Fundamentals of Organization

Structure
Session # 3
Dimensions of Organization Structure
 Structural Dimensions:  Contextual Dimensions
 Complexity  Size
 Formalization  Culture
 Centralization  Strategy
 Technology
 Environment
Complexity
 The degree of differentiation that exists within an
organization
 Horizontal Differentiation:
Considers the degree of horizontal separation between
units
 Vertical Differentiation:
Refers to the degree of depth
 Spatial Differentiation:
The degree to which the location of an organization’s
facilities and personnel are dispersed geographically
Horizontal Differentiation
 Refers to the degree of differentiation between units
based on the orientation of members, the nature of task
they perform, their education and training
 The most visible evidence in organizations of horizontal
differentiation is work specialization and
departmentalization
 Horizontal Differentiation
 Work Specialization:
Particular grouping of activities performed by an individual
It can be achieved through:
1. Functional Specialization or Division of Labor
Job is broken down into simple repetitive task
2. Social Specialization or Professionalization
Individual is specialized rather than their work (professionals)
 Horizontal Differentiation
 Departmentalization:
Grouping together of specialists.
Departments could be created on the basis of:
a. Functions
b. Product
c. Customer
d. Geography
e. Process
f. Number
Departmentalization by Number
In the Army:
Fire teams make up squads.
Squads make up platoons.
Platoons make up Companies
Companies make up battalions.
Battalions make up regiments.
Regiments make up divisions.
 Vertical Differentiation
 Refers to the depth in structure
The number of levels that exist between top
management and operatives
Greater the number of levels (positions), taller will be
organization structure.
 Question:

 Can horizontal differentiation and vertical differentiation be

construed as independent of each other?
 Ans:
 Vertical differentiation should be understood as a response to
horizontal differentiation
 Question:
 Do organizations with equal number of employees need to have the same
degree of vertical differentiation?
 Ans:
 The determining factor is span of control
 Span of control:
Defines the number of subordinates that a manager controls directly
a. Wide span:
Managers have large number of subordinates reporting to them
b. Narrow span:
Managers have lower number of subordinates reporting to them
Wider span of control leads to flat organization structure whereas narrow
span would lead to taller organization
 Vertical Differentiation
 Advantages of tall organizations:
1. Tighter controls within a span
2. Better psychological career paths, better promotion opportunities
 Disadvantages:
1. Vertical coordination and communication become complicated
2. Costly
 Advantages of Flat Organizations
1. Shorter and simpler communication chain
2. Efficient
 Disadvantages
1. Loose controls within a span
2. Reduced promotion chances
 Formalization
 The degree to which jobs within an organization are standardized
 In highly formalized jobs, the employee has minimum amount of
discretion over what is to be done, and how it should be done.
 Results in consistent and uniform output
 In jobs with low formalization, employees’ behavior is relatively
non-programmed by the organization.
 Such jobs would offer employees a great deal of freedom to
exercise discretion in their work
Implications of (high) formalization
 Since the natural behavior of employees is inversely
related to the behavior that is programmed by the
organization, the greater the formalization, lower the
variability in employees’ behavior.
 Formalization not only eliminates employees engaging in
alternative behavior, but also removes the need for
employees to consider alternatives (Conditioning)
 Formalization results in economies (save cost),
but is not conducive to promoting innovation
 Range of Formalization (low – high)
 Unskilled jobs versus professional jobs
 Kind of work being performed (production versus sales)
 Level in the hierarchy of organization
 Standardization: the “Make or Buy” Decision

 The “Make” decision refers to formalization achieved on the job

 This approach is emphasized with unskilled workers
 The “Buy” decision refers to creation of standardization through social
specialization.
 This is true in hiring professionals, where the individual is
“standardized” rather than the job!
 Direct on the job formalization and professionalization are basically
substitutes for each other
 The organization can either control employee behavior directly or it
can achieve indirect control by hiring highly trained professionals
HRM Techniques to achieve standardization
 Recruitment
 Selection
 Job Orientation
 Work Place Orientation
 Rules, Procedures & Policies
 Role Requirements (Cultural Acclimatization)
 Training
 The Relationship between Formalization and
Complexity

 The key to understanding the complexity – formalization

relationship is to focus on the degree of horizontal
differentiation and the way it is achieved
 High horizontal differentiation when achieved through division
of labor, typically means hiring unskilled personnel to perform
routine and repetitive task tends to be associated with high
degree of formalization to facilitate coordination and control.
 Where high horizontal differentiation is achieved by hiring
professionals, formalization tends to be low
Centralization
 The degree to which decision making authority is
concentrated at the top in the organization
 A high concentration implies high centralization, while a low
concentration results in decentralization
 In highly centralized structures, employees down the line
have little or no authority to take decisions
 In decentralized organizations, decision making authority is
delegated
 Issues in Centralization
 Centralization can go beyond the formal structure:
1. Can policies override decentralization?
2. Yes. Results it results in Pseudo decentralization
3. Does high amount of pressure/influence applied by lower
level employees result in decentralization of what appears to
be centralization?
4. Yes: Leads to De facto Decentralization.
 Implications of Centralization
 Reasons for Decentralization
 Avoidance of information/work overload
 Fast, on-the-spot decision making
 Detailed input into decision making process
 Employee motivation
 Training opportunity
 Reasons for Centralization
 Unwillingness by top management to delegate authority
 Lack of trust in the skills of lower level mangers & employees
 Strategic
Apex

Departmental Heads
Techno-
Server Support
Middle Level

Line Managers

Operatives
 ASSIGNMENT
 Bring a printed solution to the case:
“The Six Day War”