5.1 Organisational Structure

Study Question 1: What is strategy and
how is it linked to different types of

organizational goals?
 Strategy.
– The process of positioning the organization in
the competitive environment and
implementing actions to compete successfully.
– A pattern in a stream of decisions.
• Choices regarding goals and the way the firm
organizes to accomplish them.
Organizational Behavior: Chapter 17 1

 Elements of conventional strategy

decisions.
– Choosing the types of contributions the firm
intends to make to society.
– Precisely whom the firm will serve.
– Exactly what the firm will provide to others.

 Goals
– Societal goals.
– Output goals.
– Systems goals.
 Control.
– Output controls.
– Process controls.

 Societal goals.
– Reflect an organization’s intended contributions to the
broader society.
– Enable organizations to gain legitimacy, a social right
to operate, and more discretion for their non-societal
goals and operating practices.
– Enable organizations to make legitimate claims over
resources, individuals, markets, and products.
 Societal contributions and mission
statements.
– A firm’s societal contribution is often part of
its mission statement.
• A written statement of organizational purpose.
– A good mission statement identifies whom the
firm will serve and how it will go about
accomplishing its societal purpose.

 Output goals.
– Define the type of business the organization is
pursuing.
– Provide some substance to the more general
aspects of mission statements.

 Systems goals.
– Concerned with the conditions within the organization
that are expected to increase the organization’s
survival potential.
– Typical systems goals include growth, productivity,
stability, harmony, flexibility, prestige, and human
resource maintenance.
– Systems goals must often be balanced against one
another.

Study Question 2: What are the basic
attributes of organizations?
 Successful organizations develop a structure
consistent with the pattern of goals established by
senior management.
 The formal structure shows the planned
configuration of positions, job duties, and the
lines of authority among different parts of the
organization.
 The formal structure of the firm is also known as
the division of labor.
 Vertical specialization.
– A hierarchical division of labor that distributes formal
authority and establishes where and how critical
decisions are to be made.
– Creates a hierarchy of authority.
• An arrangement of work positions in order of increasing
authority.
– Organization charts are diagrams that depict the
formal structures of organizations.


 Chain of command.
– A listing of who reports to whom up and down the
organization.
 Unity of command.
– Each person has only one boss and each unit one
leader.
 Span of control.
– The number individuals reporting to a supervisor.

 Line units.
– Work groups that conduct the major business
of the organization.
 Staff units.
– Work groups that assist the line units by
providing specialized expertise and services to
the organization.

 Internal versus external units.
– Internal line units.
• Transform raw materials and information into products and
services.
– External line units.
• Maintain outside linkages.
– Internal staff units.
• Assist the line units in performing their functions.
– External staff units.
• Assist the line units with outside linkages and act to buffer
internal operations.

 Some firms are outsourcing many of their staff
functions.
 Use of information technology to streamline
operations and reduce staff.
 Most organizations use a variety of means to
specialize the vertical division of labor.
 Best pattern of vertical specialization depends on
environment, size, technology, and goals.
 Control.
– The set of mechanisms used to keep actions or
outputs within predetermined limits.
– Deals with:
• Setting standards.
• Measuring results against standards.
• Instituting corrective action.

 Output controls.
– Focus on desired targets and allow managers
to use their own methods to reach defined
targets.
– Part of overall method of managing by
exception.
– Promote flexibility and creativity.

 Process controls.
– Specify the manner in which tasks are
accomplished.
– Types of process controls.
• Policies, procedures, and rules.
• Formalization and standardization.
• Total quality management controls.

 Policies, procedures, and rules.
– Policies.
• Guidelines for action that outline important
objectives and broadly indicate how activities are
to be carried out.
– Procedures.
• Identify the best method for performing a task,
show which aspects of a task are most important,
or outline how an individual is to be rewarded.

 Policies, procedures, and rules (cont.).
– Rules.
• Describe in detail how a task or a series of tasks is
to be performed, or indicate what cannot be done.
– Policies, procedures, and rules are often used
as substitutes for direct managerial
supervision.

 Formalization.
– The written documentation of policies,
procedures, and rules to guide behavior and
decision making.
 Standardization.
– The degree to which the range of allowable
actions in a job or series of jobs is limited so
that uniform actions occur.
 Deming’s 14 points for achieving total quality
management.
• Create a consistency of purpose in the company to:
• Innovate
• put resources into research and education, and
• into maintaining equipment and new production aids.
– Learn a new philosophy of quality to improve every

system.
– Require statistical evidence of process control and
eliminate financial controls on production.
management (cont.).
– Require statistical evidence of control in purchasing
parts.
– Use statistical methods to isolate the sources of
trouble.
– Institute modern on-the-job training.
– Improve supervision to develop inspired leaders.
– Drive out fear and instill learning.
– Break down barriers between departments.
management (cont.).
– Eliminate numerical goals and slogans.
– Constantly revamp work methods.
– Institute massive training programs for employees in
statistical methods.
– Retrain people in new skills.
– Create a structure that will push, every day, on the
above 13 points.

