Designing Organizational Structure

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Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall 9 – 1 Designing Organizational Structure • Organizational Design ➢ A process involving decisions about six key elements: ❖ Work specialization ❖ Departmentalization ❖ Chain of command ❖ Span of control ❖ Centralization and decentralization ❖ Formalization
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Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall 9 – 2 Organizational Structure • Work Specialization ➢ The degree to which tasks in the organization are divided into separate jobs with each step completed by a different person. ➢ Overspecialization can result in human diseconomies from boredom, fatigue, stress, poor quality, increased absenteeism, and higher turnover.
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Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall 9 – 3 Departmentalization by Type • Functional ➢ Grouping jobs by functions performed • Product ➢ Grouping jobs by product line • Geographical ➢ Grouping jobs on the basis of territory or geography • Process ➢ Grouping jobs on the basis of product or customer flow • Customer ➢ Grouping jobs by type of customer and needs
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Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall 9 – 4 Organizational Structure (cont’d) • Chain of Command ➢ The continuous line of authority that extends from upper levels of an organization to the lowest levels of the organization and clarifies who reports to whom.

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