Fundamentals of Organizing

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 Organizing
The deployment of organizational resources to
achieve strategic goals.

◼ The deployment of resources is reflected in

the division of labor.

◼ Formal lines of authority and mechanisms

for coordinating diverse organization tasks.
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Fundamental Concepts of
Organizing
◼ Differentiation means that the
organization is composed of units that
work on specialized tasks using
different work methods and requiring
employees with unique competencies.
◼ Integration means that the various units
must be put back together so that work
is coordinated.
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 Mechanistic Versus Organic Structures

•High horizontal differentiation •Low horizontal differentiation

•Rigid hierarchical relationships •Collaboration
•Fixed duties (vertical and horizontal)
•High formalization •Adaptable duties
•Formalized communication •Low formalization
channels •Informal communication
•Centralized decision authority •Decentralized decision 4
Open Vs Closed System

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Open System Characteristics
◼ Cycle of Events
◼ Negative Entropy (Don’t let the system
break down)
◼ Feedback
◼ Kreitner’s Dynamic Homeostasis
(maintaining optimal state)
◼ Differentiation

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◼ Equifinality (In business, equifinality
implies that firms may establish similar
competitive advantages based on
substantially different competencies)

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 Factors Determining Span of
Control
◼ Subordinates’ location
◼ Support available for the manager
◼ Amount of non-supervisory tasks
◼ The competence of both the manager and the employee.
◼ The similarity or dissimilarity of tasks being supervised.
◼ The incidence of new problems in the manager’s
department.
◼ The extent of clear operating standards and rules.

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 Tall Versus Flat Structure
◼ Tall structure has an overall narrow span of
management and more levels in the hierarchy

◼ Flat structure has a wide span, is horizontally

dispersed, and has fewer hierarchical levels

◼ The trend is toward larger spans of

management as a way to facilitate delegation.
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Tall vs. Flat Structure

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Entrepreneuring & Intrapreneuring
(Gifford Pinchot)

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Organizing Process
◼ Differentiation
◼ Specialization
◼ Delegation of Authority
◼ Integration

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Organizational
Structure

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 Organization Structure

Defined as:
1. The set of formal tasks assigned to
individuals and departments.
2. Formal reporting relationships.
3. The design of systems to ensure effective
coordination of employees across
departments.
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 The Elements of Structure

◼ Organization design
◼ A process in which managers develop

or change their organization’s structure.

◼ Work specialization
◼ A component of organization structure

that involves having each discrete step

of a job done by a different individual
rather than having one individual do
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 Four Points About
the Organization Chart

Visual representation

Set of formal tasks

Formal
reporting relationships
Framework
for vertical control
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Economies and Diseconomies
of Work Specialization

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 Work Specialization

◼ Tasks are subdivided into individual jobs.

◼ Employees perform only the tasks relevant
to their specialized function.
◼ Jobs tend to be small, but they can be
performed efficiently.
◼ There is a concern that employees may
become isolated, and do only a single
boring job.
◼ Many organizations are moving away from
this principle.
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JOURNEY OF STARBUCKS
 Chain of Command
◼ Unbroken line of authority that links all
persons in an organization.

◼ Underlying principles
 Unity of Command.

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Departmentalization

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Departmentalization
Basis for grouping job positions into departments and
departments into the total organization.
◼ Internal Operations Oriented

◼ Functional

◼ Network (Virtual)

◼ Output Oriented

◼ Divisional

◼ Product

◼ Geographic

◼ Customer

◼ Team (Cluster)
◼ Combinations
◼ Hybrid (different types at different places in an org.)

◼ Matrix (different types at simultaneous at the same places in an org.) 23

 Departmentalization
The basis on which individuals are
grouped into departments

Five structural alternatives

 Vertical functional approach. People are grouped

together in departments by common skills.

 Divisional approach. Grouped together based on a

common product, customer or geographical region.

 Matrix approach. Functional and divisional chains of

command are implemented. Two chains of

command exists.
 Team-based approach. Created to accomplish specific tasks.
 Network approach. Small, central hub electronically connected to their
other organizations that perform vital functions. Departments are
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independent, and can be located anywhere.
 Functional Design
◼ Functional design means grouping
managers and employees according
to their areas of expertise and the
resources they use to perform their
jobs.

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Functional Structure

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 Functional Design
Potential Pitfalls
Potential Benefits
◼ Inadequate
◼ Supports skill specialization communication
◼ Reduces duplication of ◼ Difficulties with interunit
resources & increases coordination
coordination
◼ Focus on departmental
◼ Enhances career development rather than organizational
& training within functional area issues and goals
◼ Allows superiors and
subordinates to share common
expertise
◼ Promotes high-quality technical
decision making
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 Product Design

◼ Product design means that all functions

that contribute to a product are
organized under one manager.

