Concept & Process of

Organizing
 ORGANISATIONAL STRUCTURE

• Division of labor,

• Patterns of coordination,

• Communication,

• Workflow,

• Formal power
Importance of Organizing
Effective
Coordination Clarity of Job
Management

Coping with
Efficiency Decentralization
Change

Broader Span of
Communication Discipline
Control

Management
Development
Organizational Structure

• Organizational Structure
 The formal arrangement of jobs within an organization.
• Organizational Design
 A process involves decisions about six key elements:
 Work specialization
 Departmentalization
 Chain of command
 Span of control
 Centralization and decentralization
 Formalization
 Purposes of Organizing
• Divides work to be done into specific jobs and
departments.
• Assigns tasks and responsibilities associated with individual
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.
 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.

Departmentalization by Type
• Functional • Process
 Grouping jobs by
 Grouping jobs on the
functions performed
basis of product or
• Product
 Grouping jobs by product customer flow

line
• Customer
• Geographical
 Grouping jobs by type of
 Grouping jobs on the
basis of territory or customer and needs

geography
 Functional Departmentalization

• Advantages
• Efficiencies from putting together similar specialties and people
with common skills, knowledge, and orientations
• Coordination within functional area
• In-depth specialization
• Disadvantages
• Poor communication across functional areas
• Limited view of organizational goals
 Geographical Departmentalization

Advantages•
• More effective and efficient handling of specific regional issues
that arise
• Serve needs of unique geographic markets better
Disadvantages
•
• Duplication of functions
• Can feel isolated from other organizational areas
Organisation by Area
Hewlett-Packard’s Headquarters Worldwide

Hewlett Packard

Americas Europe, Middle East, Africa Asia Pacific

Houston, Texas Geneva, Switzerland Hong Kong
 Product Departmentalization

+ Allows specialization in particular products and services

+ Managers can become experts in their industry
+ Closer to customers
– Duplication of functions
– Limited view of organizational goals
 An Example of Organisation by
Product/Activity
Hewlett Packard

Imaging and Personal Enterprise HP Financial

HP Services
Printing Group Systems Group Systems Group Services
 Process Departmentalization

+ More efficient flow of work activities

– Can only be used with certain types of products

 Customer Departmentalization

+ Customers’ needs and problems can be met by specialists

- Duplication of functions

- Limited view of organizational goals

Organization Structure (cont’d)
• 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 who.

• Authority
 The rights inherent in a managerial position to tell
people what to do and to expect them to do it.
Organization Structure (cont’d)

• 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.

 Organization Structure (cont’d)
• Span of Control
 The number of employees who can be effectively and efficiently
supervised by a manager.
 Width of span is affected by:
 Skills and abilities of the manager
 Employee characteristics
 Characteristics of the work being done
 Similarity of tasks
 Complexity of tasks
 Physical proximity of subordinates
 Standardization of tasks
Contrasting Spans of Control
 Organization Structure (cont’d)
• Centralization
 The degree to which decision-making is concentrated at a
single point in the organizations.
 Organizations in which top 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.
 Factors that Influence the Amount of Centralization

• More Centralization
 Environment is stable.

 Lower-level managers are not as capable or experienced at making

decisions as upper-level managers.

 Lower-level managers do not want to 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 depends on managers

retaining say over what happens.
 Factors that Influence the Amount of Centralization

• More Decentralization
 Environment is complex, uncertain.

 Lower-level managers are capable and experienced at making decisions.

 Lower-level managers want a voice in decisions.

 Decisions are significant.

 Corporate culture is open to allowing managers to have a say n

i what
happens.

 Company is geographically dispersed.

 Effective implementation of company strategies depends on managers

having involvement and flexibility to make decisions.
 Organization Structure (cont’d)

• Formalization

 The degree to which jobs within the organization are

standardized and the extent to which employee behavior is

guided by rules and procedures.

 Highly formalized jobs offer little discretion over what is to bedone.

 Low formalization means fewer constraints on how employees

do their work.
Organizational Design Decisions
• Mechanistic Organization • Organic Organization
 A rigid and tightly controlled  Highly flexible and
structure adaptable structure

 High specialization  Non-standardized jobs

 Rigid departmentalization  Fluid team-based structure

 Narrow spans of control  Little direct supervision

 High formalization  Minimal formal rules

 Limited information network  Open communication

(downward) network

 Low decision participation  Empowered employees

 Mechanistic versus Organic Organization

• 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
Burns and Stalker

G.Dessler, 2003
 Contingency Factors
• Structural decisions are influenced by:
 Overall strategy of the organization
 Organizational structure follows strategy.

 Size of the organization

 Firms change from organic to mechanistic organizations asthey grow in size.

 Technology use by the organization

 Firms adapt their structure to the technology they use.

 Degree of environmental uncertainty

 Dynamic environments require organic structures; mechanistic structures
need stable environments.
 Contingency Factors (cont’d)
• Strategy Frameworks:
 Innovation
 Pursuing competitive advantage through meaningful and unique innovations
favors an organic structuring.

