MANAGEMENT
(MGNT 1020)
Session 8: Organizing, Structuring
and Designing Organizations
Professor Cathy Liu
Organizing
Organizing is the function of management that determines what
needs to be done; how it will be done; and who is to do it. It
creates the organizational structure.
Organization design - when managers develop or change the
organization’s structure
Involves decisions such as how specialized jobs should be, the rules to
guide employees’ behaviors, and at what level decisions are to be made.
Organization design decisions are typically made by senior managers.
Elements of Organizational Structure
Work specialization
Departmentalization
Authority and responsibility
Span of control
Centralization versus decentralization
Formalization
Work specialization - dividing work activities
into separate jobs tasks (also known as
division of labor).
What Is Individual employees “specialize” in doing
Work part of an activity rather than the entire
Specializa activity in order to increase work output.
tion?
Excessive work specialization or human
diseconomies (e.g., boredom, fatigue,
stress, low productivity, poor quality,
increased absenteeism, and high turnover).
Economies and
Diseconomies of Work
What Is
Departmentalizatio
n?
Departmentalization—common work
activities are grouped back together so
work gets done in a coordinated and
integrated way.
how the firm divides into sub-units
Common forms of
departmentalization
Functional departmentalization—employees grouped
based on work performed (e.g., manufacturing,
accounting, information systems, human resources)
Product departmentalization—employees grouped based
on major product areas in the corporation
Customer departmentalization—employees grouped based
on customers’ problems and needs (e.g., wholesale, retail,
government)
Common forms of
departmentalization
Geographic departmentalization—employees
grouped based on location served
Process departmentalization—employees
grouped based on the basis of work or
customer flow (e.g., testing, payment)
What Are Authority and
Responsibility?
Authority refers to the rights inherent in a managerial position—to give
orders and expect the orders to be obeyed.
• Each management position has specific inherent rights that incumbents acquire
from the position’s rank or title.
• Authority is related to one’s position and ignores personal characteristics.
When managers delegate authority, they must allocate commensurate
responsibility.
• When employees are given rights, they assume a corresponding obligation to
perform and should be held accountable for that performance.
• No one should be held responsible for something over which he or she has no
authority.
The chain
of
command
When organizing work,
managers need to clarify
who reports to whom,
which is known as the chain
of command.
The line of authority
extending from upper to
the lower organizational
levels.
How do Authority and Power
Differ?
Authority is a right, the
Power refers to an
legitimacy of which is based
individual’s capacity to
on the authority figure’s
influence decisions.
position in the organization.
• Authority goes with the • Authority is part of the larger
job. concept of power - the formal
rights that come with an
individual’s position in the
organization are just one means
by which an individual can affect
the decision process.
How do Authority and Power Differ?
The higher one moves in an organization (an
increase in authority), the closer one moves to the
power core; the closer one is to the power core, the
more influence one has on decisions.
It is not necessary to have authority in order to
wield power because one can move horizontally
inward toward the power core without moving up.
Low-ranking employees with contacts in high
places might be close to the power core. So, too,
are employees with scarce and important skills.
Power can come from different sources.
What Is Span of Control?
Span of control - how many
employees can a manager efficiently Level in the organization is a
and effectively supervise? contingency variable.
No consensus on a specific number but small Top managers need a smaller span than do
spans of less than six employees are easier to middle managers, and middle managers
maintain close control. require a smaller span than do supervisors.
Centralization and decentralization are a
function of how much decision-making
authority is pushed down to lower levels in
the organization.
A degree phenomenon - no
Centralization organization is completely centralized
and or completely decentralized, it’s a
matter of degree.
Decentralization Few, if any, organizations could
effectively function if all their decisions
were made by a select few people
(centralization) or if all decisions were
pushed down to the level closest to the
problems (decentralization).
Formalization
Formalization - how standardized an
organization’s jobs are and the extent to which
employee behavior is guided by rules and
procedures.
Highly formalized organizations
‒ explicit job descriptions, numerous organizational
rules, and clearly defined procedures covering
work processes.
Lowly formalized organizations
‒ employees have more discretion in how they do
their work.
Necessary for consistency and control
Models of Organizational Design
The mechanistic organization (or bureaucracy)
• Rigid and tightly controlled structure
• high specialization, rigid departmentalization, clear chain of
command, narrow spans of control, high degree of centralization and
formalization, leading to taller structures.
The organic organization
• Highly adaptive and flexible structure (can change rapidly when
necessary).
• Collaboration (both vertical and horizontal), adaptable duties, few
rules, informal communication, decentralized decision authority, and
wider spans of control leading to flatter structures.
Models of Organizational Design
• Rigid hierarchical relationships • Collaboration (both vertical and horizontal)
• Fixed duties • Adaptable duties
• Many rules • Few rules
• Formalized communication channels • Informal communication
• Centralized decision authority • Decentralized decision authority
• Taller structures • Flatter structures
What influences organizational structure
Firm size Firm strategy Environment
• Large organizations • structure should • Stable environment:
(e.g., 2,000 or more facilitate goal Mechanistic
employees) tend to achievement and fit structure
be more organizational • Dynamic/uncertain
mechanistic. strategy. environment:
• Simple strategy - Organic structure
simple structure;
elaborate strategy -
complex structure.
