Organizational Structure: Questions and Exercises

Download this Document for Free training in time management; and training to think more positively and realistically about sources of job stress. Tentative evidence suggests that these applications are useful in reducing physiological arousal, sleep disturbances, and self-reported tension and anxiety. E. Work-Life Balance Programs An increasing number of organizations are providing work-life balance programs and employees are beginning to demand them.These are programs that are designed to help employees’ lead more productive and balanced lives and can include mental and physical fitness programs, coffee bars, and cafeteria health food.

Work-life programs are believed to result in lower-health care costs in part due to stress reduction. 60 Chapter 14: Organizational Structure Chapter Summary Questions and Exercises prepared by Alan Saks. I. What Is Organizational Structure? Organizational structure is the manner in which an organization divides its labour into specific tasks and achieves coordination among these tasks.It broadly refers to how the organization’s individuals and groups are put together or organized to accomplish work.

Organizational structure intervenes between goals and organizational accomplishments and thus influences organizational effectiveness. Structure affects how effectively and efficiently group effort is coordinated. To achieve its goals, an organization has to divide labour among its members and then coordinate what has been divided. II. The Division and Coordination of Labour Labour has to be divided because individuals have physical and intellectual limitations. There are two basic dimensions to the division of labour, a ertical dimension and a horizontal dimension. Once labour is divided, it must be coordinated to achieve organizational effectiveness.

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A. Vertical Division of Labour The vertical division of labour is concerned primarily with apportioning authority for planning and decision making. A couple of key themes or issues underlie the vertical division of labour. Autonomy and Control. The domain of decision making and authority is reduced as the number of levels in the hierarchy increases. A flatter hierarchy pushes authority lower and involves people further down the hierarchy in more decisions.Communication. As labour is progressively divided vertically, timely communication and coordination can become harder to achieve. As the number of levels in the hierarchy increases, filtering is more likely to occur. B. Horizontal Division of Labour The horizontal division of labour involves grouping the basic tasks that must be performed into jobs and then into departments so that the organization can achieve its goals. Just as organizations differ in the extent to which they divide labour vertically, they also differ in the extent of horizontal division of labour.A couple of key themes or issues underlie the horizontal division of labour. Job Design. Job design is an important component in the horizontal division of labour. The horizontal division of labour strongly affects job design and it has profound implications for the degree of coordination necessary. It also has implications for the vertical division of labour and where control over work processes should logically reside. Differentiation. Differenti ation is the tendency for managers in separate functions or departments to differ in terms of goals, time spans, and interpersonal styles.As organizations engage in increased horizontal division of labour, they usually become more and more differentiated. C. Departmentation One way of grouping jobs is to assign them to departments. The assignment of jobs to departments is called departmentation. It represents one of the core aspects of horizontal division of labour. There are several methods of departmentation. Functional departmentation. Underfunctional departmentation, employees with closely related skills and responsibilities (functions) are located in the same department. The main advantage of functional departmentation is efficiency.It works best in small to medium-sized firms that offer relatively few product lines or services. Product departmentation. Under product departmentation, departments are formed on the basis of a particular product, product line, or service. Each of these departments can operate fairly autonomously. A key advantage is better coordination and fewer barriers to communication among the functional specialists who work on a particular product line. They also have more potential for responding to customers in a timely way. A disadvantage is that product-oriented departments might actually work at cross purposes.Matrix departmentation. Matrix departmentation is an attempt to capitalize simultaneously on the strengths of both functional and product departmentation. Employees remain members of a functional department while also reporting to a product or project manager. As a result, it is very flexible. Problems could arise when product or project managers do not see eye-to-eye with various functional managers and because employees assigned to a product or project team in essence report to a functional manager as well as a product or project manager.Other Forms of Departmentation. Several other forms of departmentation also exist. Under geographic departmentation, relatively self-contained units deliver the organization’s products or services in specific geographic territories. Under customer departmentation, relatively self-contained units deliver the organization’s products or services to specific customer groups. The obvious goal is to provide better service to each customer group through specialization. Finally, it is not unusual to see hybrid departmentation, which involves some combination of these structures.In other words, a structure based on some mixture of functional, product, geographic, or customer departmentation. They attempt to capitalize on the strengths of various structures, while avoiding the weaknesses of others. D. Basic Methods of Coordinating Divided Labour The tasks that help organizations achieve its goals must be coordinated so that goal accomplishment is realized. Coor dination is the process of facilitating timing, communication, and feedback among work tasks. There are five basic methods of