 Cost minimization
 Focusing on tightly controlling costs requires a mechanistic structure for the
organization.

 Imitation
 Minimizing risks and maximizing profitability by copying market leaders
requires both organic and mechanistic elements in the organization’s
 Contingency Factors (cont’d)
• Strategy and Structure

 Achievement of strategic goals is facilitated by changes

in organizational structure that accommodate and
support change.

• Size and Structure

 As an organization grows larger, its structure tends to change

from organic to mechanistic with increased specialization,
departmentalization, centralization, and rules and regulations.
 Contingency Factors (cont’d)
• Technology and Structure
 Organizations adapt their structures to their technology.
 Woodward’s classification of firms based on the complexity of
the technology employed:
 Unit production of single units or small batches
 Mass production of large batches of output
 Process production in continuous process of outputs
 Routine technology = mechanistic organizations
 Non-routine technology = organic organizations
Woodward’s Findings on Technology, Structure, and
Effectiveness
Contingency Factors (cont’d)
• Environmental Uncertainty and Structure

 Mechanistic organizational structures tend to be most

effective in stable and simple environments.

 The flexibility of organic organizational structures is

better suited for dynamic and complex environments.

 Common Organizational Designs
• Traditional Designs
 Simple structure
 Low departmentalization, wide spans of control, centralized authority,
little formalization
 Functional structure
 Departmentalization by function
– Operations, finance, human resources, and product
research and development
 Divisional structure
 Composed of separate business units or divisions with limited
autonomy under the coordination and control the parent corporation.
Strengths and Weaknesses of Traditional
Organizational Designs
 Contemporary Organizational Designs

Team Structure
• What it is: A structure in which the entire organization is made up of
work groups or teams.
• Advantages: Employees are more involved and empowered. Reduced
barriers among functional areas.
• Disadvantages: No clear chain of command. Pressure on teams to perform.

Matrix-Project Structure
What it is: A structure that assigns specialists from different functional
areas to work on projects but who return to their areas when
the project is completed. Project is a structure in which
employees continuously work on projects. As one project is
completed, employees move on to the next project.
• Advantages: Fluid and flexible design that can respond to environmental
changes. Faster decision making.
• Disadvantages: Complexity of assigning people to projects. Task and
personality conflicts.
 Contemporary Organizational Designs

Boundaryless Structure
What it is: A structure that is not defined by or limited to artificial
horizontal, vertical, or external boundaries; includes virtual
and network types of organizations.
• Advantages: Highly flexible and responsive. Draws on talent wherever it’s
found..
• Disadvantages: Lack of control. Communication difficulties..
 Organizational Designs (cont’d)
• Contemporary Organizational Designs
 Team structures
 The entire organization is made up of work groups or self- managed teams of
empowered employees.
 Matrix and project structures
 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.
Matrix Structure (Project-based)
Employees ( ) are temporarily assigned to a specific
project team and have a permanent functional unit

CEO

Engineering Marketing Design

Project A
Manager

Project B
Manager

Project C
Manager
An Example of a Matrix Organization
 Organizational Designs (cont’d)
• Contemporary Organizational Designs (cont’d)
 Boundaryless Organization
 An flexible and unstructured organizational design that isintended to
break down external barriers between the organization and its
customers and suppliers.
 Removes internal (horizontal) boundaries:
– Eliminates the chain of command
– Has limitless spans of control
– Uses empowered teams rather than departments
 Eliminates external boundaries:
– Uses virtual, network, and modular organizational structures
to get closer to stakeholders.
 Removing External Boundaries
• Virtual Organization
 An organization that consists of a small core of full-time employees
and that temporarily hires specialists to work on opportunities that
arise.
• Network Organization
 A small core organization that outsources its major business
functions (e.g., manufacturing) in order to concentrate what it
does best.
• Modular Organization
 A manufacturing organization that uses outside suppliers toprovide
product components for its final assembly operations.
Today’s Organizational Design Challenges

• Keeping Employees Connected

 Widely dispersed and mobile
employees
• Building a Learning Organization
• Managing Global Structural Issues
 Cultural implications of design
elements
Organizational Designs (cont’d)
• The Learning Organization
 An organization that has developed the capacity to
continuously learn, adapt, and change through the
practice of knowledge management by employees.
 Characteristics of a learning organization:
 An open team-based organization design that empowers
employees
 Extensive and open information sharing
 Leadership that provides a shared vision of the organization’s
future, support and encouragement
 A strong culture of shared values, trust, openness, and a
sense of community.
Additional Readings
• Microsoft’s Organisation Structure: http://panmore.com/microsoft-
corporation-organizational-structure-characteristics-analysis

• Problems of Matrix Organizations by Stanley M. Davis

and Paul R. Lawrence- https://hbr.org/1978/05/problems-of-matrix-
organizations.
• https://what-matters-today.simplecast.com/episodes/covid-19-impact-on-organisational-structure-and-
governance