Chapter 6 Organizational Structure and Design

CHAPTER ORGANIZATIONAL
STRUCTURE AND
6
DESIGN

LEARNING OUTCOMES
After reading this chapter students should be able to:
1. Describe 6 key elements in organizational design.
2. Identify the contingency factors that favor the mechanistic model or the organic model.
3. Compare and contrast traditional and contemporary organizational designs.
4. Discuss the design challenges faced by todays organizations.
Opening Vignette The United Arab Emirates Tiger
SUMMARY
Tiger has been in operation since 1976 and is a member of the Tiger Group. The business has
a portfolio of projects in the United Arab Emirates (UAE), along with other markets. The
business has either delivered, or is in the process of delivering, about 200 projects.
In 2008, the groups board of directors decided the group needed a new management team to
keep pace with the increasing number of projects and the development of the business as a
whole, and so the entire company was given a major reshuffle. A big part of this reshuffle aimed
to incorporate new appointments at the senior management level, in order to strengthen the
core team. Notably, the groups existing management team was moved into a new department,
known as the Facilities Services Department, and given the responsibility of overseeing the
groups projects.

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Chapter 6 Organizational Structure and Design

I.

WHAT ARE THE SIX KEY ELEMENTS IN ORGANIZATIONAL DESIGN?

A. Introduction
1. Organization design decisions are typically made by senior managers.
2. Organization design applies to any type of organization.
3. Formulated by management writers such as Henri Fayol and Max Weber in the
early 1900s.
4. These principles still provide valuable insights into designing effective and efficient
organizations.
B. What Is Work Specialization?
1. Work specialization is dividing work activities into separate jobs tasks.
a) Individuals specialize in doing part of an activity.
b) Work specialization makes efficient use of the diversity of skills that workers
hold.
2. Some tasks require highly developed skills; others lower skill levels.
3. Excessive work specialization or human diseconomies, can lead to boredom,
fatigue, stress, low productivity, poor quality, increased absenteeism, and high
turnover. (See Exhibit 6-1.)
4. Today's view is that specialization is an important organizing mechanism for
employee efficiency, but it is important to recognize the economies work
specialization can provide as well as its limitations.
C. What Is Departmentalization?
1. Departmentalization is when common work activities are grouped back together
so work gets done in a coordinated and integrated way.
2. There are five common forms of departmentalization (see Exhibit 6-2).
a) Functional Groups - employees based on work performed (e.g., engineering,
accounting, information systems, human resources)
b) Product Groups - employees based on major product areas in the corporation
(e.g., womens footwear, mens footwear, and apparel and accessories)
c) Customer Groups - employees based on customers problems and needs
(e.g., wholesale, retail, government)
d) Geographic Groups - employees based on location served (e.g., North,
South, Midwest, East)
e) Process Groups - employees based on the basis of work or customer flow
(e.g., testing, payment)
3. With today's focus on the customer, many companies are using cross-functional
teams, which are teams made up of individuals from various departments and that
cross traditional departmental lines.

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D. What are Authority and Responsibility?
1. The chain of command is the continuous line of authority that extends from upper
organizational levels to the lowest and clarifies who reports to whom.
2. An employee who has to report to two or more bosses might have to cope with
conflicting demands or priorities.
3. Authority refers to the rights inherent in a managerial position to give orders and
expect the orders to be obeyed.
4. Each management position has specific inherent rights that incumbents acquire
from the positions rank or title.
a) Authority is related to ones position and ignores personal characteristics.
5. When managers delegate authority, they must allocate commensurate
responsibility.
a) When employees are given rights, they assume a corresponding obligation to
perform and should be held accountable for that performance!
b) Allocating authority without responsibility creates opportunities for abuse.
c) No one should be held responsible for something over which he or she has no
authority.
6. What are the different types of authority relationships?
a) The early management writers distinguished between two forms of authority.
(1) Line authority entitles a manager to direct the work of an employee.
(a) It is the employer-employee authority relationship that extends from
top to bottom.
(b) See Exhibit 6-3.
(c) A line manager has the right to direct the work of employees and
make certain decisions without consulting anyone.
(d) Sometimes the term line is used to differentiate line managers from
staff managers.
(e) Line emphasizes managers whose organizational function contributes
directly to the achievement of organizational objectives (e.g.,
production and sales).
(2) Staff managers have staff authority (e.g., human resources and payroll).
(a) A managers function is classified as line or staff based on the
organizations objectives.
(b) As organizations get larger and more complex, line managers find that
they do not have the time, expertise, or resources to get their jobs
done effectively.
(c) They create staff authority functions to support, assist, advise, and
generally reduce some of their informational burdens.
(d) Exhibit 6-4 illustrates line and staff authority.

