MANAGING ORGANIZATION
Lecture 7
FARHADULLAH FARHAD
MBA PROGRAM
KARDAN UNIVERSITY
LEARNING OBJECIVES
Purpose of Organization
Designing Organizational Structure
Organizational Structure
Mechanistic versus Organic Design
Common Organizational Design
Contemporary Organizational Design
Why do organizations differ?
PURPOSE OF ORGANIZING
Divides work to be done into specific jobs and
departments
Assigning tasks and responsibilities associated
with individual jobs.
Coordinates diverse organizational tasks
Cluster jobs into units
Establishes relationships among
individuals, groups, and departments.
Establishes formal lines of authority
Allocates and deploys organizational
resources
DESIGNING ORGANIZATIONAL STRUCTURE
Organizational Design
A process involving decisions about six key
elements:
Work Specialization
Departmentalization
Chain of Command
Span of Control
Centralization and Decentralization
Formalization
ORGANIZATIONAL STRUCTURE
Work Specialization
The degree to which tasks in the
organization are divided into separate
jobs with each step completed by a
different person.
Overspecialization can result in human
diseconomies from boredom, fatigue,
stress poor quality, increased
absenteeism, and higher turnover
ORGANIZATIONAL STRUCTURE
Chain of Command
The continuous line of authority that extends
from upper levels of an organization to the lowest
levels of the organization and clarifies who
reports to whom.
ORGANIZATIONAL STRUCTURE
Departmentalization by Type
Functional :
Grouping Jobs by functions performed
Product :
Grouping jobs by product line
Geographical:
Grouping jobs on the basis of the territory or
geography
Process:
Grouping jobs on the basis of products or
costumer flow
Costumer :
Grouping jobs by types of customer and needs
ORGANIZATIONAL STRUCTURE
Types of Departmentalization
ORGANIZATIONAL STRUCTURE
Authority:
The rights inherent in a managerial position to tell people
what to do and to expect them do it.
Responsibility:
The obligation or expectation to perform
Unity of Command:
The concept that a person should have one boss and should
report only to that person.
ORGANIZATIONAL STRUCTURE
Span of control:
The number of employees
who can be effectively
and efficiently supervised
by a manager
ORGANIZATIONAL STRUCTURE
Contrasting spans of control
ORGANIZATIONAL STRUCTURE
Centralization:
The degree to which decision making is concentrated at
upper levels in the organization.
Organizations in which tops managers make all the decisions
and lower-level employees simply carry out those orders
Decentralization:
Organizations in which decision making is pushed down to
the managers who are closest to the action
Employee Empowerment:
Increasing the decision-making authority (power) of
employees.
ORGANIZATIONAL STRUCTURE
MORE CENTRALIZATION:
Environment is stable.
Lower-level managers are not as capable at decision making as
upper-level managers.
Lower-level managers do not want have a say in decisions
Decisions are relatively minor
Organization is facing a crisis or the risk of company failure
Company is large
Effective implementation of company strategies depend on
managers retaining say over what happens
ORGANIZATIONAL STRUCTURE
MORE DECENTRALIZATION:
Environment is complex and uncertain.
Lower-level managers capable and experienced at making
decision
Lower-level managers want a voice in decision decisions
Decisions significant
Corporate culture is open to allowing managers to have a say in
what happens
Company is geographically dispersed
Effective implementation of company strategies depends on
managers having involvement and flexibility to make decisions
MECHANISTIC VS ORGNANIC ORGANIZATION
MECHANISTIC VS ORGNANIC ORGANIZATION
MECHNISTIC ORGANIC
High specialization Cross-functional teams
Rigid Departmentalization Cross-Hierarchical teams
Clear chain of command Free flow of information
Narrow spans of control Wide spans of control
Centralization Decentralization
High formalization Low formalization
COMMONN ORGANIZATIONAL DESIGNS
TRADITIONAL DESIGNS:
Simple Structure:
Low Departmentalization, wide spans of control, centralized
authority, little formalization.
Functional Structure:
Departmentalization by function : operations, finance,
marketing, HR and etc.
Divisional Structure:
Composed of separate business units or divisions with
limited autonomy under the coordination and control the
parent corporation
STRENGTHS & WEAKNESSES OF TRADITIONAL DESIGNS:
CONTEMPRORY ORGANIZATIONAL DESIGNS
FLAT VS TALL STRUCTURE
FLAT VS TALL STRUCTURE
Tall / Vertical Structures
Advantages: Disadvantages:
More promotional Coordination problems
opportunities
Information distortion
Smoother progression Motivational problems-less
from one level to
another span of control
More expensive in terms of
Small spans of control
lead to more personal management overhead
contact Extra levels of management
Slow down decision making
and communication
FLAT VS TALL STRUCTURE
Flat / Horizontal Structures
Advantages: Disadvantages:
Wide span of control Lack of personal contact
encourages more delegation Fewer promotion
Lower management cost Higher risk of failure when
Better communication promoted
Promotions are real and
meaningful
Closer contract between
senior management and
lower levels.
CONTEMPRORY ORGANIZATIONAL DESIGNS
Team Structure:
The entire organization is made up of work groups or self-
managed teams of empowered employee.
Matrix and project Structure:
Specialists from different functional departments are
assigned to work on projects led by project managers.
Matrix and project participants have two managers
In project structures, employees work continuously on
projects, moving on to another project as each project is
completed.
WHY DO STRUCTURES DIFFER?
ORGANIZATION STRUCTURE: ITS DETERMINANTS AND
OUTCOMES
The End