coordination. Direct Supervision. This is a very traditional form of coordination.Working through the chain of command, designated supervisors or managers coordinate the work of their subordinates. Standardization of Work Processes. Some jobs are so routine that the technology itself provides a means of coordination and little direct supervision is necessary for them to be coordinated. Work processes can also be standardized by rules and regulations. Standardization of Outputs. Coordination can also be achieved through the standardization of work outputs. The concern shifts to ensuring that the work meets certain physical and economic standards.Standardization of Skills. Coordination can be achieved through the standardization of skills. This is the case when technicians and professionals know what to expect of each other because of their standard training. Mutual Adjustment. Mutual adjustment relies on informal communication to coordinate tasks. It is useful for coordinating the most simple and the most complicated divisions of labour. 61 The five methods of coordinating divided labour can be crudely ordered in terms of the degree of discretion they permit individual workers in terms of task performance.Direct supervision permits little discretion. Standardization of processes and outputs permits successively more discretion. Finally, standardization of skills and mutual adjustment put even more control into the hands of those who are actually doing the work. E. Other Methods of Coordination Sometimes coordination problems require more customized, elaborate mechanisms. This is especially the case for lateral coordination across highly differentiated departments. Integ ration is the process of attaining coordination across differentiated departments.In ascending order of elaboration, three methods of achieving integration include the use of liaison roles, task forces, and full-time integrators. Liaison Roles. A liaison role is occupied by a person in one department who is assigned, as part of his or her job, to achieve coordination with another department. The person serves as a part-time link between two departments. Task Forces and Teams. Task forces are temporary groups set up to solve coordination problems across several departments. Representatives from each department are included on a full-time or part-time basis. Integrators.I ntegr ators are organizational members who are permanently assigned to facilitate coordination between departments. They are especially useful for dealing with conflict between (1) highly interdependent departments, (2) which have very diverse goals and orientations, (3) in a very ambiguous environment. II. Traditional Structural Characteristics Over the years, management scholars and practising managers have agreed on a number of characteristics that summarize the structure of organizations. A. Span of Control The span of control is the number of subordinates supervised by a manager.The larger the span, the less potential there is for coordination by direct supervision. As the span increases, the attention that a supervisor can devote to each subordinate decreases. Spans at the upper levels tend to be smaller. B. Flat versus Tall A flat organization refers to an organization with relatively few levels in its hierarchy of authority, while a tall organization refers to an organization with many levels in its hierarchy of authority. Thus, flatness versus tallness is an index of the vertical division of labour.Flatter structures tend to push decision-making powers downward and generally enhance vertical communication and coordination. C. Formalization Formalization refers to the extent to which work roles are highly defined by the organization. A very formalized organization tolerates little variability in the way members perform their tasks. Detailed, written job descriptions, thick procedure manuals, and the requirement to “put everything in writing” are evidence of formalization that stems from rules, regulations, and procedures.D. Centralization Centralization refers to the extent to which decision-making power is localized in a particular part of the organization. In the most centralized organization, the power for all key decisions would rest in a single individual, such as the president. In a more decentralized organization, decision- making power would be dispersed down through the hierarchy and across departments. E. Complexity Complexity refers to the extent to which organizations divide labour vertically, horizontally, and geographically.The essential characteristic of complexity is variety, and as an organization grows in complexity it has more kinds of people performing more kinds of tasks in more places, whether these places are departments or geographic territories. IV. Summarizing Structure – Organic versus Mechanistic Mechanistic structures are organizational structures characterized by tallness, narrow spans, specialization, high centralization, and high formalization. Organic structures are organizational structures characterized by flatness, wider spans, fewer authority levels, less specialization, less formalization, and decentralization.In general, more mechanistic structures are called for when an organization’s environment is more stable and its technology is more routine. Organic structures tend to work better when the environment is less stable and the technology is less routine. Many organizations, however, do not have only a single structure. Further, structure can and should change over time. When a large and established firm gets into a new line of business either on its own or by acquiring a smaller and newer innovative firm, the innovative unit often requires some autonomy (i. e. differentiation) and a more organic structure than the established parent. As innovative units mature, they often tend to become more mechanistic and more integrated into the larger organization. V. Contemporary Organic Structures Recent years have seen the advent of new, more organic organizational structures. A. Network and Virtual Organizations In a network organization, various functions are coordinated as much by market mechanisms as by managers and formal lines of authority. Emphasis is placed on who can do what most effectively and economically rather than on fixed ties dictated by an organizational chart.All of the assets necessary to produce a finished product