978-0132729833 Chapter 13 Solution Manual

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C H A P T E R T H I R T E E N

Designing Eective

Organizations 13

Lecture Outline

Organizational Structure: The Basic

Dimensions of Organizations

Hierarchy of Authority

Span of Control

Division of Labor

Line Versus Sta Positions

Decentralization

Departmentalization: Ways of Structuring

Organization

Functional Organizations

Product Organizations

Matrix Organizations

Organizational Design

Classical and Neoclassical Approaches

The Contingency Approach

Mintzberg’s Framework

The Vertically Integrated Organization

Interorganizational Designs

Boundaryless Organizations

Conglomerates

Strategic Alliances

This chapter examines the .led of organizational

structure and organizational design. The formal

con.guration between individuals and groups with

respect to the allocation of tasks, responsibilities, and

authority is known as organizational structure. The

.ve elements of organization structure are:

hierarchy, division of labor, span of control, line

versus sta positions, and decentralization.

Departmentalization is the combination of people

into departments in organizations. There are several

approaches examined in this chapter: (1) functional

organization, (2) product organization, and (3) matrix

organization. The contingency approach to

organizational design is based on the belief that

external environments within which organizations

operate should in6uence the choice of design. A key

factor is the degree to which the organization is

subject to change. In a stable environment, a

mechanistic organization is most appropriate. In a

turbulent environment, organic organization would be

most eective. Henry Mintzberg suggests that

depending on which groups are in power one of .ve

organizational designs (simple structure, machine

bureaucracy, professional bureaucracy, divisional

structure, or adhocracy) will emerge. In addition to

intraorganizational design (the arrangement of units

within an organization), .rms may create

interorganizational designs that combine more that

one organization including boundaryless, modular,

and virtual. Boundaryless organizations are designed

so that there is no chain of command, the span of

control is unlimited and empowered teams replace

rigid departments. Modular organizations outsource

secondary aspects of the company’s operations.

Finally, virtual organizations combine forces with

others on a temporary basis to form new

organizations. Other interorganizational designs are

conglomerates and strategic alliances. Strategic

alliances operate along a continuum ranging from

mutual service consortia through value chains.

ANNOTATED OUTLINE

1. ORGANIZATIONAL STRUCTURE: THE BASIC DIMENSIONS OF ORGANIZATIONS

Organizational structure – the formal con.guration between individuals and

groups with respect to the allocation of tasks, responsibilities, and authority

within organizations

Organization chart ― a diagram that represents how various tasks or

functions are interrelated within the organization

Reporting relationships – who answers to whom

A. Hierarchy of authority: up and down the organizational ladder

1. Hierarchy of authority ― the distinction between higher-level

individuals and lower-level individuals

2. Downsizing – eliminating entire levels of organizational structure

B. Span of control: breadth of responsibility

1. Span of control ― number of people formally required to report to

each individual manager

a. Tall ― organizations with many levels

b. Flat ― organizations with few levels

c. Wide span of control ― responsibility for many individual

reports; organization has a 6at hierarchy

d. Narrow span of control ― responsibility for few individual

reports; organization has a tall hierarchy

C. Division of labor: carving up the work to be done

1. Division of labor ― tasks to be performed within an organization are

divided into specialized jobs

a. The more specialized are jobs, the narrower the range

incumbents are required to perform

D. Line versus sta positions: decision makers versus advisers

1. Line positions ― decision-making power

2. Sta& positions ― provides advice and recommendations

E. Decentralization: delegating power downward

1. Centralization ― tendency for a few powerful individuals or groups to

hold most of the decision making power

2. Decentralization ― process of delegating power from higher to lower

levels within the organization

a. Employees respond to dierent levels of centralization based on

perceptions of fairness.

2. DEPARTMENTALIZATION: WAYS OF STRUCTURING ORGANIZATIONS

Departmentalization – ways of organizing companies into coherent units

A. Functional organizations: departmentalization by task

1. Functional organizations – departmentalize people by functions

they perform

a. Most basic approach to departmentalization

i. As organizations grow in complexity, more departments

are added or deleted as the need arises

ii. Avoids duplication of eort and takes advantage of

economies of scale

iii. Could cause narrow-mindedness and discourage

innovation

B. Product organizations: departmentalization by type of output

1. Product organization – creates self-contained divisions each of which

is responsible for everything to do with a certain product or group of

products

a. Drawbacks ― loss of economies of scale from the duplication of

various departments within operating units

1. Problems of coordination across product lines may arise

C. Matrix organizations – departmentalization by both function and product

1. Matrix organization – combines both the function and product forms

of departmentalization

a. Types of bosses

i. Employee is required to report to both a functional

manager and a product manager (dual authority)

ii. Three kinds of bosses: top leader, matrix bosses, and

two-boss managers

iii. Matrix boss has authority over function or product

iv. Two-boss managers report to both functional and

product manager

b. When are matrix organizations used?