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E. What is Unity of Command?
1. The chain of command is the continuous line of authority that extends from upper
organizational levels to the lowest and clarifies who reports to whom.
2. An employee who has to report to two or more bosses might have to cope with
conflicting demands or priorities.
3. Therefore, the early management writers argued that an employee should have
only one superior (Unity of command)
4. If the chain of command had to be violated, early management writers always
explicitly designated that there be a clear separation of activities and a supervisor
responsible for each.
5. The unity of command concept was logical when organizations were
comparatively simple.
6. There are instances today when strict adherence to the unity of command creates
a degree of inflexibility that hinders an organizations performance.
7. How does the contemporary view of authority and responsibility differ from the
historical view?
a) The early management writers assumed that the rights inherent in ones
formal position in an organization were the sole source of influence.
b) This might have been true 30 or 60 years ago.
c) It is now recognized that you do not have to be a manager to have power, and
that power is not perfectly correlated with ones level in the organization.
d) Authority is but one element in the larger concept of power.
8. How do authority and power differ?
a) Authority and power are frequently confused.
b) Authority is a right, the legitimacy of which is based on the authority figures
position in the organization.
(1) Authority goes with the job.
c) Power refers to an individuals capacity to influence decisions.
(1) Authority is part of the larger concept of power.
(2) Exhibit 6-5 visually depicts the difference.
d) Power is a three-dimensional concept.
(1) It includes not only the functional and hierarchical dimensions but also
centrality.
(2) While authority is defined by ones vertical position in the hierarchy, power is
made up of both ones vertical position and ones distance from the
organizations power core, or center.
e) Think of the cone in Exhibit 6-5 as an organization.
(1) The closer you are to the power core, the more influence you have on
decisions.
(2) The existence of a power core is the only difference between A and B in
Exhibit 6-5.
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f)

The cone analogy explicitly acknowledges two facts:

(1) The higher one moves in an organization (an increase in authority), the closer
one moves to the power core.
(2) It is not necessary to have authority in order to wield power because one can
move horizontally inward toward the power core without moving up.
(a) Example, administrative assistants, powerful as gatekeepers with
little authority.
(3) Low-ranking employees with contacts in high places might be close to the
power core.
(4) So, too, are employees with scarce and important skills.
(a) The lowly production engineer with twenty years of experience might
be the only one in the firm who knows the inner workings of all the old
production machinery.
g) Power can come from different areas.
(1) John French and Bertram Raven have identified five sources, or bases, of
power.
(a) See Exhibit 6-6.
(b) Coercive power -based on fear; Reward power - based on the ability
to distribute something that others value; Legitimate power - based on
ones position in the formal hierarchy; Expert power - based on ones
expertise, special skill, or knowledge; Referent power -based on
identification with a person who has desirable resources.
F. What is Span of Control?
1. How many employees can a manager efficiently and effectively direct?
2. This question received a great deal of attention from early management writers.
3. There was no consensus on a specific number but early writers favored small
spans of less than six to maintain close control.
4. Level in the organization is a contingency variable.
a) Top managers need a smaller span than do middle managers, and middle
managers require a smaller span than do supervisors.
5. There is some change in theories about effective spans of control.
6. Many organizations are increasing their spans of control.
7. The span of control is increasingly being determined by contingency variables.
a) The more training and experience employees have, the less direct supervision
needed.
8. Other contingency variables should also be considered; similarity of employee
tasks, the task complexity, the physical proximity of employees, the degree of
standardization, the sophistication of the organizations management information
system, the strength of the organizations value system, the preferred managing
style of the manager, etc.

