Learning Objectives

Week 7
• At the end of the session, you should be able to:
Organising Identify the factors that influence managers’ choice
of an organizational structure.
Explain how managers group tasks into jobs that
are motivating and satisfying for employees.

Principles of Management Describe the types of organizational structures

managers can design, and explain why they choose
one structure over another.
Evans Khadambi Luyali Explain why there is a need to both centralize and
Department of Civil & Structural Engineering decentralize authority.

9–2

Learning Objectives (cont’d) Organizational Structure

Explain why managers must coordinate and • Organizational Architecture
integrate between jobs, functions, and divisions as
The organizational structure, control systems,
an organization grows.
culture, and human resource management systems
that together determine how efficiently and
effectively organizational resources are used.

9–3 9–4

Designing Organizational Structure Factors Affecting Organizational Structure

• Organizing
The process by which managers establish working
relationships among employees to achieve goals.
• Organizational Structure
Formal system of task and reporting relationships
showing how workers use resources.
• Organizational design
The process by which managers make specific
choices that result in a particular kind of
organizational structure.

9–5 9–6

1
 Factors Affecting Organizational Structure Determinants of Structure
• The Organizational Environment
The quicker the environment changes, the more
problems managers face .
Structure must be more flexible (i.e., decentralized
authority) when environmental change is rapid.

9–7 9–8

Determinants of Structure Determinants of Structure

• Strategy • Technology
Different strategies require the use of different The combination of skills, knowledge, tools,
structures. equipment, computers and machines used in the
• A differentiation strategy needs a flexible structure, organization.
low cost may need a more formal structure. More complex technology makes it harder for
• Increased vertical integration or diversification also managers to regulate the organization.
requires a more flexible structure.

9–9 9–10

Determinants of Structure Types of Technology

• Technology (cont’d) • Small Batch Technology
Technology can be measured by: Small quantities of one-of-a-kind products are
• Task variety: the number of new problems a manager produced by the skills of the workers who work
encounters. together in small groups.
• Task analyzability: the availability of programmed • Appropriate structure is decentralized and flexible.
solutions to a manager to solve problems.
• Mass Production Technology
High task variety and low analyzability present
Automated machines that are programmed to make
many unique problems to managers.
high volumes of standard products.
• Flexible structure works best in these conditions.
• Formal structure is the best choice for workers who
Low task variety and high analyzability allow must perform repetitive tasks.
managers to rely on established procedures.

9–11 9–12

2
 Types of Technology Determinants of Structure
• Continuous Process Technology • Human Resources
Totally mechanized systems of automatic machines. Highly skilled workers whose jobs require working
• A flexible structure is necessary to allow workers to in teams usually need a more flexible structure.
react quickly to unexpected problems. Higher skilled workers (e.g., QS’s and Engineers)
• Information Technology (IT) often have internalized professional norms.
Knowledge management • Managers must take into account all four
• The sharing and integrating of expertise within and factors (environment, strategy, technology and
between functions and divisions through realtime, human resources) when designing the
interconnected IT that allows for new kinds of tasks structure of the organization.
and job reporting relationships.

9–13 9–14

Job Design Job Design

• Job Design • Job Enlargement
The process by which managers decide how to Increasing the number of tasks for a given job to
divide tasks into specific jobs. reduce boredom.
The appropriate division of labour results in an • Job Enrichment
effective and efficient workforce.
Increasing the degree of responsibility a worker has
• Job Simplification over a job.
The process of reducing the tasks each worker can lead to increased worker involvement.
performs.
• Too much simplification and boredom results.

9–15 9–16

Departmentalization Grouping Jobs into Functions

• Three Major Forms of Departmentalization • Functional Structure
(Organizational Design) An organizational structure composed of all the
Functional – by functions departments that an organization requires to
produce its goods or services.
Divisional – by Products, Customers, Channels,
Geographical territories and process Advantages
Matrix – one or more forms of departmentalization • Encourages learning from others doing similar jobs.
are imposed on top of an existing one • Easy for managers to monitor and evaluate workers.
Hybrid – combines Functional and Divisional Disadvantages
designs • Difficult for departments to communicate with other.
• Preoccupation with own department and losing sight
of organizational goals.

9–17 9–18

3
 Divisional Structures Types of Divisional Structures
• Divisional Structure • Product Structure
An organizational structure composed of separate Customers are served by self-contained divisions
business units within which are the functions that that handle a specific type of product or service.
work together to produce a specific product for a • Allows functional managers to specialize in one
specific customer product area
• Divisions create smaller, manageable parts of a firm. • Division managers become experts in their area
• Divisions develop a business-level strategy to • Removes need for direct supervision of division by
compete. corporate managers
• Divisions have marketing, finance, and other • Divisional management improves the use of
functions. resources
• Functional managers report to divisional managers
who then report to corporate management.