or service are present in the network as a whole, not held in-house by one firm. The most interesting networks are dynamic or virtual organizations. In a virtual organization an alliance of independent companies share skills, costs, and access to one another’s markets. It consists of a network of continually evolving independent companies. Each partner in a virtual organization contributes only in its area of core competencies. The key advantage of network and virtual organizations is their flexibility and adaptability.B. The Modular Organization A modular organization is an organization that performs a few core functions and outsources noncore activities to specialists and suppliers. Services that are often outsourced include the manufacture of parts, trucking, catering, data processing, and accounting. Thus, modular organizations are like hubs that are surrounded by networks of suppliers that can be added or removed as needed. By outsourcing noncore activities, modular organizations are able to keep unit costs low and develop new products more rapidly.They work best when they focus on the right specialty and have good suppliers. 62 C. The Boundaryless Organization In a boundaryless organization, the boundaries that divide employees such as hierarchy, job function, and geography as well as those that distance companies from suppliers and customers are broken down. A boundaryless organization seeks to remove vertical, horizontal, and external barriers so that employees, managers, customers, and suppliers can work together, share ideas, and identify the best ideas for the organization.Instead of being organized around functions with many hierarchical levels, the boundaryless organization is made up of self-managing and cross- functional teams that are organized around core business processes that are critical for satisfying customers such as new-product development or materials handling. The traditional vertical hierarchy is flattened and replaced by layers of teams making the organization look more horizontal than vertical. Some believe that the boundaryless organization is the perfect organizational structure for the 21st century. VI.The Impact of Size Organizational size has a number of effects on the structure of organizations. A. Size and Structure In general, large organizations are more complex and less centralized than small organizations. Larger organizations have greater horizontal specialization and require more integrators and other coordination functions. Large organizations also rely more on formalization and often display greater vertical and geographic complexity. B. Downsizing A reduction in workforce size, popularly calleddownsizing, has been an organizational trend in recent years.Downsizing has a number of implications for organizational structure. Downsizing and Structure. Downsizing is the intentional reduction of workforce size with the goal of improving organizational efficiency or effectiveness. Downsizing usually results in a different organization, not just a smaller one. That is because there are different forces at work than those which drive growth. Also, white collar managerial and staff jobs have been hit hardest changing how organizations are structured. Downsizing is often accompanied by reducing horizontal and vertical complexity.Organizations become flatter and self-managed teams take over supervisory and quality control functions. Problems with Downsizing. There can be a downside to downsizing. Many organizations have not done a good job of anticipating and managing the structural and human consequences of downsizing. Organizations have a tendency to become mechanistic, particularly more formalized and centralized when threatened which works against needed flexibility in times of change. Firms may also be overzealous in their cutting and end up sub-contracting work to consultants which may be both inferior in quality and more expensive.Removing levels from the organization may be a good idea, provided that it doesn’t overload the remaining staff and that everyone is comfortable with the greater levels of delegation required. Finally, the process of downsizing must be considered. Surprising people with workforce cuts is likely to result in low morale, reduced productivity, and continuing distrust of management. Research has shown that contrary to expectations, downsizing does not result in cost reductions in the long run or improvements in productivity. However, when carefully and properly implemented, downsizing can have positive consequences.VII. A Footnote: Symptoms of Structural Problems There are a number of symptoms of structural problems in organizations. Bad job design . There is a reciprocal relationship between job design and organizational structure. Frequently, improper structural arrangements turn good jobs into poor jobs in practice. The right hand doesn’t know what the left is doing . If repeated examples of duplication of effort occur, or if parts of the organization work at cross- purposes, structure is suspect. Persistent conflict between departments . A failure of integration is often the source of conflicts.Slow response times . Delayed responses might be due to improper structure. Decisions made with incomplete information . If decisions have been made with incomplete information, and the information existed somewhere in the organization, structure could be at fault. A proliferation of committees . When committee is piled on committee, or when task forces are being formed with great regularity, it is often a sign that the basic structure of the organization is being “patched up” because it does not work well. 63 Chapter 15: Environment, Strategy, and Technology Chapter SummaryQuestions and Exercises prepared by Alan Saks. I. The External Environment of Organizations The external environment consists of events and conditions surrounding an organization that influence its activities. The external environment has a tremendous influence on organizations and profoundly shapes organizational behavior. A. Organizations as Open Systems Organizations can be described as open systems. Open systems are systems that take inputs from the external environment, transform some of these inputs, and send them back into the external environment as outputs.This concept is important because it sensitizes us to the need for organizations to cope with demands