I. WHAT CONTINGENCY VARIABLES AFFECT STRUCTURAL CHOICE?
A. Introduction
1. The most appropriate structure to use will depend on contingency factors.
2. Exhibit 6-7 describes two organizational forms: mechanistic and organic.
3. The mechanistic organization (or bureaucracy) was the result of combining the
six elements of structure.
a) High specialization.
b) Rigid departmentalization.
c) Clear chain of command.
d) Narrow spans of control leading to taller structure.
e) Centralization.
f) High formalization.
4. The organic organization is a highly adaptive form.
a) Collaboration (both vertical and horizontal).
b) Adaptable duties.
c) Few rules.
d) Informal communication.
e) Decentralized decision authority.
f) Wider spans of control leading to flatter structures.
B. How Does Strategy Affect Structure?
1. Based on the work of Alfred Chandler.
2. Goals are an important part of an organization’s strategies; structure should
facilitate goal achievement.
3. Simple strategy suggests a simple structure; an elaborate strategy suggests a more
complex structure.
4. Certain structural designs work best with different organizational strategies.
a) Passionate pursuit of innovation – organic.
b) Passionate pursuit of cost control – mechanistic.
C. How Does Size Affect Structure?
1. There is evidence that an organization’s size affects its structure.
2. Large organizations—employing 2,000 or more employees—tend to have more
work specialization, horizontal and vertical differentiation, and rules and
regulations than do small organizations.
3. The relationship is not linear; the impact of size becomes less important as an
organization expands.
a) Example, once an organization has around 2,000 employees, it is already fairly
mechanistic—an additional 500 employees will not have much effect.
b) Adding 500 employees to an organization that has only 300 members is likely
to result in a shift toward a more mechanistic structure.
D. How Does Technology Affect Structure?
1. Every organization uses some form of technology to convert its inputs into outputs.
(Exhibit 6-8)
2. To attain its objectives, the organization uses equipment, materials, knowledge,
and experienced individuals and puts them together into certain types and patterns
of activities.
a) For example, your tablet or smartphone has a standardized assembly line.
b) For example, your resume is custom design and print.
c) For example, your bottle of Ibuprofen was manufactured using a continuous
flow production line by the pharmaceutical company.
From the Past to the Present
Joan Woodward (British scholar) found that distinct relationships exist between size of
production runs and the structure of the firm. The effectiveness of organizations was related to
“fit” between technology and structure. Most studies focused on the processes or methods that
transform inputs into outputs and how they differ by their degree of routine.
Three categories, representing three distinct technologies, had increasing levels of complexity
and sophistication. Unit production described the production of items in units or small batches.
Mass production described large batch manufacturing. The most technically complex group,
process production, included continuous-process production. The more routine the technology,
the more standardized and mechanistic the structure can be. Organizations with more non-routine
technology are more likely to have organic structures. See Exhibit 6-8.
Discuss This:
Why is (a) mechanistic structure more appropriate for an organization with routine
technology and (b) organic structure more appropriate for an organization with
nonroutine technology?
Does Woodward’s framework still apply to today’s organizations? Why or why not?
E. How Does Environment Affect Structure?
1. Mechanistic organizations are most effective in stable environments.
2. Organic organizations are best matched with dynamic and uncertain environments.
3. The environment-structure relationship is why so many managers have
restructured their organizations to be lean, fast, and flexible.
II. WHAT ARE SOME COMMON ORGANIZATIONAL DESIGNS?
A. The main designs are simple, functional, and divisional.
1. See Exhibit 6-9.
B. What Is a Simple Structure?
1. Most organizations start as an entrepreneurial venture with a simple structure.
2. There is low departmentalization, wide spans of control, authority centralized in a
single person, and little formalization.
3. The simple structure is most widely used in smaller businesses.
4. The strengths of the simple structure are that it is fast, flexible, and inexpensive to
maintain, and accountability is clear.
5. Major weaknesses.
a) It is effective only in small organizations.
b) It becomes increasingly inadequate as an organization grows; its few policies
or rules to guide operations and its high centralization result in information
overload at the top.
c) As size increases, decision making becomes slower and can eventually stop.
d) It is risky since everything depends on one person.
C. What is the functional structure?
1. Many organizations do not remain simple structures because structural
contingency factors dictate it.
