Reni Rosari

FE UGM

Organizational Structure
Organizing
and Design
•• mendeskripsikan
mendeskripsikan apaapa yang
yang dimaksud
dimaksud dengan
dengan struktur
struktur organisasi
organisasi dan
dan bagaimana
bagaimana ) arranging the activities of the enterprise in such a way that they
struktur
struktur organisasi
organisasi digambarkan
digambarkan dalam
dalam bagan
bagan organisasi
organisasi (organizational
(organizational chart)
chart) systematically contribute to the enterprise’s goals
•• menjelaskan
menjelaskan karakteristik
karakteristik dasar
dasar struktur
struktur organisasi
organisasi yang
yang digambarkan
digambarkan dalam
dalam bagan
bagan Organizing concerned with
organisasi
organisasi (hirarki wewenang, pembagian kerja, rentang kendali, lini vs staff, dan
(hirarki wewenang, pembagian kerja, rentang kendali, lini vs staff, dan
desentralisasi)
desentralisasi) (1) assembling and allocating the resources necessary to achieve the
•• menjelaskan
menjelaskan perbedaan
perbedaan pendekatan
pendekatan dalam
dalam departementalisasi
departementalisasi –– organisasi
organisasi fungsional,
fungsional, organization’s objectives,
organisasi
organisasi produk,
produk, organisasi
organisasi matrix,
matrix, organisasi
organisasi tanpa
tanpa batas
batas (2) establishing the authority relationships of the organizations,
•• membedakan
membedakan antara
antara pendekatan
pendekatan klasik
klasik dan
dan neo
neo klasik
klasik untuk
untuk desain
desain organisasi
organisasi dan
dan
antara
antara organisasi
organisasi mekanistik
mekanistik dan
dan organisasi
organisasi organik,
organik, seperti
seperti yang
yang dijelaskan
dijelaskan oleh
oleh (3) creating the organizational structure
pendekatan
pendekatan kontingensi
kontingensi untuk
untuk desain
desain organisasi
organisasi
•• mendeskripsikan
mendeskripsikan lima
lima bentuk
bentuk organisasi
organisasi yang
yang diidentifikasikan
diidentifikasikan oleh
oleh Mintzberg:
Mintzberg: The Importance of Structure
simple
simple structure,
structure, machine
machine bureaucracy,
bureaucracy, professional
professional bureaucracy,
bureaucracy, divisional
divisional “Good organization structure does not by itself produce good performance.
structure,
structure, dan
dan adhoracy
adhoracy But poor organization structure makes good performance impossible, no
•• menggolongkan/mengkarakteristikkan
menggolongkan/mengkarakteristikkan dua dua bentuk
bentuk desain
desain intraorganisasional
intraorganisasional –– matter how good the individual managers may be” Drucker (1989)
konglomerat
konglomerat dandan strategi
strategi aliansi
aliansi

ORGANIZATIONAL STRUCTURE: THE BASIC The Organizational Chart

DIMENSIONS OF ORGANIZATIONS Organization Chart Chain of Command
diagram depicting a
President/Owner reporting relationships
Organizational structure company’s structure and
within a company
showing employees where
 the way individuals and groups are arranged with respect to the tasks they perform they fit into its operations
 the formal configuration between individuals and groups with respect to the
allocation of tasks, responsibilities, and authorities within organizations

Organizational chart Marketing Finance Human Resource

 a useful pictorial way of depicting key features of organizational structure Manager Manager Manager
 a diagram representing the connections between the various departments within an
organization; a graphic representation of organizational design

Organizational design
 the process of coordinating these structural elements in the most effective manner
Supervisor Supervisor Supervisor Supervisor Supervisor Supervisor
 management decisions and actions that result in a specific organization structure

3 6-4

Organization Charts The effects of structure on individual and group behavior

Example of Hospital's Organization Chart

Individuals and groups respond in significant ways to the jobs they perform, to the
Board of Directors
groups they work with, to the leaders who influence them.
Type title here

„ Individual
Chief Executive
Strategic Planning
Officer Legal Counsel The job itself provides powerful stimuli for individual behavior.
Officer
„ The demands on, and the expectations of, individuals can result in high levels of
President Cost-Containment personal satisfaction or stress, anxiety, and psychological difficulties. People’s
Staff
job require the to perform activities in combination with other people. Activities can be
Executive Executive routine/non routine: they can require high/low levels of skills; they can be perceived
Administrative Medical
as challenging or as trivial
Director Director

