CHAPTER 15

Activities/Exercises

Choose one activity.

2. (If the student has internet connection available.) Search the web to find three articles on an
organization that has changed its structure in the recent past (downsized or increased in scale).
Carefully read the articles and describe what happened using structural terms from this chapter.
What kinds of internal and external reactions were there to the structural change? What was the
impact of the change on the organization’s effectiveness (e.g., perhaps as measured by its stock
price)?

Answer:
An organization that has undergone a notable change in its structure during the recent
years is Microsoft. Despite the success of Windows and Office products, they had trouble keeping up
with other companies – namely, the domination of Google in the search and software market and with
Apple owning the phone market. The organization was also running into serious internal problems
with its organizational structure; there were internal wars between major departments that often
viewed each other as competitors rather than partners within the same company.
All these issues led Microsoft into hiring a new CEO, Satya Nadella. After being named
CEO, Mr. Nadella hastily made a major restructuring to eliminate the destructive internal competition.
Under his supervision, Microsoft underwent a major downsizing in their organization structure – it has
eliminated over 7,400 positions thus cutting down the high division of labor. In order to alleviate the
problems regarding internal competition, Microsoft severe departmentalization has been
implemented to form only 3 engineering departments which led the engineers to work together rather
than competing with one another. This led to changes such as change in the overall leadership
structure, culture change, technology change, and product change. Microsoft no longer groups things
according to the product itself, Instead, all employees would start focusing on a limited set of common
goals — and bringing them all together. Therefore, having higher work specialization, higher
centralization, higher formalization, and a narrower span of control.
In my opinion, the restructuring has become very effective for the organization. This
can be seen when we compare the financial reports from before the restructuring to the present.
Before the restructuring (January 2015), the stock price of Microsoft was only valued at $48 per share,

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comparing to its current price in December of 2020, which is now at approximately $220 per share;
this shows a drastic 450% increase in price per share. We can also compare the reported net incomes:
for the year 2015, Microsoft reported a net income of $12.19 billion, meanwhile Microsoft’s reported
net income for the year 2020 alone is at almost $44.3 billion, that again represents a 363% growth in
net income in just the span of 5 years. The organizational change has brought major impacts to the
company but because of excellent execution it yielded beneficial results which has led to Microsoft’s
success as of today.

Sources:
• Dudovskiy, J. (2019). Microsoft Corporation Report - Research-Methodology. Retrieved from
https://research-methodology.net/microsoft-corporation-report/
• Everwise. (2020). Organizational Change: Success Stories To Learn From. Retrieved from
https://www.geteverwise.com/human-resources/organizational-change-stories/
• Li, L. (2020). Organizational Change Done Right: Examples from the Giants of the Industry. Retrieved
from https://www.tinypulse.com/blog/3-examples-of-organizational-change-and-why-they-got-it-right
• Lombardo, J. (2017). Microsoft Corporation's Organizational Culture & Its Characteristics (An Analysis).
Retrieved from http://panmore.com/microsoft-corporation-organizational-culture-characteristics-
analysis
• Microsoft Corporation. (2020). Microsoft Annual Report 2020. Retrieved from
https://www.microsoft.com/investor/reports/ar20/index.html
• Miller, R. (2019). After 5 years, Microsoft CEO Satya Nadella has transformed more than the stock price.
Retrieved from https://techcrunch.com/2019/02/04/after-5-years-microsoft-ceo-satya-nadella-has-
transformed-more-than-the-stock-price/
• NasdaqGS. (2021). Microsoft Corporation (MSFT) Stock Historical Prices & Data. Retrieved from
https://finance.yahoo.com/quote/MSFT/history/?guce_referrer=aHR0cHM6Ly93d3cuZ29vZ2xlLmNvbS8
&guce_referrer_sig=AQAAAMRjBMhwKf-
BJwZoY0U1ijDmBRgfPeOCsdELIxEYUnfaGmESN8dDC2YsD_iM0pKyE1BevjcByW2MeiZ9yAz0oyeStxWIsbj
Rk8We1gGhAMZyCEF2EGQy7gCA54YnmPN9&guccounter=2
• Nobl Academy. (2020). How Satya Nadella Led Microsoft through a Corporate Turnaround. Retrieved
from https://academy.nobl.io/how-satya-nadella-led-microsoft-through-a-corporate-turnaround/
• Ryon, B. (2015). Microsoft aligns engineering teams to strategy. Retrieved from
https://news.microsoft.com/2015/06/17/microsoft-aligns-engineering-teams-to-strategy/

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Reflection

Examine your own work/student life: consider the jobs/positions you have held and organizations
with which you have been associated. Based on your experiences, what type of organizational
structure appears to suit your best? Why? Relate your own attitudes, behaviors, and values to the
organizational structures described in this chapter.