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Right or Wrong

You hear it in the news every week, a hacker (or hackers) has gained access to personal data
of thousands of customers or employees. In the dilemma described here, a security hole in an
AT&T website allowed Goatse Security, a group of computer security experts, to retrieve the
email addresses for thousands of new iPad users. The head of Goatse Security pointed out
they were doing AT&T a favor by identifying the problem. On the other hand, the information
released by Goatse could have helped hackers break into AT&Ts website.
Questions for students to consider:
Is there such a thing as ethical hacking?
What ethical issues they see in the case?
What are the implications for various stakeholders in this situation?
G. How Do Centralization and Decentralization Differ?
1. Centralization is a function of how much decision-making authority is pushed
down to lower levels in the organization.
2. Centralization-decentralization is a degree phenomenon.
3. By that, we mean that no organization is completely centralized or completely
decentralized.
4. Early management writers felt that centralization in an organization depended on
the situation.
a) Their objective was the optimum and efficient use of employees.
b) Traditional organizations were structured in a pyramid, with power and
authority concentrated near the top of the organization.
c) Given this structure, historically, centralized decisions were the most
prominent.
5. Organizations today are more complex and are responding to dynamic changes.
a) Many managers believe that decisions need to be made by those closest to
the problem.
6. Today, managers often choose the amount of centralization or decentralization
that will allow them to best implement their decisions and achieve organizational
goals.
7. One of the central themes of empowering employees was to delegate to them the
authority to make decisions on those things that affect their work.
a) Thats the issue of decentralization at work.
b) It doesnt imply that senior management no longer makes decisions!
H. What is Formalization?
1. Formalization refers to how standardized an organizations jobs are and the extent
to which employee behavior is guided by rules and procedures.
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2. Early management writers expected organizations to be fairly formalized, as
formalization went hand-in-hand with bureaucratic-style organizations.
3. Today, organizations rely less on strict rules and standardization to guide and
regulate employee behavior.
____________________________________________________________________________
II.

WHAT CONTINGENCY VARIABLES AFFECT STRUCTURAL CHOICE?

A. Introduction
1. The most appropriate structure to use will depend on contingency factors.
2. The more popular contingency variables are strategy, size, technology, and
environment.
B. How Is a Mechanistic Organization Different from an Organic Organization?
1. Exhibit 6-7 describes two organizational forms.
2. The mechanistic organization (or bureaucracy) was the natural result of combining
the six elements of structure.
a) The chain-of-command principle ensured the existence of a formal hierarchy
of authority.
b) Keeping the span of control small created tall, impersonal structures.
(1) Top management increasingly imposed rules and regulations.
c) The high degree of work specialization created simple, routine, and
standardized jobs.
d) Departmentalization increased impersonality and the need for multiple layers
of management.
3. The organic form is a highly adaptive form that is a direct contrast to the
mechanistic one.
a) The organic organizations loose structure allows it to change rapidly as needs
require.
(1) Employees tend to be professionals who are technically proficient and trained
to handle diverse problems.
(2) They need very few formal rules and little direct supervision.
b) The organic organization is low in centralization.
4. When each of these two models is appropriate depends on several contingency
variables.
C. How Does Strategy Affect Structure?
1. An organizations structure should facilitate goal achievement.
a) Strategy and structure should be closely linked.
b) Example, if the organization focuses on providing certain servicespolice
protection in a communityits structure will be one that promotes
standardized and efficient services.

