Fundamentals of Management Essential Concepts and Applications Chapter 5 Organizational Sructure and Culture organizing the function of management that creates the organization's structure. organizational design When managers develop or change the organization's structure This process involves making decisions about how specialized jobs should be, the rules to guide employees' behaviors, and at what level decisions are to be made. What Are the Six Key Elements in Organizational Design? The basic concepts of organizational design formulated by management writers like Henri Fayol and Max Weber offered structural principles for managers to follow. six basic elements of organizational structure work specialization dividing work activities into separate job tasks. also known as division of labor. the workers specialize in job tasks Individual employees "specialize" in doing part of an activity rather than the entire activity in order to increase work output. makes efficient use of the diversity of skills that workers have. some tasks require highly developed skills; others can be performed by employees with lower skill levels. If all workers were engaged in all the steps all would need the skills necessary to perform both 'the most demanding and the least demanding jobs. At some point, the human diseconomies from division of labor surface as boredom, fatigue, stress, low productivity, poor quality, increased absenteeism, and high turnover exceed the economic advantages TODAY'S VIEW OF SPECIALIZATION? Most managers today see work specialization as an important organizing mechanism because it helps employees be more efficient. departmentalization how jobs are grouped together Early management writers argued that after deciding what job tasks will be done by whom, common work activities needed to be grouped back together so work gets done in a coordinated and integrated way. Five common forms of departmentalization functional departmentalization grouping activities by functions performed One of the most popular ways to group activities A manager might organize the workplace by separating engineering, accounting, information systems, human resources, and purchasing specialists into departments. Functional departmentalization can be used in all types of organizations. Only the functions change to reflect the organization's objectives and activities. The major advantage to functional departmentalization is the achievement of economies of scale by placing people with common skills and specializations into common units. Product departmentalization Grouping activates by major product areas focuses attention on major product areas in the corporation. Each product is under the authority of a senior manager who is a specialist in, and is responsible for, everything having to do with his or her product line. If an organization's activities were service related rather than product related each service would be autonomously grouped. The advantage of product grouping is that it increases accountability for product performance, because all activities related to a specific product are under the direction of a single manager. The particular type of customer an organization seeks to reach can also dictate employee grouping. customer departmentalization grouping activities by customer is that customers in each department have a common set of problems and needs that can best be met by specialists. geographic departmentalization grouping activates on the basis of geography or territory departmentalize is on the basis of geography or territory If an organization's customers are scattered over a large geographic area, this form of departmentalization can be valuable. process departmentalization grouping activities on the basis of work or customer flow which groups activities on the basis of work or customer flow Units are organized around common skills needed to complete a certain process WHAT IS TODAY'S VIEW OF DEPARTMENTALIZATION? Most large organizations continue To use most or all of the departmental groups suggested by the early management writers A recent trend is the use of cross-functional teams, teams made up of individuals from various departments and that cross traditional Departmental lines. authority and responsibility chain of command the line of authority extending from upper organizational levels to lower levels, which clarifies who reports to whom. Authority the rights inherent in a managerial position to give orders and expect the orders to be obeyed. Authority was a major concept discussed by the early management writers as they viewed it as the glue that held an organization together. is related to one's position within an organization and has nothing to do with the personal characteristics of an individual manager. Responsibility An obligation to perform assigned duties When managers delegate authority, they must allocate commensurate responsibility when employees are given rights, they also assume a corresponding obligation to perform. And they should be held accountable for their performance! Allocating authority without responsibility and accountability creates opportunities for abuse. no one should be held responsible or accountable for something over which he or she has no authority. DIFFERENT TYPES OF AUTHORITY RELATIONSHIPS Line authority Authority that entitles a manager to direct the work of an employee. It is the employer-employee authority relationship that extends from the top of the organization to the lowest echelon, Keep in mind that sometimes the term line is used to differentiate line managers from staff managers. line refers to managers whose organizational function contributes directly to the achievement of organizational objectives Whether a manager's function is classified as line or staff depends on the organization's objectives. staff authority positions with some authority that have been created to support, assist, and advise those holding line authority As organizations get larger and more complex, line managers find that they do not have time, expertise, or resources to get their jobs done effectively. In response, they create staff authority functions to support, assist, advise, and generally reduce some of their informational burdens. unity of command management principle that no person should report