罗宾斯《管理学原理》

CHAPTER 5 - BASIC ORGANIZATION DESIGNS

LEARNING OUTCOMES

After reading this chapter students should be able to:

1. Identify and define the six elements of organization structure.

2. Describe the advantages and disadvantages of work specialization.

3. Contrast authority and power.

4. Identify the five different ways by which management can departmentalize.

5. Contrast mechanistic and organic organizations.

6. Summarize the effect on organization structures of strategy, size, technology, and environment.

7. Contrast the divisional and functional structures.

8. Explain the strengths of the matrix structure.

9. Describe the boundaryless organization and what elements have contributed to its development.

10. Explain what is meant by the term “learning organization.”

11. Describe what is meant by the term “organization culture.”

Opening Vignette
SUMMARY
Stew Leonard, of the famed Norwalk, Connecticut Dairy Store once remarked that there were two simple rules for customer service.  First, the customer is always right.  Second, never forget rule number one!1  Many companies have attempted to follow this sage advice, but only a few have excelled at it.  One of those companies is Royal Office Products, headquartered in suburban Chicago, IL.  Through the leadership of CEO and co-owner, Bob Bergdoll, Jr., Royal Products is showing the world that customer service can flourish even in a company that operates in such a low-margin business.2
For Bergdoll, customer service is not an option, nor simply pretty sayings that decorate one of the company’s 11 locations in the US.  Orders are taken in several languages in the company upwards of 18 hours a day, and employees can be seen dressed in jerseys from local sports teams who have made the playoffs in their respective sports. Customer service is something that is ingrained in all 200 plus employees and an explicit policy in the company that all employees are mandated to follow.  Customer service to Bergdoll begins by recognizing the company’s market niche.  He knows large business customers will typically shop at Staples and Office Depot because of their buying power.  But what about the small business--especially those with fewer than 100 employees?  Who handles them?  For his 28,000 plus customers who fit this description is Royal and no one else.  The personal touch at Royal is exemplified by the fact that there are no phone answering systems in any Royal operation.  A human answers every call within the first 3 rings.  If the phone isn’t answered by the end of the third ring an alarm goes off in the entire building indicating that someone isn’t being helped.  Fax or email orders are responded to within 15 minutes of their receipt--a response that comes in the form of a phone call from a Royal representative.  Bergdoll also insists that each new customer has 17 interactions from a royal representative in the first 3 months.  These may be phone calls, handwritten notes, or something else that says “we care.”  In fact, several of the “best” customers often receive flowers from Royal as a means of saying thanks for the business.
To make sure that employees understand the implications of their actions, Royal sales representatives meet once a week with the delivery team to discuss what worked well that week and what needs improving (the delivery team has the primary and most frequent one-on-one contact with the customer). Royal’s revenues have grown from $500,000 in 1989 to over $50 million in 2006.  But Bergdoll likes to point out that he doesn’t want just committed customers, he wants “raving fans, customers who will still love you when you make a mistake,” and give you another chance because they care about you because they know you care about them!.

Teaching Notes
Discuss this case with the students, asking

1)  Do you think Royal has many layers of management, or just a few?  (Probably just a few to make sure the management is very close to the customer)
2)  How is Royal’s mission of excellent customer service built into the organization’s policies and procedures? (17 touches, phone answering, alarms for phone ringing, sales people with delivery drivers)
 3)  What role do you think Royal’s size plays in its ability to offer this level of customer service?  Do you think it would be more difficult for Royal to offer this same level of service if it were a larger organization? Why or why not?

I. INTRODUCTION

A. Organization design is a process in which managers develop or change their organization’s structure.  

1.  This process involves making decisions about how specialized jobs should be allocated, the rules to guide employees’ behavior, and at what levels decisions are to be made. 

2. Once decisions regarding corporate strategies are made, an effective structure must be implemented to facilitate the attainment of those goals.

a) When managers develop or change the organization’s structure, they are engaging in organization design.

3. Organization design decisions are typically made by senior managers.

4. Organization design applies to any type of organization.

II. THE ELEMENTS OF STRUCTURE (PPT 5-2)

A. The Basic Concepts of Organization Design

1. Formulated by management writers in the early 1900s.

2. These principles still provide valuable insights into designing effective and efficient organizations.

3. There are six elements of structure:  work specialization, unity of command, span of control, authority and responsibility, centralization versus decentralization, and departmentalization.

B. What Is Work Specialization? (PPT 5-2)

1. In the 1700s Adam Smith advocated in Wealth of Nations the use of work specialization.

2. A job is broken down into a number of steps and each is completed by a separate individual.

a) Individuals specialize in doing part of an activity.

b) Work specialization makes efficient use of the diversity of skills that workers hold.

3. Some tasks require highly developed skills; others lower skill levels.

4. Excessive work specialization can lead to boredom, fatigue, stress, low productivity, poor quality, increased absenteeism, and high turnover.  (See Exhibit 5-1.)

5. It is important to recognize the economies work specialization can provide as well as its limitations.

C. What Is the Chain and Unity of Command? (PPT 5-3)

1. The chain of command is the continuous line of authority that extends from upper organizational levels to the lowest and clarifies who reports to whom. 

2. An employee who has to report to two or more bosses might have to cope with conflicting demands or priorities. 

3. Therefore, the early management writers argued that an employee should have only one superior (Unity of command)

4. If the chain of command had to be violated, early management writers always explicitly designated that there be a clear separation of activities and a supervisor responsible for each.

5. The unity of command concept was logical when organizations were comparatively simple.

6. There are instances today when strict adherence to the unity of command creates a degree of inflexibility that hinders an organization’s performance.

D. What Is the Span of Control? (PPT 5-3)

1. How many employees can a manager efficiently and effectively direct?

2. This question received a great deal of attention from early management writers.

3. There was no consensus on a specific number but early writers favored small spans of less than six to maintain close control.

4. Level in the organization is a contingency variable.

a) Top managers need a smaller span than do middle managers, and middle managers require a smaller span than do supervisors.

5. There is some change in theories about effective spans of control.

6. Many organizations are increasing their spans of control.

7. The span of control is increasingly being determined by contingency variables.

a) The more training and experience employees have, the less direct supervision needed.