of the environment on both the input and the output side. B. Components of the External Environment It is useful to divide the external environment into a manageable number of components. The General Economy. The general economy affects organizations as they profit from an upturn or suffer from a downturn. Customers. All organizations have potential customers for their products and services. Successful firms are highly sensitive to customer relations. Suppliers.Organizations are dependent on the environment for supplies that include labour, raw materials, equipment, and component parts. Shortages can cause severe difficulties. Competitors. Environmental competitors vie for resources that include both customers and suppliers. Successful organizations devote considerable energy to monitoring the activities of competitors. Social/Political Factors. Organizations cannot ignore the social and political events that occur around them. Organizations must cope with a series of legal regulations that prescribe fair employment practices, proper competitive activities, product safety, and clients’ rights.Technology. The environment contains a variety of technologies that are useful for achieving organizational goals. The ability to adopt the proper technology should enhance an organization’s effectiveness. In addition to these basic components of organizational environments, there are a large number of interest groups that can exist in an organization’s environment. Interest groups are parties or organizations other than direct competitors that have some vested interest in how an organization is managed. Events in various components of the environment provide both onstraints and opportunities for organizations. C. Environmental Uncertainty Environmental uncertainty is a condition that exists when the environment is vague, difficult to diagnose, and unpredictable. Uncertainty depends on the environment’s complexity (simple versus complex) and its rate of change (static versus dynamic). Simple environment. A simple environment involves relatively few factors, and these factors are fairly similar to each other. Complex environment. A complex environment contains a large number of dissimilar factors that affect the organization.Static environment. The components of this environment remain fairly stable over time. Dynamic environment. The components of a highly dynamic environment are in a constant state of change, which is unpredictable and irregular, not cyclical. It is possible to arrange the rate of change and complexity in a matrix. A simple/static environment should provoke the least uncertainty, while a dynamic/complex environment should provoke the most. Some research suggests that change has more influence than complexity on uncertainty.Thus, we might expect a static/complex environment to be somewhat more certain than a dynamic/simple environment. Increasing uncertainty has several predictable effects on organizations including being less clear about cause-and-effect relationships, more difficulty agreeing on priorities, and more information must be processed by the organization to make adequate decisions. Organizations will act to cope with or reduce uncertainty because uncertainty increases the difficulty of decision making and thus threatens organizational effectiveness. D. Resource DependenceBecause organizations are open systems that receive inputs from the external environment and transfer outputs into this environment, they are in a state of resource dependence with regard to their environments. Resource dependence refers to the dependency of organizations on environmental inputs, such as capital, raw materials, and human resources. Carefully managing and coping with this resource dependence is a key to survival and success. Although all organizations are dependent on their environments for resources, some organizations are more dependent than others.As well, resource dependence can be fairly independent of environmental uncertainty, and dealing with one issue will not necessarily have an effect on the other. Organizations are not totally at the mercy of their environments. However, they must develop strategies for managing both resource dependence and environmental uncertainty. II. Strategic Responses to Uncertainty and Resource Dependence Organizations devote considerable effort to developing and implementing strategies to cope with environmental uncertainty and resource dependence.Strategy can be defined as the process by which top executives seek to cope with the constraints and opportunities posed by an organization’s environment. It is the perceived environment that comprises the basis for strategy formulation. Strategy formulation involves determining the mission, goals, and objectives of the organization. The chosen strategy must correspond to the constraints and opportunities of the environment. A. Organizational Structure as a Strategic Response Paul Lawrence and Jay Lorsch studied how organizations should be structured to cope with environmental uncertainty.They found a close connection among environment, structure, and effectiveness. When there is a great range of uncertainty across the sub-environments faced by various organizational departments, the organization must be highly differentiated. Lawrence and Lorsch found that successful organizations facing a certain 64 environment were fairly undifferentiated and tended to adopt mechanistic structures. Effective organizations facing an uncertain environment were highly differentiated and tended to adopt organic structures.The argument that strategy determines structure is a reasonable conclusion when considering an organization undergoing great change or the formulation of a new organization. However, for ongoing organizations, structure sometimes dictates strategy formulation. In general, organizations tailor structure to strategy in coping with the environment. However, structure sometimes dictates strategy formulation. B. Other Forms of Strategic Response Variations on organizational structure are not the only strategic response that organizations can make.Structural variations often accompany other responses that are oriented toward coping with environmental uncertainty or resource dependence. Some more elaborate forms of strategic responses concern relationships between organizations. Vertical integration. Vertical integration