to more than one boss Early writers believed that each employee should report to only one manager, In those rare instances when the unity of command had to be violated, a clear separation of activities and a supervisor responsible for each was always explicitly designated. Unity of command was logical when organizations were relatively simple. in some instances, strict adherence to the unity of command creates a degree of inflexibility that may hinder an organization's performance. HOW DOES TODAY'S VIEW OF AUTHORITY AND RESPONSIBILITY DIFFER FROM THE HISTORICAL VIEW? early management writers were enamored of authority. They assumed that the rights inherent in one's formal position in an organization were the sole source of influence, and they believed that managers were all-powerful. Researchers and practitioners of management now recognize that you don't have to be a manager to have power and that power is not perfectly correlated with one's level in the organization. Authority is an important concept in organizations, but an exclusive focus on authority produces a narrow, unrealistic view of influence. Today, we recognize that authority is but one element in the larger concept of power. HOW DO AUTHORITY AND POWER DIFFER? Authority is a right Its legitimacy is based on an authority figure's position in the organization. Authority goes with the job. Authority is part of the larger concept of power. the formal rights that come with an individual's position in the organization are just one means by which an individual can affect the decision process. is defined by one's vertical position in the hierarchy Power an individual's capacity to influence others. is a three-dimensional concept includes not only the functional and hierarchical dimensions but also a third dimension called centrality. power is made up of both one's vertical position and one's distance from the organization's power core or center. The center of the cone is the power core The closer you are to the power core, the more influence you have on decisions. The cone analogy explicitly acknowledges two facts The higher one moves in an organization (an increase in authority), the closer one moves to the power core 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. French and Raven identified five sources, or bases, of power Coercive power Power based on fear. Reward power Power based on the ability to distribute something that others value. Legitimate power Power based on one's position in the formal hierarchy. expert power Power based on one's expertise, special skill, or knowledge referent power Power based on identification with a person who has desirable resources span of control the number of employees a manager can efficiently and effectively supervise received a great deal of attention from early management writers. early writers came to no consensus on a specific number, most favored small spans typically no more than six workers-in order to maintain close control. several writers did acknowledge level in the organization as a contingency variable. They argued that as a manager rises in an organization-he or she has to deal with a greater number of unstructured problems, so top managers need a smaller span than do middle managers, and middle managers require a smaller span than do supervisors. Over the last decade we've seen some change in theories about effective spans of control. span of control is increasingly being determined by looking at contingency variables. the more training and experience employees have, the less direct supervision they need. Managers who have well trained and experienced employees can function with a wider span. Other contingency variables that determine the appropriate span include similarity of employee tasks, the complexity of those the physical proximity of employees, the degree to which standardized procedures are in place, the sophistication of the organization's management information system, the strength of the organization's value system the preferred managing style of the manager." centralization versus decentralization Centralization the degree to which decision making takes place at upper levels of the organization. Decentralization the degree to which lower-level managers provide input or actually make decisions. Centralization-decentralization is not an either-or concept. It?s a matter of degree. no organization is completely centralized or completely decentralized. formalization how standardized an organization's jobs are and the extent to which employee behavior is guided by rules and procedures In highly formalized organizations, there are explicit job descriptions, numerous organizational rules, clearly defined procedure covering work processes. Employees have little discretion over what's done, when it's done. and how it's done. where formalization is low, employees have more discretion in how they do their work. Early management writers expected organizations to be fairly formalized, as formalization went hand-in-hand with bureaucratic-style organizations. WHAT IS TODAY'S VIEW OF FORMALIZATION? Although some formalization is necessary for consistency and control, many organizations today rely less on strict rules and standardization to guide and regulate employee behavior. What Contingency Variables Affect Structural Choice? two organizational forms The mechanistic organization (or bureaucracy) a bureaucratic organization: a structure that?s high in specialization, formalization, and centralization the natural result of combining the six elements of structure. Adhering to the chain-of-command principle ensured the existence of a formal hierarchy of authority, with each person controlled and supervised by one superior. Keeping the span of control small at increasingly higher levels in the organization created tall, impersonal structures. As the distance between the top and the bottom of the organization expanded, top management would increasingly impose rules and regulations. Because top managers couldn't control lower-level activities through direct observation and ensure the use of standard practices, they substituted rules and regulations. The early management writers' belief in a high degree of work specialization Created jobs that were simple, routine, and standardized. Further specialization through