9–19 9–20

Types of Divisional Structures (cont’d) Types of Divisional Structures (cont’d)

• Geographic Structure • Market (Customer) Structure
Each region or country or area with customers with Each kind of customer is served by a self-contained
differing needs is served by a local self-contained division
division producing products that best meet those Global market (customer) structure
needs.
• Customers in different regions buy similar products so
Global geographic structure firms can locate manufacturing facilities and product
• Different divisions serve each world region when distribution networks where they decide is best.
managers find different problems or demands across • Firms pursuing a global strategy will use this type of
the globe. structure.
• Generally, occurs when managers are pursuing a
multidomestic strategy

9–21 9–22

Matrix Design Structure Matrix Structure

• Matrix Structure
An organizational structure that simultaneously
groups people and resources by function and
product.
• Results in a complex network of superior-subordinate
reporting relationships.
• The structure is very flexible and can respond rapidly
to the need for change.
• Each employee has two bosses (functional manager
and product manager) and possibly cannot satisfy
both.

9–23 9–24

4
 Hybrid Structures Product Team Design Structure
• Hybrid Structure • Product Team Structure
The structure of a large organization that has many The members are permanently assigned to the
divisions and simultaneously uses many different team and empowered to bring a product to market.
organizational structures Avoids problems of two-way communication and
• Managers can select the best structure for a the conflicting demands of functional and product
particular division—one division may use a functional team bosses.
structure, another division may have a geographic
structure. Cross-functional team is composed of a group of
managers from different departments working
• The ability to break a large organization into smaller
together to perform organizational tasks.
units makes it easier to manage.

9–25 9–26

Product Team Structure Coordinating Functions:

Allocating Authority
• Authority
The power to hold people accountable for their
actions and to make decisions concerning the use
of organizational resources.
• Hierarchy of Authority
An organization’s chain of command, specifying the
relative authority of each manager.

9–27 9–28

Allocating Authority (cont’d) Tall and Flat Organizations

• Span of Control • Tall structures have many levels of authority
The number of subordinates that report directly to and narrow spans of control.
a manager. As hierarchy levels increase, communication gets
• Line Manager difficult creating delays in the time being taken to
implement decisions.
Managers in the direct chain of command who have
authority over people and resources lower down. Communications can also become garbled as it is
repeated through the firm.
Primarily responsible for the production of goods or
services. • Flat structures have fewer levels and wide
• Staff Manager spans of control.
Structure results in quick communications but can
Managers who are functional-area specialists that
lead to overworked managers.
give advice to line managers.
9–29 9–30

5
 Flat Organizations Tall Organizations

9–31 9–32

Organizational Structure
Chief Executive

• Managers should carefully evaluate:

Tall hierarchy

Does the organization have the right number of

middle managers?
Can the structure be altered to reduce levels?
• Centralized and Decentralized of Authority
Relatively narrow Decentralization puts more authority at lower levels
Chief Executive
span of control and leads to flatter organizations.
Flat hierarchy

• Works best in dynamic, highly competitive

environment.
Stable environment favours centralization of
Relatively wide
authority.
span of control
9–34

Typical Functions of Construction Company

At the next session
• Project Team Organization

Leading

35 9–36

6
 Organizing Organizing
The Unified System is represented by
Comes after the Planning an Organization Chart, with Structural
activities by creating a elements including:
 Allocation of duties, tasks, and
Unified System to support
responsibilities between
the established Strategies departments and individuals
and Goals.  Reporting relationships
 Number of levels
Week 6 1 Week 6 2

Organizing
 Organizational charts show only the formal
structure.
- An incomplete picture because of hidden and informal
arrangements and underlying behavioral processes,
and natural organizational evolution

 Two basic goals of organizational design

- Get information to decision makers
- Coordinate the interdependent parts of an organization

Week 6 3

1
Functional Departmentalization
General Manager

Finance Human Resource

R&D Operations Marketing

Week 6 1

1
 Organic vs. Mechanistic Organization
Organization and Environment
UNCERTAINTY
Low High
 Burns and Stalker’s suggest that there are
strong evidences that the nature of the Mechanistic Structure Organic Structure
organization’s environment influences the way  Change Unlikely  Change Likely
 High Formalization  Low Formalization
an Organization is organized and managed.  Narrow Span of Control  Wide Span of Control
 In a stable environment, the organization tends  Tall Structure  Flat Structure
to be more mechanistic, whereas in an  Centralized Authority in few top  Decentralized and Diffused
people Authority throughout Organization
innovative/changing environment, the  Rigid Rules  Considerable Flexibility
organization tends to be organic.  Many Specialists  Many Generalists

Week 6 1 Week 6 2

1
 Matrix Departmentalization
Matrix Departmentalization
M Director

• Functions?
• Products?
• Customers? Project Production & Engineering & Materials & Personnel &
Management Facilities Research Procurement Safety
• Channels?
• Geographic?
Begins with a Functional
• Process? Departmentalization

Week 6 1 Week 6 2

Matrix Departmentalization Matrix Departmentalization

M Director M Director

General Manager General Manager General Manager General Manager

General Manager General Manager General Manager General Manager
Technical Electrical /Mechanical Contracts Mechanical
Construction Electrical Mechanical Civil Works
Services Services Plant

Project Production & Engineering & Materials & Personnel &

Project Production & Engineering & Materials & Personnel & Management Facilities Research Procurement Safety
Management Facilities Research Procurement Safety

