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Economies and diseconomies of work specialization

29/11/2021 Client: muhammad11 Deadline: 2 Day

Essentials of Organizational Behavior

Fourteenth Edition

Chapter 15

Foundations of Organizational Structure

After studying this chapter you should be able to:

Identify the seven elements of an organization’s structure.

Identify the characteristics of the functional structure, the divisional structure, and the matrix structure.

Identify the characteristics of the virtual structure, the team structure, and the circular structure.

Describe the effects of downsizing on organizational structures and employees.

Contrast the reasons for mechanistic and organic structural models.

Analyze the behavioral implications of different organizational designs.

What Is Organization Structure?

Organizational Structure:

Defines how job tasks are formally divided, grouped, and coordinated

Key elements:

Work specialization

Departmentalization

Chain of command

Span of control

Centralization and decentralization

Formalization

Boundary spanning

Organizational structure depicts how job tasks are formally divided, grouped, and coordinated. The key elements of organizational structure include work specialization, departmentalization, chain of command, span of control, centralization and decentralization, formalization, and boundary spanning.

Key Questions and Answers

This exhibit presents each element as an answer to an important structural question.

Work Specialization

Work specialization:

Describes the degree to which activities in the organization are subdivided into separate jobs

Also known as division of labor

Benefits

Greater efficiency and lower costs

Costs

Human costs when carried too far

Job enlargement as a solution

A key part of organizational structure is understanding the degree to which tasks are divided into separate jobs or work specialization. The division of labor is helpful in creating the most efficient way to utilize employee skills, increase their skills, and maximize their input.

Work specialization can cause greater economies, but in some cases it can cause diminishing returns due to repetition that can lead to boredom. Job enlargement can be more effective at creating greater efficiencies than work specialization.

Work Specialization Economies

This exhibit shows economies and diseconomies of work specialization.

Departmentalization

Departmentalization:

Basis by which jobs are grouped together so that common tasks can be coordinated

Common bases:

Functional

Product or service

Geography

Process and customer

Departmentalization defines how jobs are grouped together. There are a number of options to choose from when grouping jobs; you could organize around function, product, location, process, or customer. When jobs are grouped, departments are formed.

Chain of Command

Chain of command:

Unbroken line of authority that extends from the top of the organization to the lowest echelon and clarifies who reports to whom

Authority: positional rights

Unity of command: one boss

Fewer organizations find this is relevant

The chain of command represents the line of authority present in decision making. Embedded in the chain of command is the inherent right of a manager to give orders and expect the orders to be followed. Unity of command is the idea that a subordinate should have only one superior to report to so that directions and the chain of command are clear.

As organizations change, this concept is becoming less and less important.

Span of Control

Span of control:

The number of employees a manager is expected to effectively and efficiently direct

Determines the number of levels and managers an organization has

Trend is toward wider spans of control

Wider span depends on knowledgeable employees

Affects speed of communication and decision making

Span of control looks at how many workers a manager can effectively direct towards organizational goals. Wider span allows for more efficiency because you need fewer managers. However, it can also limit the amount of time and direction managers can give to their employees. A narrow span can allow for more direction but can add layers of management, increase the complexity of the vertical communication, and encourage overly tight supervision, limiting employee autonomy.

Contrasting Spans of Control

The exhibit illustrates that wider spans of control have fewer levels and fewer managers.

Centralization and Decentralization

Centralization:

Degree to which decision making is concentrated at a single point in the organization

Only includes formal authority: positional rights

Highly centralized when top managers make all the decisions

Decentralized when front line employees and supervisors make decisions

Trend is toward increased decentralization

The fifth aspect of structure deals with centralization and decentralization. Centralization is the degree to which decision making is concentrated at a single point in the organization, typically at the top. Decentralization represents an organization that spreads decision making throughout the organization.

