ECT 3350 CONSTRUCTION MANAGEMENT II

MR. OLIVER AGINA

ORGANIZATIONAL STRUCTURE AND DESIGN

Introduction
- No other topic in management has undergone as much change in the past few years as that of
organizing and organizational structure.
- Managers keep questioning and re-evaluating traditional approaches to organizing work in
their search for organizational structures that can achieve efficiency but also have the flexibility
necessary for success in today’s dynamic environment.
- The challenge for managers is to design an organizational structure that allows employees to
work effectively and efficiently.
 Defining organization structure & Design
Organizing
- A management function that involves determining what tasks are to be done, who is to do them,
how the tasks are to be grouped, who reports to whom, and where decisions are to be made.
Organizational structure
- This is how job tasks are formally divided, grouped, and coordinated within an organization.
Organizational design
- This is the process of developing or changing an organization’s structure. When managers develop
or change the structure, they are engaged in organizational design, a process that involves decisions
on about six key elements (Elements of Organizational design):
i) work specialization ii) Departmentalization iii) chain of command iv) span of control v)
centralization and decentralization vi) formalization
1. work specialization
- This is the degree to which tasks in an organization are subdivided into separate jobs.
- The essence of work specialization is that an entire job is not done by one individual but
instead is broken down into steps, and each step is completed by a different person.
- Individual employees specialize in doing part of an activity rather than the entire activity.
- When work specialization is implemented, employee productivity rises.
- However, when used to extreme, the disadvantages include boredom, fatigue, stress, poor
quality, increased absenteeism etc.
 2. Departmentalization
- Once jobs have been divided up through work specialization, they have to be grouped back
together so that common tasks can be coordinated.
- The basis on which jobs are grouped together is called departmentalization.
- There are five common forms of departmentalization;
a. Functional departmentalization
b. Product departmentalization
c. Geographical departmentalization
d. Process departmentalization
e. customer departmentalization
a. Functional departmentalization – groups jobs by functions performed.
b. Product
departmentalization –
groups jobs by product line.
In this approach, each major
product area is placed under
the authority of a manager
who is responsible for
everything having to do with
that product line. (e.g
LAFARGE)
c. Geographical departmentalization – groups jobs on the basis of territory or geography, such
as the Kenyan Coastal region, North Eastern Kenya, Sub-Sahara Africa etc. A good example is
with the CocaCola company or Motor Company (RANA in Meru, Meru traders being specialized
in miraa trading, probox and pick ups are main selling vehicles, in Mombasa it would probably
be tuk tuks, and maybe Mercedes in Kisumu)
d. Process departmentalization – groups jobs on the basis of product or customer flow. In this
approach, work activities follow a natural processing flow of products or even of customers.
For example, many beauty salons have separate employees for shampooing, colouring, and
cutting hair, all different processes for having one’s hair styled.
e. customer departmentalization – groups jobs on the basis of customers who have common
needs or problems that can best be met by having specialists for each e.g safaricom care centers
or even banks.
3. Chain of Command
- This is the continuous line of authority that extends from upper organizational levels to the lowest
levels and clarifies who reports to whom.
- It helps employees answer questions such as “Who do I go to if I have a problem?” or “To whom
am I responsible?”
- The chain of command goes hand in hand with authority, responsibility, accountability, unity of
command and delegation.
4. Span of Control
- How many employees can a manager efficiently and effectively manage?
- This question of span of control is important because, to a large degree, it determines the
number of levels and managers an organization needs.
- All things being equal (ceteris paribus), the wider or larger the span, the more efficient the
organization. Wider spans are more efficient in terms of cost.
- larger span means few managers with many employees under them while shorter span means
many managers with few employees under them.
- However, at some point, wider spans reduce effectiveness. When the span becomes too large,
employee performance can suffer because managers may no longer have the time to provide
the necessary leadership and support.
 N.B Today’s View on Span of Control – The contemporary view of span of control recognizes
that many factors influence the appropriate number of employees a manager can efficiently and
effectively manage.
- These factors include;
i. The skills and abilities of the manager
ii. The skills and abilities of the employees i.e. the more training and experience employees
