Deck 12: Designing Organizational Structures

Question 1

Describe three types of coordination in organizational structures.

Answer 1

Organizational structure is the division of labor as well as the patterns of coordination, communication, workflow, and formal power that direct organizational activities. All organizational structures divide labor into distinct tasks and coordinate that labor to accomplish common goals. The primary means of coordination are informal communication, formal hierarchy, and standardization.

Question 2

Discuss the role and effects of span of control, centralization, and formalization, and relate these elements to organic and mechanistic organizational structures.

Answer 2

The four basic elements of organizational structure are span of control, centralization, formalization, and departmentalization. The optimal span of control-the number of people directly reporting to the next level in the hierarchy-depends on the presence of coordinating mechanisms other than formal hierarchy, as well as on whether employees perform routine tasks and how much interdependence there is among employees within the department.
Centralization occurs when formal decision making authority is held by a small group of people, typically senior executives. Many companies decentralize as they become larger and more complex, but some sections of the company may remain centralized while other sections decentralize. Formalization is the degree to which organizations standardize behavior through rules, procedures, formal training, and related mechanisms. Companies become more formalized as they get older and larger. Formalization tends to reduce organizational flexibility, organizational learning, creativity, and job satisfaction.
Span of control, centralization, and formalization cluster into mechanistic and organic structures. Mechanistic structures are characterized by a narrow span of control and a high degree of formalization and centralization. Companies with an organic structure have the opposite characteristics.

Question 3

Identify and evaluate five types of departmentalization.

Answer 3

Departmentalization specifies how employees and their activities are grouped together. It establishes the chain of command, focuses people around common mental models, and encourages coordination through informal communication among people and subunits. A functional structure organizes employees around specific knowledge or other resources. This fosters greater specialization and improves direct supervision, but it weakens the focus on serving clients or developing products.
A divisional structure groups employees around geo- graphic areas, clients, or outputs. This structure accommodates growth and focuses employee attention on products or customers rather than tasks. However, this structure duplicates resources and creates silos of knowledge. Team-based structures are very flat, with low formalization, and organize self-directed teams around work processes rather than functional specialities. The matrix structure combines two structures to leverage the benefits of both types of structure. However, this approach requires more coordination than functional or pure divisional structures, may dilute accountability, and increases conflict.

Question 4

Explain how the external environment, organizational size, technology, and strategy are relevant when designing an organizational structure.