„ Group
Director of Director of Director of Director of Director of Director of Director of Chief
Human Admissions Accounting Nutrition X-Ray and Surgery Pharmacy Physician Structure also affects the behavior and functioning of groups in organization.
Resources and Food Laboratory „ Depending upon the specific configuration of jobs and departments, groups can be
Services Services
either more or less cohesive and more or less communicative. Studies of org.
Director of Director of structure indicates that the group containing people doing the same job will be less
Patient and Outpatient cohesive, less open to new ideas, and less communicative than the group of people doing
Public Services
Relations
different jobs

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 Reni Rosari
FE UGM

DESIGNING AN ORGANIZATIONAL STRUCTURE

The concept of organization structure
(Gibson, Ivancevich, Donnelly, 2000)
„ Structure as an influence on behavior
The key word in this definition is control.
Structure Æ to control or distinguish its parts
„ Structure as recurring activities
This definition emphasizes persistence and regularity of activities ~ the
importance of organizational processes
„ Structure as purposeful and goal-oriented behavior
Organizations are purposeful and goal oriented. The org’l. structure is
likewise purposeful and goal oriented
Structure Æ a relatively stable framework of jobs and departments that
influence the behavior of individuals and group toward organizational goals
Æ organization structures facilitate the achievement of org’l goals
Æ management should think of structure in term of its contribution to
organizational effectiveness
Organizational Design
¾ management decisions and actions that result in a specific organization
structure
The content of the decision is always the same:
¾ Division of labor: carving up the jobs
Æ the process of dividing the many tasks performed within an organization into
specialized jobs Æ work specialization
¾ Hierarchy of authority: up and down the organizational ladder
Æ a configuration of the reporting relationships within organizations, that
is, who reports to whom
Æ delegation of authority throughout the structure (centralization and
decentralization)
¾ Span of control: breadth of responsibility
Æ the number of subordinates in an organization who are supervised by an
individual manager
¾ Departmentalization: ways of structuring organizations
Æ group of jobs

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THE FOUR KEY DESIGN DECISIONS Organizational Structure

Classical, formalistic, Neoclassical, informalistic, (Robbins et al, 1998)
structured, unstructured,
bureaucratic, System 1, neobureaucratic, System 4,
„„ To
Towhat
whatdegree
degreeare
aretasks
taskssubdivided
subdividedinto
into „ Work specialization
mechanistic organic
Spesialisasi separate
separatejobs?
jobs?
Pembagian kerja „„ On „ Departmentalization
Tinggi Rendah Onwhat
whatbasis
basiswill
willjobs
jobsbe
begrouped
groupedtogether?
together?
„„ To
Towhom
whomdo
doindividuals
individualsand
andgroups
groupsreport?
report? „ Chain of command
Dasar
Departementalisasi „„ How
Howmany
manyindividuals
individualscan
canaamanager
manager „ Span of control
Homogen Heterogen efficiently
efficientlyand
andeffectively
effectivelydirect?
direct?

Jumlah
„„ Where
Wheredoes
doesdecision
decisionmaking
makingauthority
authoritylie?
lie? „ Centralization and
decentralization
Rentang Kendali
Sempit Lebar/luas „„ To
Towhat
whatdegree
degreewill
willthere
therebe
berules
rulesand
and „ Formalization
regulations
regulationstotodirect
directemployees
employeesandand
Delegasi managers?
managers?
Wewenang
Sentralisasi Desentralisasi

9 10

 Struktur organisasi merupakan hasil dari keputusan manajerial ORGANIZATIONAL STRUCTURE

(Gibson, Ivancevich, Donnelly, 2000)
mengenai 4 hal penting (Gibson, Ivancevich, Donnelly, 2000), tuntutan tugas
yaitu:
Î Division of labor/specialization (pembagian kerja/siapa mengerjakan apa) Faktor-faktor kemampuan & ketrampilan
Î Bases for departmentalization desain pekerjaan teknologi
Î Size of department/span of control (rentang kendali) KEEFEKTIFAN ORG

Î Delegation of authority (sentralisasi vs desentralisasi) KEPUTUSAN MANAJER PRODUKSI