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c) Example, if an organization is attempting to employ a growth strategy by
entering into global markets, it will need a structure that is flexible, fluid, and
readily adaptable to the environment.
2. Accordingly, organizational structure should follow strategy. If management
makes a significant change in strategy, it needs to modify its structure as well.
3. The first important research on the strategy-structure relationship was Alfred
Chandlers study of close to 100 large U.S. companies.
4. After tracing the development of these organizations over fifty years and compiling
extensive case histories, Chandler concluded that changes in corporate strategy
precede and lead to changes in an organizations structure.
a) Organizations usually begin with a single product or line.
b) The simplicity of the strategy requires only a simple form of structure to
execute it.
c) Decisions can be centralized and complexity and formalization will be low.
d) As organizations grow, their strategies become more ambitious and elaborate.
5. Research has generally confirmed the strategy-structure relationship.
a) Organizations pursuing a differentiation strategy must innovate to survive.
(1) An organic organization matches best with this strategy because it is flexible
and maximizes adaptability.
b) A cost-leadership strategy seeks stability and efficiency.
(1) Stability and efficiency help to produce low-cost goods and services and can
best be achieved with a mechanistic organization.
D. How Does Size Affect Structure?
1. There is historical evidence that an organizations size significantly affects its
structure.
2. Large organizationsemploying 2,000 or more employeestend to have more
work specialization, horizontal and vertical differentiation, and rules and
regulations than do small organizations.
3. The relationship is not linear; the impact of size becomes less important as an
organization expands.
a) Example, once an organization has around 2,000 employees, it is already
fairly mechanistican additional 500 employees will not have much effect.
b) Adding 500 employees to an organization that has only 300 members is likely
to result in a shift toward a more mechanistic structure.
E. How Does Technology Affect Structure?
1. Every organization uses some form of technology to convert its inputs into
outputs.
2. To attain its objectives, the organization uses equipment, materials, knowledge,
and experienced individuals and puts them together into certain types and
patterns of activities.

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a) Example, workers at Whirlpool build washers, dryers, and other home
appliances on a standardized assembly line.
b) Example, employees at Kinkos produce custom jobs for individual customers.
c) Example, employees at Bayer AG in Pakistan work on a continuous flow
production line for manufacturing its pharmaceuticals.
From the Past to the Present
Joan Woodward (British scholar) found that distinct relationships exist between size of
production runs and the structure of the firm. The effectiveness of organizations was related to
fit between technology and structure. Most studies focused on the processes or methods that
transform inputs into outputs and how they differ by their degree of routine.
Three categories, representing three distinct technologies, had increasing levels of complexity
and sophistication. Unit production described the production of items in units or small batches.
Mass production described large batch manufacturing. The most technically complex group,
process production, included continuous-process production. The more routine the technology,
the more standardized and mechanistic the structure can be. Organizations with more nonroutine technology are more likely to have organic structures. See Exhibit 6-8.
F. How Does Environment Affect Structure?
1. Mechanistic organizations are most effective in stable environments.
2. Organic organizations are best matched with dynamic and uncertain
environments.
3. The environment-structure relationship is why so many managers have
restructured their organizations to be lean, fast, and flexible.
4. Global competition, accelerated product innovation, knowledge management, and
increased demands from customers for higher quality and faster deliveries are
examples of dynamic environmental forces.
5. Mechanistic organizations tend to be ill-equipped to respond to rapid
environmental change.
III.

WHAT ARE SOME COMMON ORGANIZATIONAL DESIGNS?

