Chapter
Organizational Structure
and Design
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Learning Outcomes
After studying this chapter, you should be able
to
1. Describe six key elements in organizational
design.
2. Identify the contingency factors that favor
either the mechanistic model or the organic
model of organizational design.
3. Compare and contrast traditional and
contemporary organizational designs.
4. Discuss the design challenges faced by
today’s organizations.
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Designing Organizational Structure
• Organizing—arranging and structuring work
to accomplish an organization’s goals
 Work specialization
 Departmentalization
 Chain of command
 Span of control
 Centralization vs. decentralization
 Formalization
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Work Specialization
• Work specialization—dividing work
activities into separate job tasks
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Departmentalization
• Departmentalization—the basis by which
jobs are grouped together
 Functional
 Geographical
 Product
 Process
 Customer
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Chain of Command
• Chain of
command—the
line of authority that
clarifies who
reports to whom
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Chain of Command
• Authority—the right to make decisions,
issue orders, and use resources
• Responsibility—the obligation or
expectation to perform any assigned duties
• Accountability—being subject to reporting
and justifying task outcomes
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Span of Control
• Span of control—the number of
employees a manager can efficiently and
effectively supervise
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Centralization vs. Decentralization
• Centralization—the degree to which
decision making is concentrated at upper
levels of the organization
• Decentralization—the degree to which
lower-level employees provide input or
make decisions
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Formalization
• Formalization—extent to which
 Jobs are standardized
 Employee behavior is guided by rules and
procedures
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Exercise: Paper Airplane Company
• Your task
 Build as many flyable airplanes as possible within
a 7-minute production run.
• Guidelines
 Each team must appoint a CEO, who will be
granted full authority by the Board of Directors.
 CEOs should design their organizations to be
efficient and effective.
 Airplanes must be built according to customer
specifications.
 Each airplane must take a test flight to ensure
airworthiness.
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Exercise: Paper Airplane Company
1. How did you change your organizational
structure between rounds 1 and 2 and
rounds 2 and 3?
• Work specialization
• Departmentalization
• Chain of command
• Span of control
• Degree of centralization
• Formalization
2. Why did you change your structure
between each round?
3. After making each change, was the
outcome superior? What would you do
differently?
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Mechanistic vs. Organic Structures
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Contingency Factors Affecting
Structural Choice
• Carnival Cruise Lines provides pleasure
cruises to the masses. Carnival has
several ships and works on high volume
and low price rather than offering luxury
cruises.
• What would you predict about the
organizational structure of a Carnival
Cruise ship compared with a company that
had smaller ships for wealthy customers?
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Contingency Factors Affecting
Structural Choice
• Strategy
• Size
• Technology
• Environmental uncertainty
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