DIMENSI STRUKTUR ORG
1. PEMBAGIAN KERJA KUALITAS
1. FORMALISASI EFISIENSI
Keputusan manajer tersebut dipengaruhi oleh faktor-faktor: 2. DEPARTEMENTALISASI
2. KOMPLEKSITAS FLEKSIBI LITAS
3. UKURAN DEPARTEMEN KEPUASAN
Î job design (Æ task requirements, technology, ability and skill) 3. SENTRALISASI
4. DELEGASI WEWENANG DAYA SAING
Î organization design (Æ technology, environmental uncertainty, strategy, PERKEMBANGAN
managerial choice)
KELANGSUNGAN
Faktor-faktor strategi USAHA
Keputusan manajer akan menentukan dimensi dari struktur
organisasi Æ formalism, complexity, dan centralization desain organisasi pilihan manajer

Struktur organisasi Æ menyumbang pada efektivitas

organisasional teknologi Environmental
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 Reni Rosari
FE UGM

Division of Labor/Specialization: Delegation/Hierarchy of Authority:

up and down the organizational ladder
carving up the jobs done
 a configuration of the reporting relationships within
 the process of dividing the many tasks in an organization into organizations (i.e. who reports to whom)
specialized jobs
 process of distributing authority downward in an organization
Job specialization can occurs in 3 different ways : Î Decentralize
„ Personal specialties ~ occupational and professional specialties Æ
Î Centralize
e.g. accountants, engineers, scientists, physicians, etc.
„ Horizontal specialties ~ work is divided by the natural sequence of Decision guideline:
the work the organization does Æ e.g. manufacturing plants – divide 1. How routine and straightforward are the job’s or unit’s
work into fabricating and assembly required decisions?
„ Vertical specialties ~ work is divided along the vertical plane of an
organization Æ from the lowest level manager to the highest level 2. Are individuals competent to make the decision?
manager 3. Are individuals motivated to make the decision?
4. Do the benefits of decentralization outweigh its costs?
13 14

Decentralization: delegating power

downward
Span of Control:
Breadth of Responsibility
 the extent to which authority and decision making are spread
throughout all levels of an organization rather than being  number of individuals who report to specific manager
reserved for top management (i.e. centralized)
 The number of subordinates in an organization who are
Decentralization: Benefits when low and when high supervised by managers

LOW DECENTRALIZATION (HIGH HIGH DECENTRALIZATION (LOW

CENTRALIZATION) CENTRALIZATION) 3 factors important for determining optimum span of control:
 Eliminates the additional  Can eliminate levels of Πrequired contact
responsibilities not desired by management, making a leaner
Î degree of specialization
people performing routine jobs organization
 Permits crucial decisions to be  Promotes greater opportunities for Πability to communicate
made by individuals who have the decisions to be made by people
“big picture” closest to problems

15 16

Tall United States Army

Flat Organizational Structure
Organizational General
Characteristic of decentralized companies with relatively few
layers of management and relatively wide spans of control
Structure Colonels
Characteristic of centralized
Majors
Typical Law Firm companies with multiple
layers of management and Captains &
Chief Partner relatively narrow spans of Lieutenants
control Warrant
Relatively narrow span of Officers
Partners control.
Sergeants
At lower levels, where
Associates tasks are similar and Corporals
simpler, span of control
Relatively wide span of control widens. Privates
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 Reni Rosari
FE UGM

Line and Staff Positions: Departmentalization:

ways of structuring organizations
Decision Makers and Advisers
Line Position  process of grouping jobs into logical units
 Position in organizations in which people can make decisions related to  The process of breaking organizations into coherent units
basic work
 process in which an org. is structurally divided by combining
e.g. vice president, managers Æ have a decision making power
jobs in departments according to some shared characteristics or
Staff positions basis
 Positions in organizations in which people make recommendations to others
but are not involved in decisions concerning day to day operations Î Functional
e.g. legal counsel Æ provides advice & recommendations to the line Î Product
managers
Î Territorial
HR managers Æ line + staff positions ?
Î Customer

19 20

Departmentalization Multiple Forms of Departmentalization

Functional Departmentalization President
Departmentalization according to groups’ functions or activities
Functional Departmentalization
Territorial/Geographic Departmentalization
Vice President Vice President Vice President
Departmentalization according to areas served by a business Marketing Production Finance
Product Departmentalization
Departmentalization according to specific products being created Geographical Departmentalization
Customer Departmentalization
Yogyakarta Plant Semarang Plant Surabaya Plant
Departmentalization according to types of customers likely to buy a Manager Manager Manager
given product
Process Departmentalization Product Departmentalization
Departmentalization according to production processes used to create a
good or service Consumer Industrial Consumer Industrial Consumer Industrial
Products Products Products Products Products Products
21 22

