15. ORGANIZATIONAL STRUCTURE

1. DEFINITION:

How job tasks are formally divided, grouped, and coordinated.


2.  IMPORTANT FACTORS:

• Work specialization: To what degree are activities subdivided into different jobs?

• Departmentalization: On what basis will jobs be grouped together?

• Chain of command: To whom do people report?

• Span of control: How many individuals report to a manager?

• Centralization vs. Decentralization: Where does decision-making lie?

• Formalization: To what degree do rules and regulations direct employee behavior?


3. Types of Organizational Structure

Functional

Product

Matrix

Network


4. Functional Organization:

Departmentalization based on the activities or functions performed (e.g., sales, finance)


- Advantage : managers are experts in one particular function

- Limitations:

---may limit innovation and hinder cross-functional projects

---leads to silos


5. Product Organizations:

 Departmentalization based on the products (or product lines) produced

- separate divisions established that contain all of the resources necessary to develop, manufacture, and sell a product

- organization is composed of separate divisions, each of which operates independently – “Cost centers”


- Advantage : managers from each division can devote their energies to one particular business

- Limitations:

--- loss of economies of scale because of duplication of resources

--- problems of coordination across product lines may arise


6. Matrix Organizations :

Departmentalization in which a product or project form is superimposed on a functional form

Dual authority - employees report to two bosses, one functional, the other product (project)


Advantages:

- Permits flexible use of an organization’s human resources

- Efficient means of responding to changed environment

- Enhances communication among managers

Limitations:

- frustration and stress due to role ambiguity and role conflict


7. Network organizations : 

flexible organization that forms teams specific to each project or task

-Division of labor by knowledge within project

-All managers need to be network entrepreneurs

-Decentralized

-Low stability

-Informal structure important


 Advantages:

- highly flexible design

- allows for constant adaptation

- minimal infrastructure or fixed costs

Limitations:

-Jobs and roles ambiguous

-Top executives are responsible but have little control

-Difficult to maintain in a large organization

-Political behavior rampant


8. Mechanistic Versus Organic Structures


9. Structures are related to strategy


10. Interorganizational Design

• Conglomerates – An organization (usually a very large,multinational one) adds an entirely unrelated business or product

- Diversification

- Countercyclical business trends across different industries

- Built-in markets and access to suppliers


• Strategic Alliance - 2 or more separate companies combine forces to develop and operate a specific business

- Each firm contributes its own specialty

- Provide benefits to each individual organization that could not be attained by operating separately

- Gain access to markets in foreign countries

- Share technology, i.e. licensing agreements

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