SUO_MGT3002 W5 L3

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Structures of Organizations © 201 6 South University

Page 2 of 2 Organizational Behavior ©2016 South University 2 Structures of Organizations MGT3002 W5 L3 Classical Structure There are two categories of elements that define the classical organizational structure. In the first category the three most significant elements of the pyramidal structure are: • Division of Labor (as evidenced in functional specialization, departmentation, divisionalization) • Hierarchy • Unity of Command The classical structure is based primarily on these principles of management. This structure emerged more than 2000 years ago in the Roman army. With the development of the Roman Empire there were plenty of wars. Soon Roman generals found that a loose configuration of large numbers of soldiers was quite inefficient. However if ten soldiers were commanded and led by one person (they named him a "Decurion"—from "deca" which means ten), and ten Decurions were commanded by one man, the unit would be much more effective. The Romans called this commander of the Decurions a "Centurion" (after "centum" meaning a hundred). Thus, a separate unit was led by one man; ten such men were commanded by another man, and so on. As a result, the organization followed a pyramidal structure. And as we know from history, this structure led the Romans to extraordinary success in battles, defeating much larger armies. Over the next few centuries, this structure was widely used primarily in armies in Europe. It was also adopted by the Church— which we now refer to as the Roman Catholic Church. The church

Page 3 of 2 Organizational Behavior ©2016 South University 3 Structures of Organizations MGT3002 W5 L3 established its organization in the Vatican, which was also structured as a pyramid with the Pope as its head. The next few centuries in Europe saw feudalism as an economic way of life—giving way to capitalism and monarchy, which, in turn, gave way to the governance change to democracy. In a slow evolving process, the new democratic governance in Europe adopted this same kind of structure for better management. The demand for goods and services and the concurrent technological innovations increased dramatically from the early 18th century, leading to the phenomena of industrial revolution. In response, manufacturers needed to employ much larger numbers of people to meet the demand. They soon found that structuring jobs by specialization, hierarchy, and unity of command led to much more significant and efficient production. Soon enough large industrial organizations all over Europe started getting organized in the same way. By the 19th century, the assembly-line model of production had developed—using the principles of both organizational structure and economics. By the mid-19th century some of the legacies of feudalism and monarchy—problems with fairness, equity, favoritism, justice, errors of judgment—started emerging in organizations of governance, in the legal or justice system, and in organizations of industrial production. In response, the second category of elements that make up the classical structure appeared. Thus, we can say that inequity appeared in the amount of work allocated and the work hours demanded from employees. It was found that it may be better to create a rule that all employees would be required to work for a fixed number of hours each day. Likewise, the rule to standardize the wages of employees would

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Page 4 of 2 Organizational Behavior ©2016 South University 4 Structures of Organizations MGT3002 W5 L3 become a measure of equity. Similarly, a wide variety of standardized rules began to be popular. In essence, the creation of rules and regulations was also an attempt to deal with the problem of errors in judgments and personal favoritism. Rather than leaving the discretion with the supervisor; rules would dictate how supervisors would apply any decision over the employees under their control. It was felt that since personal factors might lead to favoritism and errors the standardized rules ensured a degree of impersonal applications. This pattern of a system of rules and regulations coupled with impersonality (to avoid errors of judgment and favoritism) became widely popular throughout Europe and North America. This trend was studied by many philosophers and researchers including Max Weber of Germany. Weber conceptualized this pattern of a system of rules and regulations and impersonality in the organization structured by a division of labor and hierarchy and gave it the name "Bureaucracy"—governance by the office (In German, "bureau" means office). Weber in the 19th century predicted accurately as it now turns out that before long the bureaucratic organization structure would permeate every level of life in industrial societies. Here it is quite incorrect to think of bureaucracy as the preserver of governance and very large organizations alone. Almost all organizations—large and small— are structured using the same principles of Division of labor, Hierarchy, and Unity of command. Interestingly enough the second category of elements that defines the classical structure are structured by the same principles of: • A System of Rules and Regulations • Impersonality

Page 5 of 2 Organizational Behavior ©2016 South University 5 Structures of Organizations MGT3002 W5 L3 The problems of bureaucracy, as we understand, are commonly more visible in the larger organizations but can exist in the smaller ones as well. The most commonly perceived problems of the classical structure are impersonality and inhumanness, loss of autonomy, rigidity of hierarchy, conflict between groups and individuals (as a result of specialization), obsessive preoccupation with rules ("going by the book"), communication problems, accentuation of conformity, and groupthink. These problems are commonly attributed to individuals and leadership styles. The solutions then relate to fostering change in individuals and in leadership styles.

