized with little or no departmentalization
– Provides maximum flexibility while concentrating on
what the organization does best
– Reduced control over key parts of the business
Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved.
A Virtual Organization
Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved.
The Team Structure
• Team structure:
–
–
–
–
Eliminates the chain of command
Has limitless spans of control
Replaces departments with empowered teams
Breaks down geographical barriers
Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved.
The Circular Structure
• Circular structure: Top management is at the
center of the organization with its vision spreading
outward in rings grouped by function
– May be confusing for employees
– May be used to spread CSR initiatives
Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved.
The Leaner Organization: Downsizing
• Downsizing:
A systematic effort to make an organization leaner
by selling off business units, closing locations or
reducing staff
– Controversial because of the negative impact on
employees
– Impact on organizational performance has been very
controversial
Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved.
Organizational Design Models
Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved.
Determinants of Structure
• Organizational Strategy
– Innovation strategy: introduce new offerings-prefer
organic structures
– Cost-minimization strategy: cost control–prefer
mechanistic structures
– Imitation strategy: minimal risk and maximum profit–
both structures used
Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved.
Optimal Structural Option
Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved.
More Determinants of Structure
• Organization Size
– Move toward mechanistic structure as size increases
• Technology
– Routine activities prefer mechanistic structures, nonroutine prefer organic structures
Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved.
Still More Determinants of Structure
• Environment
–
–
–
–
Dynamic environments lead to organic structures
Capacity
Volatility
Complexity
• Institutions
– Act as guidelines for appropriate behavior
Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved.
The Environment
Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved.
Organizational Designs and Employee
Behavior
• Cannot generalize any link between structure and
performance
• Consider employee preferences for:
–
–
–
–
Work specialization
Span of control
Centralization
Predictability versus autonomy
• National culture influences organizational
structure
– High power distance cultures accept mechanistic
structures
Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved.
Implications for Managers
• Specialization can make operations more efficient, but excessive
specialization can create dissatisfaction and reduced motivation.
• Avoid designing rigid hierarchies that overly limit employees’
empowerment and autonomy.
• Balance the advantages of remote work against the potential pitfalls
before adding flexible workplace options.
• Downsize your organization to realize major cost savings, and focus
the company around core competencies-but only if necessary because
downsizing can have a significant negative impact on employee affect.
• Consider the scarcity, dynamism, and complexity of the environment,
and balance the organic and mechanistic elements when designing an
organizational structure.
Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved.
Copyright
Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved.

Purchase answer to see full
attachment