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Product Design

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 Product Design
Potential Benefits Potential Pitfalls
◼ Permits fast changes in a ◼ Not allowing efficient
product line utilization of skills and
◼ Allows greater product resources
line visibility ◼ Not fostering coordination of
◼ Fosters a concern for activities across product
customer demand ◼ Encourages politics and
◼ Clearly defines conflicts in resource
responsibilities for each allocation across product
product line lines
◼ Develops managers who ◼ Limits career mobility for
can think across functional personnel outside their own
lines product lines
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 Geographical Design

◼ Geographical design organizes

activities around location.

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 Geographical Structure
for Apple Computer
CEO

Apple Apple Apple Apple

Middle East America Europe Pacific

Canada France Australia

Latin
Japan
America/
Caribbean

Asia

USA
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 Geographical Design
Potential Benefits Potential Pitfalls
◼ Has facilities and the ◼ Duplication of functions,
equipment used for to varying degrees, at
production and/or each regional or individual
distribution all in one place, unit location
saving time and costs ◼ Conflict between each
◼ Able to develop expertise in location's goals and the
solving problems unique to organization's goals
one location ◼ Adds levels of
◼ Gaining an understanding of management and
customers’ problems and extensive use of rules and
desires regulations to coordinate
◼ Getting production closer to and ensure uniformity of
raw materials and suppliers quality among locations 33
Matrix, Team and Network

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 Matrix Design
◼ Functional and divisional chains of
command simultaneously
◼ Dual lines of authority
◼ Functional hierarchy of authority runs
vertically
◼ Divisional hierarchy runs laterally
◼ Violates the unity of command concept.
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 Matrix Organization
Engineering Production Marketing Quality
Manager Manager Manager Manager

6 112 4 2
Project Mgr

5 153 3 3
Project Mgr

8 240 6 4
Project Mgr

8 186 6 4
Project Mgr

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 Matrix Design
Potential Benefits Potential Pitfalls
◼ More efficient use of ◼ Dual chain of command
resources than single ◼ High conflict between
hierarchy two sides of matrix
◼ Adaptable to changing ◼ Many meetings to
environment coordinate activities
◼ Development of both ◼ Need for human
general and specialists relations training
management skills ◼ Power domination by
◼ Expertise available to all one side of matrix.
divisions
◼ Enlarged tasks for
employees. 37
 Team Approach
◼ Cross-functional teams consist of
employees from various functional
departments
◼ Interdisciplinary approach to
management
◼ Permanent team = to solve ongoing
problems
◼ Reengineering = radical redesign for
improvements in cost, quality, service
and speed. 38
 Network Approach

◼ Organization divides major functions into

separate companies brokered by a small
headquarters organization
◼ Especially appropriate for international
operations
◼ Held together with phones, faxes, and
other electronic technology.

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 Hybrid Structure
President

Functional Chief
Human Technology Financial
Resources Vice Services
Structure Counsel
Director President Vice Pres.

Product Fuels Lubricants Chemicals

Vice Vice Vice
Structure President President President

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 Other Forms of
Departmentalization
◼ Simple Number
◼ Time
◼ Process
◼ Virtual Organization

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 Determinants of
Organizational Structure

◼ The environment
◼ The size of the organization
◼ Technology
◼ The organization’s strategy

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Organization Structure Determinants
and Outcomes
Causes
Performance
• Strategy
• Size and
• Technology Satisfaction
• Environment

Structures
Determines • Mechanistic
• Organic
Moderated by
individual differences
and cultural norms

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 Five Elements of Design
◼ Hierarchy
◼ Span of control
◼ Authority, Responsibility, and
Accountability
◼ Centralization or Decentralization
◼ Delegation

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 Power

An individual’s capacity to influence

decisions.

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 Types of Power

Coercive powerPower based on fear.

Reward power Power based on the ability to distribute
something that others value.
Legitimate power Power based on one’s position in the
formal hierarchy.
Expert power Power based on one’s expertise,
special skill, or knowledge.
Referent power Power based on identification with a
person who has desirable resources or
personal traits. 55
Line & Staff Function

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Organizational Culture

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 Organizational Culture
◼ A system of shared values, assumptions, beliefs, and
norms that unite the members of an organization.

◼ Reflects employees’ views about “the way things are

done”

◼ The culture specific to each firm affects how

employees feel and act and the type of employee
hired and retained by the company.
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Layers of Organizational Culture

Cultural
Symbols

Shared
Behaviors

Cultural
Values

Shared
Assumptions

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 Steps in Socialization
7. Role model to sustain
culture
6. Rituals, taboos, rites, and
stories to reinforce culture
5. Adoption of cultural Removal of
value policies Employees who
4. Rewards that sustain deviate from culture
the culture
3. Training to develop capabilities
consistent with culture
2. Challenging early work
assignments
Removal of candidates who
1. Careful selection
do not “fit” culture

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