A. The main designs are simple, functional and divisional.
1. See Exhibit 6-9.
B. What Is a Simple Structure?
1. Most organizations start as an entrepreneurial venture with a simple structure.
2. There is low departmentalization, wide spans of control, authority centralized in a
single person, and little formalization.
3. The simple structure is most widely used in smaller businesses.
4. The strengths of the simple structure are that it is fast, flexible, and inexpensive to
maintain, and accountability is clear.
5. Major weaknesses.
a) It is effective only in small organizations.
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b) It becomes increasingly inadequate as an organization grows; its few policies
or rules to guide operations and its high centralization result in information
overload at the top.
c) As size increases, decision making becomes slower and can eventually stop.
d) It is risky since everything depends on one person.
C. What is the functional structure?
1. Many organizations do not remain simple structures because structural
contingency factors dictate it.
2. As the number of employees rises, informal work rules of the simple structure give
way to more formal rules.
3. Rules and regulations are implemented; departments are created, and levels of
management are added to coordinate the activities of departmental people.
4. At this point, a bureaucracy is formed.
5. Two of the most popular bureaucratic design options are called the functional and
divisional structures.
6. Why do companies implement functional structures?
a) The functional structure merely expands the functional orientation.
b) The strength of the functional structure lies in work specialization.
(1) Economies of scale, minimizes duplication of personnel and equipment,
makes employees comfortable and satisfied.
c) The weakness of the functional structure is that the organization frequently
loses sight of its best interests in the pursuit of functional goals.
D. What is the divisional structure?
1. An organization design made up of self-contained units or divisions.
2. Health care giant Johnson & Johnson, for example, has three divisions:
pharmaceuticals, medical devices and diagnostics, and consumer products.
3. The chief advantage of the divisional structure is that it focuses on results.
a) Division managers have full responsibility for a product or service.
b) It also frees the headquarters from concern with day-to-day operating details.
4. The major disadvantage is duplication of activities and resources.
a) The duplication of functions increases the organizations costs and reduces
efficiency.
E. What Contemporary Organizational Designs Can Managers Use?
1. See Exhibit 6-10 for the three contemporary organization designs.
a) Team structure is when the entire organization consists of work groups or
teams.
b) Team members have the authority to make decisions that affect them,
because there is no rigid chain of command.
c) Companies such as Amazon, Boeing, Hewlett-Packard, Louis Vuitton,
Motorola, and Xerox extensively use employee teams to improve productivity.
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d) In these teams, Employees must be trained to work on teams, receive crossfunctional skills training, and be compensated accordingly.
2. The matrix structure assigns specialists from different functional departments to
work on projects led by a project manager.
a) Exhibit 6-11 illustrates the matrix structure of a firm.
b) The unique characteristic of the matrix is that employees in this structure have
at least two bosses, a dual chain of command: their functional departmental
manager and their product or project managers.
c) Project managers have authority over the functional members who are part of
that managers team.
d) Authority is shared between the two managers.
(1) Typically, the project manager is given authority over project employees
relative to the projects goals.
(2) Decisions such as promotions, salary recommendations, and annual reviews
remain the functional managers responsibility.
e) To work effectively, project and functional managers must communicate and
coordinate.
f)

The primary strength of the matrix is that it can facilitate coordination of a

multiple set of complex and interdependent projects while still retaining the
economies that result from keeping functional specialists grouped together.

g) The major disadvantages of the matrix are in the confusion it creates and its
propensity to foster power struggles.
3. Project structure - is when employees continuously work on projects.
a) Tends to be more flexible
b) The major advantage of that is that employees can be deployed rapidly to
respond to environmental changes.
c) The two major disadvantages of the project structure are the complexity of
assigning people to projects and the inevitable task and personality conflicts
that arise.
F. What is a Boundaryless Organization?
1. A boundaryless organization, coined by former GE CEO, Jack Welch, is not
defined or limited by boundaries or categories imposed by traditional structures.
2. It blurs the historical boundaries surrounding an organization by increasing its
interdependence with its environment.
3. There are two types of boundaries:
a) Internalthe horizontal ones imposed by work specialization and
departmentalization and the vertical ones that separate employees into
organizational levels and hierarchies.
b) Externalthe boundaries that separate the organization from its customers,
suppliers, and other stakeholders.
4. A virtual organization consists of a small core of full-time employees and outside
specialists temporarily hired as needed to work on projects.
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5. A network organization - is one that uses its own employees to do some work
activities and networks of outside suppliers to provide other needed product
components or work processes. Also called a modular organization by
manufacturing firms.
Technology and the Managers Job - The Changing World of Work
It is almost clich to say that technology has had a dramatic impact on how people work. Mobile
communication and technology has allowed organizations to stay connected. Hand-held
devices, cellular phones, webcams, etc. allow employees to work virtually. Information
technology continues to grow and become an integral part of the way business is conducted.
However, one challenges caused by some the high level of integrated technology is security.
Software and other disabling devices have helped in this arena and many companies are
developing creative applications for their workforce.