Residential

Infrastructure
Product Departments are & Heavy
Three Product Groups are
then superimposed superimposed
Industrial

Week 6 3 Week 6 4

Matrix Departmentalization Matrix Departmentalization

M Director M Director

General Manager
General Manager General Manager General Manager General Manager General Manager General Manager General Manager
Construction
Construction Electrical Mechanical Civil Works Electrical Mechanical Civil Works

Project Production & Engineering & Materials & Personnel & Project Production & Engineering & Materials & Personnel &
Management Facilities Research Procurement Safety Management Facilities Research Procurement Safety

Residential Production Engineering Materials Personnel Residential Production Engineering Materials Personnel

Infrastructure Infrastructure
Production Engineering Materials Personnel Production Engineering Materials Personnel
& Heavy & Heavy
Reps.from each Functional
Industrial Industrial Production Engineering Materials Personnel
Dept. are assigned to each
Product Group Week 6 5 Week 6 6

1
 Hybrid Departmentalization
Products M Director

Production & Engineering & Materials & Personnel &

Functions Customers Marketing
Facilities Research Procurement Safety

Hybrid
Firms
Marketing
Process
Channels

Geographic Hybrid structure comprises the Functional structure

and some of the Divisional Structures (i.e. Products,
Week 6 7 Customers, Channels, Geographic, Process) Week 6 8

Hybrid Departmentalization Hybrid Departmentalization

M Director M Director

Production & Engineering & Materials & Personnel & Production & Engineering & Materials & Personnel &
Marketing Marketing
Facilities Research Procurement Safety Facilities Research Procurement Safety

Nairobi County Nandi County Uasin Gishu County Vihiga County Nairobi County Nandi County Uasin Gishu County Vihiga County

Structural Steel Aluminum Sections Precast Concrete Timber Products

This Hybrid structure example comprises the

Functional structure and Geographic structure Week 6 9
… and Products structure) Week 6 10

Hybrid Departmentalization Hybrid Departmentalization

M Director M Director

Production & Engineering & Materials & Personnel & Production & Engineering & Materials & Personnel &
Marketing Marketing
Facilities Research Procurement Safety Facilities Research Procurement Safety

Nairobi County Nandi County Uasin Gishu County Vihiga County Nairobi County Nandi County Uasin Gishu County Vihiga County

Structural Steel Aluminum Sections Precast Concrete Structural Steel Aluminium Sections Precast Concrete Timber Products
Timber Products

Local Export Retail Wholesale (bulk) Local Export Retail Wholesale (bulk)

… and Marketing Channels structure) Week 6 11 A Functional, Geographic, Products and Channels Hybrid structure Week 6 12

2
 11/2/2016

Project Team Organisation Typical Functions of Company

Construction Management

• Operations
• Business development/marketing
• Services
• Financial control
• Administration
(CVS 465)

Evans Khadambi Luyali

1 2
kluyali@uoe.ac.ke

Typical Functions of Construction Company Typical Functions of Construction Company

Shareholders

Board of Directors

Health & Company Business Financial

Estimating & Services Administration
Safety Operations Development/ Control
Tendering Operations
Operations Marketing Temporary Finance & Health &
management
Finance & Information management Estimating & works design accounts Safety
accounts technology Temporary Tendering
Plant Planning & Plant Economics Personnel
works design production Business and cost
Purchasing Planning & Business Information Education &
production development analysis development technology Estate training
Personnel
Economics analysis Quality Publicity Purchasing management Administration
Estate Education &
and cost Research & & records
Wages & management training
Quality Salaries development Wages &
Administration Research & Salaries
Publicity Legal matters & records development Legal matters
3 4

Typical Functions of Construction Company Organised by Product and

Shareholders Geographical Location
Board of Directors Shareholder

Company Business Financial

Operations
Estimating & Services Health &
Development/
Administration Holding Company
Tendering Safety Control Operations
Operations Marketing Temporary Finance & management
Health &
management Finance
Estimating Information
& & works design accounts Safety
technology Company B
Planning
Plant & accounts
Tendering Plant Economics Temporary
Personnel Company A Company D Company E
Management/ Company C
production Business and cost works design General Special International
Planning & InformationBusiness Education & D&B Housing
Purchasing
analysis contracting Products Construction
development
production technology
development Estate training
Personnel Contracts
Quality
Economics analysis Purchasing
Publicity management Administration
Estate Education &
and cost & records
Wages & Researchmanagement
& training
Quality Salaries development Wages &
Administration Research &
Salaries
Publicity Legal matters & records development
Legal matters
5 6

1
 11/2/2016

Organisational Arrangements on The Construction Site

Director of Construction Operation
Contract Manager A Contract Manager C
Contract Manager B

Project Project Project Project Project

Manager A Manager B Manager C Manager D Manager E

Office Quantity Supervisor of Supervisor of

Engineer Plant Manager
Manager Surveyor Labour Subcontractors

Materials Planning Temporary Sub-

Site Engineers Safety Officer
Controller Engineer Works Designer contractors

Crew leader Crew leader Crew leader Crew leader Crew leader Crew leader

Operatives Operatives Operatives