8. Other contingency variables should also be considered; similarity of employee tasks, the task complexity, the physical proximity of employees, the degree of standardization, the sophistication of the organization’s management information system, the strength of the organization’s value system, the preferred managing style of the manager, etc.

E. What Are Authority and Responsibility? (PPT 5-4)

1. Authority refers to the rights inherent in a managerial position to give orders and expect the orders to be obeyed.

2. Authority was a major tenet of the early management writers; the glue that held the organization together.

a) It was to be delegated downward to lower-level managers.

3. Each management position has specific inherent rights that incumbents acquire from the position’s rank or title.

a) Authority is related to one’s position and ignores personal characteristics.

4. When a position of authority is vacated, the authority remains with the position.

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Details On a Management Classic
SUMMARY

Stanley Milgram, a social psychologist at Yale University, wondered how far individuals would go in following orders. If subjects were placed in the role of a teacher in a learning experiment and told by the experimenter to administer a shock to a learner each time that learner made a mistake, would the subjects follow the commands of the experimenter?
Milgram hired a set of subjects. Each was led to believe that the experiment was to investigate the effect of punishment on memory. Punishment in this case was an electric shock. The learner was an actor, and the electric shocks were phony--but the subjects didn't know that. The subjects were instructed to shock the learner each time he made a mistake. And subsequent mistakes would result in an increase in shock intensity. Throughout the experiment, the subject got verbal feedback from the learner. After 300 volts, the learner did not respond to further questions.
Most subjects protested and, fearful that they might kill the learner if the increased shocks were to bring on a heart attack, insisted that they could not go on. But the experimenter said that was their job. Most of the subjects dissented but didn’t disobey. 62% increased the shock level to the maximum of 450 volts,  more than enough to kill even the strongest human! One conclusion is that authority is a potent source of getting people to do things.

Teaching notes
1. As you discuss this case with students, give them an opportunity to comment on what they saw and why they think the “teachers” behaved differently during the experiment. 

2. You might want to encourage students to talk about what the “teachers” had in common and what the students felt was different about them. 

3. You might ask if the students think there was anything unique about that time period in history versus today that might have caused them to respond as they did. 

4. How do students believe people typically respond to authority today?  (If cell phones had been available during the Milgram Experiments, and the “teacher” received a call during the experiment, do they think the “teacher” would have halted the experiment to take the call?  Does that relate to authority?  Why or why not?)

5. Give students an opportunity to comment on what they think they would have done in the same situation and why.

6. Ask students if they think people in their general age group or geographic area or ethnic group respond to authority differently.  If so, in what ways?

7. Before agreeing too easily with students that you and they “wouldn’t have done that,” you might want to steer the conversation to work-related issues.  Who would you agree to fire and under what conditions?  What if you felt the person didn’t deserve to be fired but the person you reported to said essentially, “I don’t like that person.  They don’t fit with the image I have for this organization.  You need to fire them.”  What if you were a single parent with three small children and jobs in your area were scarce?  What would you do?  What other factors might impact your final decision?

  5.  When managers delegate authority, they must allocate commensurate responsibility.

a) When employees are given rights, they assume a corresponding obligation to perform and should be held accountable for that performance!

b) Allocating authority without responsibility creates opportunities for abuse.

c) No one should be held responsible for something over which he or she has no authority.

6.    Are there different types of authority relationships?  (PPT 5-5)
 
 a)  The early management writers distinguished between two forms of authority.

1) Line authority entitles a manager to direct the work of an employee.

(a) It is the employer-employee authority relationship that extends from top to bottom.

(b) See Exhibit 5-2.

(c) A line manager has the right to direct the work of employees and make certain decisions without consulting anyone.

2) Sometimes the term “line” is used to differentiate line managers from staff managers. (PPT 5-5)

(a) Line emphasizes managers whose organizational function contributes directly to the achievement of organizational objectives (e.g., production and sales).

(b) Staff managers have staff authority (e.g., human resources and payroll).

3) A manager’s function is classified as line or staff based on the organization’s objectives.

b) As organizations get larger and more complex, line managers find that they do not have the time, expertise, or resources to get their jobs done effectively.

1) They create staff authority functions to support, assist, advise, and generally reduce some of their informational burdens.

2) Exhibit 5-3 illustrates line and staff authority. (PPT 5-5)

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

a) The early management writers assumed that the rights inherent in one’s formal position in an organization were the sole source of influence.

b) This might have been true 30 or 60 years ago.

c) It is now recognized that you do not have to be a manager to have power, and that power is not perfectly correlated with one’s level in the organization.

d) Authority is but one element in the larger concept of power.

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Dilemma in Management
Following Orders
SUMMARY
A survey of U.S. managers has revealed that there was a significant difference in the values, attitudes, and beliefs they personally held and what they encountered in the workplace. This is also true of managers around the world.
If you were asked to follow orders that you believed were unconscionable, would you comply? What if you merely disagreed with the orders? What would you do in these instances? Furthermore, what effect do you feel national culture has on your complying with orders that have been given to you?

Teaching notes
1.   When discussing this, help students understand that it is the process and where they draw the line that
is important.

2.   Offer the students the following framework for evaluating such decisions. While it doesn’t provide
      “the” answer, it provides a tool for evaluating ethical decisions.

 Who are the stakeholders? Who will be affected? What is your relationship with them? How will this possibly harm them?

 What competing claims or values are in conflict? What personal and organizational values are involved?

 Where does responsibility for action lie? Who or what caused the situation—causal? Who has responsibility—role? Who could address the situation if they chose to—capacity?

 What organizational factors contribute to the ethical conflict? Culture, rules and procedures, or possibly organizational systems.

 How much freedom of choice do you really have and what is at risk for each choice?

  Use the examples offered in the vignette and try to apply each framework to them.

  Ask each student to evaluate the examples with the above criteria and come to a decision and reason for their decision.

  Discuss their decisions by either asking for volunteers, asking who would and who wouldn’t and select participants from each side of the issue, or place them into groups and have them choose one decision among them to present to the class.

8.    How do authority and power differ?   

 a)  Authority and power are frequently confused.

b) Authority is a right, the legitimacy of which is based on the authority figure’s position in the organization. 

