ORGANIZATIONAL BEHAVIOR

CHAPTER 15 – FOUNDATIONS OF ORGANIZATIONAL STRUCTURE

In Chapter 15 we will concentrate on concepts of the programming, data processing, or evaluation tasks are
foundations of organizational structure. delegated to a global network of individuals by a program
manager who then assembles the results. For example, a
After studying this chapter you should be able to: manager who has a complex but routine computer program to
1. Identify the six elements of an organization’s structure. write might send a request for specific subcomponents of the
code to be written and tested by dozens of subcontracted
2. Identify the characteristics of a bureaucracy. individuals in the network (which spans the entire globe),
3. Describe a matrix organization. enabling the project to be completed far more quickly than if a
single programmer were writing the parts. This emerging trend
4. Identify the characteristics of a virtual organization. suggests there still may be advantages to be had in
5. Show why managers want to create boundaryless organizations. specialization.
6. Demonstrate how organizational structures differ and contrast
mechanistic and organic structural models.
7. Analyze the behavioral implications of different organizational
designs.
An organizational structure defines how job tasks are formally
divided, grouped, and coordinated. There are six key elements
shown in Exhibit 15-1. They are Work specialization,
Departmentalization, Chain of command, Span of control,
Centralization and decentralization, and Formalization. The second element is Departmentalization or grouping jobs
together so common tasks can be coordinated. One of the most
popular ways to group activities is by functions performed. For
example, a manufacturing manager might organize his/her
plant by separating engineering, accounting, manufacturing,
personnel, and purchasing specialists into common
departments. The advantage to this type of grouping is obtaining
efficiencies from putting like specialists together. Tasks can also
be departmentalized by the type of product or service the
organization produces. Procter & Gamble recently reorganized
along these lines. Each major product—such as Tide, Pampers,
Charmin, and Pringles—will be placed under the authority of an
executive who will have complete global responsibility for that
Let’s focus on the first of the elements, Work Specialization. product. The major advantage to this type of grouping is
Henry Ford became rich and famous by building automobiles on increased accountability for product performance under a single
an assembly line, demonstrating that work can be performed manager. Another way to departmentalize is on the basis of
more efficiently by using a work specialization strategy. Every geography or territory. The sales function, for instance, may
Ford worker was assigned a specific, repetitive task. By breaking have western, southern, mid-western, and eastern regions.
jobs up into small standardized tasks, Ford was able to produce Process departmentalization can be used for processing
cars at the rate of one every ten seconds, while using employees customers as well as products. For example, at the state motor
who had relatively limited skills. Work specialization, or division vehicles office you might find: Validation by motor vehicles
of labor, describes the degree to which activities in the division, Processing by the licensing department, and Payment
organization are subdivided into separate jobs. In essence, an collection by the treasury department.
entire job is broken into a number of steps, each completed by a
separate individual. By the late 1940s, most manufacturing jobs A final category of departmentalization is by type of customer.
in industrialized countries were being done this way. Microsoft, for instance, recently reorganized around four
Management saw this as a means to make the most efficient customer markets: consumers, large corporations, software
use of its employees’ skills. Managers also looked for other developers, and small businesses.
efficiencies that could be achieved through work specialization.
For example, employee skills at performing a task successfully The assumption is that customers in each department have a
increase through repetition. Training for specialization is more common set of problems and needs that can best be met by
efficient from the organization’s perspective. It increases having specialists for each.
efficiency and productivity, encouraging the creation of special The third element is the Chain of Command. The chain-of-
inventions and machinery. For much of the first half of this command was once a basic cornerstone in the design of
century, managers viewed work specialization as an unending organizations, it is far less important today. The chain of
source of increased productivity. By the 1960s, there became command is "an unbroken line of authority that extends from the
increasing evidence that a good thing can be carried too far. top of the organization to the lowest echelon and clarifies who
The human diseconomies from specialization are boredom, reports to whom.” Two complementary concepts occur,
fatigue, stress, low productivity, poor quality, increased authority and unity of command. Authority is "the rights inherent
absenteeism, and high turnover. They more than offset the to management to give orders and expect the orders to be
economic advantages. (Exhibit 15-2) In such cases, enlarging the obeyed.” The unity-of-command principle helps preserve the
scope of job activities could increase productivity. Most concept of an unbroken line of authority. It states that a person
managers today recognize the economies specialization should have only one superior to whom he/she is directly
provides in certain jobs and the problems when it’s carried too responsible.
far. High work specialization helps McDonald’s make and sell Times change, and so do the basic tenets of organizational
hamburgers and fries efficiently and aids medical specialists in design. The concepts of chain of command have less relevance
most health maintenance organizations. Amazon’s Mechanical today because of technology and the trend of empowering
Turk program, TopCoder, and others like it have facilitated a new employees. A low-level employee today can access information in
trend in microspecialization in which extremely small pieces of seconds that 30 years ago was available only to top managers.
