Summary of Chapter 11: Designing Organizational Structure-Basic Designs

Chapter 11 talked about how to design organization structure and the types of organizational structure. Organizing meaning is arranging work to achieve organization’s goals. Meanwhile organizational structure is an organization formal arrangement of jobs.

- Organizational chart: visual representation of organization structure.

- Organizational design: have 6 key elements:

· Work specialization: it is done to increase productivity but overspecialization can resulted in worse result such as stress, boredom, and fatigue.

· Departmentalization: basis of how jobs are grouped:

1. Functional:

§ The advantages: efficiencies because putting people with similar specialties, have good coordination, in-depth specialization.

§ The disadvantages: poor communication with other functional areas, having limited view of organizational job.

2. Product:

§ The advantages: manager able to become expert in their respective industry, close to customer, specialization in product or service.

§ The disadvantages: function duplication and limited view of organizational job.

3. Geographical

§ The advantages: in specific regional issues it is more effective and efficient, better serving regional needs.

§ The disadvantages: function duplication and feeling of isolated.

4. Process:

§ The advantage: flow work of activities become more efficient.

§ The disadvantage: work only with a particular product.

5. Customer

§ The advantage: specialist solve the needs and problem of customer.

§ The disadvantage: limited view of organizational goal.

6. cross-functional team: team made from various functional specialties.

· Chain of command: line of authority from the upper level to the lowest level in an organization to know who reports to whom.

§ Authority: right to tell people what to do and expect them to do it.

§ Acceptance theory of authority: view that see that authority comes when it is accepted by subordinates.

§ Line authority: give manager an authority to direct employee work. (e.g. CEO > President > Vice President > Region > District)

§ Staff authority: position with authority that created to support, assist, and advise the one that hold line authority.

§ Unity of command: management principle where each person report only to one manager.

· Span of control: how many personnel that a manager can sufficiently and effectively supervised.

· Centralization and decentralization:

§ Centralization: degree of decision-making that is concentrated at upper levels of organization.

o More centralization: stable environment, relatively minor decisions, large company, risk of company failure, lower-level managers aren’t as capable as upper-level manager.

§ Decentralization: degree of lower-level decision making where employees make decisions or give input.

o More decentralization: complex and uncertain environment, decisions are significant, geographically dispersed company, lower-level managers are more capable and have the right experience when making decision.

§ Employee empowerment: giving more authority to employee to make decisions.

· Formalization : it is the degree of how employee behavior is guided with rules and procedure and the extent where jobs are standardized.

§ Highly formalized jobs: give little discretion of what need to be done.

§ Low formalized job: employees have fewer constraints.

The purpose of organizing:

- Divides work into specific job and department.

- Have task and responsibility assigned with individual jobs.

- Manage diverse organizational task.

- Have a formal lines of authority.

- Creating relationship within the company.

Organization have 2 structure that are organic and mechanistic structures:

- Mechanistic organization: rigid and tightly controlled type of organization design.

§ Characteristics: high specialization, rigid departmentalization, chain of command is clear, centralization, high formalization.

- Organic organization: flexible and highly adaptive type of organization design.

§ Characteristics: cross-functional teams, decentralization, low formalization, free flow of information, cross-hierarchical teams.

There are a couple of factor that affect an organizational structure. When an organization have shifted in its strategy then it is best to change it structure to support that strategy. And certain type of structural design fitted with certain type organizational work, for example:

- Organic structure: work with organization that pursue meaningful and unique innovations.

- Mechanistic organization: for company that want tightly cost control.

Other than that these are the factor that affects organization structure:

- Size and structure: as organization get bigger, it has the tendency to shifted to mechanistic organization with a lot more specialization, rules, regulation, and centralization.

- Technology: classification based on Woodward’s classification of firm are:

· Unit production: small batches or single units.

§ Have low vertical differentiation, horizontal differentiation, and formalization. Work best with organic structure.

· Mass production: large batches of output.

o Have moderate vertical differentiation. Have high horizontal differentiation and formalization. Work best with mechanistic structure.

· Process production: continuous process of outputs.

o Have high vertical differentiation. Have low horizontal differentiation and formalization. Work best with organic structure.

