Organization Structure Spring 2007 Organization Structure 1 Why Organizations Are Structured • Organizing: • The deployment and structuring of organizational resources to achieve organizational goals • Dimensions • Specialization / division of labor • Formal lines of authority • Mechanisms for coordination • Organization or structure is designed to: • Facilitate accomplishment of organizational goals • Fit with technology and environment Spring 2007 Organization Structure 2 Dimensions of Organization Structure • Hierarchical • Vertical dimension • “...relative ranks in a manner similar to the organization chart” • Functional • Horizontal dimension • “...different types of work to be done” • Inclusion or centrality • “...the degree to which any given person is nearer to or farther from the central core of the organization” Spring 2007 Organization Structure 3 Specialization / Division of Labor • Adam Smith and the pins • Efficiency vs. effectiveness • Individuals perform well-defined tasks • Short training time • Individuals become expert • Individuals can perform tasks for which they are best suited • Problems • Lose sight of overall goal • Boredom, fatigue, stress • Lack of flexibility Spring 2007 Organization Structure 4 Issues in Determining Division of Labor • Nature of the work • Complexity of work • Task interdependency • Organization • Goals (re-engineering) • Resources • Employees • Abilities • Expectations Spring 2007 Organization Structure 5 Authority and Responsibility • • Look back at Fayol, Weber Chain of command • Unity of command • Scalar principle • Authority • The right to make decisions, issue orders and allocate resources • Does it exist if not accepted? • Responsibility • Accountability • Unity of authority and responsibility • • Spring 2007 Delegation Line and staff Organization Structure 6 Span of Control • Tall vs. flat organizations • Nature of work • Stability • Task similarity • Location • Employees • Preferences • Skills • Organization • Policies and procedures • Support for managers Spring 2007 Organization Structure 7 Centralization vs. Decentralization • Where are decisions made? • Need for pooled resources • Speed and flexibility (environmental uncertainty) • Consistency • Where is the knowledge? • Who must implement decisions Spring 2007 Organization Structure 8 Formalization • Policies and procedures • Bureaucracy • Max Weber again • Pro • Uniformity • Less uncertainty • Con • Less flexibility • Deciding • Nature of the work • Nature of the employees Spring 2007 Organization Structure 9 Mechanistic vs. Organic Structures Teams Free flow of information Wide spans of control Decentralization Low formalization Mechanistic High specialization Rigid departmentalization Clear chain of command Narrow span of control Centralization High formalization Spring 2007 Organization Structure Organic 10 Departmentalization • Functional • Divisional • Product • Customer • Geographical • Matrix • Project teams Spring 2007 Organization Structure 11 Functional Structures • Pro: • • • • • Specialization Efficiency Career progress for employees High-quality problem solving Con: • Poor communication between functions • May be too centralized • Employees have limited perspective on total organization • Where best used • Stable environment • Single product Spring 2007 Organization Structure 12 Functional Structure CEO VP Sales VP Manufacturing VP Finance G/ L Tax Budget Spring 2007 Organization Structure 13 Divisional • Types • Where best used • Product • Geographical • Customer • Uncertain environment • Diversified organization • Pro: • Con: • Speed and flexibility of response • Cross-fertilization of ideas • Focus on product / customer / area • Emphasis on organizational goals Spring 2007 Organization Structure • Resources duplicated (inefficient) • Less coordination between divisions • Competition for resources 14 Sample Divisional Structure CEO VP Cereal VP Detergent VP Paper Tissue Diapers Towels Spring 2007 Organization Structure 15 ThyssenKrupp Spring 2007 Organization Structure 16 Sara Lee Structure Headquarters Food and Beverage Spring 2007 Intimates and Underwear Organization Structure Household Products 17 University of Tennessee System Board of Trustees UT- Martin UT - Knoxville Institute of Agriculture Institute for Public Service Spring 2007 UT Chattanooga Space Institute at Tullahoma Health Science Center at Memphis Organization Structure 18 Mixed Structure CEO VP Admin VP Manufacturing VP Sales Retail Wholesale International Spring 2007 Organization Structure 19 Unilever Structure Unilever Bestfoods Home & Personal Care • Africa, Middle East & Turkey Bestfoods • Ice Cream and Frozen Foods • Latin America & Slim.fast worldwide • Unilever Bestfoods Asia • Unilever Bestfoods, Europe • Unilever Bestfoods, North America Spring 2007 Organization Structure • Africa, Middle East & Turkey Home • Diverseyever • Home and Personal Care, Asia • Home & Personal Care, Europe • Home & Personal Care, North America • Latin America 20 Matrix • Dual lines of authority • Examples • Pro: • Combines advantages of functional and divisional structures • Con: • Conflict may arise • Cost associated with grater need for coordination • Where best used: • Extreme environmental pressure • Very large or geographically dispersed organizations Spring 2007 Organization Structure 21 Organizing Work Processes • Unit production • Mass production • Process production Spring 2007 Organization Structure 22 Technology, Structure and Effectiveness Characteristic Vertical Differentiation Unit Mass Process Low Moderate High Horizontal Differentiation Low High Low Formalization Low High Low Organic Mechanistic Organic Structure Spring 2007 Organization Structure 23