1) Authority goes with the job.

c) Power refers to an individual’s capacity to influence decisions.

1) Authority is part of the larger concept of power.

2) Exhibit 5-4 visually depicts the difference. 

d) Power is a three-dimensional concept.

1) It includes not only the functional and hierarchical dimensions but also centrality.

2) While authority is defined by one’s vertical position in the hierarchy, power is made up of both one’s vertical position and one’s distance from the organization’s power core, or center.

e) Think of the cone in Exhibit 5-4 as an organization. 

1) The closer you are to the power core, the more influence you have on decisions.

2) The existence of a power core is the only difference between A and B in Exhibit 5-4.

f) The cone analogy explicitly acknowledges two facts:

1) The higher one moves in an organization (an increase in authority), the closer one moves to the power core.

2) It is not necessary to have authority in order to wield power because one can move horizontally inward toward the power core without moving up.

(a) Example, administrative assistants, “powerful” as gatekeepers with little authority.

3) Low-ranking employees with contacts in high places might be close to the power core.

4) So, too, are employees with scarce and important skills.

(a) The lowly production engineer with twenty years of experience might be the only one in the firm who knows the inner workings of all the old production machinery.

g) Power can come from different areas.

1) John French and Bertram Raven have identified five sources, or bases, of power.

(a) See Exhibit 5-5.

Developing Your Power Base
Building a Power Base

About the Skill
One of the more difficult aspects of power is acquiring it. What can one do to develop power?

Steps in practicing the skill

 1) Respect others.
 2) Build power relationships.
 3) Develop associations.
 4) Control important information.
 5) Gain seniority.
 6) Build power in stages.

Practicing the Skill
1.    Scenario
        Margaret is a supervisor in the Internet sales division of a large clothing retailer.  She has let it be
       known that she is devoted to the firm and plans to build her career there.  Margaret is hard working
       and reliable, has volunteered for extra projects, taken in-house development courses, and joined a
       committee dedicated to improving employee safety on the job.  She undertook an assignment to
       research ergonomic office furniture for the head of the department and gave up several lunch hours to
       consult with the head of human resources about her report.  Margaret filed the report late, but she
       excused herself by explaining that her assistant lost several pages that she had to redraft over the
       weekend.  The report was well received and several of Margaret’s colleagues think she should be
       promoted when the next opening arises.

2)  Evaluate Margaret’s skill in building a power base.

3)  What actions has she taken that are helpful to her in reaching her goal?

4)  Is there anything she should have done differently?

Teaching tips
1) Have students apply the criteria listed under “Steps in practicing the skill.”

Conduct as a discussion rather than as a written exercise.

2) Be prepared for students to complain that there isn’t enough information regarding how she built a
       power base to evaluate her skill.

3) Brainstorm with students what things she should do, specifically in this type of business, to build a power base.

F. How Do Centralization and Decentralization Differ? (PPT 5-6)

1. Centralization is a function of how much decision-making authority is pushed down to lower levels in the organization.

2. Centralization-decentralization is a degree phenomenon.

3. By that, we mean that no organization is completely centralized or completely decentralized.

4. Early management writers felt that centralization in an organization depended on the situation.

a) Their objective was the optimum and efficient use of employees.

b) Traditional organizations were structured in a pyramid, with power and authority concentrated near the top of the organization.

c) Given this structure, historically, centralized decisions were the most prominent.

5. Organizations today are more complex and are responding to dynamic changes.

a) Many managers believe that decisions need to be made by those closest to the problem.

6. Today, managers often choose the amount of centralization or decentralization that will allow them to best implement their decisions and achieve organizational goals.

7. One of the central themes of empowering employees was to delegate to them the authority to make decisions on those things that affect their work.

a) That’s the issue of decentralization at work.

b) It doesn’t imply that senior management no longer makes decisions!

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G. Can You Identify the Five Ways to Departmentalize? 

1. Early management writers argued that activities should be specialized and grouped.

2. Work specialization creates specialists who need coordination.

a) This is facilitated by putting specialists together in departments under the direction of a manager.

3. Creation of these departments is typically based on a variety of factors (e.g., work functions performed, product or service offered, the target customer or client, the geographic territory covered, or the process used to turn inputs into outputs).

4. No single method of departmentalization was advocated by the early writers.

5. Method(s) used should reflect grouping that would best contribute to the attainment of the organization’s objectives and the goals of individual units (see Exhibit 5-6).
6. How are activities grouped? 

a) One of the most popular ways to group activities is by functional departmentalization.

1) Can be used in all types of organizations.

2) The major advantage is the achievement of economies of scale by placing people with common skills and specializations into common units.

  Product departmentalization focuses attention on major product areas in the corporation.

1) Each major product area in the corporation is placed under the authority of a senior manager who is a specialist in, and is responsible for, everything having to do with his or her product line.

2) L.A. Gear’s structure is based on its varied product lines.

3) The advantage of product grouping is that it increases accountability for product performance.

  The particular type of customer the organization seeks can also be used to group employees.

1) The assumption is that customers in each department have a common set of problems and needs that can best be met by having specialists for each.

2) A customer-related organization’s activities can dictate employee grouping.

(a) Example, sales activities in an office supply firm can be grouped into three departments that serve retail, wholesale, and government customers.

  Another way to departmentalize is geographic departmentalization.

1) Valuable, if an organization’s customers are scattered over a large geographic area.

2) The organization structure of Coca-Cola in the new millennium reflects the company’s operations in two broad geographic areas.

(a) The North American sector.

(b) The international sector (includes the Pacific Rim, the European Community, Northeast Europe and Africa, and Latin America).

  Process departmentalization groups activities on the basis of work or customer flow.

1) Units are organized around common skills needed to complete a certain process.

2) If you have ever been to a state motor vehicle office to get a driver’s license, you experienced a process organization.

7.    How does the contemporary view of departmentalization differ from the historical view? 

 a)    Most large organizations continue to use the departmental groups suggested by the early
        management writers.

b) There is a recent trend for rigid departmentalization to be complemented by the use of teams that cross traditional departmental lines.

