Chapter 7

Designing Organizational Structure

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 Learning Objectives 1 of 2
LO7-1 Identify the factors that influence
managers’ choice of an organizational
structure.
LO7-2 Explain how managers group tasks into
jobs that are motivating and satisfying for
employees.
LO7-3 Describe the types of organizational
structures managers can design, and
explain why they choose one structure
over another.

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 Learning Objectives 2 of 2
LO7-4 Explain why managers must coordinate
jobs, functions, and divisions using the
hierarchy of authority and integrating
mechanisms.
LO7-5 Describe how information technology (IT)
is helping managers build strategic
alliances and network structures to
increase efficiency and effectiveness.

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 Designing Organizational Structure 1 of 3
Organizing
• The process by which managers establish the
structure of working relationships among employees
to achieve goals

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 Designing Organizational Structure 2 of 3
Organizational Structure
• Formal system of task and reporting relationships that
coordinates and motivates organizational members
so that they work together to achieve organizational
goals

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 Designing Organizational Structure 3 of 3
Organizational Design
• The process by which managers make specific
organizing choices that result in a particular kind of
organizational structure

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 Figure 7.1 Factors Affecting
Organizational Structure

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 Job Design 1 of 2
Job Design
• The process by which managers decide how to divide
tasks into specific jobs
Job Simplification
• The process of reducing the number of tasks that
each worker performs

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 Job Design 2 of 2
Job Enlargement
• Increasing the number of different tasks in a given job
by changing the division of labor
Job Enrichment
• Increasing the degree of responsibility a worker has
over a job

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 Job Characteristics Model

Job Characteristic Description

Skill variety Employee uses a wide range of skills

Task identity Worker is involved in all tasks of the job from

beginning to end of the production process
Task significance Worker feels the task is meaningful to
organization
Autonomy Employee has freedom to schedule tasks and
carry them out
Feedback Worker gets direct information about how well
the task is done

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 Grouping Jobs into Functions 1 of 2
Functional Structure
• An organizational structure composed of all the
departments that an organization requires to produce
its goods or services

© Tim Boyle/Getty Images

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 Figure 7.2 The Functional Structure of
Pier 1 Imports

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description
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 Grouping Jobs into Functions 2 of 2
Advantages
• Encourages learning from others doing similar jobs
• Easy for managers to monitor and evaluate workers
Disadvantages
• Difficult for departments to communicate with others
• Preoccupation with own department and losing sight
of organizational goals

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 Divisional Structures
Divisional Structure
• An organizational structure composed of separate
business units within which are the functions that
work together to produce a specific product for a
specific customer

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 Types of Divisional Structures
Product Structure
• Each product line or business is handled by a self-
contained division

© Kim Steele/Photodisc Green/Getty Images RF

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 Product Structure
Advantages
• Allows functional managers to specialize in one
product area
• Division managers become experts in their area
• Removes need for direct supervision of division by
corporate managers
• Divisional management improves the use of
resources

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 Figure 7.3
Product,
Market, and
Geographic
Structures

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 Types of Divisional Structures 1 of 3
Geographic Structure
• Each region of a country or area of the world is
served by a self-contained division
Global Geographic Structure
• Managers locate different divisions in each of the
world regions where the organization operates
• Generally occurs when managers are
pursuing a multidomestic strategy

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 Types of Divisional Structures 2 of 3
Global Product Structure
• Each product division, not the country or regional
managers, takes responsibility for deciding where to
manufacture its products and how to market them in
foreign countries

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 Figure 7.4 Global Geographic and
Global Product Structures

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 Types of Divisional Structures 3 of 3
Market Structure
• Each kind of customer is served by a self-contained
division
• Also called customer structure

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 Matrix Design Structure
Matrix Structure
• An organizational structure that simultaneously
groups people and resources by function and product

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 Figure 7.5
Matrix and
Product Team
Structures

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description
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 Product Team Structure
Product Team Structure
• Employees are permanently assigned to a cross-
functional team and report only to the product team
manager or to one of his direct subordinates
Cross-Functional Team
• Group of managers brought together from different
departments to perform organizational tasks

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 Coordinating Functions and Divisions
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

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 Allocating Authority
Span of Control
• The number of subordinates who report directly to a
manager
Line Manager
• Someone in the direct line or chain of command who
has formal authority over people and resources
Staff Manager
• Someone responsible for managing a specialist
function, such as finance or marketing

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 Figure 7.6 The Hierarchy of Authority and
Span of Control at McDonald’s Corporation

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 Tall and Flat Organizations
Tall Organization
• Many levels of authority relative to company size
Flat Organization
• Fewer levels of authority relative to company size

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 Figure 7.7 Tall and Flat Organizations 1 of 2

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 Figure 7.7 Tall and Flat Organizations 2 of 2

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 Centralization and Decentralization of
Authority
Decentralizing Authority
• Giving lower-level managers and nonmanagerial
employees the right to make important decisions
about how to use organizational resources

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 Integrating and Coordinating Mechanisms
Integrating Mechanisms
• Organizing tools that managers can use to increase
communication and coordination among functions
and divisions

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 Figure 7.8 Types and Examples of
Integrating Mechanisms

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 Strategic Alliances 1 of 4
Strategic Alliance
• A formal agreement that commits two or more
companies to exchange or share their resources in
order to produce and market a product

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 Strategic Alliances 2 of 4
B2B Network Structure
• A series of strategic alliances that an organization
creates with suppliers, manufacturers, and
distributors to produce and market a product
Outsource
• To use outside suppliers and manufacturers to
produce goods and services

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 Strategic Alliances 3 of 4
Boundaryless Organization
• An organization whose members are linked by
computers, email, computer-aided design systems,
video-conferencing and cloud-based software, and
who, rarely, if ever, see one another face-to-face

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 Strategic Alliances 4 of 4
Knowledge Management System
• A company-specific virtual information system that
systematizes the knowledge of its employees and
facilitates the sharing and integration of their
expertise

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 Be the Manager
Discuss ways in which you can improve how the
current functional structure operates so that it
speeds website development.

End.
Any questions.

TEST: 17 April 2018

Chapters 1,2,4,5,6 and 7

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 Topics for Discussion 1 of 6
Would a flexible or a more formal structure be
appropriate for these organizations: (a) a large
department store, (b) a Big Four accountancy firm,
or (c) a biotechnology company? Explain your
reasoning. [LO 7-1, 7-2]

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 Topics for Discussion 2 of 6
How do matrix structures and product team
structures differ? Why is the product team
structure more widely used? [LO 7-1, 7-3, 7-4]

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 Topics for Discussion 3 of 6
When and under what conditions might managers
change from a functional to (a) a product, (b) a
geographic, or (c) a market structure? [LO 7-1, 7-3]

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 Topics for Discussion 4 of 6
Using the job characteristics model as a guide,
discuss how a manager can enrich or enlarge
subordinates’ jobs [LO 7-2]

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 Topics for Discussion 5 of 6
How might a salesperson’s job or a secretary’s job
be enlarged or enriched to make it more
motivating? [LO 7-2, 7-3]

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 Topics for Discussion 6 of 6
As high-powered, low-cost wireless technologies
continue to grow, many managers soon may not
need to come to an office to do their jobs but may
work at home. What are the pros and cons of such
an arrangement? [LO 7-5]

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