Page 6 of 2 Organizational Behavior ©2016 South University 6 Structures of Organizations MGT3002 W5 L3 However, let us go back to the starting point—the statement— structure has a strong influence on feelings and behavior. We can see now that the nature of the structure itself influences people at all levels to behave impersonally, to deny autonomy to others, or to thwart the flow of communication. The effective manager would understand the nature of the structure and its influences so as to be able to free himself or herself from the potential problems. He or she would then find solutions in the structure more often than in individuals and leader styles. These problems of the classical structure have been studied quite widely and various alternate models have been developed and utilized to deal with the problems. Let us now look at some common organizational designs related to the classical structure. Decentralized Decentralization is one of the earliest and most widely known efforts to deal with the problems of the classical structure. Decentralization in the form of creation of operating units involves granting increased authority and autonomy. Organizations have also been decentralized by function and by territory. There are other kinds of decentralization as well; for example franchising involves substantial decentralization with resulting increased cost efficiencies and control. Third-party manufacturing and marketing of products is also a modern type of decentralization. Likewise outsourcing which is usually seen only as a measure of cost control can be viewed as a kind of decentralization. These methods—franchising and third-party contracting—benefit companies by limiting their size since an unwieldy size creates its own problems. Many organizations also decentralize by product

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Page 7 of 2 Organizational Behavior ©2016 South University 7 Structures of Organizations MGT3002 W5 L3 type. Pharmaceutical companies for instance have restructured their organizations by decentralizing various operations to match the basic categorization of prescription drugs and over-the-counter (OTC) medications. Within these two categories further sub- grouping of products and restructuring by more decentralization is also very common. While the benefits of decentralization are well known, many companies have made the mistake of placing limits on the degree of delegated authority. For instance some companies retain centralized control of purchase of supplies at the corporate office, leaving manufacturing units at a severe disadvantage. Likewise some companies retain centralized control of all promotions in decentralized operating units—the result has commonly been an increased politicking and loss of control at the units. Project Organization Another alternative model to deal with the problems of the classical structure is project organization. Project designs emerged in the aerospace industry and in companies working on contract for the Department of Defense. The projects executed by these companies required a great deal of coordination, planning, and research. The traditional, classical structure of such companies would be as shown below.

Page 8 of 2 Organizational Behavior ©2016 South University 8 Structures of Organizations MGT3002 W5 L3 Project Structure As a departure from the classical model, the project structure has its own project manager with his or her own quality control, research and development, purchasing, and scheduling, as shown in the following diagram.

Page 9 of 2 Organizational Behavior ©2016 South University 9 Structures of Organizations MGT3002 W5 L3 When a project structure is superimposed on a traditional structure, what we get is a matrix structure. This is a model which gained a lot of popularity in the 1970s and 1980s. In the matrix design, functional department heads have line authority over the specialists in their departments. The functional specialists are then assigned to specific projects in a consultative process that exists between the functional departments and project managers. This design cuts across the classical principles of hierarchy and unity of command. Thus, the specialists report both to the functional head and the project head, as shown in the organization chart below:

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Page 10 of 2 Organizational Behavior ©2016 South University 10 Structures of Organizations MGT3002 W5 L3 The excitement of the matrix design goes hand-in-hand with some disappointing experiences. In IBM, for instance, it was found that this design raised ambiguities in power relationships, fostered conflicts, discouraged informal groups, and hindered positive relationships between superiors and subordinates. In spite of the disappointing evidence, however, the concept of the matrix structure is important because it is another major organizational structure that is different from classical organizational design. Semiautonomous Team Design

Page 11 of 2 Organizational Behavior ©2016 South University 11 Structures of Organizations MGT3002 W5 L3 We have already discussed the semiautonomous work team concept. If you recall, this model also violates the classical principles of unity of command and hierarchy. Within the team, the members have to operate with both greater autonomy and sharing of authority. The concept developed as a result of the classical British Coal Mine studies by Trist and Bamforth of the Tavistock Institute, London in the 1950s. This concept had been named the Socio- Technical System design. The concept was experimented with by A.K. Rice and others of the Tavistock Institute in a large textile mill (with about 8,000 employees) in Ahmedabad, India. The traditional assembly-line design was abandoned in favor of small work teams which would handle all the production of a set of textile looms. The groups had considerable authority to rotate jobs among their members, to schedule tasks, and even change membership of work teams. The results were very encouraging—production increased significantly, costs were reduced to some degree, and job satisfaction soared. Strangely, in spite of the success of this and other experiments, the concept (which was, by the 1970s rechristened as "Semiautonomous Work teams") didn't find much popularity either in Britain or in India. However, in other European countries, notably the Scandinavian countries, it has been used quite extensively and profitably. Volvo of Sweden and the fishing industry of Norway have been most often mentioned in research studies and papers. In North America, as mentioned earlier, many organizations have used the semiautonomous work team concept quite effectively. However, the concept is not much more popular even today; one of the reasons being the major changes in the level of delegation of authority involved. Some writers have attributed this to need or