1) Today’s competitive environment has refocused attention on customers.

 c)    To better monitor the needs of customers and to be able to respond to changes in those
        needs, many organizations have given greater emphasis to customer departmentalization.
d)    As tasks have become more complex, and diverse skills are needed to accomplish those
       tasks, management has increasingly introduced the use of teams and task forces.

e)    Early writers believed the ideal structural design to be mechanistic or bureaucratic.

 f)    Today, we recognize that there is no single ideal organization structure for all situations.

8.    Self-Assessment #41, What Type of Organizational Structure Do I Prefer? 

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III. CONTINGENCY VARIABLES AFFECTING STRUCTURE

A. Introduction

1. The most appropriate structure to use will depend on contingency factors.

2. The more popular contingency variables are strategy, size, technology, and environment.

B. How Is a Mechanistic Organization Different from an Organic Organization? (PPT 5-7)

1. Exhibit 5-7 describes two organizational forms. (PPT 5-7)

2. The mechanistic organization (or bureaucracy) was the natural result of combining the six elements of structure.

a) The chain-of-command principle ensured the existence of a formal hierarchy of authority.

b) Keeping the span of control small created tall, impersonal structures.

1) Top management increasingly imposed rules and regulations.

c) The high degree of work specialization created simple, routine, and standardized jobs.

d) Departmentalization increased impersonality and the need for multiple layers of management.

3. The organic form is a highly adaptive form that is a direct contrast to the mechanistic one.

a) The organic organization’s loose structure allows it to change rapidly as needs require.

1) Employees tend to be professionals who are technically proficient and trained to handle diverse problems.

2) They need very few formal rules and little direct supervision.

b) The organic organization is low in centralization.

4. When each of these two models is appropriate depends on several contingency variables.

C. How Does Strategy Affect Structure?

1. An organization’s structure is a means to help management achieve its objectives.

a) Strategy and structure should be closely linked.

b) Example, if the organization focuses on providing certain services—police protection in a community—its structure will be one that promotes standardized and efficient services.

c) Example, if an organization is attempting to employ a growth strategy by entering into global markets, it will need a structure that is flexible, fluid, and readily adaptable to the environment.

2. Accordingly, organizational structure should follow strategy. If management makes a significant change in strategy, it needs to modify its structure as well.

3. The first important research on the strategy-structure relationship was Alfred Chandler’s study of close to 100 large U.S. companies.

4. After tracing the development of these organizations over fifty years and compiling extensive case histories, Chandler concluded that changes in corporate strategy precede and lead to changes in an organization’s structure.

a) Organizations usually begin with a single product or line.

b) The simplicity of the strategy requires only a simple form of structure to execute it.

c) Decisions can be centralized and complexity and formalization will be low.

d) As organizations grow, their strategies become more ambitious and elaborate.

5. Research has generally confirmed the strategy-structure relationship.

a) Organizations pursuing a differentiation strategy must innovate to survive.

1) An organic organization matches best with this strategy because it is flexible and maximizes adaptability.

b) A cost-leadership strategy seeks stability and efficiency.

1) Stability and efficiency help to produce low-cost goods and services and can best be achieved with a mechanistic organization.
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D. How Does Size Affect Structure?

1. There is historical evidence that an organization’s size significantly affects its structure.

2. Large organizations—employing 2,000 or more employees—tend to have more work specialization, horizontal and vertical differentiation, and rules and regulations than do small organizations.

3. The relationship is not linear; the impact of size becomes less important as an organization expands.

a) Example, once an organization has around 2,000 employees, it is already fairly mechanistic—an additional 500 employees will not have much effect.

b) Adding 500 employees to an organization that has only 300 members is likely to result in a shift toward a more mechanistic structure.

E. How Does Technology Affect Structure? (PPT 5-8)

1. Every organization uses some form of technology to convert its inputs into outputs.

2. To attain its objectives, the organization uses equipment, materials, knowledge, and experienced individuals and puts them together into certain types and patterns of activities.

a) Example, workers at Maytag build washers, dryers, and other home appliances on a standardized assembly line.

b) Example, employees at Kinko’s produce custom jobs for individual customers.

c) Example, employees at Bayer AG work on a continuous flow production line for manufacturing its pharmaceuticals.

3. Joan Woodward (British scholar) found that distinct relationships exist between size of production runs and the structure of the firm.

a) The effectiveness of organizations was related to “fit” between technology and structure.

4. Most studies focused on the processes or methods that transform inputs into outputs and how they differ by their degree of routineness.

a) Three categories, representing three distinct technologies, had increasing levels of complexity and sophistication. (PPT 5-8)

1) Unit production described the production of items in units or small batches.

2) Mass production described large batch manufacturing.

3) The most technically complex group, process production, included continuous-process production.

b) The more routine the technology, the more standardized and mechanistic the structure can be.

5. Organizations with more non-routine technology are more likely to have organic structures.

F. How Does Environment Affect Structure?

1. Mechanistic organizations are most effective in stable environments.

2. Organic organizations are best matched with dynamic and uncertain environments.

3. The environment-structure relationship is why so many managers have restructured their organizations to be lean, fast, and flexible.

4. Global competition, accelerated product innovation, knowledge management, and increased demands from customers for higher quality and faster deliveries are examples of dynamic environmental forces.

5. Mechanistic organizations tend to be ill equipped to respond to rapid environmental change.

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IV. ORGANIZATION DESIGN APPLICATIONS (PPT 5-9)

A. What Is a Simple Structure?

1. Most organizations start as an entrepreneurial venture with a simple structure.

2. This design reflects the owner as president, with all employees reporting directly to her.

3. Work specialization is low, few rules govern the operations, and authority is centralized in a single person—the owner.

4. The simple structure is a “flat” organization, with centralized decision-making authority.

5. The simple structure is most widely used in smaller businesses.

6. The strengths of the simple structure are that it is fast, flexible, and inexpensive to maintain, and accountability is clear.

7. Major weaknesses.

a) It is effective only in small organizations.

b) It becomes increasingly inadequate as an organization grows; its few policies or rules to guide operations and its high centralization result in information overload at the top.
c) As size increases, decision making becomes slower and can eventually stop.

d) Everything depends on one person.

