Common Organizational Designs
Black Gold, Texas Tea (Scenario)
Paul Abdul Oil Corporation (PAOC) began as a relatively small, oil company. However, through the years it has grown to become an international corporation.
121. The original entrepreneurial venture consisted only of Mr. Abdul and a few employees. It was an informal organization, and everyone reported to Mr. Abdul. This is best described as a ________ structure.
a. simple
b. functional
c. divisional
d. matrix
(a; easy; p. 244)
122. A sharp rise in oil prices helped PAOC's business expand. Abdul concluded that it was impractical and inefficient for all decisions to continue flowing through his office. He granted his key subordinates the authority and responsibility to manage others within their areas of specialty. This organizational structure is best described as a ____________ organizational structure.
a. simple
b. functional
c. divisional
d. matrix
(b; moderate; p. 244)
123. Paul Abdul decided to purchase an oil drilling supply company, located in a new country. The purchase of this company was classified as a related diversification, but distance and the new product line suggested that this newly purchased organization continue to be operated as a separate company. In beginning a new phase in the history of Paul Abdul Oil Corporation, a _________ structure should be implemented to allow the company to continue to grow.
a. simple
b. functional
c. divisional
d. matrix
(c; difficult; p. 244)
124. As PAOC continues to grow, a highly trained group of managers and analysts has developed at corporate headquarters. This group is highly adaptive in its structure. Members of this group do not have standardized jobs, but are empowered to handle diverse job activities and problems. This group of employees is said to have a(n) ___________ structure.
a. simple
b. divisional
c. functional
d. organic
(d; difficult; p. 243)
 |
| http://groups.google.com/group/vuZs |
| Visit this group |
125. To deal with the workload in an effective manner, PAOC's executive management group assigns specialists from the different functional departments to work on one or more work groups that are led by project managers. This popular contemporary design is called a ___________ structure.
a. matrix
b. divisional
c. functional
d. organic
(a; moderate; P. 246)
126. Mr. Abdul realizes that his company is taking on a life of its own and he wants to allow people from all levels to work together in teams. This view grows to include employees working actively with external agencies. This organizational design does not have a predefined structure and is referred to as a (n) _________.
a. learning organization
b. threatened organization
c. functional structure
d. boundaryless organization
(d; difficult; P. 247)
127. Twenty years after founding PAOC, Abdul decides he is approaching retirement. He wants PAOC to develop the capacity to adapt itself and change because each member will take an active role in identifying and resolving work-related issues. Abdul wants the firm to become a ______________.
a. learning organization
b. threatened organization
c. functional structure
d. boundaryless organization
(a; moderate; pp. 248-249)
128. Several years after the retirement of Mr. Abdul, management at PAOC decided to sell off its oil exploration and drilling supply holdings, and instead focus on the more profitable distribution end of the business. In conjunction with this decision, management decided to outsource most of its noncore functions, such as accounting, payroll, and human resources. These moves are consistent with what type of contemporary organizational design?
a. a virtual organization
b. a network organization
c. a modular organization
d. a matrix organization
(b; difficult; p. 248)
ESSAY QUESTIONS
DEFINING ORGANIZATIONAL STRUCTURE
129. In a short essay, list and explain the six key elements in designing an organization's structure.
Answer
a. Work specialization—This concept describes the degree to which tasks in an organization are divided into separate jobs. The essence of work specialization is that an entire job is not done by one individual, but instead is broken down into steps, with each step completed by a different person.
b. Departmentalization—The basis by which jobs are grouped together is called departmentalization. The five common forms of departmentalization include functional, product, geographical, process, and customer departmentalization.
c. Chain of command—This is the continuous line of authority that extends from upper organizational levels to the lowest levels and clarifies who reports to whom. It helps employees answer questions such as "Who do I go to if I have a problem?" or "To whom am I responsible?"
d. Span of control—This concept is important because, to a large degree, it determines the number of levels and managers an organization has. All things being equal, the wider or larger the span of control, the more efficient the organization.
e. Centralization and decentralization—Centralization describes the degree to which decision making is concentrated at a single point in the organization. If top managers make the organization's key decisions with little or no input from below, then the organization is centralized. In contrast, the more that lower-level employees provide input or actually make decisions, the more decentralization there is.
f. Formalization—This refers to the degree to which jobs within the organization are standardized and the extent to which employee behavior is guided by rules and procedures. If a job is highly formalized, then the person doing that job has a minimum amount of discretion over what is to be done, when it's to be done, and how he or she could do it.
