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Ch.2 Organizational (Autosaved)

The document discusses organizational structure and how it impacts an organization's success. It covers key elements of structure, types of structures including functional, divisional and matrix. It also discusses how a structure should align with business strategy and the impact of an organization's growth stage on its structure.

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Mohamed Yehia
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8 views30 pages

Ch.2 Organizational (Autosaved)

The document discusses organizational structure and how it impacts an organization's success. It covers key elements of structure, types of structures including functional, divisional and matrix. It also discusses how a structure should align with business strategy and the impact of an organization's growth stage on its structure.

Uploaded by

Mohamed Yehia
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
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N

W E
The
S
Organizational
Context
Learning outcomes
 Overview

 Background

 Key elements of organizational structure.

 Types of organizational structures

 The impact of an organization's stage of development on its structure.

 The case for aligning organizational structure with the enterprise's business
strategy.
Overview

Organizational structure aligns and


relates parts of an organization, so it can
achieve its maximum performance.

The structure chosen affects an


organization's success in carrying out its
strategy and objectives.
Background
• Organizational structures have evolved
since the 1800s. In the Industrial
Revolution, individuals were organized to
add parts to the manufacture of the
product moving down the assembly line.
• Frederick Taylor's scientific management
theory optimized the way tasks were
performed, so workers performed only
one task in the most efficient way.
Background
• Today, organizational structures are
changing swiftly—from virtual
organizations to other flexible structures.
• As companies continue to evolve and
increase their global presence, future
organizations may embody a fluid, free-
forming organization, member
ownership, and an entrepreneurial
approach among all members.
Key elements of organizational structure.
Five elements create an organizational structure:

1. Job design
2. Departmentation
3. Delegation
4. Span of control
5. Chain of command.
Key elements of organizational structure.
The company's strategy of managerial centralization or
decentralization also influences organizational structures.
• "Centralization," the degree to which decision-making authority
is restricted to higher levels of management, typically leads to a
pyramid structure.

• Centralization is generally recommended when conflicting


goals and strategies among operating units create a need for a
uniform policy.
Key elements of organizational structure
• "Decentralization," the degree to which lower levels of the
hierarchy have decision-making authority, typically leads to a
leaner, flatter organization.

• Decentralization is recommended when conflicting strategies,


uncertainty or complexity require local adaptability and
decision-making.
Types of organizational structures

1. VERTICAL STRUCTURE (FUNCTIONAL AND


DIVISIONAL)

2. MATRIX ORGANIZATIONAL STRUCTURES

3. OPEN BOUNDARY STRUCTURES


1. VERTICAL STRUCTURE (FUNCTIONAL AND
DIVISIONAL)
• Two main types of vertical structure exist, functional and
divisional.
• The functional structure divides work and employees by
specialization.
• It is a hierarchical, usually vertically integrated, structure.
• It emphasizes standardization in organization and processes for
specialized employees in relatively narrow jobs.
1. VERTICAL STRUCTURE (FUNCTIONAL AND
DIVISIONAL)
Advantages of a functional structure include the following:
 The organization develops experts in its respective areas.
 Individuals perform only tasks in which they are most proficient.
 This form is logical and easy to understand.
Disadvantages center on coordination or lack thereof:
 People are isolated and often fail to coordinate or communicate
with other departments.
 Cross-functional activity is more difficult to promote.
 The structure tends to be resistant to change.
1. VERTICAL STRUCTURE (FUNCTIONAL AND
DIVISIONAL)

• A divisional structure most often divides work and employees


by output, although a divisional structure could be divided by
another variable such as market or region.
1. VERTICAL STRUCTURE (FUNCTIONAL AND
DIVISIONAL)
• A divisional organizational structure might look like this:
2. MATRIX ORGANIZATIONAL STRUCTURES
• A matrix structure combines the functional and divisional
structures to create a dual-command situation.
• In a matrix structure, an employee reports to two managers
who are jointly responsible for the employee's performance.
2. MATRIX ORGANIZATIONAL STRUCTURES

Advantages of the matrix structure include the following:

• It creates a functional and divisional partnership and focuses on the


work more than on the people.
• It minimizes costs by sharing key people.
• It creates a better balance between time of completion and cost.
• It provides a better overview of a product that is manufactured in
several areas or sold by various subsidiaries in different markets
2. MATRIX ORGANIZATIONAL STRUCTURES

Disadvantages of matrix organizations include the following:

• Responsibilities may be unclear, thus complicating governance and control.