B. What Do We Mean by a Bureaucracy?

1. Many organizations do not remain simple structures because structural contingency factors dictate it.
2. As the number of employees rises, informal work rules of the simple structure give way to more formal rules.

3. Rules and regulations are implemented; departments are created, and levels of management are added to coordinate the activities of departmental people.

4. At this point, a bureaucracy is formed.

5. Two of the most popular bureaucratic design options are called the functional and divisional structures.

6. Why do companies implement functional structures? 

a) The functional structure merely expands the functional orientation  (See Exhibit 5-8). (PPT 5-9)

b) The strength of the functional structure lies in work specialization.

1) Economies of scale, minimizes duplication of personnel and equipment, makes
      employees comfortable and satisfied.
     
c) The weakness of the functional structure is that the organization frequently loses sight of its best interests in the pursuit of functional goals.

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7. What is the divisional structure? (PPT 5-9)

a) An organization design made up of self-contained units or divisions.

b) General Foods and PepsiCo are examples.  (See Exhibit 5-9.)

c) Each division is generally autonomous, with a division manager responsible for performance and holding complete strategic and operational decision-making authority.

1)   Central headquarters provides support services—such as financial and legal
      services—to the divisions.

2) Headquarters acts as an external overseer to coordinate and control the various divisions.

d)   The chief advantage of the divisional structure is that it focuses on results.

1) Division managers have full responsibility for a product or service.

2)  It also frees the headquarters from concern with day-to-day operating details.

e)   The major disadvantage is duplication of activities and resources.

1) The duplication of functions increases the organization’s costs and reduces  efficiency.

C. Can an Organization Design Capture the Advantages of Bureaucracies While Eliminating
     Their Disadvantages?

1. The functional structure offers the advantages that accrue from specialization.

2. The divisional structure has a greater focus on results but suffers from duplication of activities and resources.

3. The matrix structure combines the advantages of functional specialization with the focus and accountability that product departmentalization provides. (PPT 5-10)

a) Exhibit 5-10 illustrates the matrix structure of an aerospace firm.

4. The unique characteristic of the matrix is that employees in this structure have at least two bosses: their functional departmental manager and their product or project managers.

a) Project managers have authority over the functional members who are part of that manager’s team.

5. Authority is shared between the two managers.

a) Typically, the project manager is given authority over project employees relative to the project’s goals.

b) Decisions such as promotions, salary recommendations, and annual reviews remain the functional manager’s responsibility.

6. To work effectively, project and functional managers must communicate and coordinate.

7. The primary strength of the matrix is that it can facilitate coordination of a multiple set of complex and interdependent projects while still retaining the economies that result from keeping functional specialists grouped together.

8. The major disadvantages of the matrix are in the confusion it creates and its propensity to foster power struggles.

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D. What Are Team-Based Structures? (PPT 5-10)

1. The entire organization consists of work groups or teams.

2. Team members have the authority to make decisions that affect them, because there is no rigid chain of command.

3. How team structures can benefit the organization is exemplified by the example of the National Cooperative Bank in Washington, DC.

a) Their functional structure in the lending area was slowing up decision making and constraining customer service.

b) They restructured the bank into teams representing specific industries, such as health care, distribution, etc., based on the special regulatory issues in each industry.

c) The bank witnessed significant reductions in the time spent to process a loan; customer satisfaction increased, as did employee cooperation.

4. At AMS Hillend’s factory in Edinburgh, Scotland, a team-based structure for their circuit board production has resulted in “enhanced customer responsiveness, quality and efficiency gains, and an 88 percent increase in productivity.”

E. Why Is There Movement Toward a Boundaryless Organization?

1. A boundaryless organization is not defined or limited by boundaries or categories imposed by traditional structures. (PPT 5-10)

2. It blurs the historical boundaries surrounding an organization by increasing its interdependence with its environment.

a) Sometimes called network organizations, learning organizations, barrier-free, modular, or virtual corporations. (PPT 5-11)

b) Boundaryless structures cut across all aspects of the organization.

c) Example, eBay, the world’s market leader in online trading has “no inventory, no warehouses, no sales force—yet trades nearly $10 billion worth of goods each year!”

3. Boundaryless organizations are not merely flatter organizations. They attempt to eliminate vertical, horizontal, and inter-organizational barriers.

a) To do this frequently requires an internal revolution.

b) Horizontal organizations require multidisciplinary work teams who have the authority to make decisions, to do the work, and to be held accountable for measurable outcomes.

4. What factors have contributed to the rise of boundaryless organizational designs?

a) Globalization of markets and competitors has played a major role.

b) An organization’s need to respond and adapt to the complex and dynamic environment.

c) Changes in technology have also contributed to this movement.

1) Advances in computer power, “intelligent” software, and telecommunications enable boundaryless e-commerce organizations to exist.

Teaching Notes  _______________________________________________________________________
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V. HOW DO YOU CREATE A LEARNING ORGANIZATION? (PPT 5-11)

1. The concept of a learning organization describes an organizational mindset or philosophy that has significant design implications.

2. A learning organization has developed the capacity to continuously adapt and change because all members take an active role in identifying and resolving work-related issues.

3. Employees are practicing knowledge management.

a) Continually acquiring and sharing new knowledge.

b) Willing to apply that knowledge in making decisions or performing their work.

4. According to some organizational design theorists, an organization’s ability to learn
       and to apply that learning may be the only sustainable source of competitive advantage.

  See Exhibit 5-11 for characteristics of a learning organization.

a) Members share information and collaborate on work activities throughout the entire organization.

b)  Minimize or eliminate existing structural and physical boundaries.

1) Employees are free to work together and to collaborate.

2) Teams tend to be an important feature of the structural design.

3) Managers serve as facilitators, supporters, and advocates.

c) Information is shared openly, in a timely manner, and as accurately as possible.

d) Leadership creates a shared vision for the organization’s future and keeps organizational members working toward that vision.

1)   Leaders should support and encourage the collaborative environment.

e) A learning organization’s culture is one in which everyone agrees on a shared vision and everyone recognizes the inherent interrelationships among the organization’s processes, activities, functions, and external environment.

1) There is a strong sense of community, caring for each other, and trust.

2) Employees feel free to openly communicate, share, experiment, and learn without fear of criticism or punishment.