Answer:
In the past, I have held certain positions within school organizations, namely:
President of the Student Council during 10th grade and Auditor of the Samahan ng mga Manlalayag
(ABM Student Organization) in my Senior High School years. Based on these experiences, I believe that
an organic structure is most effective for me especially in organizations that are relatively
small/moderate in terms of size.
I am a person that dislikes monotonous or repetitive tasks and tend to explore my
own way in achieving my goals, and the formalities of a bureaucracy would prevent me to do so. Also,
these rules bound us to certain limitations that may prevent us from achieving maximum productivity
and/or effectivity in our tasks. Lastly, a bureaucratic structure can be too complex at times. On the
other hand, an organic structure, as opposed to a bureaucratic or simple structure, would lessen
centralization within the organization – a distribution of responsibilities, power, etc. Also, an organic
structure is designed to effectively deal with a rapidly changing environment because it possesses
attributes that make it able to address unforeseen problems, issues, and requirements; such attributes
are informal communication systems that allow quick communication, a flat structure that can quickly
adapt to changes, and the ability to easily change individual activities in the organization. And lastly, it
has a low level of complexity as it is flatly structured and/or has few layers of management.
These qualities of an organic structure would allow its members to maximize their
abilities beyond boundaries and allow them to work freely as they would wish, thus increasing
satisfaction and productivity along with it. This is the reason why I believe the organic structure is most
fitting for me.

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Assessment
ENUMERATION
Organization Structure Key Elements Common Organizational Designs
• Work Specialization 1. Simple Structure
• Departmentalization 2. Bureaucracy
• Chain of Command 3. Matrix Structure

• Span of Control Determinants of Structure

• Decentralization 1. Organizational Strategy

• Formalization 2. Organization Size

3. Technology
4. Environment

MULTIPLE CHOICE
1. Which of the following is not one of the six key elements of organizational structure?
A. chain of command
B. departmentalization
C. work specialization
D. span of control
E. location of authority

2. A task that is subdivided into many separate jobs is considered to have ________.
A. a high degree of departmentalization
B. a low degree of decentralization
C. a high degree of work specialization
D. a wider span of control
E. a high degree of formalization

3. A ________ allows management to make the most efficient use of its employees' skills and even
successfully improve them through repetition.
A. low degree of centralization
B. high degree of formalization
C. wider span of control

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D. low degree of departmentalization
E. high degree of work specialization

4. Which of the following statements is true regarding work specialization?

A. Work specialization indicates to what degree there will be rules and formalization regulations to
direct employees and managers.
B. Work specialization decreases the time spent in changing tasks.
C. Work specialization increases the cost of finding and training workers to do specific and repetitive
tasks.
D. Work specialization provides an unending source of increased productivity.
E. Work specialization hinders efficient use of employee skills.

5. The basis by which jobs are grouped is called ________.

A. formalization
B. departmentalization
C. chain of command
D. span of control

6. Which one of the following is not one of the primary ways to group jobs?
A. skill
B. customer
C. function
D. product
E. service

7. A manufacturing manager organizes a plant into engineering, accounting, manufacturing,

personnel, and supply specialists’ departments. This division of an organization into groups
according to work functions is an example of ________.
A. social clustering
B. bureaucracy
C. specialization
D. centralization
E. departmentalization
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8. Agri Producers provides services related to the testing of soil and crops. It also provides advice to
its customers for improving the productivity of the soil and the quality of the crops. It has
customers all over the United States. The crops and soil are different in the various large areas of
the nation, such as the west coast and the Midwest. Which type of departmentalization would be
best for Agri Producers?
A. functional
B. process
C. product
D. geographic
E. temporal

9. Some of the departments in Procter & Gamble are Tide, Pampers, Charmin, and Pringles. This is an
example of departmentalization by ________.
A. function
B. process
C. geography
D. product
E. interest

10. Aeronautics Inc., a parts supplier, hasdepartments for government aircraft and contracts, large
commercial aircraft clients, and small personal aircraft clients. This is an example of ________
departmentalization.
A. product
B. function
C. geography
D. customer
E. service