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Operating employees are empowered to make decisions against local merchants. Similarly, when Procter & Gamble
previously reserved for management. Add the popularity of self- empowered small groups of employees to make many decisions
managed and cross-functional teams and the creation of new about new-product development independent of the usual
structural designs that include multiple bosses, and you can see hierarchy, it was able to rapidly increase the proportion of new
why authority and unity of command hold less relevance. Many products ready for market.Research investigating a large
organizations still find they can be most productive by enforcing number of Finnish organizations demonstrates that companies
the chain of command. Indeed, one survey of more than 1,000 with decentralized research and development offices in multiple
managers found that 59 percent of them agreed with the locations were better at producing innovation than companies
statement, “There is an imaginary line in my company’s that centralized all research and development in a single office.
organizational chart. Strategy is created by people above this
line, while strategy is executed by people below the line.” Last element in the model is Formalization. Formalization refers
However, this same survey found that buy-in to the to the degree to which jobs within the organization are
organization’s strategy by lower-level employees was inhibited standardized. A highly formalized job gives the job incumbent a
by too much reliance on hierarchy for decision-making. minimum amount of discretion over what is to be done, when it
is to be done, and how he or she should do it. Employees can be
The fourth element is Span of Control. How many employees a expected always to handle the same input in exactly the same
manager can efficiently and effectively direct is an important way. The greater the standardization, the less input the
question. All things being equal, the wider or larger the span, the employee has into how the job is done. Low formalization—job
more efficient the organization. Exhibit 15–3 illustrates that behaviors are relatively nonprogrammed, and employees have a
reducing the number of managers leads to significant savings. great deal of freedom to exercise discretion in their work. The
Wider spans are more efficient in terms of cost. However, at degree of formalization can vary widely between organizations
some point, wider spans reduce effectiveness. Narrow or small and within organizations.
spans have their advocates. By keeping the span of control to
five or six employees, a manager can maintain close control. Standardization is the key concept for all bureaucracies. The
Narrow spans have three major drawbacks. First, as already bureaucracy is characterized by six traits. First is a highly
described, they are expensive because they add levels of routine operating tasks achieved through specialization. Second
management. Second, they make vertical communication in the is very formalized rules and regulations. Third suggests that
organization more complex. Third, narrow spans of control tasks that are grouped into functional departments. Fourth,
encourage overly tight supervision and discourage employee there is a strong centralized authority. Fifth is narrow spans of
autonomy. The trend in recent years has been toward wider control. And, lastly, decision-making follows the chain of
spans of control. They are consistent with recent efforts by command.
companies to reduce costs, cut overhead, speed up decision- The bureaucracy’s primary strength is in its ability to perform
making, increase flexibility, get closer to customers, and standardized activities in a highly efficient manner. Putting like
empower employees. To ensure that performance does not specialties together in functional departments results in
suffer because of these wider spans, organizations have been economies of scale, minimum duplication of personnel and
investing heavily in employee training. equipment, etc. Bureaucracies get by nicely with less talented
and less costly middle- and lower-level managers.
The bureaucracy’s weaknesses include that specialization
creates subunit conflicts, functional unit goals can override the
organization’s goals. An obsessive concern with following the
rules can develop. And, the bureaucracy is efficient only as long
as employees confront familiar problems with programmed
decision rules.
The Matrix Structure is another option, It is used in advertising
agencies, aerospace firms, research and development
laboratories, construction companies, hospitals, government
agencies, universities, management consulting firms, and
Next element is Centralization and Decentralization. entertainment companies. It combines two forms of
Centralization refers to the degree to which decision-making is departmentalization—functional and product. The strength of
concentrated at a single point in the organization. In centralized functional departmentalization—putting like specialists together
organizations, top managers make all the decisions, and lower- and the pooling and sharing of specialized resources across
level managers merely carry out their directives .In products Its major disadvantage is the difficulty of coordinating
organizations at the other extreme, decentralized decision- the tasks. Product departmentalization facilitates coordination.
making is pushed down to the managers closest to the action. It provides clear responsibility for all activities related to a
The concept of centralization includes only formal authority— product, but with duplication of activities and costs.
that is, the rights inherent in a position. An organization The most obvious structural characteristic of the matrix is that
characterized by centralization is inherently different it breaks the unity-of-command concept. Exhibit 15–5 shows the
structurally from one that’s decentralized. matrix form as used in a college of business administration. Its
strength is its ability to facilitate coordination when the
organization has a multiplicity of complex and interdependent
A decentralized organization can act more quickly to solve activities. The dual lines of authority reduce tendencies of
problems, more people provide input into decisions, and departmental members to protect their worlds. It facilitates the
employees are less likely to feel alienated from those who make efficient allocation of specialists. The major disadvantages of the
decisions that affect their work lives. Management efforts to matrix lie in the confusion it creates, its propensity to foster
make organizations more flexible and responsive have produced power struggles, and the stress it places on individuals. Violation
a recent trend toward decentralized decision making by lower of unity-of-command concept increases ambiguity that often
level managers, who are closer to the action and typically have leads to conflict. Confusion and ambiguity also create the seeds
more detailed knowledge about problems than top managers. of power struggles. Reporting to more than one boss introduces
Sears and JCPenney have given their store managers role conflict, and unclear expectations introduce role ambiguity.
considerably more discretion in choosing what merchandise to
stock. This allows those stores to compete more effectively
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 environments characterized by heterogeneity and dispersion
are called complex.