the use of departmentalization increased impersonality and the need for multiple layers of management to coordinate the specialized departments. organic organization a structure that low in specialization, formalization, and centralization is a highly adaptive form that is as loose and flexible as the mechanistic organization is rigid and stable. Rather than having standardized jobs and regulations, the organic organization's loose structure allows it to change rapidly as required. It has division of labor, but the jobs people do are not standardized. Employees tend to be professionals who are technically proficient and trained to handle diverse problems. They need few formal rules and little direct supervision because their training has instilled in them standards of professional conduct. The organic organization is low in centralization so that the professional can respond quickly to problems and because top-level managers cannot be expected to possess the expertise to make necessary decisions. What that appropriate structure is depends on four contingency variables organization's strategy An organization's structure should facilitate goal achievement. Because goals are an important part of the organization's strategies, it's only logical that strategy and structure are closely linked . Alfred Chandler initially researched this relationship." He studied several large U.S. companies and concluded that changes in corporate strategy led to changes in an organization's structure that supported the strategy. Specifically, he found that organizations usually begin with a single product or line. The simplicity of the strategy required only a simple or loose form of structure to execute it. As such, decisions could be centralized in the hands of a single senior manager, and complexity and formalization were low. However, as organizations grew, their strategies become more ambitious and elaborate. Size Large organizations-typically considered to be those with more than 2,000 employees tend to have more specialization, departmentalization, centralization, rules and regulations than do small organizations. once an organization grows past a certain size, size has less influence on structure. Technology initial research on technology's effect on structure can be traced to Joan Woodward British management scholar. studied small manufacturing firms in southern England to determine the extent to which structural design elements were related to organizational success She couldn't find any consistent pattern until she divided the firms into three distinct technologies that had increasing levels of complexity and sophistication. unit production The first category, described the production of items in units or small batches. Mass production The second category, described large-batch manufacturing. process production continuous flow of products being produced the third and most technically complex group, included continuous-process production. Woodward's study of technology and organizational structure is one of the earliest studies of contingency theory. Her answer to the "it depends on" question would be that appropriate organizational design depends on what the organization's technology is. Other more recent studies also have shown that organizations adapt their structures to their technology depending on how routine their technology is for transforming inputs into outputs. the more routine the technology, the more mechanistic the structure can be, and organizations with more nonroutine technology are more likely to have organic structures. degree of environmental uncertainty mechanistic organizations are most effective in stable environments. Organic organizations are best matched with dynamic and uncertain environments. Global competition, accelerated product innovation by all competitors, knowledge management and increased demands from customers for higher quality and faster deliveries are examples of dynamic environmental forces." Mechanistic organizations tend to be ill equipped to respond to rapid environmental change. What are some common organizational designs? traditional organizational tend to be more mechanistic in nature 3 types simple structure Most companies start as entrepreneurial ventures using a simple structure, which is an organizational design with low departmentalization, wide spans of control, authority centralized in a single person, and little formalization." Strengths It's fast, Flexible, and inexpensive to maintain, and accountability is clear. Disadvantages it becomes increasingly inadequate as an organization grows, As size increases, decision making becomes slower and can eventually come to a standstill as the single executive tries to continue making all the decisions. If the structure is not changed and adapted to its size, the firm can lose momentum and is likely eventually fail. it's risky Everything depends on one person. If anything happens to the owner-manager, the organization's information and decision-making center is lost Functional structure An organizational design that groups similar or related occupational specialties together Functional departmentalization applied to the entire organization Strength accrue from work specialization putting likes together results in economies of scale, minimizes duplication of personnel and equipment and makes employees comfortable an satisfied because it gives them the opportunity to talk the same language as tier peers weakness organization loses sight of its best interest in the pursuit of functional goals no one function is totally responsive for results so members with individual functions become insulated and have little understanding of what people in other functions are doing Divisional structure An organization structure made up of separate business units or division Each division has limited autonomy, with a division manager who has authority over his or her unity is responsible for performance Parent corporation typically acts as an external overseer to coordinate and control the various divisions and often provides support services such as financial and legal Division managers have full responsibility for a product or service Frees headquarters staff from being concerned with day to day operating details so they can pay attention to ling term