Chapter 5: Basic Organization Designs



Chapter 5: Basic Organization Designs

Section 5.1 - Elements of Structure

Key Terms

• Organization design

• Work specialization

• Chain of command

• Unity of command

• Span of control

• Authority

• Responsibility

• Line authority

• Staff authority

• Power

• Centralization

• Decentralization

• Functional departmentalization

• Product departmentalization

• Customer departmentalization

• Geographic departmentalization

• Process departmentalization

Summary

In the early 1900s, management writers formulated basic concepts of organizational design by offering a set of principles for managers to follow in that design. There are six basic elements of structure: work specialization, unity of command, span of control, authority and responsibility, centralization versus decentralization, and departmentalization.

For centuries, industrialized countries have used work specialization (breaking down a job into a number of steps and each step is completed by a separate individual). Work specialization efficiently utilizes the diversity of skills that workers have. While it can heighten the economies of certain types of jobs it also contains certain limitations.

Seen as a cornerstone of organizational design for many years, chain of command is far less important today. With chain of command, the continuous line of authority extends from the highest organizational levels to the lowest and clarifies who reports to whom. While comparatively simple organizations believe in unity of command, each employee reports to only one manager, there are instances where it can create degrees of inflexibility that could hinder an organization’s performance.

The number of subordinates a manager can direct efficiently and effectively, span of control, is increasingly determined by looking at contingency variables. Well-trained and experienced employees can widen a manager’s span. Other variables include similarity of employee tasks, the tasks’ complexities, physical employee proximity, the degree of procedure standardization existing, organizational management information system sophistication, the strength of the organization’s value system, and the managing style preferred by the manager.

Long thought of as the glue that held an organization together, authority refers to the rights inherent in a managerial position to give orders and expect them to be obeyed. It is related to one’s position within the organization and removes the personal characteristics of the individual manager. The position retains the authority regardless of who occupies it. Once authority is delegated, employees accept responsibility and are held accountable for their performance. An employer-employee authority relationship is called line authority - entitling a manager to direct an employee’s work. Staff authority functions to support, assist, advise, and usually reduce some of the informational burden encountered. While authority is a right based on a figure’s position in the organization, power is the capacity of an individual to influence decisions.

Depending on the level at which decisions are made determines the centralization of an organization. Centralized organizations have decisions made by a select few people while decentralization occurs when all of the decisions are made at the level closest to the problem. The trend in most U.S. and Canadian organizations has been a movement towards decentralization. Implementation of decisions and achievement of organizational goals help managers decide the amount of centralization or decentralization.

Many large organizations departmentalize five ways based on work functions performed (functional), the product or service offered (product), the target customer or client (customer), the geographic territory covered (geographic), or the process used to turn inputs into outputs (process). Since there is no single ideal organization structure for all situations, teams and task forces are often utilized to meet customer and organizational demands.

Section Outline

What is work specialization?

What is the chain of command?

What is the span of control?

What are authority and responsibility?

A. What are the different types of authority relationships?

B. How does the contemporary view of authority and responsibility differ from the historical view?

C. How do authority and power differ?

How do centralization and decentralization differ?

Can you identify five ways to departmentalize?

A. How are activities grouped?

B. How does the contemporary view differ from this historical view?

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