After reading this chapter, you should be able to: 1. Describe three types of coordination in organizational structures. 2. Justify the optimal span of control in a given situation. 3. Discuss the advantages and disadvantages of centralization and formalization. 4. Distinguish organic from mechanistic organizational structures. 5. Identify and evaluate the six pure types of departmentalization. 6. Describe three variations of divisional structure and explain which one should be adopted in a particular situation. 7. Diagram the matrix structure and discuss its advantages and disadvantages. 8. Compare and contrast network structures with other forms of departmentalization. 9. Identify four characteristics of external environments and discuss the preferred organizational structure for each environment. 10. Summarize the influence of organizational size, technology, and strategy on organizational structure.
Part Four Organizational Processes
organizational structure The division of labor as well as the patterns of coordination, communication, workflow, and formal power that direct organizational activities.
What organizational structure will work best for BioWare? We’ll find out in this chapter. Organizational structure refers to the division of labor as well as the patterns of coordination, communication, workflow, and formal power that direct organizational activities. The chapter begins by introducing the two fundamental processes in organizational structure: division of labor and coordination. This is followed by a detailed investigation of the four main elements of organizational structure: span of control, centralization, formalization, and departmentalization. The latter part of this chapter examines the contingencies of organizational design, including external environment, organizational size, technology, and strategy. Throughout this chapter, we hope to show that an organization’s structure is much more than an organizational chart diagramming which employees report to which managers. Organizational structure includes reporting relationships, but it also relates to job design, information flow, work standards and rules, team dynamics, and power relationships. Organizational structures are frequently used as tools for organizational change because they establish new communication patterns and align employee behavior with the corporate vision.2 For example, when Charles Schwab & Co. experienced financial trouble not long ago, founder Charles Schwab (who returned as CEO) held a two-day marathon session in which the company’s top executives were asked to redraw the organizational chart in a way that would make the company simpler, more decentralized, and refocused on the customer. Every executive in the room, including those whose jobs would be erased from the new structure, was asked for his or her input.3 The point we want to emphasize here is that organizational structure reconfigures power, communication patterns, and possibly the company’s culture in the long term. As such, altering the organization’s structure is an important component of an executive’s toolkit for organizational change.4 After reading the next two sections, you should be able to: 1. Describe three types of coordination in organizational structures. 2. Justify the optimal span of control in a given situation. 3. Discuss the advantages and disadvantages of centralization and formalization. 4. Distinguish organic from mechanistic organizational structures.
Division of Labor and Coordination
All organizational structures include two fundamental requirements: the division of labor into distinct tasks and the coordination of that labor so that employees are able to accomplish common goals.5 Organizations are groups of people who work interdependently toward some purpose. To efficiently accomplish their goals, these groups typically divide the work into...
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