5. The organization’s structural design should help employees do their work in the best, most efficient, and effective way they can.

a)    The structure is simply a means to an end.

VI. ORGANIZATION CULTURE

A. What Is an Organization Culture?  (PPT 5-12)

1. A system of shared meaning.

2. Organizations have cultures that govern how their members should behave.

3. In every organization, stories, rituals, material symbols, and language evolve over time.

4. These shared values determine what employees see and how they respond to their world.

B. How Can Cultures Be Assessed?

1. Currently there is no definitive method for measuring an organization's culture.

2. Cultures can be analyzed by assessing how an organization rates on ten characteristics.

a) See Exhibit 5-12. 

b) These ten characteristics are relatively stable and permanent over time.

C. Where Does an Organization’s Culture Come from?

1. An organization’s culture usually reflects the vision or mission of the organization’s founders.

a) The founders also have biases on how to carry out the idea.

b) They are unconstrained by previous customs or ideologies.

c) The small size of most new organizations also helps the founders impose their vision.

2. An organization’s culture results from the interaction between:

a) the founders’ biases and assumptions, and

b) what the first employees learn subsequently from their own experiences.

c) Example, the founder of IBM, Thomas Watson, established a culture based on “pursuing excellence, providing the best customer service, and respect for employees.”

d) Some 75 years later, in an effort to revitalize the ailing IBM, CEO Louis Gerstner enhanced that culture with his strong “customer-oriented sensibility” recognizing the urgency the marketplace places on having their expectations met.

e) Example, Southwest Airlines, former CEO Herb Kelleher reinforced the company’s “people culture” by doing things and having in place practices—such as compensation and benefits that are above industry averages—to make employees happy.

D. How Does Culture Influence Structure?

1. An organization’s culture may have an effect on an organization’s structure, depending on how strong, or weak, the culture is.

2. In organizations that have a strong culture, the organization’s culture actually can substitute for the rules and regulations.

a) Strong cultures can create predictability, orderliness, and consistency without the need for written documentation.

b) The stronger an organization’s culture, the less need for concern with formal rules and regulations.

Teaching Notes  _______________________________________________________________________
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Review, Comprehension, Application
Chapter Summary

1.   The six elements of organization structure are:  work specialization (having each discrete step of a
     job done by a different individual rather than one individual do the whole job); unity of command   (management principle that no employee should report to more than one boss); span of control (the        number of employees a manager can effectively and efficiently manage); authority (rights inherent in        a managerial position to give orders and expect them to be followed) and responsibility (an obligation
   to perform assigned activities); centralization (the higher the level in which decisions are made)
   versus decentralization (pushing down of decision-making authority to lower levels in an
   organization); and departmentalization (the grouping of activities in an organization by function,
   product, customer, geography, or process).

2. The advantages of work specialization are related to economic efficiencies.  It makes efficient use of the diversity of skills that workers hold.  Skills are developed through repetition.  Less time is wasted than when workers are generalists.  Training is also easier and less costly, but work specialization can result in human diseconomies.  Excessive work specialization can cause boredom, fatigue, stress, low productivity, poor quality, increased absence, and high turnover.

3. Authority is related to rights inherent in a position.  Power describes all means by which an individual can influence decisions, including formal authority.  Authority is synonymous with legitimate power.  However, a person can have coercive, reward, expert, or referent power without holding a position of authority.  Thus, authority is actually a subset of power.

4. Managers can departmentalize on the basis of function (work being done), product (product or service being generated), customer (group served), geography (location of operations), or process (work flow).  In practice, most large organizations use all five ways.

5. The mechanistic organization, or bureaucracy, rates high on worker specialization, formal work rules and regulations, and centralized decisions.  Workers perform specific job duties, their actions are guided by formal work regulations, and decisions are typically made by higher levels in the organization. In the organic organization, employees are generalists and perform all parts of a job, face fewer work regulations, and often times have the authority to make decisions on issues directly related to their work.

6. The strategy-determines-structure thesis argues that structure should follow strategy.  As strategies move from single product to vertical integration, to product diversification, structure must move from organic to mechanistic.  As size increases, so, too, do specialization, formalization, and horizontal and vertical differentiation.  But size has less of an impact on large organizations than on small ones because once an organization has around 2,000 employees, it tends to be fairly mechanistic.  All other things equal, the more routine the technology, the more mechanistic the organization should be.  The more nonroutine the technology, the more organic the structure should be.  Finally, stable environments are better matched with mechanistic organizations, but dynamic environments fit better with organic organizations.

7. The functional structure groups similar or related occupational specialties together.  It takes advantage of specialization and provides economies of scale by allowing people with common skills to work together.  The divisional structure is composed of autonomous units or divisions, with managers having full responsibility for a product or service.  However, these units are frequently organized as functional structures inside their divisional framework.  So divisional structures typically contain functional structures within them—and they are less efficient.

8. By assigning specialists from functional departments to work on one or more projects led by project managers, the matrix structure combines functional and product departmentalization.  It thus has the advantages of both work specialization and high accountability.

9. The boundaryless organization is a design application in which the structure is not defined by or limited to the boundaries imposed by traditional structures.  It breaks down horizontal, vertical, and interorganizational barriers.  It’s also flexible and adaptable to environmental conditions.  The factors contributing to boundaryless organizations include global markets and competition, technology advancements, and the need for rapid innovation.

10. A learning organization is an organization that has developed the capacity to continuously adapt and change because all members take an active role in identifying and resolving work-related issues.  In a learning organization, employees are practicing knowledge management by continually acquiring and sharing new knowledge, and they are willing to apply that knowledge in making decisions or performing their work.

11. Organization culture is a system of shared meaning within an organization that determines, in large degree, how employees act.

Companion Website
We invite you to visit the Robbins/DeCenzo Companion Website at www.prenhall.com/robbins for the chapter quiz and student PowerPoints.

OneKey Online Courses
We invite you to visit www.prenhall.com/onekey for the part-ending ethics scenarios, diversity exercises, and learning modules. 