Formalization

Formalization:

Degree to which jobs within the organization are standardized

Formal: minimum discretion over what is to be done, when it is done, and how

Informal: freedom to act is necessary

Formalization is the degree to which jobs within the organization are standardized. When there is high formalization, workers have very little control over how they do their work, and they will be required to follow a number of rules and procedures. Lower formalization will tend to allow for different job behaviors to get the job done, giving workers more control over their work.

Boundary Spanning

Boundary spanning:

When individuals form relationships outside their formally assigned groups

Liaison roles

Development activities

Job rotations

Organizational goals and shared identity

Organizations can use formal mechanisms to facilitate boundary-spanning activities through their structures.

One method is to assign formal liaison roles or develop committees of individuals from different areas of the organization.

Development activities can also facilitate boundary spanning. Employees with experience in multiple functions, such as accounting and marketing, are more likely to engage in boundary spanning.

Many organizations try to set the stage for these sorts of positive relationships by creating job rotation programs so new hires get a better sense of different areas of the organization.

A final method to encourage boundary spanning is to bring attention to overall organizational goals and shared identity concepts.

Common Organizational Designs

Three common organizational frameworks:

Simple structure

Bureaucracy

Matrix structure

There are a number of organizational structures available to companies. We will look at a number of options over the next several slides.

Simple Structure

Low degree of departmentalization

Wide spans of control

Authority centralized in a single person

Little formalization

Difficult to maintain in anything other than small organizations

The first and most basic structure is the simple structure. This structure has a low degree of departmentalization, wide spans of control, and centralized decision making with little formalization in job design.

This structure is difficult to utilize in anything other than small organizations.

Bureaucracy

Highly routine operating tasks achieved through specialization

Formal rules and regulations

Centralized authority

Narrow spans of control

Tasks grouped by functional departments

Decision making follows the chain of command

Another type of organizational design is bureaucracy. In a bureaucratic organization, there will be a great deal of structure. The tasks will be completed through specialization, and they tend to be formalized through rules and regulations. Departments will be highly defined by function, and authority is centralized. Decision making will follow a strict chain of command and there will be narrow spans of control. The bureaucratic organization will be one that is highly defined and very controlled.

Functional and Divisional Structures

Functional structure: groups employees by their similar specialties, roles, or tasks

Divisional structure: groups employees into units by product, service, customer, or geographic market area

There are two aspects of bureaucracies we should explore: functional and divisional structures.

Matrix Structure

Combines two forms of departmentalization

Functional

Product

Dual chain of command

Advantages:

Facilitates coordination and efficient allocation of specialists

Disadvantages:

Possible confusion, fosters power struggles, stress

The matrix structure is another common organizational design. This structure creates dual lines of authority and combines functional and product departments in a way to effectively meet organizational goals.

The key elements of the matrix structure is that it gains the interactions between the functional and product departments by coordinating complex and interdependent activities to help reach the goals set forth in an efficient manner, opening up avenues for new ideas to achieve the company’s mission. The matrix structure also breaks down the unity-of-command concept as the lines of authority are blurred.

Matrix Structure for a College of Business Administration

This slide shows an example of a matrix structure within a college.

New Design Options

Virtual Organization:

A small core organization that outsources its major business functions

Highly centralized with little or no departmentalization

Provides maximum flexibility while concentrating on what the organization does best

Reduced control over key parts of the business

Virtual organizations are developing as acceptable organizational structures. This structure offers a small core organization that outsources many of its major functions to competent suppliers. Virtual organizations are highly centralized with virtually no departmentalization to provide maximum flexibility, focusing on what the organization does best. This type of organization reduces control over some of the key parts of the business.

A Virtual Organization

This exhibit shows a virtual organization in which management outsources all the primary functions of the business.

The Team Structure

Team structure:

Eliminates the chain of command

Has limitless spans of control

Replaces departments with empowered teams

Breaks down geographical barriers

Boundaryless organizations are set up to reduce the structure and tight control over work. They organize in a way to try to empower teams. They eliminate vertical and horizontal boundaries, as well as geographic boundaries. Boundaryless organizations also try to breakdown external barriers to customers and suppliers through their structure and style of communication. These organizations also break down geographical barriers.