refers to the strategy of formally taking control of sources of organizational supply and distribution. Vertical integration can reduce risk for an organization in many cases but when the environment becomes very turbulent, it can reduce flexibility and actually increase risk.Managerial inefficiencies can also develop as a result of control and coordination difficulties. Mergers and Acquisitions. Themerger or joining of two firms and theacquisition of one firm by another has become common strategic responses. Some mergers and acquisitions are stimulated by simple economies of scale. Other mergers and acquisitions are pursued for purposes of vertical integration. Strategic Alliances. Strategic alliances refer to actively cooperative relationships between legally separate organizations.The organizations in question retain their own cultures, but true cooperation replaces distrust, competition, or conflict for the project at hand. Properly designed, such alliances reduce risk and uncertainty for all parties, and resource interdependence is recognized. Organizations can engage in strategic alliances with competitors, suppliers, customers, and unions. Interlocking Directorates. Interlocking directorates refers to a condition that exists when one person serves on two or more boards of directors. They provide a subtle but effective means of coping with environmental uncertainty and resource dependence.The director’s expertise and experience with one organization can provide valuable information for another. Interlocks can also serve as a means of influencing public opinion about the wealth, status, or social conscience of a particular organization. Establishing Legitimacy. One way for organizations to respond to the dilemma of making correct organizational responses when it is hard to know which response is correct is to do things that make the organization appear legitimate to various constituents. Establishing legitimacy involves taking actions that conform to prevailing norms and expectations.This will often be strategically correct, but equally important, it will have the appearance of being strategically correct. In turn, management will appear to be rational, and providers of resources will feel comfortable with the organization’s actions. Legitimacy can be achieved by conforming to established industry practices, bringing high profile people onto the board of directors, or making visible responses to social issues. The most common way of achieving legitimacy is to imitate management practices that other firms have institutionalized. III. The Technologies of OrganizationsTechnology can be defined as the activities, equipment, and knowledge necessary to turn organizational inputs into desired outputs. The concepts of technology and environment are closely related. Organizations choose their technologies. In general, this choice will be predicated on a desired strategy. Also, different parts of an organization rely on different technologies, just as they respond to different aspects of the environment as a whole. A. Basic Dimensions of Technology Three classification schemes of technology that can be applied to manufacturing firms and to service organizations are those of Charles Perrow, James D.Thompson, and Joanne Woodward. Perrow’s Routineness. According to Perrow, the key factor that differentiates various technologies is the routineness of the transformation task that confronts the department or organization. Technological routineness refers to the extent to which exceptions and problems affect the task of converting inputs into outputs. It is a function of two factors: Exceptions. An organization that uses standardized inputs to produce standardized outputs confronts few exceptions compared with one that uses varied inputs and produces varied outputs. Technology is less routine as exceptions increase.Problems. When exceptions occur, are the problems easy to analyze or difficult to analyze? That is, can programmed decision-making occur, or must workers resort to nonprogrammed decision making? The technology becomes less routine as problems become more difficult to analyze. These dimensions can be arranged to produce a matrix of technologies. The matrix includes the following technologies: Craft technologies deal with fairly standard inputs and outputs. Routine technologies , such as assembly line operations and technical schools, also deal with standardized inputs and outputs.Nonroutine technologies must deal frequently with exceptional inputs or outputs, and the analysis of these exceptions is often difficult. Engineering technologies encounter many exceptions of input or required output, but these exceptions can be dealt with by using standardized responses. From most routine to least routine, Perrow’s four technological classifications can be ordered in the following manner: routine, engineering, craft, and nonroutine. Thompson’s Interdependence. In contrast to Perrow, James D.Thompson was interested in the way in which work activities are sequenced or “put together” during the transformation process. A key factor is technological interdependence which is the extent to which organizational subunits depend on each other for resources, such as raw materials or information. In order of increasing interdependence, Thompson proposed three classifications of technology as follows: Mediating technologies operate under pooled interdependence. This means that each unit is to some extent dependent on the pooled resources generated by other units but is otherwise fairly independent of those units.Long-linked technologies operate under sequential interdependence. This means that each unit in the technology is dependent on the activity of the unit that preceded it in a sequence. The transformed product of each unit becomes a resource or raw material for the next unit. Intensive technologies operate under reciprocal interdependence. This means that considerable interplay and mutual feedback must occur between the units performing the task in order to accomplish it properly. This is necessary because each task is unique, and the intensive technology is thus a customized technology.As technologies become increasingly interdependent, problems of coordination, communication, and decision making increase. To perform effectively, each technology requires a tailored structure to facilitate these tasks.