Exhibit 15-9 summarizes our definition of the environment along
its three dimensions. The arrows indicate movement toward
higher uncertainty. Thus, organizations that operate in
environments characterized as scarce, dynamic, and complex
face the greatest degree of uncertainty because they have high
unpredictability, little room for error, and a diverse set of
elements in the environment to monitor constantly. Given this
three-dimensional definition of environment, we can offer some
Exhibit 15-8 describes the structural option that best matches general conclusions about environmental uncertainty and
each strategy. Innovators need the flexibility of the organic structural arrangements. The more scarce, dynamic, and
structure, whereas cost minimizers seek the efficiency and complex the environment, the more organic a structure should
stability of the mechanistic structure. Imitators combine the be. The more abundant, stable, and simple the environment, the
two structures. They use a mechanistic structure to maintain more the mechanistic structure will be preferred.
tight controls and low costs in their current activities but create
organic subunits in which to pursue new undertakings. This chapter opened by implying
that an organization’s structure
can have significant effects on
its members. A review of the
evidence leads to a pretty clear
conclusion: you can’t generalize!
Not everyone prefers the
freedom and flexibility of organic
structures. Different factors
Technology refers to how an organization transfers its inputs stand out in different structures
into outputs. Every organization has at least one technology for as well. In highly formalized, heavily structured, mechanistic
converting financial, human, and physical resources into organizations, the level of fairness in formal policies and
products or services. Ford Motor Company predominantly uses procedures is a very important predictor of satisfaction. In more
an assembly-line process to make its products. Colleges may use personal, individually adaptive organic organizations, employees
a number of instruction technologies—the ever-popular formal value interpersonal justice more. Some people are most
lecture method, the case analysis method, the experiential productive and satisfied when work tasks are standardized and
exercise method, the programmed learning method, etc. to ambiguity minimized—that is, in mechanistic structures. So, any
educate its students. discussion of the effect of organizational design on employee
behavior has to address individual differences.
Numerous studies have examined the technology–structure
relationship. What differentiates technologies is their degree of Exhibit 15-10 summarizes what we’ve discussed. There are a
routineness? Routine activities are characterized by automated few other take-home messages worth considering. Although
and standardized operations. Examples are injection-mold specialization can bring efficiency, excessive specialization also
production of plastic knobs, automated transaction processing can breed dissatisfaction and reduced motivation. Formal
of sales transactions, and the printing and binding of this book. hierarchies offer advantages like unification of mission and goal
Nonroutine activities are customized and require frequent while employees in excessively rigid hierarchies can feel they
revision and updating. They include furniture restoring, custom have no power or autonomy. As with specialization, the key is
shoemaking, genetic research, and the writing and editing of this striking the right balance. Virtual and boundaryless forms are
book. In general, organizations engaged in nonroutine activities changing the face of many organizations. Contemporary
tend to prefer organic structures, while those performing managers should thoroughly understand their implications and
routine activities prefer mechanistic structures. recognize advantages and potential pitfalls. Organizational
downsizing can lead to major cost savings and focus
An organization’s environment includes outside institutions or organizations around their core competencies, but it can leave
forces that can affect its performance, such as suppliers, workers dissatisfied and worried about the future of their jobs.
customers, competitors, government regulatory agencies, and When determining an appropriate organizational form,
public pressure groups. Dynamic environments create managers will need to consider scarcity, dynamism, and
significantly more uncertainty for managers than do static ones. complexity of the environment and balance the organic and
To minimize uncertainty, managers may broaden their structure mechanistic elements appropriate to their organization’s
to sense and respond to threats. For example, most companies, environment.
including Pepsi and Southwest Airlines, have added social
networking departments to counter negative information
posted on blogs. Or companies may form strategic alliances,
such as when Microsoft and Yahoo! joined forces to better
compete with Google. Any organization’s environment has three
dimensions: capacity, volatility, and complexity. First is Capacity
that is "The degree to which it can support growth.” Rich and
growing environments generate excess resources, which can
buffer times of relative scarcity. Second is Volatility, which
refers to "the degree of instability in an environment
characterized by a high degree of unpredictable change.” The
environment is dynamic, making it difficult for management to
predict accurately the probabilities associated with various
decision alternatives. At the other extreme is a stable
environment. Last is Complexity or "The degree of heterogeneity
and concentration among environmental elements.” Simple
environments are homogeneous and concentrated. In contrast,

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