i. In complex and uncertain environments

ii. When there is a need for economies of scale in the use

of internal resources

c. Degree of permanence

i. Permanent overlay – project teams are kept going

after a project is completed

a. Mature matrix both functional and product lines

are permanent and equally strong in the

organization

ii. Temporary overlay – projects are crossed with

functions on a short-term basis

d. Advantages and disadvantages:

i. They permit 6exible use of human resources

ii. They oer an eCcient means of responding quickly to a

changing, unstable environment

iii. They enhance communication among managers

iv. They create frustration and stress as a result of the dual

reporting system

3. ORGANIZATIONAL DESIGN: COORDINATING THE STRUCTURAL ELEMENTS OF

ORGANIZATIONS

Organizational design ― process of coordinating the structural elements of

organizations in the most appropriate manner

A. Classical and neoclassical approaches: the quest for the one best design

1. Classical organizational theory ― eective organizations are those

with a formal hierarchy, a clear set of rules, specialization of labor,

highly routine tasks, and a highly impersonal working environment

a. Ideal form ― bureaucracy (Max Weber)

2. Neoclassical organizational theory ― attempt to improve classical

approach; emphasizes the need to pay attention to basic human needs

a. Organizations designed with 6at hierarchies, high degree of

decentralization

B. The contingency approach: design according to environmental conditions

1. The contingency approach to organizational design – design based

on environmental conditions

a. Based on belief that most appropriate way to design

organizations depends on the external environments within

which they operate

i. The external environment – the sum of all the forces

impinging on an organization with which it must deal

eectively if it is to survive

(a). How stable the environment is (unchanging)

(b). How unstable (turbulent) the environment is

ii. Mechanistic versus organic organizations: designs for

stable versus turbulent conditions

(a). Mechanistic organization ― people perform

specialized jobs, many rigid rules, authority

vested in a few top ranking oCcials

Eective when environment is stable

(b). Organic organization ― jobs tend to be very

general, few rules, decisions made by low-level

employees

Eective when the environment is turbulent

Self-Assessment Exercise Which Do You Prefer ― Mechanistic or Organic

Organizations?

Students should consider the following upon completion of the exercise.

1. How did you score? That is, which organizational form, mechanistic or organic, did

this exercise suggest that you prefer?

2. Think back over the jobs you’ve had. For the most part, have these been in

organizations that were mechanistic or organic?

3. Do you think you were any more committed to organizations in which you worked

whose designs matched your preferences as compared to those in which there was a

mismatch?

C. Mintzberg’s Framework: Five Organizational Forms

1. Organizations are composed of .ve basic elements – the one that

dominates determines the most eective organizational design.

a. Operating core – employees who perform the basic work

D. The vertically integrated organization

1. Vertically integrated organizations – companies that own their own

E. Team-based organizations

1. Team-based organizations – autonomous work teams are organized

4. INTERORGANIZATIONAL DESIGNS: JOINING MULTIPLE ORGANIZATIONS

Intraorganizational designs – the arrangements of units within one

A. The boundaryless organization: business without barriers

1. Boundaryless organization – organization in which chains of

Winning

Practices

When Is It Time To Go Virtual?

Use Winning Practices for a discussion on Virtual Organizations.

B. Conglomerates: Diversi.ed “Megacorporations”

1. Conglomerate – when an organization diversi.es by adding an

C. Strategic alliances: joining forces for mutual bene.t

1. Strategic alliance – organizational design in which two or more

a. Mutual service consortia ― arrangements between two

b. Value-chain partnerships ― alliances between companies

c. Joint ventures ― arrangements where companies work

3. Strategic alliances in the global economy

a. Popular between companies from developed countries and

1. Market access

2. Exchange technology and manufacturing services

4. An alternative to the joint venture

a. Spino& ― an entirely new company separate from the original

You Be the Consultant Suggested Answers

1. What would you recommend with respect to the following structural variables:

hierarchy of authority (tall or at?), division of labor (specialized or not?), span of

control (wide or narrow?), and degree of centralization (highly centralized or highly

decentralized?). Explain the reasons behind your recommendations.

Student answers will vary. Key points are presented in bullet form.

2. How do you think the company should be departmentalized—by task (functional), by

output (product), both task and output (matrix), or process (horizontal)? What are the

reasons for these conclusions?

3. If the company were thinking about entering into a strategic alliance with another,

what factors would have to be considered? What kind of company would be an

e)ective partner in an alliance with this software *rm?