The Circular Structure

Circular structure: Top management is at the center of the organization with its vision spreading outward in rings grouped by function

May be confusing for employees

May be used to spread CSR initiatives

Picture the concentric rings of an archery target. In the center are the executives; radiating outward in rings grouped by function are the managers, then the specialists, then the workers. This is the circular structure.

The Leaner Organization: Downsizing

Downsizing:

A systematic effort to make an organization leaner by selling off business units, closing locations or reducing staff

Controversial because of the negative impact on employees

Impact on organizational performance has been very controversial

In the midst of tough economic times and the need for companies to be leaner, downsizing has been on the rise. Downsizing is a systematic effort to make an organization leaner by ridding itself of a business units, excessive locations, and staff. It has been very controversial because of the strong negative impact on employees. Because of this negative impact, the link to performance enhancement has been questioned.

Organizational Design Models

This slide show two extreme models of organizational design – the mechanistic model and the organic model. Several factors, discussed next, influence which type of structure is best for an organization.

Determinants of Structure

Organizational Strategy

Innovation strategy: introduce new offerings-prefer organic structures

Cost-minimization strategy: cost control–prefer mechanistic structures

Imitation strategy: minimal risk and maximum profit–both structures used

Structures differ for a number of reasons. The first is that structure is set up to facilitate the strategy of the organization. If your organization is focusing on innovation as a key value, then it may be best served by an organic structure. Whereas, if the strategy emphasizes minimizing costs, a mechanistic structure will work better. Strategy should always dictate structure instead of structure dictating strategy.

Optimal Structural Option

Exhibit 15-7 describes the structural option that best matches each strategy.

More Determinants of Structure

Organization Size

Move toward mechanistic structure as size increases

Technology

Routine activities prefer mechanistic structures, non-routine prefer organic structures

Structures will also differ by organization size, the larger the organization, the more likely it will be mechanistic. Technology also influences structure. The more routine the activities, the more mechanistic the structure should be.

Still More Determinants of Structure

Environment

Dynamic environments lead to organic structures

Capacity

Volatility

Complexity

Institutions

Act as guidelines for appropriate behavior

Structures will also differ based on the environment in which they exist. The more dynamic the environment, the more organic the structure will need to be to facilitate quick decisions and fast turnaround. Finally, institutions play a role in organizational design by acting as guidelines for appropriate behavior.

The Environment

Exhibit 15-8 summarizes our definition of the environment along its three dimensions.

Organizational Designs and Employee Behavior

Cannot generalize any link between structure and performance

Consider employee preferences for:

Work specialization

Span of control

Centralization

Predictability versus autonomy

National culture influences organizational structure

High power distance cultures accept mechanistic structures

Organizational designs are not a good predictor of employee behavior. Research has shown that work specialization can lead to increased productivity but lower job satisfaction. Specialization has not been popular, as employees are seeking more intrinsically rewarding jobs. Span of control has mixed results depending on individual differences in employees and organizational factors. Centralization can facilitate different employee responses.

Research suggests that national culture may influence organizational structure. In particular, organizations with people from high-power distance cultures typically find that employees are more accepting of mechanistic structures than employees from low power-distance countries.

Various factors will influence workers in their job satisfaction and their willingness to stay with an organization.

Implications for Managers

Specialization can make operations more efficient, but excessive specialization can create dissatisfaction and reduced motivation.

Avoid designing rigid hierarchies that overly limit employees’ empowerment and autonomy.

Balance the advantages of remote work against the potential pitfalls before adding flexible workplace options.

Downsize your organization to realize major cost savings, and focus the company around core competencies-but only if necessary because downsizing can have a significant negative impact on employee affect.

Consider the scarcity, dynamism, and complexity of the environment, and balance the organic and mechanistic elements when designing an organizational structure.

Structure does have an impact on both the attitudes and behaviors of the people within the organization, so it is important that managers effectively select and utilize structure within their organizations.

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