ninth edition
STEPHEN P. ROBBINS
PowerPoint Presentation by Charlie Cook
The University of West Alabama
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MARY COULTER
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All rights reserved.
Organizational Structure and Design
Chapter
10

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10–2
L E A R N I N G  O U T L I N E
Follow this Learning Outline as you read and study this chapter.
•Defining Organizational Structure
•Discuss the traditional and contemporary views of work specialization, chain of command, and span
of control.
•Describe each of the five forms of departmentalization.
•Explain cross-functional teams.
•Differentiate, authority, responsibility, and unity of command.
•Tell what factors influence the amount of centralization and decentralization.
•Explain how formalization is used in organizational design.
•

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10–3
L E A R N I N G  O U T L I N E  (cont’d)
Follow this Learning Outline as you read and study this chapter.
•Organizational Design Decisions
•Contrast mechanistic and organic organizations.
•Explain the relationship between strategy and structure.
•Tell how organizational size affects organizational design.
•Discuss Woodward’s findings on the relationship of technology and structure.
•Explain how environmental uncertainty affects organizational design.

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10–4
L E A R N I N G  O U T L I N E  (cont’d)
Follow this Learning Outline as you read and study this chapter.
•Common Organizational Designs
•Contrast the three traditional organizational designs.
•Explain team, matrix, and project structures.
•Describe the design of virtual and network organizations.
•Discuss the organizational design challenges facing managers today.

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10–5
Defining Organizational Structure
•Organizational Structure
ØThe formal arrangement of jobs within an organization.
•Organizational Design
ØA process involving decisions about six key elements:
vWork specialization
vDepartmentalization
vChain of command
vSpan of control
vCentralization and decentralization
vFormalization

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Exhibit 10–1 Purposes of Organizing
•Divides work to be done into specific jobs and departments.
•Assigns tasks and responsibilities associated with individual jobs.
•Coordinates diverse organizational tasks.
•Clusters jobs into units.
•Establishes relationships among individuals, groups, and departments.
•Establishes formal lines of authority.
•Allocates and deploys organizational resources.

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10–7
Organizational Structure
•Work Specialization
ØThe degree to which tasks in the organization are divided into separate jobs with each step
completed by a different person.
ØOverspecialization can result in human diseconomies from boredom, fatigue, stress, poor quality,
increased absenteeism, and higher turnover.
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10–8
Departmentalization by Type
•Functional
ØGrouping jobs by functions performed
•Product
ØGrouping jobs by product line
•Geographical
ØGrouping jobs on the basis of territory or geography
•Process
ØGrouping jobs on the basis of product or customer flow
•Customer
ØGrouping jobs by type of customer and needs
•

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Exhibit 10–2 Functional Departmentalization
•Advantages
•Efficiencies from putting together similar specialties and people with common skills, knowledge,
and orientations
•Coordination within functional area
•In-depth specialization
•Disadvantages
•Poor communication across functional areas
•Limited view of organizational goals

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Exhibit 10–2 (cont’d) Geographical Departmentalization
•Advantages
•More effective and efficient handling of specific regional issues that arise
•Serve needs of unique geographic markets better
•Disadvantages
•Duplication of functions
•Can feel isolated from other organizational areas

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10–11
Exhibit 10–2 (cont’d) Product Departmentalization
+ Allows specialization in particular products and services
+ Managers can become experts in their industry
+ Closer to customers
– Duplication of functions
– Limited view of organizational goals

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10–12
Exhibit 10–2 (cont’d) Process Departmentalization
+ More efficient flow of work activities
– Can only be used with certain types of products

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10–13
Exhibit 10–2 (cont’d) Customer Departmentalization
+ Customers’ needs and problems can be met by specialists
- Duplication of functions
- Limited view of organizational goals

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10–14
Organization Structure (cont’d)
•Chain of Command
ØThe continuous line of authority that extends from upper levels of an organization to the lowest
levels of the organization and clarifies who reports to who.
Ø
j0090344

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10–15
Organization Structure (cont’d)
•Authority
ØThe rights inherent in a managerial position to tell people what to do and to expect them to do
it.
•Responsibility
ØThe obligation or expectation to perform.
•Unity of Command
ØThe concept that a person should have one boss and should report only to that person.

