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5-1
Basic
Organization Designs
Where
We Are
Organization design means to
develop or change (create) the
organization’s structure
:
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How
specialized job be allocated
?
Rules to guide
employees behavior
?
At what level decisions to be made
It is the
top manager’s
main concern, while others managers ...
Chapter guide
We
will discuss in this chapter
?
6
basic
structural elements
?
4 contingency
variables
?
5 types of
designs
?
10
characteristics of culture
6 Basic Elements of
Structure
?
By definition,
an organization is
a systematic
arrangement of
people to accomplish
some specific purpose
, where the
systematic arrangement is what we call
structure here.
?
How can you say 2 organizations are
different ---- the difference
between
organizations in term of
their structure?
?
The bases of
organization design formulated in 1900s, most of
them still apply
Work Specialization
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Work specialization,
or
Division of labor
describes
the degree
to which organizational
tasks are subdivided into separate jobs.
In 1700s Adam Smith found
dividing job into small pieces
can
increase the productivity. (Wealth of Nations).
An entire job
is
not done by one person. Instead, it is divided
into discrete steps,
each one completed
by a different person. In his pin factory story:
?
1-20 per
day
each worker when work
independently,
Lecture note
: Fundamental of Management
–
Chap 5 + Chap 8(partly)
Lecture
note
:
Fundamental
of
Management
–
Chap
5
+
Chap
8(partly)
?
48000 per day
when 10 workers work together but each
only do a part of
200---
5000
times!
?
Why can division of labor increase
productivity?
Individual: skill and
training, tools and special equipment,
focus
, ….
Group: use labor skill
Ex: PC assembly line
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The changes of
people’s belief and attitude towards the
economies of work specialization:
Early proponents
believed
that work specialization could lead to
indefinitely increasing productivity.
Since specialization was not
widely
practiced at the turn of the twentieth century,
their belief was
reasonable.
By the late 1940s
, work
specialization enabled manufacturing firms
to make the most effective use of their
employees’ skills. So,
managers
believed that division of labor offered an
unending source
of increased
productivity.
By the
1960s
, however, the
human
diseconomies
resulting from
work specialization began to offset the
economic advantages.
Managers today realize that while
division of labor is appropriate for
some jobs, productivity in other jobs
can be increased through
enlarging, not
narrowing, job activities. ----
Job
enriching trend
Chain of Command
?
Chain of
command: the route of orders go through in the
organization ---- the mechanism make
the organization a whole
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Chain of Command
Principle:
No person should report to more
than
one boss
Past: a logical concept to
simple structure organizations
Now:
sound for most organizations/many cases but too
strict
adherence may lead to
inflexibility
Span of
Control
?
Span of
control: the
number
of subordinates a
manager
directly
5-1
5-2
supervise
?
Small spans of
control helps managers maintain close control;
but, there are several drawbacks:
they require more managers
and are more costly, they retard
vertical communication, and they foster
tight controls and
limited employee
autonomy.
Wide spans of
control reduce costs, cut overhead, expedite
decision making, increase flexibility,
empower employees,
and promote customer
contact.
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Narrow -- > taller: All things being
equal, the broader the span
of control,
the more efficient the organization
?
How many
employees can a manager efficiently and
effectively
direct? --- a question draw
a lot of attention of researches for
long time
Magic
number
6 ?
GE: 10~12, Now:
It
depends
…
Span of Control
determinants
?
similarity and complexity of employee
tasks
?
the
proximity of employees
?
the presence of standardized procedures
?
the
capabilities of the information management system
?
the strength of
the firm’s value system
?
the preferred
style of management.
Authority and Responsibility
?
Authority
refers to the
rights inherent in a managerial position,
such as giving orders and expecting
that the orders will be
obeyed.
Authority, therefore, is related to one’s position
within
an organization and ignores the
personal characteristics of the
individual manager. When managers
delegate authority, they
must allocate
commensurate
responsibility
to perform.
?
Stanley Milgram (Yale U )Experiment:
How far [people follow
the commands
they admit
Lecture note :
Fundamental of Management
–
Chap 5 + Chap 8(partly)
Lecture
note
:
Fundamental
of
Management
–
Chap
5
+
Chap
8(partly)
Line vs. Staff Authority
Early management writers distinguished
between two forms of
authority:
line and staff
.
?
Line: direct
supervisory, order/report and responsibility,
employer vs employees, chain of command
?
Staff: support,
assistant, advise, especially in technical
area
, “on
behalf”
Early management scholars
assumed that the authority and
rights
inherent in one’s formal position were the sole
source of
influence; so, managers were
all powerful. But, organizations were
simpler then, staff was less important,
and management was only
minimally
dependent on technical specialists. Modern
theorists now
realize that nonmanagers
can have power and that power is not
perfectly correlated with one’s job.
Define power
and authority
?
Power: an individual’s capability to
influence decisions/other
people’s behavior.
?
Authority,
therefore, is a part of the
larger
concept of power
, It
goes
with the job.
Comparison of power and authority
?
Authority goes
with job, power come out of individual
?
authority is a
two-dimensional concept: that is, the higher one
is
in an organization, the more
authority he or she has. power is a
three-dimensional concept: that is,
it includes not only the
functional and hierarchical dimensions,
but also a third
dimension called
centrality or one’s distance from
t
he center ---
the core of
power
.
?