2. As the number of employees rises, informal work rules of the simple structure give
way to more formal rules.
3. Rules and regulations are implemented, departments are created, and levels of
management are added to coordinate the activities of departmental people.
4. At this point, a bureaucracy is formed.
5. Two of the most popular bureaucratic design options are called the functional and
divisional structures.
6. Why do companies implement functional structures?
a) The functional structure merely expands the functional orientation.
b) The strength of the functional structure lies in work specialization.
1) Economies of scale, minimizes duplication of personnel and equipment,
makes employees comfortable and satisfied.
c) The weakness of the functional structure is that the organization frequently
loses sight of its best interests in the pursuit of functional goals.
D. What is the divisional structure?
1. An organization design is made up of self-contained units or divisions.
2. Health care giant Johnson & Johnson, for example, has three divisions:
pharmaceuticals, medical devices and diagnostics, and consumer products.
3. The chief advantage of the divisional structure is that it focuses on results.
a) Division managers have full responsibility for a product or service.
b) It also frees the headquarters from concern with day-to-day operating details.
4. The major disadvantage is duplication of activities and resources.
a) The duplication of functions increases the organization’s costs and reduces
efficiency.
E. What Contemporary Organizational Designs Can Managers Use?
1. See Exhibit 6-10 for the three contemporary organization designs.
a) Team structure is when the entire organization consists of work groups or
teams.
b) Team members have the authority to make decisions that affect them, because
there is no rigid chain of command.
c) Companies such as Amazon, Boeing, Hewlett-Packard, Louis Vuitton,
Motorola, and Xerox extensively use employee teams to improve productivity.
d) In these teams, employees must be trained to work on teams, receive
cross-functional skills training, and be compensated accordingly.
2. The matrix structure assigns specialists from different functional departments to
work on projects led by a project manager.
a) Exhibit 6-11 illustrates the matrix structure of a firm.
b) The unique characteristic of the matrix is that employees in this structure have
at least two bosses, a dual chain of command: their functional departmental
manager and their product or project managers.
c) Project managers have authority over the functional members who are part of
that manager’s team.
d) Authority is shared between the two managers.
1) Typically, the project manager is given authority over project employees
relative to the project’s goals.
2) Decisions such as promotions, salary recommendations, and annual reviews
remain the functional manager’s responsibility.
e) To work effectively, project and functional managers must communicate and
coordinate.
f) The primary strength of the matrix is that it can facilitate coordination of a
multiple set of complex and interdependent projects while still retaining the
economies that result from keeping functional specialists grouped together.
g) The major disadvantages of the matrix are in the confusion it creates and its
propensity to foster power struggles.
3. Project structure – is when employees continuously work on projects.
a) Tends to be more flexible
b) The major advantages are that employees can be deployed rapidly to respond
to environmental changes, no rigid hierarchical structure to slow down decision
making, managers serve as facilitators, mentors, and coaches to eliminate or
minimize organizational obstacles.
c) The two major disadvantages of the project structure are the complexity of
assigning people to projects and the inevitable task and personality conflicts
that arise.
4. What is a boundaryless organization?
a) A boundaryless organization, coined by former GE CEO Jack Welch, is not
defined or limited by boundaries or categories imposed by traditional
structures.
b) It blurs the historical boundaries surrounding an organization by increasing its
interdependence with its environment.
c) There are two types of boundaries:
1) Internal—the horizontal ones imposed by work specialization and
departmentalization and the vertical ones that separate employees into
organizational levels and hierarchies.
2) External—the boundaries that separate the organization from its customers,
suppliers, and other stakeholders.
5. A virtual organization consists of a small core of full-time employees and outside
specialists temporarily hired as needed to work on projects.
6. A network organization – is one that uses its own employees to do some work
activities and networks of outside suppliers to provide other needed product
components or work processes. Also called a modular organization by
manufacturing firms.
Technology and the Manager’s Job – The Changing World of Work
It is almost cliché to say that technology has had a dramatic impact on how people work. Mobile
communication and technology has allowed organizations to stay connected. Hand-held devices,
cellular phones, webcams, etc. allow employees to work virtually. Information technology
continues to grow and become an integral part of the way business is conducted. However, one
challenge caused by some the high level of integrated technology is security. Software and other
disabling devices have helped in this arena and many companies are developing creative
applications for their workforce.