IV.

WHAT ARE TODAY'S ORGANIZATIONAL DESIGN CHALLENGES?

A. How Do You Keep Employees Connected?
1. Choosing a design that will best support and facilitate employees doing their work
efficiently and effectively, creates challenges.
2. A major structural design challenge for managers is finding a way to keep widely
dispersed and mobile employees connected to the organization.
B. How Do Global Differences Affect Organizational Structure?
1. Researchers have concluded that the structures and strategies of organizations
worldwide are similar, while the behavior within them is maintaining its cultural
uniqueness.
2. When designing or changing structure, managers may need to think about the
cultural implications of certain design elements, such as rules and bureaucratic
mechanisms.
C. How Do You Build a Learning Organization?
1. Building a learning organization is a mindset in which the learning organization
has developed the capacity to continuously adapt and change because all
members take an active role in identifying and resolving work-related issues.
2. Employees are practicing knowledge management.
a) Continually acquiring and sharing new knowledge.
b) Willing to apply that knowledge in making decisions or performing their work.
3. According to some organizational design theorists, an organizations ability to
learn and to apply that learning may be the only sustainable source of competitive
advantage.
See Exhibit 6-12 for characteristics of a learning organization.
a) Members share information and collaborate on work activities throughout the
entire organization.
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b) Minimize or eliminate existing structural and physical boundaries.
(1) Employees are free to work together and to collaborate.
(2) Teams tend to be an important feature of the structural design.
(3) Managers serve as facilitators, supporters, and advocates.
c) For a learning organization to "learn" information is shared openly, in a timely
manner, and as accurately as possible.
d) Leadership creates a shared vision for the organizations future and keeps
organizational members working toward that vision.
(1) Leaders should support and encourage the collaborative environment.
e) A learning organizations culture is one in which everyone agrees on a shared
vision and everyone recognizes the inherent interrelationships among the
organizations processes, activities, functions, and external environment.
f)

There is a strong sense of community, caring for each other, and trust.

(1) Employees feel free to openly communicate, share, experiment, and learn
without fear of criticism or punishment.
g) Organizational culture is an important aspect of being a learning organization.
A learning organizations culture is one in which everyone agrees on a shared
vision and everyone recognizes the inherent interrelationships among the
organizations processes, activities, f functions, and external environment.
D. How Can Managers Design Efficient and Effective Flexible Work Arrangements?
1.

As organizations adapt their structural designs to fit a diverse workforce, growing

competition, customer demands and new technology, we see more of them
adopting flexible working arrangements.

2.

Such arrangements not only exploit the power of technology, but give organizations
the flexibility to deploy employees when and where needed.

3.