Enhancing your Skill in Ethical Decision Making
New to this edition is an online interactive feature designed to give students experience in making management decisions about hypothetical yet realistic ethical issues.  Introductory paragraphs at the ends of Parts 1, 2, 3, 4, and 5 provide background about the company (Boeing) and set up the situation for each set of exercises.  After they have studied the chapters in each part, have students log onto www.prenhall.com/onekey and work through the two multiple choice questions and two short-essay questions.  You may want to hold classroom debates, assign students to conduct role-plays, or have students work in teams to explore the decision alternatives involved in some of these ethical challenges. 

 Diversity Perspectives: Communication and Interpersonal Skills, by Carol Harvey and June Allard
1.  In terms of diversity, what opportunities/issues did the previous management of Savory Foods, Inc. miss?
     Clearly, management was not proactive about the increasing diversity of the consumer markets that offer growth opportunities. Because of the bureaucratic structure and the culture of the organization, feedback and communication from diverse employees such as Danny, who had new perspectives to offer, was not encouraged or supported.

2.  From the scenario, provide specific examples of the types of power Len demonstrated. In your answer, be sure to indicate how these vary by participant’s perspectives. 
     As the CEO, Len has reward power (taking Danny to lunch), legitimate power (as the sole owner), expert power (in finance and marketing), and possibly referent power too (as exemplified by his approach of working closely with the employees, listening to Danny’s ideas, etc.). From Nick’s perspective Len may exhibit coercive power in terms of the plan to reorganize and take the organization into new strategic directions.

3.  What other aspect of diversity could also affect this situation? 
     Nick perceived that he was losing power and Danny was gaining power. This situation may be exacerbated because of Nick’s experience as an older long-time employee. He may feel that his work and history with the company are no longer valued from Len’s perspective. It is important that managers be aware that experienced employees may perceive situations such as this as threatening their proximity to the power core. Len needs to be aware that sometimes older workers feel threatened by such changes and need reassurance of their value to an organization.

Reading for Comprehension
1. Describe what is meant by the term organization design.
Answer – Once decisions regarding corporate strategies are made, an effective structure must be implemented to facilitate the attainment of those goals. When managers develop or change the organization’s structure, they are engaging in organization design. Organization design decisions are typically made by senior managers. Organization design applies to any type of organization.

2. How are authority and organization structure related? Authority and power?
Answer – Authority refers to the rights inherent in a managerial position to give orders and expect the orders to be obeyed. Authority was a major tenet of the early management writers, the glue that held the organization together. It was to be delegated downward to lower-level managers. Each management position has specific inherent rights that incumbents acquire from the position’s rank or title. Authority is related to one’s position and ignores personal characteristics. When a position of authority is vacated, the authority remains with the position. Authority is closely tied to structure. That is not necessarily true with power.

Authority and power are frequently confused. Authority is a right, the legitimacy of which is based on the authority figure’s position in the organization. Authority goes with the job. Power refers to an individual’s capacity to influence decisions. Authority is part of the larger concept of power. Exhibit 5-4 visually depicts the difference. While authority is defined by one’s vertical position in the hierarchy, power is made up of both one’s vertical position and one’s distance from the organization’s power core, or center.

3. In what ways can management departmentalize? When should one method be considered over the others?
Answer – See Exhibit 5-6, Types of Departmentalization.

One of the most popular ways to group activities is by functional departmentalization. See Exhibit    5-8.  Functional departmentalization can be used in all types of organizations.

L.A. Gear uses the product departmentalization method. See Exhibit 5-9.  Its structure is based on its varied product lines. Service-related organization activities would be autonomously grouped.

The particular type of customer the organization seeks can also be used to group employees. The assumption is that customers in each department have a common set of problems and needs that can best be met by having specialists for each.

Another way to departmentalize is geographic departmentalization. Valuable, if an organization’s customers are scattered over a large geographic area.

Process departmentalization groups activities on the basis of work or customer flow.

The matrix structure combines the advantages of functional specialization with the focus and accountability that product departmentalization provides.  See Exhibit 5-10.

4. Why is the simple structure inadequate in large organizations?
Answer – The simple structure is a “flat” organization, with centralized decision making. The simple structure is most widely used in smaller businesses. The strengths of the simple structure: it is fast, flexible, and inexpensive to maintain, and accountability is clear.  Major weaknesses: it is effective only in small organizations. It becomes increasingly inadequate as an organization grows; its few policies or rules to guide operations and its high centralization result in information overload at the top. As size increases, decision-making becomes slower and can eventually stop. Everything depends on one person.

5. Describe the characteristics of a boundaryless organization structure.
Answer – A boundaryless organization is not defined or limited by boundaries or categories imposed by traditional structures. It blurs the historical boundaries around an organization by increasing its interdependence with its environment. Sometimes called network organizations, learning organizations, barrier-free, modular, or virtual corporations. Boundaryless structures cut across all aspects of the organization. Boundaryless organizations are not merely flatter organizations. They attempt to eliminate vertical, horizontal, and inter-organizational barriers. A boundaryless organization provides the flexibility and fluid structure that facilitates quick movements to capitalize on opportunities.

6. What is the source of an organization’s culture?
Answer – An organization’s culture usually reflects the vision or mission of the organization’s founders.   Because the founders had the original idea, they also have biases on how to carry out the idea.  The small size of most new organizations also helps the founders impose their vision on all organization members.  An organization’s culture, then, results from the interaction between 1) the founders’ biases and assumptions and (2) what the first employees learn subsequently from their own experiences.  See Exhibit 5-12.

Linking Concepts to Practice
1. Which do you think is more efficient—a wide or a narrow span of control? Support your decision.
Answer – Students’ arguments should differentiate between efficient and effective. A narrow span of control is more effective because it provides more control. A wide span of control is more efficient because there is less overhead and bureaucracy, but also less control, which could lead to greater waste.

2. “An organization can have no structure.” Do you agree or disagree with this statement? Explain.
Answer – A boundaryless or virtual organization is not without structure, structure is minimized but not eliminated. There is always some degree of reporting relations, some type of division of labor, some need for the management of processes, etc.

3. Show how both the functional and matrix structures might create conflict within an organization.
Answer – The conflict within a matrix is clear, competing and conflicting demands by different bosses on the same employee. In a functional organization, different functions and their managers can end up in competition for resources, personnel, priorities, etc., since each area is responsible for a separate function.

