Marketing Manager Course - Chapter 09
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Chapter
9
Managing the Structure and
Design of Organizations
McGraw-Hill © 2004 The McGraw-Hill Companies, Inc. All rights reserved.
Learning Objectives
After reading this chapter, you should be able to:
Identify the vertical and horizontal dimensions of organization
structure.
Develop coordination across departments and hierarchical levels.
Differentiate between authority, responsibility, and
accountability.
Recognize when structural characteristics of centralization, span
of control, formalization, and chain of command should be used.
Apply the three basic approaches – functional, divisional, and
matrix – to departmentalization.
Use organization structure and the three basic organization
designs – mechanistic, organic, and boundaryless – to achieve
strategic goals.
Anticipate key strategic events likely to trigger a change in the
structure and design of an organization.
McGraw-Hill © 2004 The McGraw-Hill Companies, Inc. All rights reserved.
Organizing
The deployment of resources to achieve strategic
goals. It is reflected in:
The organization’s division of labor that forms jobs and
departments.
Formal lines of authority.
The mechanisms used for coordinating diverse jobs and roles
in the organization.
Strategy indicates what needs to be done.
Organizing shows how to do it.
McGraw-Hill © 2004 The McGraw-Hill Companies, Inc. All rights reserved.
Organization Structure
Formal system of relationships that determine:
Lines of authority – who reports to whom.
Tasks assigned to individuals and units – who does what
tasks and with which department.
Dimensions of organization structure:
Vertical dimension
Horizontal dimension
McGraw-Hill © 2004 The McGraw-Hill Companies, Inc. All rights reserved.
The Vertical Dimension of
Organization Structure
Unity of Command – a
subordinate should have only
one direct supervisor.
A decision can be traced back
from the subordinates who
carry it out to the manager who
made it.
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The Vertical Dimension of
Organization Structure (continued)
Authority – The formal right of a manager to make
decisions, give orders, and expect the orders to be
carried out.
Line Authority
Staff Authority
Responsibility – the manager’s duty to perform an
assigned task.
Accountability – the manager (or other employee)
with authority and responsibility must be able to
justify results to a manager at a higher level in the
organizational hierarchy.
McGraw-Hill © 2004 The McGraw-Hill Companies, Inc. All rights reserved.
The Vertical Dimension of
Organization Structure (continued)
Line Authority
entitles a manager to directly control the
work of subordinates by hiring, discharging,
evaluating, and rewarding them
line managers hold positions that contribute directly to the
strategic goals of the organization
part of the chain of command
Staff Authority
the right to provide advice, recommend, and
counsel line managers and others in the organization
staff managers direct line managers
McGraw-Hill © 2004 The McGraw-Hill Companies, Inc. All rights reserved.
The Vertical Dimension of
Organization Structure (continued)
Span of control – the feature of vertical structure
that outlines:
The number of subordinates who report to a manager.
The number of managers.
The layers of management within an organization.
Smaller span – fewer employees supervised by a
manager – creates a tall vertical organizational
structure
Larger span – greater number of employees
supervised – creates a flat organizational structure
McGraw-Hill © 2004 The McGraw-Hill Companies, Inc. All rights reserved.
The Vertical Dimension of
Organization Structure (continued)
Centralization – the location of decision authority at
the top of the organization hierarchy.
Decentralization – the location of decision authority
at lower levels in the organization.
Formalization – the degree of written
documentation that is used to direct and control
employees.
McGraw-Hill © 2004 The McGraw-Hill Companies, Inc. All rights reserved.
The Horizontal Dimension of
Organization Structure
The organization structure element that is the basis
for:
Dividing work into specific jobs and tasks.
Assigning jobs into units such as departments or teams.
Departmentalization:
Functional
Divisional
Matrix
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Functional Departmental Structure
President
Engineering Production Marketing Finance
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Advantages and Disadvantages of
the Functional Approach
Advantages Disadvantages
Decision authority is Communication barriers
centralized at the top of the Conflict between departments
organization hierarchy Coordination of products and
Career paths foster services is difficult
professional identity with the Diminished responsiveness to
business function customers’ needs
High degree of efficiency Employees identify with
functional department goals and
Economies of scale help not organization goals or needs
develop specialized expertise of the customer
in employees
McGraw-Hill © 2004 The McGraw-Hill Companies, Inc. All rights reserved.
Divisional Organization Structure
President
President
Computer Software Consulting
Consulting
Computer Software Source
Source
Division
Division Division
Division Division
Division
Production
Production Production
Production Production
Production
Marketing
Marketing Marketing
Marketing Marketing
Marketing
Finance
Finance Finance
Finance Finance
Finance
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Geographic-Based
Organization Structure
President
U.S. and Latin European Asian
Canada America Division Division
Division Division
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Advantages and Disadvantages of
the Divisional Approach
Advantages Disadvantages
Coordination among different Duplication of resources by
business functions two or more departments
Improved and speedier Reduced specialization in
service occupational skills
Accountability for Competition among divisions
performance
Development of general
manager and executive skills
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Matrix Organization Structure
President
President
Vice President
Vice President
Vice President
Vice President Vice President
Vice President Vice President
Vice President Sales and
Sales and
Finance
Finance Operations
Operations Manufacturing
Manufacturing Marketing
Marketing
Region A
Region A
Manager
Manager
Region B
Region B
Manager
Manager
Region C
Region C
Manager
Manager
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Advantages and Disadvantages of
the Matrix Approach
Advantages Disadvantages
Efficient utilization of scarce, Employee frustration and
expensive specialists confusion as a result of the dual
Flexibility that allows new chain of command
projects to start quickly Conflict between product and
Development of cross- functional managers over
functional skills by employees deadlines and priorities
Increased employee Too much time spent in
involvement in management meetings to coordinate decisions
decisions affecting project or
product assignments
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Coordination Mechanisms
Meetings Organization-wide
Reward Systems
Task Forces and Teams
Liaison Roles
Integrating Managers
Organizational Culture
McGraw-Hill © 2004 The McGraw-Hill Companies, Inc. All rights reserved.
Organization Design
The selection of an organization structure that
best fits the strategic goals of the business.
Basic organization designs:
Mechanistic
Organic
Boundaryless
These designs incorporate vertical and horizontal
structural elements.
McGraw-Hill © 2004 The McGraw-Hill Companies, Inc. All rights reserved.