Example of core
of power
?
administrative assistance/secretary:
gate keeper to access
boss/passing
information ----structure related
?
personal
friends, scare/important skill: 20 years
experience
5-2
5-3
vs. new graduates, seniority---- not
structure related
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The cone analogy acknowledges two
facts:
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the higher one moves in an
organization, the closer he or
she is
to the power core; and
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even those
without authority can wield power because one
can move horizontally inward toward the
power core
without moving up.
The core of
power can be described or further analyzed by the
concepts of sources of power: coercive,
reward, legitimate, expert,
and
referent. These five sources are presented in the
next slide.
Sources of power
John French and Bertram
Raven:
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Coercive
power is based on fear and threat
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Reward power is
based on the ability to distribute something
that others value.
(Punishment = negative rewards)
?
Legitimate
power i
s based on one’s
position in the formal
hierarchy.
(
“authority is legitimated
power”
)
?
Expert
power is based on
one’s expertise, special
skill, or
knowledge.
?
Referent power is based on
identification with a person who has
desirable resources or personal traits.
Can you provide
an
example of each power you
see in y
our life ……
Management workshop:
developing your power base skill
?
Similar Chinese
sayings
?
Respect
others ----
Treat others the way you
would like to be
treated
：
己所不欲勿施于人
?
Build power
relationships ----
bird of feather
flock together
：
物
以
类聚人以群分
?
Develop associations ----
there is strength in
numbers
：
拧起的
绳不易断
?
Control
information ---
knowledge is
power
：
知情就是权力
Lecture note : Fundamental of
Management
–
Chap 5 + Chap
8(partly)
Lecture
note
:
Fundamental
of
Management
–
Chap
5
+
Chap
8(partly)
?
Gain seniority:
多年
的媳妇熬成婆
?
Build power in
stages
：
千里之行始于足下
Degree of
Centralization
?
Degree of
centralization/decentralization refers to place
the
authority ---- where should a
particular decision should be
made)
?
The term
centralization
means the
decision making is
concentrated at a
single point in the organization.
The term
decentralization
means that
significant input is provided by
lower-
level personnel.
A general present trend now is to
pushdown --- push decision
points down
make them close to the problems, but at the same
time
brings the risk of lost control,
what we called empowerment.
Movement of Decentralization
Traditional organizations
were structured in a pyramid, with
power and authority centralized at the
top. In order to respond to the
dynamics of the contemporary
marketplace, organizations today are
more decentralized to solve problems
more quickly and to obtain
increased
employee input and commitment to organizational
goals.
5 Ways
to Departmentalize
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It is
hard to think to put several thousands
people in one
group
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Department
refers to a group
of specialists under the direction
of a
manager,
Departmentalization
is to group
activities
,
thus
people and
recourses
.
?
Work
specialization
breaks the
job, departmentization put
pieces of
job together in other ways way
?
The department
is based on work functions, the product or
service, the target customer or client,
the geographic territory,
or the
production process.
5-3
5-4
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Functional: by function performed
?
Product: by
product produced/served provide
?
Customer: by
common customers
?
Geography: by territory
?
Process: by
work plow
Product vs.
Customer or Geographic
Tasks can be grouped according to a
specific
product
, thus
placing all activities related to the
product under one manager. Jobs
may be
grouped according to the type of
customer
served by the
organization. If
an
organization’s customers are geographically
dispersed, it can group jobs based on
geography
(
territory
).
Functional vs. Process
Activities can also e
grouped according to
function
to pursue
economies of scale
by
placing employees with shared skills and
knowledge into work-groups. Since each
process requires different
skills,
process
departmentalization
allows homogenous activities to
be
categorized.
Contemporary View on
Departmentalization
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Most of the traditional departmental
groupings are in use
?
More use of
interdepartmental teams.
?
Intense competition force the
management pay more attention
on the
needs of customers and responding to them.
Organizational Forms: 2
generic structure
?
Mechanic organizations
:
characterized by
high specialization,
extensive departmentalization, narrow
spans of control,
high
formalization
,
downward communication
,
high
centralization,
and little participation
by low-level members in decision
making.
Jobs are standardized,
simple, and routine, and strict
Lecture
note : Fundamental of Management
–
Chap 5 + Chap 8(partly)
Lecture
note
:
Fundamental
of
Management
–
Chap
5
+
Chap
8(partly)
adherence to the chain of command. In
its ideal form, the
mechanistic
organization is an “efficiency machine,” well
lubricated by rules, regulations, and
routines.
?
Organic
organization: characterized by a flat structure,
flexibility,
use of cross-
functional teams,
adaptability
,
comprehensive
information
networking
, and decentralization.
Jobs are not
standardized, and employees are
well-
trained and empowered to make job-related
decisions. The
net effect is that
workers need a minimal degree of formal rules
and little direct supervision.
With the two models in
mind, we are now going to address the
question why are some organizations
structured along more
mechanistic lines
while others lean toward organic characteristics?
4 Determinants of structure
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Strategy
Structure follows the
strategy
:
After
studying nearly 100
large companies,
Alfred Chandler concluded that changes in
corporate strategy foster changes in an
organization’s
structure.
To exemplify this structure-strategy
relationship, consider
that
organizations pursuing a differentiation strategy
must
innovate to survive; so an organic
structure complements this
strategy due
to its flexibility and adaptability. A cost-
leadership
strategy, on the other hand,
seeks stability and efficiency, a
mechanistic structure would be best for
this type of strategy.
?
Size
While the size of an organization
significantly influences
its
structure,
the relationship is non-
linear
.
Large
organizations (2,000+ employees) have more
specialization, departmentalization,
vertical levels, rules, and
5-4