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10–16
Organization Structure (cont’d)
•Span of Control
ØThe number of employees who can be effectively and efficiently supervised by a manager.
ØWidth of span is affected by:
vSkills and abilities of the manager
vEmployee characteristics
vCharacteristics of the work being done
vSimilarity of tasks
vComplexity of tasks
vPhysical proximity of subordinates
vStandardization of tasks

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Exhibit 10–3 Contrasting Spans of Control

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Organization Structure (cont’d)
•Centralization
ØThe degree to which decision-making is concentrated at a single point in the organizations.
vOrganizations in which top managers make all the decisions and lower-level employees simply carry
out those orders.
•Decentralization
ØOrganizations in which decision-making is pushed down to the managers who are closest to the
action.
•Employee Empowerment
ØIncreasing the decision-making authority (power) of employees.

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10–19
Exhibit 10–4 Factors that Influence the Amount of Centralization
•More Centralization
ØEnvironment is stable.
ØLower-level managers are not as capable or experienced at making decisions as upper-level
managers.
ØLower-level managers do not want to have a say in decisions.
ØDecisions are relatively minor.
ØOrganization is facing a crisis or the risk of company failure.
ØCompany is large.
ØEffective implementation of company strategies depends on managers retaining say over what
happens.

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10–20
Exhibit 10–4 (cont’d) Factors that Influence the Amount of Centralization
•More Decentralization
ØEnvironment is complex, uncertain.
ØLower-level managers are capable and experienced at making decisions.
ØLower-level managers want a voice in decisions.
ØDecisions are significant.
ØCorporate culture is open to allowing managers to have a say in what happens.
ØCompany is geographically dispersed.
ØEffective implementation of company strategies depends on managers having involvement and
flexibility to make decisions.

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Organization Structure (cont’d)
•Formalization
ØThe degree to which jobs within the organization are standardized and the extent to which employee
behavior is guided by rules and procedures.
vHighly formalized jobs offer little discretion over what is to be done.
vLow formalization means fewer constraints on how employees do their work.

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10–22
Organizational Design Decisions
•Mechanistic Organization
ØA rigid and tightly controlled structure
vHigh specialization
vRigid departmentalization
vNarrow spans of control
vHigh formalization
vLimited information network (downward)
vLow decision participation
•Organic Organization
ØHighly flexible and adaptable structure
vNon-standardized jobs
vFluid team-based structure
vLittle direct supervision
vMinimal formal rules
vOpen communication network
vEmpowered employees

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Exhibit 10–5 Mechanistic versus Organic Organization
• High specialization
• Rigid departmentalization
• Clear chain of command
• Narrow spans of control
• Centralization
• High formalization
• Cross-functional teams
• Cross-hierarchical teams
• Free flow of information
• Wide spans of control
• Decentralization
• Low formalization

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Contingency Factors
•Structural decisions are influenced by:
ØOverall strategy of the organization
vOrganizational structure follows strategy.
ØSize of the organization
vFirms change from organic to mechanistic organizations as they grow in size.
ØTechnology use by the organization
vFirms adapt their structure to the technology they use.
ØDegree of environmental uncertainty
vDynamic environments require organic structures; mechanistic structures need stable environments.

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Contingency Factors (cont’d)
•Strategy Frameworks:
ØInnovation
vPursuing competitive advantage through meaningful and unique innovations favors an organic
structuring.
ØCost minimization
vFocusing on tightly controlling costs requires a mechanistic structure for the organization.
ØImitation
vMinimizing risks and maximizing profitability by copying market leaders requires both organic and
mechanistic elements in the organization’s structure.

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10–26
Contingency Factors (cont’d)
•Strategy and Structure
ØAchievement of strategic goals is facilitated by changes in organizational structure that
accommodate and support change.
•Size and Structure
ØAs an organization grows larger, its structure tends to change from organic to mechanistic with
increased specialization, departmentalization, centralization, and rules and regulations.

