Unlock document.
This document is partially blurred.
Unlock all pages and 1 million more documents.
Get Access
Chapter 15 Foundations of Organization Structure Page 543
1.
B. The Bureaucracy
1. Standardization—the key concept for all bureaucracies.
2. The bureaucracy is characterized by:
b. Very formalized rules and regulations.
c. Tasks that are grouped into functional departments.
d. Centralized authority.
e. Narrow spans of control.
3. Its primary strength is in its ability to perform standardized activities in a
highly efficient manner.
etc.
b. Bureaucracies get by nicely with less talented and less costly middle- and
lower-level managers.
4. Weaknesses
the organization’s goals.
b. Obsessive concern with following the rules.
problems with programmed decision rules.
5. The Functional Structure
a. The functional structure groups employees by their similar specialties,
roles, or tasks.
and accounting departments is an example.
i. Many large organizations utilize this structure, although this is
evolving to allow for quick changes in response to business
opportunities.
diversified units.
i. Employees can also be motivated by a clear career path to the top of
the organization chart specific to their specialties.
product or service.
i. Unfortunately it creates rigid, formal communications because the
hierarchy dictates the communication protocol.
6. The Divisional Structure
a. The divisional structure groups employees into units by product, service,
customer, or geographical market area.
i. It is highly departmentalized.
Chapter 15 Foundations of Organization Structure Page 544
pharmacy that report to hospital administration), or geographic
organizational structure (like units for Europe, Asia, and South America
that report to corporate headquarters).
functional structure.
d. It facilitates coordination in units to achieve their goals, while addressing
the specific concerns of each unit.
with duplication of functions and costs.
f. Furthermore, it appears as if organizations can shift from a divisional to a
functional structure, and vice versa; however, those who shift from a
C. The Matrix Structure
1. The matrix structure is used in advertising agencies, aerospace firms,
research and development laboratories, construction companies, hospitals,
government agencies, universities, management consulting firms, and
entertainment companies.
2. It combines two forms of departmentalization—functional and product:
products.
b. Its major disadvantage is the difficulty of coordinating the tasks.
c. Product departmentalization facilitates coordination.
with duplication of activities and costs.
unity-of-command concept. (Exhibit 15-5)
multiplicity of complex and interdependent activities.
protect their worlds.
6. It facilitates the efficient allocation of specialists.
to conflict.
9. Confusion and ambiguity also create the seeds of power struggles.
expectations introduce role ambiguity.
II. Alternate Design Options
A. The Virtual Organization
Chapter 15 Foundations of Organization Structure Page 545
1. The essence of the virtual organization is that it is typically a small, core
organization that outsources major business functions.
organization.
i. In Hollywood’s golden era, movies were made by huge, vertically
integrated corporations.
project.
(b) This structural form allows each project to be staffed with the
talent most suited to its demands, rather than having to choose just
from those people the studio employs.
2. Exhibit 15-6 shows a virtual organization in which management outsources all
of the primary functions of the business.
maintained under contracts.
b. Managers in virtual structures spend most of their time coordinating and
controlling external relations.
3. Network organizations often take many forms.61 Some of the more
“traditional” forms include the franchise form in which there are managers,
Dunkin’ Donuts.
b. However, in this form, franchisees do not tend to collaborate or coordinate
from the executive group.
c. Another example is the starburst form in which a “parent” firm splits off
one of its functions into a “spinoff” firm.62 For example, in 2012 Netflix
4. The major advantage to the virtual organization is its flexibility.
5. Virtual organizations’ drawbacks have become increasingly clear as their
popularity has grown.
a. They are in a state of perpetual flux and reorganization, which means
roles, goals, and responsibilities are unclear, setting the stage for political
behavior.
B. The Team Structure
1. The team structure seeks to eliminate the chain of command and replace
departments with empowered teams.
2. This structure removes vertical and horizontal boundaries in addition to
breaking down external barriers between the company and its customers and
suppliers.
Chapter 15 Foundations of Organization Structure Page 546
a. By removing vertical boundaries, management flattens the hierarchy and
minimizes status and rank.
3. Cross-hierarchical teams (which include top executives, middle managers,
supervisors, and operative employees), participative decision-making
practices, and the use of 360-degree performance appraisals (in which peers
and others evaluate performance) can be used.
a. When fully operational, the team structure may break down geographic
barriers.
4. Today, most large U.S. companies see themselves as team-oriented global
corporations; many, like Coca-Cola and McDonald’s, do as much business
overseas as in the United States, and some struggle to incorporate geographic
regions into their structure.
C. The Circular Structure
1. Picture the concentric rings of an archery target. In the center are the
executives, and radiating outward in rings grouped by function are the
managers, then the specialists, then the workers. This is the circular
structure.
a. The circular structure has intuitive appeal for creative entrepreneurs, and
some small innovative firms have claimed it. However, as in many of the
current hybrid approaches, employees are apt to be unclear about whom
they report to and who is running the show.
2. We are still likely to see the popularity of the circular structure spread. The
concept may have intuitive appeal for spreading a vision of corporate social
responsibility (CSR) initiatives, for instance.