Departmentalization The Matrix Organization

 Functional Organizations: Departmentalization
by Task
 Product Organizations: Departmentalization by
Type of Output
 Matrix Organization: Departmentalization by
Function and Product
 Horizontal Organizations: Structuring by Process
Æ the practice of structuring organizations by the
processes performed, using autonomous work teams in
flattened hierarchies
Æ combines functional and product departmental bases ~ dual
authority system
Æ organizational structure in which teams are formed and team
members report to two or more managers
Î A matrix is a highly flexible form that is readily
adaptable to changing circumstances.
Î Matrix structures rely heavily on committee and team
authority.
Î Some companies use the matrix organization as a
temporary measure to complete a specific project. The
end of the project usually means the end of the matrix.

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 Reni Rosari
FE UGM

Matrix Organization at Martha Stewart

Advantages of Matrix Organization
Area Media Group Merchandising Group
Specialists
 Efficient use of resources

K-mart Line

Sears Paint
Newspaper
Magazines

Specialty/
Cable TV
Network/

Retailing
Catalog
Internet

Radio/
Books

Line
 Flexibility in conditions of change and uncertainty
Cooking
 Technical expertise
Entertainment
 Freeing top management for long-range planning
Weddings

Crafts  Improving motivation and commitment

Gardening
 Providing opportunities for personal development
Home

Holidays

Children
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Organization Dimensions in Relation to

DIMENSIONS OF STRUCTURE Organizational Decisions

 Formalization: extent to which an organization relies DIMENSIONS DECISIONS

on written rules and procedures to predetermine actions of High formalization „ High specialization
employees „ Functional departments
„ Wide span of control
 Centralization: degree to which top management „ Delegated authority
delegates authority to make decisions High centralization „ High specialization
 Complexity: number of different job titles, or „
„
Functional departments
Wide span of control
occupational groupings, units or departments and authority „ Centralized authority
levels in an organization High complexity „ High specialization
„ Territorial, customer, and product departments
Relationship between dimensions of organizational structure and the four „ Narrow span of control
design decisions are summarized in the next table. „ Delegated authority

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ORGANIZATIONAL DESIGN:
COORDINATING THE STRUCTURAL ORGANIZATION DESIGN MODEL
ELEMENTS OF ORGANIZATIONS Â The Mechanistic Model = System 1
Organizational design Î the principle of specialization, unity of direction,
authority and responsibility, the scalar chain
 the process of co-ordinating the structural principle, bureaucracy
elements of an organization in the most  The Organic Model = System 4
appropriate manner
Î simple, decentralize, informal
 management decisions and actions that result
 The Matrix Model
in a specific organization structure
Î combines functional and product departmental
bases
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 Reni Rosari
FE UGM

ORGANIZATIONAL DESIGN ORGANIZATIONAL DESIGN

ÂClassical and neoclassical approaches: the quest for
the best design
„ CLASSICAL ORGANIZATIONAL THEORY:
approaches assuming there is a single best way to design organizations
Æ Max Weber, F. Taylor, and Henry Fayol ~ effective organization had a formal
hierarchy, clear rules, specialization of labor, highly routine task and a highly
impersonal working environment Æ bureaucracy (Weber)
„ NEOCLASSICAL ORGANIZATIONAL THEORY: an
attempt to improve an classical organizational theory that argues
employee satisfaction as well as economic effectiveness are the
goals of organizational structure
Æ D. McGregor (Theory Y), Chris Argyris, Rensis Likert (System 4 organization
Æ Designing organization with flat hierarchical structure (minimizing managerial
control over subordinates) and a high degree of decentralization (encouraging
employees to make their own decisions)
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 The Contingency Approach: design according to
environmental conditions Æ recognizing that no one approach to
organizational design is best, but that the best design is the one that best fits
with the existing environmental conditions
Î The external environment: its connection to organizational design
Æ The sum of all the forces with which an organization must deal
effectively if it is to survive Æ include general work conditions (e.g.
economy, geography, national resources) and specific task environment
within which the company operates (e.g. competitors, customers, work
force, suppliers)
Î Mechanistic and organic organizations: designs for
stable and turbulent conditions
y Mechanistic Æ in which people perform specialized jobs, rigid rules are
imposed, and authority is vested in a few, top ranking officials
y Organic Æ in which jobs tend to be very general, there are few rules, and
decisions can be made by lower level employees
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The Mechanistic vs. The Organic Organization ¾ Mechanistic versus organic designs

