OB lecture 7 issues in organizational structure

A large organization contains several types of structure at different levels Issues in Organization structure 1 Formal and Informal 2 Centralized and Decentralized 3 Tall and flat 4 Span of control 5. FormalizationStandardization

Other Issues in Organization Structure

Lecture 7

Unit 3 Organizations and Behaviour

Scope for Today

1.Issues in Organization Theory

2.Assignment 1 – Case Study

New Method for Sharing

Teaching Material

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Types of Organization Structure

1 Simply Structure (no structure !)

A large organization contains several types

of structure at different levels

7 Issues in Organization structure

1 Formal and Informal

2 Centralized and Decentralized

3 Tall and flat

4 Span of control

5 Formalization/Standardization

Formal vs Informal

Page 58 – 59 of Text book

Formal Structure

CEO

Quality Control Assembly

Incoming Inspection

Reporting

Formal Structure describes how work is

organized (division of labour), authority

(Unity of Command), and how information

is passed down (Scalar Chain of Command)

Informal Structure

There is an informal structure that exists

alone side the formal structure – social

network, cliques, and temporary networks

- Unwritten Rules (How we do things here)

- Informal channel of communication

(Grapevine)

Informal Structure can be faster and moreeffective.

It is part of the ‘organizational culture’that management should pay attention

Old Dorm for Lecturers in Beijing

Vincent Ben David Angie Isabelle TV

Dinning

Cleaner

Tall and Flat

Structure

Tall and Short

Tall

Flat

Tall and Flat Who is handsome?

Advantages and Disadvantages

(page 64)

Malorganization = Sick Organizati on

The most common and serious symptom

More Layers

Introduces ‘noise’

More layesr make the attainment of

common direction and mutual understanding additional distorts objectives and misdirects

attention - Peter Drucker

Management Development

If an organization has 12 layers, and an

executive will never reach CEO whie he or she is still young and vigorous

12x 5 = 60 years !

Assuming a candidate stays 5 years at one level

So much noise that communication is impossible

Example of Chinese Emperor Yongzhenand his invention

He sent and received letters from his

Generals directly in sealed envelope

Why So Many Layers ?

Parkinson’s law of Rising Pyramid

“Work expands so as to fill the time available for its completion”.

If there are A, B and C in a department If A

too much work, Instead of distribute among

B, and C, A will hire D and F to build

up his/her position

Delayering

Reduce the number of layers

Very little value added there is by the

intermediate level

It is much feasible now with advances ininformation technology

What is the minimum number

of layers 3? 5? 6?

Centralization vs Decentralization

The degree of concentration of authority

Decentralize if it works

Certain Functions Should be

Centralized

1 Corporate Finance

2 Purchasing e.g Wal-mart

3 Other – The agency successfully managed Yellow

River in China

There should be reasons and designed into

organization structure.

Yellow River in China.

Its successful taming required a centralization

Span of control

Number of subordinates immediate report

to the superior

Span of Control

CEO

Quality Control Assembly

Incoming Inspection

Technology Resources Human

Span of Control for CEO = 7

Excluding ‘supervisory’, span of control should not be too large, 7 to 8

This assumption is

being challenged by

Sergio Marchionne

CEO Fiat and Chrysler

After Fiat taking over of

Chrysler, he has all his top 25

Chrysler executives – everyone

from engineering to and

manufacturing to legal and HR –

report directly to him

Sergio Marchionne

Formalization is the degree to which

organizations standardize behavior

through rules, procedures, formal training, And related mechanism.

Examples

The Story of Asean Hotel

Formalization increases efficiency and

compliance.

Dark Side of Formalization

Older and larger companies tend to have

formalization, and less flexibility, creativity

And given a source of stress

The key issue is how to identify good practice (quantification), and formalizeun-formalize it