and strategic planning Disadvantages duplication of activates and resources increases the organizations cost and reduce efficiency three types of contemporary organizational designs managers can use organizations need to be lean, flexible, and innovative (organic) team structures a structure in which the entire organization is make up of work teams employees empowerment is crucial because there is no line of managerial authority from top to bottom employee teams design and doe work in the way they think is best, but are also held responsible for all work performance results in their respective areas. In large organizations, the team structure complements what is typically a functional or divisional structure. This allows the organization to have the efficiency of a bureaucracy while providing the flexibility of teams. Although team structures have been positive, simply arranging employees into teams is not enough. Employees must be trained to work on teams, receive cross-functional skills training, and be compensated accordingly. Without a properly implemented team-based pay plan, , many of the benefits of a team structure may be lost. MATRIX AND PROJECT STRUCTURES matrix structure a structure in which specialists form difference functional departments are assigned to work on projects leg by a project manager assigns specialists from different functional departments to work on projects led by a project manager. When employees finish work on an assigned project, they go back to their functional departments. One unique aspect of this design is that it creates a dual chain of command since employees in a matrix organization have two managers who share authority. their functional area manager any decisions about promotions, salary recommendations, and annual performance reviews typically remain the functional manager's responsibility. and their product or project manager, The project manager has authority over the functional members who Are part of his or her project team in areas related to the project's goals. managers have to communicate regularly, coordinate work demands on employees, and resolve conflicts together. 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 disadvantages of the matrix are the confusion it creates and its propensity to foster power struggles. When you dispense with the chain of command and unity of command principles, you significantly increase ambiguity. Confusion can arise over who reports to whom. The confusion and ambiguity, in turn, are what trigger the power struggles. managers have to communicate regularly, coordinate work demands on employees, and resolve conflicts together. project structure a structure in which employees continuously work on projects. Unlike the matrix structure, a project structure has no formal departments where employees return at the completion of a project. employees take their specific skills, abilities, and experiences to other projects. work in project structures is performed by teams of employees. Project structures tend to be more flexible organizational designs. Advantages is that employees can be deployed rapidly to respond to environmental changes. there's no departmentalization or rigid organizational hierarchy to slow down making decisions or taking action. managers serve as facilitators, mentors, and coaches. They eliminate or minimize organizational obstacles and ensure that teams have the resources they need to effectively and efficiently complete their work. disadvantages are the complexity of assigning people to projects the inevitable task and personality conflicts that arise. boundaryless organization is an organization whose design is not defined by, or limited to, the horizontal, vertical, or external boundaries imposed by a predefined structure." the ideal structure for them is not having a rigid, bounded, and predefined structure." 2 types of boundaries internal- horizontal ones imposed by work specialization and departmentalization and the vertical ones that separate employees into organizational levels and hierarchies external- the boundaries that separate the organization from its customers, suppliers, and other stakeholders. To minimize or eliminate these boundaries, managers might use virtual or network structural designs virtual organization an organization that consists of a small core of full-time employees and outside specialists temporarily hired as needed to work on projects." inspiration for this structural approach comes from the film industry people are essentially "free agents" who move from project to project applying their skills-directing, talent casting, costuming, makeup, set design, and so forth-as needed. network organization an organization that uses its own employees to do some work activities and networks of outside suppliers to provide other needed product components work processes. sometimes called a modular organization by manufacturing firms." This structural approach allows organizations to concentrate on what they do best by contracting out other activities to companies that do those activities best Researchers have concluded that the structures and strategies of organizations worldwide are similar, "while the behavior within them is maintaining its cultural uniqueness.?" When designing or changing structure, managers may need to think about the cultural implications of certain design elements. For instance, one study showed that Formalization rules and bureaucratic mechanisms-may be more important in less economically developed countries and less important in more economically developed countries where employees may have higher levels of professional education and skills. Other structural design elements may be affected by cultural differences as well. learning organization an organization that has developed the capacity to continuously learn, adapt, and change." The concept of a learning organization Doesn?t involve a specific organizational design per se, but instead describes an organizational mind set or philosophy that has significant design implications. In a learning organization employees are practicing knowledge management by continually acquiring and sharing new knowledge and are willing to apply that knowledge in making decisions or performing their work. Some organizational design theorists even go