4. Do you think the concept of organizational structures, as described in this chapter, is appropriate for charitable organizations? If so, which organization design application would you believe to be most appropriate? If not, why not? Explain your position.
Answer – All organizations have some type of design, so of course the material is relevant and appropriate. Any form can fit depending on the mission and purpose of the charity. Does it provide a service or product? Does it need to minimize cost and overhead—a thrift shop, a church; or exercise maximum control—a juvenile home, etc.

5. What effects do you think the characteristics of the boundaryless organization will have on employees in the 21st century organizations?
Answer – It will lead to a need for smarter, more independent, better educated and more trustworthy employees as they will work with more individual authority and less direct supervision.

6. Classrooms have cultures. Describe your class culture. How does it affect your instructor? You?
Answer – The answer will vary based on your class.

Integrative Chapter Skills

Controlling the borders
Purpose: This case is designed to introduce students to the importance and potential consequences of organizational design through an introduction of organizational chart re-alignment.
   Secretary: Michael Chertoff
(http://www.dhs.gov/xabout/structure/biography_0116.shtm)
On February 15, 2005, Judge Michael Chertoff was sworn in as the second Secretary of the Department of Homeland Security. Chertoff formerly served as United States Circuit Judge for the Third Circuit Court of Appeals. Secretary Chertoff was previously confirmed by the Senate to serve in the Bush Administration as Assistant Attorney General for the Criminal Division at the Department of Justice. As Assistant Attorney General, he helped trace the 9/11 terrorist attacks to the al-Qaida network, and worked to increase information sharing within the FBI and with state and local officials. Before joining the Bush Administration, Chertoff was a Partner in the law firm of Latham & Watkins. From 1994 to 1996, he served as Special Counsel for the U.S. Senate Whitewater Committee. Prior to that, Chertoff spent more than a decade as a federal prosecutor, including service as U.S. Attorney for the District of New Jersey, First Assistant U.S. Attorney for the District of New Jersey, and Assistant U.S. Attorney for the Southern District of New York. As United States Attorney, Chertoff investigated and prosecuted several significant cases of political corruption, organized crime, and corporate fraud. Chertoff graduated magna cum laude from Harvard College in 1975 and magna cum laude from Harvard Law School in 1978. From 1979-1980 he served as a clerk to Supreme Court Justice William Brennan, Jr. Secretary Chertoff is married to Meryl Justin Chertoff and has two children (personal information is taken directly from the link provided above).  
Micheal Chertoff has approached you with a delicate problem. He states that he is seeking your advice as he hands you a large stack of papers which details all of the present organizational charts of Homeland Security. However, he points to the chart on top of the stack and states simply “I need help in reorganizing the present structure.” He mentions that he needs help in reconceptualizing the present structure to solve several difficulties he had trying to juggle all of the roles required of his job over the past several months. He lists his concerns and needs in order of importance. Your job is to assess the current structure and develop a new organizational form that meets his current needs.
1. Over the past couple of years, Immigration and the protection of our borders has become increasingly important on two fronts. First, in regards to domestic politics there has been a slow but steadying increase in the anger and frustration about the security of the southern borders. The president and leaders of both parties have come to you with the concern that this could become much worse if the country would fall into a recession. Second, there have been increasing reports that Muslim extremists tied to Al Qaida have been trying to infiltrate the U.S. from its northern borders. Therefore, the first priority is to somehow increase the prominence of border security and the departments related to border security in the new organizational structure.
2. I am currently overwhelmed. I receive direct reports from twenty four to twenty eight direct reports in any given week. I am finding it increasingly difficult to meet all of the demands put upon me. This structure is unmanageable for me, I don’t know what the correct number of direct reports would be, but it certainly has to be much smaller than this number.
3. I have been given permission to reduce some departments that might not be central to the mission of Homeland Security. Also, it might be possible to combine some departments, but either scenario is awfully difficult when dealing with government agencies. If there are some reporting relationships that you feel can be transferred into another department or area of the government please go ahead and remove them. I would warn you that the more you propose to move out of the department the more difficult it will become.
4. I remember one professor back when I was at Harvard mention flexible organizational forms. I think that flexibility and speed with which to handle emergencies is very important. When you produce your new organizational chart can you explain in the terminology of organizational structure why your structure will be able to react to emergencies quicker than the current structure? In fact, could you please begin your recommendation by refreshing my memory regarding the principles of organizational structure and the role that it played in your decision?
Group Instructions
Your goal is to present a streamlined and more efficient organizational structure for Homeland Security Secretary Michael Chertoff. Consider all four issues and note that they are listed in the order of importance. Consider the six elements of organizational structure (Specialization, Unity of command, Span of control, Decentralization, Departmentalization, and Authority) and how important each one will be in providing guidance as you make your choices. Will some of these be more relevant when considering the present structure than others? Which aspects of the principles of are more relevant to correcting the current structure than others? When you write your report, explain which elements of organizational structure in the current system were not properly applied in the design.
Teaching Tips

This case will require students apply the chapter material directly to the design of the new organizational form for Homeland Security.  Encourage them to consider all of the aspects of structure discussed in the chapter, first considering the current form with respect to all of the dimensions and then considering their new form across the same dimensions.  Make sure they consider all of the Secretary’s concerns; for example, point 1 states “Therefore, the first priority is to somehow increase the prominence of border security and the departments related to border security in the new organizational structure.”  This would imply that the border security group will be moved closer to the top---perhaps right next to/included with National Protection & Programs.  Urge the students to consider how to accomplish the Secretary’s goals through considering a less bureaucratic structure as well, for enhanced flexibility.  There will be no one correct answer in this exercise.  However, this represents a great opportunity for students to consider the fundamentals of organizational design and structure. 
Once the students have completed their design, have them share their recommendations and reasoning with the class. 

PH:  NOTE:  THE GRAPHIC BELOW IS FROM http://www.dhs.gov/xabout/structure/editorial_0644.shtm AND IS NOT INCLUDED IN THE TEXT BOOK PDF FOR THIS CHAPTER---THE STUDENTS NEED ACCESS TO IT TO COMPLETE THE EXERCISE.  
 
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