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10–27
Contingency Factors (cont’d)
•Technology and Structure
ØOrganizations adapt their structures to their technology.
ØWoodward’s classification of firms based on the complexity of the technology employed:
vUnit production of single units or small batches
vMass production of large batches of output
vProcess production in continuous process of outputs
ØRoutine technology = mechanistic organizations
ØNon-routine technology = organic organizations

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Exhibit 10–6 Woodward’s Findings on Technology, Structure, and Effectiveness

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Contingency Factors (cont’d)
•Environmental Uncertainty and Structure
ØMechanistic organizational structures tend to be most effective in stable and simple environments.
ØThe flexibility of organic organizational structures is better suited for dynamic and complex
environments.
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Common Organizational Designs
•Traditional Designs
ØSimple structure
vLow departmentalization, wide spans of control, centralized authority, little formalization
ØFunctional structure
vDepartmentalization by function
–Operations, finance, human resources, and product research and development
ØDivisional structure
vComposed of separate business units or divisions with limited autonomy under the coordination and
control the parent corporation.

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Exhibit 10–7 Strengths and Weaknesses of Traditional Organizational Designs

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Exhibit 10–8 Contemporary Organizational Designs
Team Structure
• What it is:
A structure in which the entire organization is made up of work groups or teams.
• Advantages:
Employees are more involved and empowered. Reduced barriers among functional areas.
• Disadvantages:
No clear chain of command. Pressure on teams to perform.
Matrix-Project Structure
What it is:
A structure that assigns specialists from different functional areas to work on projects but who
return to their areas when the project is completed. Project is a structure in which employees
continuously work on projects. As one project is completed, employees move on to the next project.
• Advantages:
Fluid and flexible design that can respond to environmental changes. Faster decision making.
• Disadvantages:
Complexity of assigning people to projects. Task and personality conflicts.

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Exhibit 10–8 (cont’d) Contemporary Organizational Designs
Boundaryless Structure
What it is:
A structure that is not defined by or limited to artificial horizontal, vertical, or external
boundaries; includes virtual and network types of organizations.
• Advantages:
Highly flexible and responsive. Draws on talent wherever it’s found..
• Disadvantages:
Lack of control. Communication difficulties..

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Organizational Designs (cont’d)
•Contemporary Organizational Designs
ØTeam structures
vThe entire organization is made up of work groups or self-managed teams of empowered employees.
ØMatrix and project structures
vSpecialists from different functional departments are assigned to work on projects led by project
managers.
vMatrix and project participants have two managers.
vIn project structures, employees work continuously on projects; moving on to another project as
each project is completed.

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10–35
Exhibit 10–9 An Example of a Matrix Organization

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Organizational Designs (cont’d)
•Contemporary Organizational Designs (cont’d)
ØBoundaryless Organization
vAn flexible and unstructured organizational design that is intended to break down external
barriers between the organization and its customers and suppliers.
vRemoves internal (horizontal) boundaries:
–Eliminates the chain of command
–Has limitless spans of control
–Uses empowered teams rather than departments
vEliminates external boundaries:
–Uses virtual, network, and modular organizational structures to get closer to stakeholders.

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Removing External Boundaries
•Virtual Organization
ØAn organization that consists of a small core of full-time employees and that temporarily hires
specialists to work on opportunities that arise.
•Network Organization
ØA small core organization that outsources its major business functions (e.g., manufacturing) in
order to concentrate what it does best.
•Modular Organization
ØA manufacturing organization that uses outside suppliers to provide product components for its
final assembly operations.

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Today’s Organizational Design Challenges
•Keeping Employees Connected
ØWidely dispersed and mobile employees
•Building a Learning Organization
•Managing Global Structural Issues
ØCultural implications of design elements

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Organizational Designs (cont’d)
•The Learning Organization
ØAn organization that has developed the capacity to continuously learn, adapt, and change through
the practice of knowledge management by employees.
ØCharacteristics of a learning organization:
vAn open team-based organization design that empowers employees
vExtensive and open information sharing
vLeadership that provides a shared vision of the organization’s future, support and encouragement
vA strong culture of shared values, trust, openness, and a sense of community.

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Terms to Know
•organizing
•organizational structure
•organizational design
•work specialization
•departmentalization
•functional departmentalization
•product departmentalization
•geographical departmentalization
•process departmentalization
•customer departmentalization
•cross-functional teams
•chain of command
•authority
•responsibility
•unity of command
•span of control
•centralization
•decentralization
•employee empowerment
•formalization
•mechanistic organization
•organic organization
•unit production
•mass production
•process production
•simple structure
•functional structure

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10–41
Terms to Know
•divisional structure
•team structure
•matrix structure
•project structure
•boundaryless organization
•virtual organization
•network organization
•learning organization
•organizational chart