so far as to say that an organization's ability to learn and to apply that learning as they perform the organization's may be the only sustainable source of competitive advantage. important characteristics of a learning organization revolve around organizational design, information sharing, leadership, it's critical for members to share information and collaborate on work activities throughout the entire organization across different functional Learning can't take place without information. organizational employees must engage in knowledge management by sharing information openly, in a timely manner, and as accurately as possible. few structural and physical barriers exist in a learning organization, the environment is conducive to open communication and extensive information sharing. most important functions is facilitating the creation of a shared vision for the organization's future and then keeping organizational members working toward that vision. In addition, leaders should support and encourage the collaborative environment that's critical to learning. the organizational culture is an important aspect of being a learning organization. A learning organization's culture is one in which everyone agrees on a shared vision and everyone recognizes the inherent interrelationships among the organization's processes, activities, functions, and external environment. It also fosters a strong sense of community, caring for each other, and trust. In a learning organization, employees feel free to communicate openly, share, experiment, and learn without fear of criticism or punishment. What Is an Organization's Culture and Why Is It Important? culture An organizations personality organizational culture the shared values, principles, traditions, and ways of doing things that influence the way organizational members act. these shared values and practices have evolved over time and determine, to a large extent how "things are done around here."? definition of culture implies three things. culture is a perception. It's not something that can be physically touched or seen, but employees perceive it on the basis of what they experience within the organization. organizational culture is descriptive. It's concerned with how members perceive the culture, not with whether they like it. shared aspect of culture even though individuals may have different backgrounds or work at different organizational levels, they tend to describe the organization's culture in similar terms. seven dimensions that describe an organization's culture. attention to detail outcome orientation people orientation team orientation aggressiveness stability innovation and risk taking These dimensions range from low To high, low meaning it's not very typical of the culture high is very typical of the culture describing an organization using these seven dimensions gives a composite picture of the organizations culture. In many organizations, one cultural dimension often is emphasized more Than the others and essentially shapes the organization's personality and the way organizational members work. An organization's culture usually reflects the vision or mission of the organization's founders. An organization's culture results from the interaction between the founders' biases and assumptions what the first employees learn subsequently from their own experiences. Employees "learn" an organization's culture in a number of ways. most common are stories rituals material symbols language. Organizational stories typically contain a narrative of significant events or people including such things as the organization's founders, rule breaking, reactions to past mistakes, Whenever possible, corporate "storytellers" (senior executives) explain the company's heritage and tell stories that celebrate people getting things done. To help employees learn the culture, organizational stories anchor the present in the past, provide explanations and legitimacy for current practices, exemplify what is important to the organization, and provide compelling pictures of an organization's goals." Corporate rituals are repetitive sequences of activities that express and reinforce the important values and goals of the organization. power of material symbols or artifacts The layout of an organization's facilities how employees dress, the types of automobiles provided to top executives, and the availability of corporate aircraft are examples of material symbols. language Many organizations and units within organizations use language as a way to identify and Unite members of a culture. By learning this language, members attest to their acceptance of the culture and their willingness to help preserve it. Over time, organizations often develop unique terms to describe equipment, key personnel, suppliers, customers, processes, or products related to its business. New employees are frequently overwhelmed with acronyms and jargon that, after a short period of time, become a natural part of their language. Once learned, this language acts as a common denominator that bonds members. Strong cultures Organizational cultures in which the key values are deeply held and widely shared An organization's culture may have an effect on its structure, depending on how strong, or weak, the culture is. those in which the key values are deeply held and widely shared-have a greater influence on employees than do weaker cultures. The more employees accept the organization's key values and the greater their commitment to those values, the stronger the culture is. The stronger a culture becomes, the more it affects the way managers plan, organize, lead, and control." Also, in organizations with a strong culture, that culture can substitute for the rules and regulations that formally guide employees. In essence, strong cultures can create predictability, orderliness, and consistency without the need for written documentation. the stronger an organization's culture, the less managers need to be concerned with developing formal rules and regulations. those guides will be internalized in employees when they accept the organization's culture. If, on the other hand, an organization's culture is weak-if no dominant shared values are present-its effect on structure is less clear.
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