- Environmental Uncertainty and Structure:

§ Mechanistic structure: most effective in environment where it is stable and simple.

§ Organic structure: most effective for environment where it is complex and dynamic.

Traditional Organizational Designs:

§ Simple structure: organizational design where it has little formalization, centralized authority, wide spans of control, and low departmentalization.

· Strengths: fast, flexible, inexpensive, clear accountability.

· Weaknesses: as organization grows it is no longer appropriate.

§ Functional structure: organizational design where it grouped people with similar occupational specialties.

· Strengths: cost saving advantages as effect of specialization and employees are group with people who have similar task.

· Weaknesses: functional specialist have little understanding of what other units are doing and manager can lose focus of organizational goal because of pursuit functional goals.

§ Divisional structures: organizational structure where it is made of semiautonomous units or division.

· Strengths: focuses on result and division manager have the responsibility for things that happen to their services and product.

· Weaknesses: less efficiency, increases in cost, and activities duplication.

Designing Organizational Structural-Adaptive Design

Contemporary organizational design:

§ Team structure: organizational structure where the entirety of organization is made up of work teams.

· Advantages: functional areas barriers are reduced and involving employees.

· Disadvantages: chain of command not clear and pressure on team to perform.

§ Matrix structure: organizational structure where it assigns specialist from different functional department to work on a project.

· Advantages: decision making is faster, a lot more fluid and flexible.

· Disadvantages: task and personality conflict and the complexity of assigning people to project.

§ Boundaryless structure: type of organizational structure where it is not defined by horizontal, vertical, and external boundaries.

· Advantages: flexible, responsive, talent is utilized wherever it is found.

· Disadvantages: lack of control and difficulty regarding communication.

§ Learning structure: structure where employees continuously gaining knowledge, share them, and apply it.

· Advantages: sharing of knowledge and having a sustainable source of competitive advantage.

· Disadvantages: some employees might reluctant in sharing their knowledge as they afraid of losing their power.

§ Project structure: structure where projects are continuously worked on by employees.

§ Virtual organization: organization where it is consisted of small core full time employees and outside specialists are hired depend on the need of the projects.

§ Network organization: organization where it uses it owns employees to do some work activities and networking.

§ Learning organization: organization that continuously learn, adapt, and change.

In many instances there will be a lot of collaboration in an organization and these are the types of collaboration:

§ Internal collaboration:

· Cross-functional team: work team composed of various functional specialties.

· Task force (or ad hoc committee): forming of temporary team to address specific short-term problem that is affecting several departments.

· Communities of practice: group who interact on ongoing basis to share their concern, problems, and passion to deepen their knowledge and expertise.

§ External collaboration:

· Open innovation: searching for new ideas outside of organization boundaries and allow innovations to transfer easily.

o Benefits: ability to respond to complex problem, bring focus back to marketplace, give customers what they wanted.

o Drawbacks: needed extensive support, challenges regarding cultural, need for greater flexibility.

· Strategic partnerships: collaboration that happen between 2 or more organizations where they combine their resources and capabilities to achieve their business purpose.

Flexible work arrangements:

- Telecommuting: employees work at home and they are linked to their workplace with computer.

- Compressed workweek: employees work longer hours per day but they work for fewer number of days per week.

- Flextime (flexible work hours): worker required to fulfill a certain number hour of work a week but they are free in how they fulfill that hour.

- Job sharing: a practice where fulltime jobs are divided between 2 or more people.

And for start-ups itself what is the organization design that I think fitted for start-ups? For me personally start-up work best with contemporary organizational design under the category of boundaryless structure. Why I think this worked well with start-ups? Because if you think about it start-up usually face many problem (e.g. money, finding the right people, and management) and challenges. To handle this it is best that the business model is made boundaryless so that the team can work a lot faster, flexible, and more responsive to face the problem they have. And other than that usually start-ups are made from small group of people so there isn’t too much need of differentiation because of that I think boundaryless is the business model that fitted the criteria for a start-ups business model.

Citation: Robbins, S.P., & Coulter, M. (2018). Management (14th ed.). London, United Kingdom: Pearson Education Limited.