Telecommuting is a work arrangement in which employees work at home and are

linked to the workplace by computer.
a) Telecommute provides the company a way to grow without having to incur any
additional fixed costs such as office buildings, equipment, or parking lots.
b) Some companies view the arrangement as a way to combat high gas prices
and to attract talented employees who want more freedom and control.
c) Some managers are reluctant to have their employees become laptop hobos
wasting time surfing the Internet or playing online games instead of working.
d) Employees often express concerns about being isolated.
e) Managing the telecommuters then becomes a matter of keeping employees
feeling like theyre connected and engaged, a topic we delve into at the end of
the chapter as we look at todays organizational design challenges.
4. Compressed workweek, which is a workweek where employees work longer hours
per day but fewer days per week.
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a) Flextime (also known as flexible work hours), which is a scheduling system in

which employees are required to work a specific number of hours a week but
are free to vary those hours within certain limits.
b) Job sharingthe practice of having two or more people split a full-time job.
5. Contingent Workers are temporary, freelance, or contract workers whose
employment is contingent upon demand for their services.
a) As organizations eliminate full-time jobs through downsizing and other
organizational restructurings, they often rely on a contingent workforce to fill in
as needed.
b) One of the main issues businesses face with their contingent workers,
especially those who are independent contractors or freelancers, is classifying
who actually qualifies as one.
c) Another issue with contingent workers is the process for recruiting, screening,
and placing these contingent workers where their work skills and efforts are
needed.
d) As with full-time employees, its important that managers have a method of
establishing goals, schedules, and deadlines with the contingent employees

REVIEW AND APPLICATIONS

CHAPTER SUMMARY
6.1 Describe six key elements in organizational design. The first element, work
specialization, refers to dividing work activities into separate job tasks. The second,
departmentalization, is how jobs are grouped together, which can be one of five types:
functional, product, customer, geographic, or process. The third authority,
responsibility, and powerall have to do with getting work done in an organization.
Authority refers to the rights inherent in a managerial position to give orders and expect
those orders to be obeyed. Responsibility refers to the obligation to perform when
authority has been delegated. Power is the capacity of an individual to influence
decisions and is not the same as authority. The fourth, span of control, refers to the
number of employees a manager can efficiently and effectively manage. The fifth,
centralization and decentralization, deals with where the majority of decisions are
madeat upper organizational levels or pushed down to lower-level managers. The
sixth, formalization, describes how standardized an organizations jobs are and the
extent to which employees behavior is guided by rules and procedures.
6.2

Identify the contingency factors that favor the mechanistic model or the organic
model. A mechanistic organizational design is quite bureaucratic whereas an organic
organizational design is more fluid and flexible. The strategy-determines structure factor
says that as organizational strategies move from single product to product
diversification, the structure will move from organic to mechanistic. As an organizations
size increases, so does the need for a more mechanistic structure. The more nonroutine the technology, the more organic a structure should be. Finally, stable
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environments are better matched with mechanistic structures, but dynamic ones fit better
with organic structures.
6.3

Compare and contrast traditional and contemporary organizational designs.

Traditional structural designs include simple, functional, and divisional. A simple
structure is one with low departmentalization, wide spans of control, authority centralized
in a single person, and little formalization. A functional structure is one that groups
similar or related occupational specialties together. A divisional structure is one made up
of separate business units or divisions. Contemporary structural designs include teambased structures (the entire organization is made up of work teams); matrix and project
structures (where employees work on projects for short periods of time or continuously);
and boundaryless organizations (where the structural design is free of imposed
boundaries). A boundaryless organization can either be a virtual or a network
organization.

6.4

Discuss the design challenges faced by todays organizations. One design

challenge lies in keeping employees connected, which can be accomplished through
using information technology. Another challenge is understanding the global differences
that affect organizational structure. Although structures and strategies of organizations
worldwide are similar, the behavior within them differs, which can influence certain
design elements. Another challenge is designing a structure around the mind-set of
being a learning organization. Finally, managers are looking for organizational designs
with efficient and effective flexible work arrangements. Theyre using options such as
telecommuting, compressed workweeks, flextime, job sharing, and contingent workers.