(difficult; pp. 234-240)
130. In a short essay, list and discuss the five common forms of departmentalization.
Answer
a. Functional departmentalization—Jobs are grouped by the functions (i.e., marketing, finance, human resources) performed. This approach can be used in all types of organizations, although the functions change to reflect the organization's objectives and work activities.
b. Product departmentalization—Jobs are grouped by product line. In this approach, each major product area is placed under the authority of a manager who's a specialist in, and is responsible for, everything having to do with that product line.
c. Geographical departmentalization—Jobs are grouped on the basis of a territory or geography such as southern, midwestern, or northwestern regions for an organization operating only in the United States; or for a global company, maybe U.S., European, Canadian, and Asian-Pacific regions.
d. Process departmentalization—This method groups jobs on the basis of product or customer flow. In this approach, work activities follow a natural processing flow of product or even customers.
e. Customer departmentalization—Jobs are grouped on the basis of common customers who have common needs or problems that can best be met by having specialists for each.
(moderate; pp. 235-237)
131. In a short essay, list six factors that influence the amount of centralization (or decentralization) in an organization.
Answer
More Centralization
a. The environment is stable.
b. Lower-level managers are not as capable or experienced at making decisions as upper-level managers.
c. Lower-level managers do not want to have a say in decisions.
d. Decisions are significant.
e. The organization is facing a crisis or the risk of company failure.
f. The company is large.
g. Effective implementation of company strategies depends on managers' retaining a say over what happens.
More Decentralization
a. The environment is complex, uncertain.
b. Lower-level managers are capable and experienced at making decisions.
c. Lower-level managers want a voice in decisions.
d. Decisions are relatively minor.
e. The corporate culture is open to allowing managers to have a say in what happens.
f. The company is geographically dispersed.
g. Effective implementation of company strategies depends on managers' having involvement and flexibility to make decisions.
(moderate; pp. 239-240)
132. In a short essay, list and discuss the four contingency variables that should be considered in determining an appropriate structure in organizational design.
Answer
a. Strategy and structure—An organization's structure should facilitate the achievement of goals. Since goals are influenced by the organization's strategies, it's only logical that strategy and structure should be closely linked. More specifically, structure should follow strategy. If managers significantly change the organization's strategy, they will need to modify structure to accommodate and support the change.
b. Size and structure—There's considerable evidence that an organization's size significantly affects its structure. For instance, large organizations—those with 2,000 or more employees—tend to have more specialization, departmentalization, centralization, and rules and regulations than do small organizations. However, the relationship isn't linear. Rather, size affects structure at a decreasing rate; that is, size becomes less important as an organization grows.
c. Technology and structure—Every organization has at least one form of technology to convert its inputs into outputs. The processes or methods that transform an organization's inputs into outputs differ by their degree of routineness. In general, the more routine the technology, the more standardized and mechanistic the structure can be. Organizations with more nonroutine technology are more likely to have organic structures.
d. Environmental uncertainty and structure—Since uncertainty threatens an organization's effectiveness, managers will try to minimize it. One way to reduce environmental uncertainty is through adjustments in the organization's structure. The greater the uncertainty, the greater the need for the flexibility offered by an organic design. On the other hand, in stable, simple environments, mechanistic designs tend to be most effective.
(difficult; pp. 241-243)
133. In a short essay, list the three traditional organizational designs. Describe the characteristics that are commonly associated with each.
Answer
In designing a structure to support the most efficient and effective accomplishment of organizational goals, managers often rely upon tried and true traditional organizational designs. These designs are: the simple structure, functional structure and divisional structure.
· The simple structure is most often associated with small entrepreneurial ventures and is common among organizations where the owner and manager are one and the same. Simple structures possess low departmentalization, wide spans of control, authority centralized in a single person, and little formalization. As firms grow, structure tends to become more specialized and formalized, departments and new levels of management are created, and the firm takes on a more bureaucratic nature.
· A functional structure is an organizational design that groups similar or related occupational specialties together. It is a functional approach to departmentalization applied to the entire organization. For example, organizing around the separate functions of operations, finance, human resources, marketing, and R&D. Finally, the divisional structure is an organizational structure made up of separate business units or divisions. In this design, each unit maintains limited autonomy with a division manager responsible for performance and determining who has strategic and operational authority within the divisional unit. However, the parent corporation still typically acts as an external overseer to coordinate and control the various divisions.
(moderate; p. 244)