Page 12 of 2 Organizational Behavior ©2016 South University 12 Structures of Organizations MGT3002 W5 L3 desire for power and the unwillingness to part with power. Whatever the reasons, more experimentation and research with the semiautonomous work team design are certainly warranted. Having now reviewed the nature of organization structure let us look at the micro-level of work design. Technology and Work Design In this section, we will take a brief tour of the various work (re)design options available today that are congruent and compatible with the structural changes that we have examined in the previous section. There is no question that technological changes are bringing about sweeping changes in organizations, in how we work, and indeed in many spheres of personal life. Computers and networking technologies have influenced our processes of interaction and relationships strongly. In the workplace, technology has permitted us and indeed in some instances even pushed us to create new work designs and structures. Let us look at some of them. Continuous Improvement Processes Competition has increasingly led companies to look at quality issues in an effort to secure markets. To sustain quality levels, a variety of quality improvement systems have emerged over the last couple of decades. We have already learned about Quality Circles, which involves periodic voluntary groups meeting together to discuss and find solutions for quality issues in their manufacturing units. Several other systems and techniques, such as Total Quality Management (TQM), Zero-Defect, Six Sigma, and Strategic Quality Planning are being used by more and larger organizations.

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Page 13 of 2 Organizational Behavior ©2016 South University 13 Structures of Organizations MGT3002 W5 L3 Business Process Reengineering This is a type of work redesign popularized by Michael Hammer. The basic idea is to replace traditional work designs that are primarily based on the classical structure and the assembly-line principle of task fragmentation. In Business Process Reengineering (BPR), the aim is a clean slate approach—starting from scratch and rethinking the entire job that has to be redesigned. The designers start by looking at the total job, and creating a new design without reference to the existing job design with a focus on optimizing efficiency and minimizing costs. This involves two major aspects. First, the use of Information Technology (IT) is essential in BPR. The job processes are streamlined extensively by using IT. Secondly, the use of self- managed or semi-autonomous work teams is also essential and imperative. The assumption here is that the use of self-managed work teams makes for significantly more efficient performance. The designers focus on the core processes needed for the completion of jobs whether it is manufacturing or marketing or support. BPR has helped create leaner organizations. However, when the economy is down, employees quite understandably resist BPR because loss of jobs is almost always an outcome of the design. Nevertheless, BPR has been used quite successfully all over the world. It must also be mentioned that process reengineering is quite an elaborate process that requires extensive planning, consultations, and planning. eOrganization Have you ever shopped on the Internet? Have you filled out a tax form online? Have you bought airline tickets online and checked in

Page 14 of 2 Organizational Behavior ©2016 South University 14 Structures of Organizations MGT3002 W5 L3 by using a machine in the airport? Have you searched for information and data on the Internet? If the answer to these questions is "yes," then you've transacted with eOrganizations. These are organizations that operate through networking and offer a very wide range of services. Some are in the form of free services, such as those by the Internal Revenue Services (IRS), which offers methods of submitting tax returns online. Many government agencies provide the option of making applications and filling out a variety of forms online, and search engines such as Google and Yahoo offer search services. Some organizations do all or part of their business transactions online. Orbitz, Travelocity, PriceLine, and eBay are wholly electronic organizations. Other companies like Amazon are partly eOrganizations with both retail and online stores. eOrganizations are here to stay. The gains in efficiency and cost- reduction are far too great for companies to avoid e-business. In the next decade, it is very likely that we will see a significant increase in the use of eOrganizations all over the world. Work Schedule Options Traditionally, work schedules have remained fixed and standardized in the design of work. However, the last few decades have seen the increased popularity of schedule modifications as a redesign option. We are all familiar with flexitime , which offers the option to schedule flexible work hours, so employees are better able to manage their work and personal or family responsibilities. The advantages to employees, especially single parents, are clear. The advantages to employers are manifold, including greater job satisfaction, reduced absenteeism, overtime costs, and higher productivity.

Page 15 of 2 Organizational Behavior ©2016 South University 15 Structures of Organizations MGT3002 W5 L3 Another development is job sharing. Here two or more people share a job and work at complementary schedules. For instance, two people may work on the same job on alternate days. Job sharing increases flexibility for employees but it also makes severe demands on them in terms of personal compatibility, understanding, and coordination. Telecommuting allows people to work from home using computer network technology to link with the office. At least 10% of the workforce in the United States is engaged in telecommuting today. This design is indeed a very significant option that more and more companies are exercising successfully.

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