Foundations of Organizational Structure

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No other topic in management has undergone as much change in the past few years as that of organizing and organizational structure. Traditional approaches to organizing work are being questioned and re-evaluated as managers search out structural designs that will best support and facilitate employees' doing the organization's work—ones that can achieve efficiency but also have the flexibility that's necessary for success in today's dynamic environment. Recall that organizing is defined as the process of creating an organization's structure. That process is important and serves many purposes. The challenge for managers is to design an organizational structure that allows employees to effectively and efficiently do their work. Just what is an organization's structure? An organizational structure is the formal framework by which job tasks are divided, grouped, and coordinated. When managers develop or change an organization's structure, they are engaged in organizational design, a process that involves decisions about six key elements: work specialization, departmentalization, chain of command, span of control, centralization and decentralization, and formalization.

Organizational Structure and Design

Organizational Structure
The formal pattern of how people and jobs are divided, grouped and coordinated in an organization.

Organizational Design
The decisions and actions that result in organizational structure.

What Determines Organizational Structure?
• To what degree are tasks subdivided into separate jobs?
• On what basis will jobs be grouped together?
• To whom do individuals and groups report?
• How many individuals can a manager efficiently and effectively direct? • Where does decision-making authority lie?
• To what degree will there be rules and regulations to direct employees and managers?

The Basics of Organizational Structure
• Organizational structure defines how job tasks are formally divided, grouped, and coordinated. • The organization chart is a visual representation of this division, grouping, and coordination.

Early in the twentieth century, Henry Ford used this concept in an assembly line where every Fordworker was assigned a specific, repetitive task. By breaking jobs into small standardized tasks, which could be performed over and over again, Ford was able to produce cars at the rate of one every 10 seconds, while using relatively low-skilled workers.

Today we use the term work specialization to describe the degree to which tasks in an organization are divided into separate jobs. The essence of work specialization is that an entire job is not done by one individual but instead is broken down into steps, and each step is completed by a different person. Individual employees specialize in doing part of an activity rather than the entire activity.

During the first half of the twentieth century, managers viewed work specialization as an unending source of increased productivity. And for a time it was! Because it wasn't widely used, when work specialization was implemented, employee productivity rose. By the 1960s, however, it had become evident that a good thing could be carried too far. The point had been reached in some jobs where human diseconomies from work specialization—boredom, fatigue, stress, poor quality, increased absenteeism, and higher turnover—more than offset the economic advantages. In such instances, worker productivity could be increased by enlarging, not narrowing, the scope of job activities. In addition, managers found that employees, who were given a variety of work to do, allow doing the activities necessary to complete a whole job, and put into teams with interchangeable skills often achieved significantly higher output with increased employee satisfaction.

Most managers today see work specialization as an important organizing mechanism but not as a source of ever-increasing productivity. They...
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