Extra Notes Chapter 5: Organizational Structure & Design

Six Elements of Organizational Design

Elements 1 - Work Specialization
Element 2 Departmentalization
5 Types of departmentalization:

1. Functional Departmentalization
- Activities or task are grouped according to organizational
functions such as production, marketing, and finance.

2. Geographical Departmentalization
- Is formed based on location.
- Every division is responsible for the production and marketing
of products in their location.

3. Product Departmentalization
- Involves the grouping of activities or tasks based on the
product produced by the organization.
- Each manager will report to general manager.
- This type of departmentalization is usually practiced by
organizations producing multiple products.

4. Process Departmentalization
- Grouping jobs based on product process or customer flow.


5. Customer Departmentalization
- Group related work activities according to what customer are
likely to buy in term of organizations products or services.
- Eg: Departmental store such as JUSCO are divided in
departments- Mens Department, Womens Department and
Cosmetics Department.
Extra Notes Chapter 5: Organizational Structure & Design
Element 3 Chain of Command
The solid lines in the organization that specifies who report to whom.
3 Important concept of Chain of Command:


a. Line Authority
is authority possessed by those who are directly responsible for
achieving goals.
Represented by a standard chain of command that starts with a
board of directors and extend towards through various levels in a
hierarchy to a point where the basic activities of an organization are
carried out.
This authority basically based on legitimate power.

b. Staff Authority
Is authority that belongs to individuals or groups in an organization
who provide types of services and advice to line managers.
This authority mainly based on expert power.
Eg: staff may provide planning advice via research, analysis and
option development. Staff can also assist in policy implementation,
monitoring & control.

c. Functional Authority
Is the right to control the activities of other departments which are
related to specific staff responsibilities.
This authority basically based on legitimate and expert power.
Eg: A finance manager (Division A) reports to General Manager of
Division A through chain of command but also reports to Vice
President of Finance at corporate level.


Extra Notes Chapter 5: Organizational Structure & Design
Element 4 Span Of Control
Refers to the number of subordinates or employees that is managed by a
manager.
Two type span of control:

1. Narrow Span of Control
- Requires manager to supervise a small group of employees,
resulting Tall Organization Structure.
- Inefficient because of the probability that the manager will
underutilized.
- More costly because there will be more managers and involves
higher number of communication issues among different
management levels.

2. Wide Span of Control
- Requires manager to supervise a larger number of
subordinates or employees, resulting Flat Organization
Structure.
- Too wide span may result managers being overextended or
over-utilized.
- Employees might also receive inadequate guidance or control
from their manager.
- Advantages:
o Less overhead cost of supervision
o Prompt response from employees
o Better communication and coordination
o Suitable for repetitive jobs or tasks

Element 5 Centralization & Decentralization
Element 6 Formalization