Describe the departmentalization approach to organizational structure

Discussion Topic

Designing Organizational Structures

1. Discuss the fundamental characteristics of organizing and explain work specialization, chain of command, span of management, and centralization versus decentralization.

Organizing is the deployment of organizational resources to achieve strategic goals. Organizing is important because it follows the management function of planning. Planning and strategy define what to do; organizing defines how to do it. Organization structure is a tool that managers use to harness resources for getting things accomplished. The deployment of resources is reflected in the organization's division of labor into specific departments and jobs, formal lines of authority, and mechanisms for coordinating diverse organization tasks.

Work specialization, sometimes called division of labor, is the degree to which organizational tasks are subdivided into separate jobs. When work specialization is extensive, employees specialize in a single task. Jobs tend to be small, but they can be performed efficiently.

The chain of command is an unbroken line of authority that links all employees in an organization and shows who reports to whom. \

The span of management is the number of employees reporting to a supervisor. Sometimes called the span of control, this characteristic of structure determines how closely a supervisor can monitor subordinates. The average span of control used in an organization determines whether the structure is tall or flat. A tall structure has an overall narrow span and more hierarchical levels. A flat structure has a wide span, is horizontally dispersed, and has fewer hierarchical levels.

Centralization and decentralization pertain to the hierarchical level at which decisions are made. Centralization means that decision authority is located near the top of the organization. With decentralization, decision authority is pushed downward to lower organization levels.

2. Describe functional and divisional approaches to structure.

Functional structure is the grouping of positions into departments based on similar skills, expertise, work activities, and resource use. A functional structure can be thought of as departmentalization by organizational resources because each type of functional activity such as accounting, human resources, engineering, and manufacturing, represent specific resources for performing the organization's task. People and facilities representing a common organizational resource are grouped together into a single department.

Divisional structure occurs when departments are grouped together based on similar organizational outputs. In the divisional structure, divisions are created as self-contained units for producing a single product. Each functional department resource needed to produce the product is assigned to one division. In a functional structure, all engineers are grouped together and work on all products whereas, in a divisional structure, separate engineering departments are established within each division. Each department is smaller and focuses on a single product line. Departments are duplicated across product lines.

3. Explain the matrix approach to structure and its application to both domestic and international organizations.

The matrix structure uses functional and divisional structures simultaneously in the same part of the organization. The matrix structure has dual lines of authority. The functional hierarchy of authority runs vertically, and the divisional hierarchy of authority runs horizontally. The matrix approach to structure provides a formal chain of command for both the functional and divisional relationships. The matrix structure is typically used when the organization experiences environmental pressure for both a strong functional departmentalization and a divisional departmentalization. Global corporations often use the matrix structure. The problem for global companies is to achieve simultaneous coordination of various products within each country or region and for each product line. The two lines of authority typically are geographic and product, and the matrix provides excellent simultaneous coordination. It is an organizational structure that deliberately violates Fayol’s principle of unity of command.

4. Describe the contemporary team and virtual network structures and why they are being adopted by organizations.

The implementation of team concepts has been a widespread trend in departmentalization. The vertical chain of command is a powerful means of control, but moving decisions through the hierarchy takes much time and keeps responsibility at the top. The trend is to delegate authority, push responsibility to the lowest possible levels, and create participative teams that engage the commitment of workers. This approach enables organizations to be more flexible and responsive in a competitive global environment. The dynamic network organization is another approach to departmentalization. Using the network structure, the organization divides major functions into separate companies that are brokered by a small headquarters organization. The network approach is revolutionary because it is difficult to answer the question, “Where is the organization?” This organizational approach is especially powerful for international operations.

5. Explain why organizations need coordination across departments and hierarchical levels and describe mechanisms for achieving coordination.
Coordination refers to the quality of collaboration across departments. It is required whether there is a functional, divisional, or team structure. Coordination problems are amplified in the global arena, because units differ not only by goals and work activities but by distance, time, culture, and language. Coordination is the outcome of information and cooperation; managers can design systems and structures to promote horizontal coordination. The vertical structure is flattened, with perhaps only a few senior executives in traditional support functions such as finance or human resources. A task force is a temporary team or committee designed to solve a short-term problem involving several departments. Task force members represent their departments and share information that enables coordination. Companies also set up cross-functional teams for coordination. Companies also use project managers, responsible for coordinating the activities of several departments on a full-time basis for the completion of a specific project. Reengineering is the radical redesign of business processes to achieve dramatic improvements in cost, quality, service, and speed. Because the focus of reengineering is on process rather than function, reengineering generally leads to a shift away from a strong vertical structure.

6. Identify how structure can be used to achieve an organization’s strategic goals.

Structure depends on a variety of contingencies. The right structure is “designed to fit” the contingency factors of strategy, environment, and technology. These three areas are changing for organizations, creating a need for stronger horizontal coordination. Two strategies proposed by Porter are differentiation and cost leadership ; these strategies require different structural approaches. The pure functional structure is appropriate for achieving internal efficiency goals. The vertical functional structure uses task specialization and a chain of command. It does not enable the organization to be flexible or innovative. Horizontal teams are appropriate when the primary goal is innovation and flexibility. The firm can differentiate itself and respond quickly to change. Other forms of structure represent intermediate steps on the firm’s path to efficiency or innovation. The functional structure with cross-functional teams and project teams provides greater coordination and flexibility than the pure functional structure. The divisional structure promotes differentiation because each division can focus on specific products and customers.

7. Define production technology and explain how it influences organization structure.

Technology includes the knowledge, tools, techniques, and activities used to transform organizational inputs into outputs. Joan Woodward described three types of manufacturing technology.

a. Small-batch and unit production. Small-batch production firms produce goods in batches of one or a few product products designed to customer specification. Examples include custom clothing, special-order machine tools, space capsules, satellites, and submarines.

b. Large-batch and mass production. Mass production technology is distinguished by standardized production runs in which a large volume of products is produced and all customers receive identical products. This technology makes greater use of machines than does small-batch production. Examples include automobiles, tobacco products, and textiles.

c. Continuous process production. In continuous process production, the entire workflow is mechanized in a sophisticated and complex form of production technology. The process runs continuously and therefore has no starting or stopping. Human operators are not part of actual production because machinery does all the work. Examples include chemical plants, distilleries, petroleum refineries, and nuclear power plants.

Service organizations include consulting companies, law firms, brokerage houses, airlines, hotels, advertising companies, amusement parks, and educational organizations. Service technology also characterizes departments such as legal, human resources, finance, and market research in large corporations. Service technology involves:

· intangible output—services are perishable and, unlike physical products, cannot be stored in inventory; and

· direct contact with customers—employees and customers interact directly to provide and purchase the service. Production and consumption are simultaneous.