• Reporting to more than one manager at a time can be confusing for the employee
and supervisors.
• The dual chain of command requires cooperation between two direct supervisors
to determine an employee's work priorities, work assignments, and performance
standards.
• When the function leader and the product leader make conflicting demands on
the employee, the employee's stress level increases, and performance may
decrease.
• Employees spend more time in meetings and coordinating with other employees.
3. OPEN BOUNDARY STRUCTURES
• More recent trends in structural forms remove the traditional boundaries of an
organization.

• Typical internal and external barriers and organizational boxes are eliminated, and all
organizational units are effectively and flexibly connected.

• Teams replace departments, and the organization and suppliers work as closely
together as parts of one company.

• The hierarchy is flat; status and rank are minimal. Everyone—including top
management, managers, and employees—participates in the decision-making
process.
3. OPEN BOUNDARY STRUCTURES
The advantages of learning organizations include the following:
• Open communication and information sharing.
• Innovativeness
• Ability to adapt to rapid change.
• Strong organizational performance.
• Competitive advantage.

The disadvantages of learning organizations include the following:


• Power difference is ignored.
• Process of implementation will be complicated and take longer.
• Fear of employee participation in organizational decisions.
• Breaking of existing organizational rules.
The Impact of Growth Stages on
Organizational Structure

Organizations typically mature in a


consistent and predictable manner.
As they move through various stages of
growth, they must address various
problems. This process creates the need for
different structures, management skills, and
priorities
The four stages of development in an
organization's life cycle include the
following:
The Impact of Growth Stages on
Organizational Structure

STARTUP
 The beginning stage of development is
characterized by an inconsistent growth
rate, a simple structure, and informal
systems.

 At this stage the organization is typically


highly centralized. "Dotcom" companies
are a good example of startup companies
The Impact of Growth Stages on
Organizational Structure

EXPANSION
 The expansion stage is evidenced by
rapid, positive growth and the emergence
of formal systems.

 Organizations at this stage typically


focus on centralization with limited
delegation.
The Impact of Growth Stages on
Organizational Structure

CONSOLIDATION
 The consolidation stage is characterized
by slower growth, departmentalization,
formalized systems, and moderate
centralization.
The Impact of Growth Stages on
Organizational Structure

DIVERSIFICATION
 The diversification stage occurs when
older, larger organizations experience
rapid growth, bureaucracy and
decentralization.
The case for aligning
organizational structure with
the business’s strategy.
• To ensure long-term viability, an
organization must adjust its structure
to fit new economic realities without
diminishing core capabilities and
competitive differentiation.
• Organizational realignment involves
closing the structural gaps impeding
organizational performance.
Problems created by a
misaligned organizational
structure
• Structural gaps in roles, work
processes, accountabilities and critical
information flows can occur when
companies eliminate middle
management levels without
eliminating the work, forcing
employees to take on additional
responsibilities.
Problems created by a
misaligned organizational
structure
• Diminished capacity, capability and
agility issues can arise when
a) lower-level employees who step in
when middle management is eliminated
are ill-equipped to perform the required
duties and
b) when higher-level executives must take
on more tactical responsibilities,
minimizing the value of their leadership
skills.
Problems created by a
misaligned organizational
structure
• Disorganization and improper staffing
can affect a company's cost structure,
cash flow and ability to deliver goods
or services.
Problems created by a
misaligned organizational
structure
• Declining workforce engagement can
reduce retention, decrease customer
loyalty and limit organizational
performance and stakeholder value.
The importance of aligning the
structure with the business
strategy
The key to profitable performance is the
extent to which four business elements are
aligned:
• Leadership. The individuals responsible for
developing and deploying the strategy and monitoring
results.
• Organization. The structure, processes ,and
operations by which the strategy is deployed.
• Jobs. The necessary roles and responsibilities.
• People. The experience, skills, and competencies
needed to execute the strategy.
Thank you
Time for the case study

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