III. The Leaner Organization: Organizational Downsizing
A. The goal of the new organizational forms we’ve described is to improve agility by
creating a lean, focused, and flexible organization.
B. Downsizing is a systematic effort to make an organization leaner by selling off
business units, closing locations, or reducing staff.
1. It has been very controversial because of its potential negative impacts on
employees.
2. The radical shrinking of Motorola Mobility in recent years was a case of
downsizing due to loss of market share and changes in consumer demand.
and speed decision making.
C. Despite the advantages of being a lean organization, the impact of downsizing on
organizational performance has been very controversial.
1. Reducing the size of the workforce perhaps has positive outcomes in the long
run, although the majority of the evidence suggests that downsizing negatively
factors).
2. Part of the problem is the effect of downsizing on employee attitudes.
a. Employees who remain (and victims alike) often feel worried about future
layoffs (including those who are furloughed, or suspended without pay)
Chapter 15 Foundations of Organization Structure Page 547
amount of stress and strain.
b. Downsizing can also lead to psychological withdrawal and more voluntary
turnover, so vital human capital is lost.
c. The result is a company that is more anemic than lean. Paradoxically,
some research suggests that the victims may even fare better than the
stock prices after the announcement.
D. The following are some effective strategies for downsizing and suggestions for
implementing them.
1. Invest. Companies that downsize to focus on core competencies are more
effective when they invest in high-involvement work practices afterward.
4. Assist. Providing severance, extended health care benefits, and job search
assistance demonstrates a company does really care about its employees and
honors their contributions.
E. Companies that make themselves lean can be more agile, efficient, and productive
IV. Why Do Structures Differ?
A. Introduction
1. The mechanistic model (Exhibit 15-7)—synonymous with the bureaucracy—
has extensive departmentalization, high formalization, a limited information
network (mostly downward), and little participation in decision making.
decision making.
3. Why are some organizations structured along mechanistic lines while others
are organic?
B. Organizational Strategy
1. An organization’s structure is a means to help management achieve its
objectives.
b. Structure should follow strategy.
2. Most current strategy frameworks focus on three strategy dimensions—
innovation, cost minimization, and imitation—and the structural design that
works best with each.
a. An innovation strategy means a strategy for meaningful and unique
Chapter 15 Foundations of Organization Structure Page 548
b. A cost-minimization strategy tightly controls costs, refrains from
incurring unnecessary innovation or marketing expenses, and cuts prices
in selling a basic product. This describes Walmart’s strategy.
and maximize opportunity for profit.
i. It moves into new products or new markets only after viability has
been proven by innovators.
ii. It copies successful ideas of innovators.
3. Exhibit 15-8 describes the structural option that best matches each strategy.
b. Imitators combine the two structures.
i. They use a mechanistic structure to maintain tight controls and low
costs in their current activities but create organic subunits in which to
pursue new undertakings.
C. Organizational Size
and regulations than do small organizations.
3. The impact of size becomes less important as an organization expands.
4. Once an organization has around 2,000 employees, it’s already fairly
mechanistic. An additional 500 employees will not have much impact.
5. However, adding 500 employees to a 300-employee firm is likely to result in a
mechanistic structure.
D. Technology
versa. Organizational structure and culture can become inscribed in the
data structure, software, and hardware an organization uses.
E. Environment
1. An organization’s environment includes outside institutions or forces that can
regulatory agencies, and public pressure groups.
2. Dynamic environments create significantly more uncertainty for managers
than do static ones.
a. To minimize uncertainty, managers may broaden their structure to sense
and respond to threats.
blogs.
Chapter 15 Foundations of Organization Structure Page 549
3. Any organization’s environment has three dimensions: capacity, volatility, and
complexity.
a. Capacity
buffer times of relative scarcity.
b. Volatility
i. Refers to the degree of instability in an environment.
ii. A dynamic environment with a high degree of unpredictable change
makes it difficult for management to make accurate predictions.
c. Complexity
i. The degree of heterogeneity and concentration among environmental
elements.
ii. Simple environments are homogeneous and concentrated.
d. In contrast, environments characterized by heterogeneity and dispersion
are called complex.
dimensions.
a. The arrows indicate movement toward higher uncertainty.
b. Thus, organizations that operate in environments characterized as scarce,
dynamic, and complex face the greatest degree of uncertainty because they
have high unpredictability, little room for error, and a diverse set of
elements in the environment to monitor constantly.
arrangements.
a. The more scarce, dynamic, and complex the environment, the more
organic a structure should be.
b. The more abundant, stable, and simple the environment, the more the
mechanistic structure will be preferred.
F. Institutions
certain industries under government contracts, for instance, must have
clear reporting relationships and strict information controls.
b. Sometimes simple inertia determines an organizational form—companies
can be structured in a particular way just because that’s the way things
have always been done.
legitimate in that culture.
Chapter 15 Foundations of Organization Structure Page 550
d. Some have attributed problems in adaptability in Japanese organizations to
the institutional pressure to maintain authority relationships.
fads or trends.
f. Many companies have recently tried to copy the organic form of a
company like Google only to find that such structures are a very poor fit
with their operating environment.
3. Institutional pressures are often difficult to see specifically because we take