UNDERSTANDING THE CHAPTER

1. Describe what is meant by the term organizational design.
Answer: Once decisions regarding corporate strategies are made, an effective structure
must be implemented to facilitate the attainment of those goals. When managers develop or
change the organizations structure, they are engaging in organization design. Organization
design decisions are typically made by senior managers. Organization design applies to any
type of organization.
2. Discuss the traditional and contemporary views of each of the six key elements of
organizational design.
Answer: Traditionally, work specialization was viewed as a way to divide work activities into
separate job tasks. Todays view is that it is an important organizing mechanism but it can
lead to problems. The chain of command and its companion conceptsauthority,
responsibility, and unity of commandwere viewed as important ways of maintaining control
in organizations. The contemporary view is that they are less relevant in todays
organizations. The traditional view of span of control was that managers should directly
supervise no more than five to six individuals. The contemporary view is that the span of
control depends on the skills and abilities of the manager and the employees and on the
characteristics of the situation.
3. Can an organizations structure be changed quickly? Why or why not? Should it be
changed quickly? Why or why not?
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Answer: No, it takes time and a lot of planning and communication. Cultures usually evolve
based initially on the founder's values. Whether or not it should be changed quickly is
dependent upon the competition, its efficiency and success and its financial viability. A
boundaryless organization provides the flexibility and fluid structure that facilitates quick
movements to capitalize on opportunities. An organic structure versus a bureaucracy could
adapt more quickly to changes.
4. An organization can have no structure. Do you agree or disagree with this
statement? Explain.
Answer: A boundaryless or virtual organization is not without structure, structure is
minimized but not eliminated. There is always some degree of reporting relations, some type
of division of labor, some need for the management of processes, etc. Boundaryless
organizations are not merely flatter organizations. They attempt to eliminate vertical,
horizontal, and inter-organizational barriers.
5. Contrast mechanistic and organic organizations.
Answer: A mechanistic organization is a rigid and tightly controlled structure. An organic
organization is highly adaptive and flexible. See Exhibit 6-7 for additional differences.
6. Explain the contingency factors that affect organizational design.
Answer: An organizations structure should support the strategy. If the strategy changes the
structure also should change. An organizations size can affect its structure up to a certain
point. Once an organization reaches a certain size (usually around 2,000 employees), its
fairly mechanistic. An organizations technology can affect its structure. An organic structure
is most effective with unit production and process production technology. A mechanistic
structure is most effective with mass production technology. The more uncertain an
organizations environment, the more it needs the flexibility of an organic design.
7. With the availability of advanced information technology that allows an organizations
work to be done anywhere at any time, is organizing still an important managerial
function? Why or why not?
Answer: Although an organizations work may be done anywhere at any time, organizing
remains a vital managerial function because the work that must be accomplished still must
be divided, grouped, and coordinated. Regardless of where employees work, there are
basic managerial functions that must be served, such as scheduling of work, setting goals,
and maintaining employee morale.
8. Researchers are now saying that efforts to simplify work tasks actually have negative
results for both companies and their employees. Do you agree? Why or why not?
Answer: Student responses may vary based on their respective opinion. Simplifying tasks
may result in monotony and boredom, even turnover. The 21st century workforce is smarter,
more independent, better educated and more trustworthy employees, so they will demand
more challenging work. They will work with more individual authority and less direct
supervision.
9. The boundaryless organization has the potential to create a major shift in the way we
work. Do you agree or disagree? Explain.

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Answer: Students responses to this will vary with most students focusing on the topics of
flexibility at work. Some organizations that adopt a boundaryless design also implement
flextime and flexplace work arrangements for their employees. This question could serve as
an interesting springboard for a class debate. Students could break into teams, with each
team taking the opposite position in the debate. Give students an opportunity to discuss
their strategy as a team before presenting their viewpoints to the class.
10. Draw an organization chart of an organization with which youre familiar (where you
work, a student organization to which you belong, your college or university, etc.). Be
very careful in showing the departments (or groups) and especially be careful to get
the chain of command correct. Be prepared to share your chart with the class.
Answer: Student answers will depend on the organization that they choose.

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