Discuss This:
What benefits do you see with being able to do work anywhere, anytime? (Think in terms
of benefits for an organization and for its human resources.)
What other issues, besides security, do you see with being able to do work anywhere,
anytime? (Again, think about this for an organization and for its employees.)
III. WHAT ARE TODAY’S ORGANIZATIONAL DESIGN CHALLENGES?
A. How Do You Keep Employees Connected?
1. Choosing a design that will best support and facilitate employees doing their work
efficiently and effectively creates challenges.
2. A major structural design challenge for managers is finding a way to keep widely
dispersed and mobile employees connected to the organization.
B. How Do Global Differences Affect Organizational Structure?
1. Researchers have concluded that the structures and strategies of organizations
worldwide are similar, “while the behavior within them is maintaining its cultural
uniqueness.”
2. When designing or changing structure, managers may need to think about the
cultural implications of certain design elements, such as rules and bureaucratic
mechanisms.
C. How Do You Build a Learning Organization?
1. Building a learning organization is a mindset in which the learning organization
has developed the capacity to continuously adapt and change because all members
take an active role in identifying and resolving work-related issues.
2. Employees are practicing knowledge management.
a) Continually acquiring and sharing new knowledge.
b) Willing to apply that knowledge in making decisions or performing their work.
3. According to some organizational design theorists, an organization’s ability to
learn and to apply that learning may be the only sustainable source of competitive
advantage. See Exhibit 6-12 for characteristics of a learning organization.
a) Members share information and collaborate on work activities throughout the
entire organization.
b) Minimize or eliminate existing structural and physical boundaries.
1) Employees are free to work together and to collaborate.
2) Teams tend to be an important feature of the structural design.
3) Managers serve as facilitators, supporters, and advocates.
c) For a learning organization to “learn” information it must be shared openly, in a
timely manner, and as accurately as possible.
d) Leadership creates a shared vision for the organization’s future and keeps
organizational members working toward that vision.
1) Leaders should support and encourage the collaborative environment.
e) A learning organization’s culture is one in which everyone agrees on a shared
vision and everyone recognizes the inherent interrelationships among the
organization’s processes, activities, functions, and external environment.
f) There is a strong sense of community, caring for each other, and trust.
1) Employees feel free to openly communicate, share, experiment, and learn
without fear of criticism or punishment.
g) Organizational culture is an important aspect of being a learning organization.
A learning organization’s culture is one in which everyone agrees on a shared
vision and everyone recognizes the inherent interrelationships among the
organization’s processes, activities, functions, and external environment.
D. How Can Managers Design Efficient and Effective Flexible Work Arrangements?
1. As organizations adapt their structural designs to fit a diverse workforce, growing
competition, customer demands, and new technology, we see more of them adopting
flexible working arrangements.
2. Such arrangements not only exploit the power of technology, but also give
organizations the flexibility to deploy employees when and where needed.
3. Telecommuting is a work arrangement in which employees work at home and are
linked to the workplace by their computer.
a) Telecommuting provides the company a way to grow without having to incur
any additional fixed costs such as office buildings, equipment, or parking lots.
b) Some companies view the arrangement as a way to combat high gas prices and
to attract talented employees who want more freedom and control.
c) Some managers are reluctant to have their employees become “laptop hobos”
wasting time surfing the Internet or playing online games instead of working.
d) Employees often express concerns about being isolated.
e) Managing the telecommuters then becomes a matter of keeping employees
feeling like they’re connected and engaged, a topic we delve into at the end of
the chapter as we look at today’s organizational design challenges.
4. Compressed workweek – a workweek where employees work longer hours per day
but fewer days per week.
a) Flextime (also known as flexible work hours) – a scheduling system in which
employees are required to work a specific number of hours a week but are free
to vary those hours within certain limits.
b) Job sharing – the practice of having two or more people split a full-time job.
5. Contingent workers are temporary, freelance, or contract workers whose
employment is contingent upon demand for their services.
a) As organizations eliminate full-time jobs through downsizing and other means
of organizational restructuring, they often rely on a contingent workforce to fill
in as needed.