have, the less direct supervision they need.
iii. The characteristics of the work being done
5. Centralization and Decentralization
- In some organizations, top managers make all the decisions and lower-level managers and employees simply
carry out their orders (centralized).
- At the other extreme are organizations in which decision making is pushed down to the managers who are
closest to the action (decentralized).
- Centralization describes the degree to which decision making is concentrated at a single point in the
organization, mostly top level of the management.
- If top level managers make the organization’s key decisions with little or no input from below, then the
organization is centralized.
- In contrast, the more that lower-level employees provide input or actually make decisions, the more
decentralization there is.
- The concept of centralization/decentralization is relative, not absolute—an organization is never completely
centralized or decentralized.
N.B Today’s View on Centralization and decentralization
- Most organizations start with a centralized model, where a founder makes all the decisions. As
the businesses grow and diversify their environments become complex.
- These businesses need to become more flexible and responsive, resulting in decentralized
decision making.
- In large companies especially, lower-level managers are “closer to the action” and typically
have more detailed knowledge about problems and how best to solve them than do top
managers.
- Another term for increased decentralization is employee empowerment, which means giving
more decision-making authority to employees. (e.g as a construction manager, your boss, the
contractor, will have decentralized decision making to you on site because you are the one at
the site and so you can make certain decisions such as recruitment of labour on site)
6. Formalization
- Formalization refers to the degree to which jobs within the organization are standardized and
the extent to which employee behavior is guided by rules and procedures. (e.g in Asian
establishments)
- If a job is highly formalized, the person doing that job has little freedom to choose what is to be
done, when it is to be done, and how he or she does it.
- Employees can be expected to handle the same input in exactly the same way, resulting in
consistent and uniform output. (important for food industry e.g KFC)
- Organizations with high formalization have explicit job descriptions, numerous organizational
rules, and clearly defined procedures covering work processes.
- On the other hand, where formalization is low, job behaviors are relatively unstructured, and
employees have a great deal of freedom in how they do their work.
- The degree of formalization varies widely among organizations and even within organizations.
For example, at a newspaper agency, news reporters often have a great deal of discretion in
their jobs. They may pick their news topics, find their own stories, research them the way they
want to, and write them up, usually within minimal guidelines.
- In contrast, employees who lay out the newspaper pages do not have that type of freedom.
- Where would you prefer working; a highly formalized work environment or less formalized
work environment? What are the advantages and disadvantages?
Today’s View on Formalization
- Although some formalization is important and necessary for consistency and control, many of
today’s organizations seem to be less reliant on strict rules and standardization to guide and
regulate employee behaviour.
- The employees are allowed some freedom to make decisions they feel are best under the
circumstances. However, this freedom does not mean that all organizational rules are thrown
out of the window.
There will be rules that are important for employees to follow, and these rules should be
explained so employees understand the importance of adhering to them.
 Structures of organization
design
- There are generally two types of structures of organization design;
i. Mechanistic structure
ii. Organic structure
Factors that affect choice of
structure for organization design
Strategy – certain structural designs work best with different organizational strategies for example,
organizations in passionate pursuit of innovation would tend to favor organic structure whereas those
in passionate pursuit of cost control would tend to adopt mechanistic structure.
Size – An organization with fewer employees would most likely adopt an organic structure. Adding a
significant number of new employees to a smaller organization that has a more organic structure will
force it to become more mechanistic
Environment - Environment is a constraint on managerial discretion. Environment also has a major
effect on an organization’s structure;
▪ Stable environment: mechanistic structure
▪Dynamic/uncertain environment: organic structure
Technology - Technology is used—by every organization—to convert inputs into outputs
(How do you think the level of technology in an organization informs the choice of structure for
organization design?)
N.B Today’s View on structure – So many managers today have restructured their organizations
to be lean, fast, and flexible