™ mechanistic organization adapted to stable environment

Mechanistic Organic ™ organic organization adapted into innovative environment

¾ High specialization ¾ Cross functional teams Mechanistic and organic designs differs along several key dimensions
identified here. These represent extremes; organizations can be
¾ Rigid ¾ Cross hierarchical relatively organic, relatively mechanistic, or somewhere in between
departmentalization teams
¾ Clear chain of ¾ Free flow of Dimension Mechanistic Organic
command information Stability Change unlikely Change likely
¾ Narrow span of controls ¾ Wide spans of control Specialization Many specialists Many generalists
¾ Centralization ¾ Decentralization Formal rules Rigid rules Considerable flexibility
Authority Centralized in Decentralized, diffused
¾ High formalization ¾ Low formalization
few top people throughout the organization

33 34

ÂMintzberg’s Framework  Mintzberg’s Framework: Five Organizational Forms

Mintzberg Æ organization are composed of five basic elements - or DESIGN DESCRIPTION EXAMPLE
groups of individuals- any one of which may predominate Simple, informal, authority Small, entrepreneurial
Simple structure
centralized in a single person business
 The operating core Æ employees who perform the basic work related to an
organization’s product or service
Machine Highly complex, formal Government office
 The strategic apex Æ top level executives responsible for running an entire bureaucracy environment with clear lines of
organization authority
 The middle line Æ managers who transfer information between higher and lower Professional Complex, decision making authority University
levels of the organizational hierarchy
bureaucracy in professionals

 The technostructure Æ organizational specialists responsible for standardizing Divisionalized Large, formal organizations with Multidivision business,
various aspects of an organization’s activities structure several separate divisions such as General Motors
 The support staff Æ individuals who provide indirect support services to an
organization Adhoracy Simple, informal, with decentralized Software development
authority firm
What organizational designs fit best under conditions in which
these five groups dominate?
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 Reni Rosari
FE UGM

ORGANIZATIONAL DESIGN Virtual Organization

 The Boundaryless Organization: A New Corporate Contracted Contracted
Architecture Æ minimize or eliminate traditional boundaries and Manufacturing Administrative
structures Æ chains of command are eliminated, spans of control in Asia Services
are unlimited, and rigid departments give way to empowered
teams • Accounting
Core
The Boundaryless Organizations: various Forms • Human
Organization Resources
™ Boundaryless Organizations (Barrier-Free Organization Æ all • Finance
barriers, both inside and outside the organization, are eliminated • Operations
™ Modular organizationÆ eliminate only external barriers Æ • Management
organization expands by outsourcing functions to other
organizations that provide specialized services
Contracted Contracted
™ Virtual organization Æ eliminate only external barriers Æ Sales & Distribution &
organization temporarily forms a new organization by joining Marketing Logistics
with several others until project is completed
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INTERORGANIZATIONAL DESIGNS: GOING Strategic Alliances: A Continuum of

BEYOND THE SINGLE ORGANIZATION Interorganizational Relationship

 Conglomerates: diversified “Megacorporations” Mutual Service Joint Ventures Value-Chain

a form of organizational diversification in which an organization Consortia
(usually a very large, multinational one) adds an entirely (Similar companies pool
resource to share a joint
unrelated business or product to its organizational design benefit; e.g. hospitals share
expense to build and
 Strategic Alliances operate on MRI /magnetic
resonance imager unit)]
a type of organizational design in which two or more separate
companies combine forces to develop and operate a specific
business (see mutual consortia, joint ventures, and value chain
partnerships) Weak
and
distant
39
Partnerships
(Different companies
work together to fulfill the (Different companies
same opportunity, each that rely on each other
requiring each other for their unique
business; e.g.
benefit; e.g. Pertamina &
customer-supplier
Mobil Oil)
relationships)
Strong
Closeness of Relationship and
close
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Strategic Alliances: Joining for Mutual Benefit

 Strategic alliances
 The continuum of alliances
Î Mutual service consortia
Î Value chain partnerships
Î Joint ventures
Î Networked incubator
Î Incubator
 An alternative to the joint venture
Î spinoff
 Strategic alliances in the global economy
 Strategic alliances can help minority-owned businesses
 Are strategic alliances successful?

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