 Centralization and decentralization.
– Centralization.
• Degree to which the authority to make decisions is
restricted to higher levels of management.
– Decentralization.
• Degree to which the authority to make decisions is
given to lower levels in an organization’s
hierarchy.

 Benefits of decentralization.
– Higher subordinate satisfaction.
– Quicker response to a series of unrelated
problems.
– Assists in on-the-job training of subordinates
for higher-level positions
– Encourages participation in decision making.

Study Question 3: How is work
organized and coordinated?
 Horizontal specialization.
– A division of labor that establishes specific
work units or groups within an organization.
– Often referred to as departmentation.
– Whenever managers divide tasks and group
similar types of skills and resources together,
they must also be concerned with
coordination.
Traditional department structures
 Functional Departmentation is grouping
individuals by skill, knowledge and action
yields.
 Divisional Departments groups
individuals and resources by products,
territories, services, clients etc
 Matrix structure is a combination of
functional and divisional patterns wherein
an individual is assigned to more than one
28
type of unit.


 Coordination.
– The set of mechanisms that an organization
uses to link the actions of its units into a
consistent pattern.
– Within a unit, much of the coordination is
handled by its manager.
– Smaller organizations rely on management
hierarchy for coordination.
– As the organization grows, more efficient and
effective methods of coordination are required.
 Personal methods of coordination.
– Produce synergy by promoting dialogue, discussion,
innovation, creativity, and learning, both within and
across units.
– Common personal methods of coordination are direct
contact between and among organizational members
and committee memberships.
– Mix of personal coordination methods should be
tailored to subordinates, skills, abilities, and
experiences.
 Impersonal methods of coordination.
– Produce synergy by stressing consistency and
standardization so that individual pieces fit together.
– Often are refinements and extensions of process
controls.
– Historical use of specialized departments to coordinate
across units.
– Contemporary use of matrix departmentation and
management information systems for coordination.

Study Question 4: What are bureaucracies and
what are the common structures?
 Bureaucracy.
– An ideal form of organization, the
characteristics of which were defined by the
German sociologist Max Weber.
– Relies on a division of labor, hierarchical
control, promotion by merit with career
opportunities for employees, and
administration by rule.


 Mechanistic type of bureaucracy (machine

bureaucracy).
– Emphasizes vertical specialization and control.
– Stresses rules, policies, and procedures;
specifies techniques for decision making; and
use well-documented control systems.
– Often used with a low cost leader strategy.

 Organic type of bureaucracy (professional

bureaucracy).
– Horizontal specialization.
– Procedures are minimal, and those that do
exist are not highly formalized.
– Used to pursue strategies that emphasize
product quality, quick response to customers,
or innovation.
 Common types of hybrid structures.

– Divisional firm.
• Composed of quasi-independent divisions so that
different divisions can be more or less organic or
mechanistic.
– Conglomerate.
• A single corporation that contains a number of
unrelated businesses.

 The conglomerate simultaneously
illustrates three key points
– All structures are combinations of the basic
elements.
– There is no one best structure.
– The firm does not stand alone but is part of a
larger network of firms that compete against
other networks.

5.1 Organisational Structure

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Study Question 1: What is strategy and

how is it linked to different types of

Organizational Behavior: Chapter 17 1

 Elements of conventional strategy

Organizational Behavior: Chapter 17 2

Organizational Behavior: Chapter 17 3

Organizational Behavior: Chapter 17 5

Organizational Behavior: Chapter 17 6

Organizational Behavior: Chapter 17 7

Organizational Behavior: Chapter 17 9

Organizational Behavior: Chapter 17 10

Organizational Behavior: Chapter 17 11

Organizational Behavior: Chapter 17 12

Organizational Behavior: Chapter 17 14

Organizational Behavior: Chapter 17 16

Organizational Behavior: Chapter 17 17

Organizational Behavior: Chapter 17 18

Organizational Behavior: Chapter 17 19

Organizational Behavior: Chapter 17 20

– Learn a new philosophy of quality to improve every

Organizational Behavior: Chapter 17 24

Organizational Behavior: Chapter 17 25

Organizational Behavior: Chapter 17 26

Organizational Behavior: Chapter 17 29

Organizational Behavior: Chapter 17 30

Organizational Behavior: Chapter 17 33

Organizational Behavior: Chapter 17 34

Organizational Behavior: Chapter 17 35

 Mechanistic type of bureaucracy (machine

Organizational Behavior: Chapter 17 36

 Organic type of bureaucracy (professional

 Common types of hybrid structures.

Organizational Behavior: Chapter 17 38

Organizational Behavior: Chapter 17 39

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