Chapter 15 Foundations of Organization Structure

MULTIPLE CHOICE What is Organizational Structure? 1. _____ defines how job tasks are formally divided, grouped, and coordinated. a. Organizational structure b. Work specialization c. Departmentalization d. Organizational behavior (a; Easy; p. 452) 2. Organizational structure has six key elements. elements? a. centralization b. departmentalization c. span of authority d. formalization (c; Moderate; p. 452) 3. Work specialization is the same as: a. departmentalization. b. division of labor. c. decentralization. d. job grouping. (b; Easy; p. 452-453) 4. The degree to which tasks are subdivided into separate jobs is termed: a. departmentalization. b. decentralization. c. work specialization. d. structure. (c; Moderate; p. 452-453) 5. In the late 1940s, most manufacturing jobs in industrialized countries were being done with high: a. departmentalization. b. decentralization. c. work specialization. d. structuralization. (c; Moderate; p. 453) Which of the following is not one of these

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For much of the first half of the 20 th century, managers viewed _____ as an unending source of increased productivity. a. departmentalization b. formalization c. work specialization d. automation (c; Moderate; p. 454) 6. 7. Which one of the following components of organizational structure specifically defines where decisions are made? a. complexity/simplicity b. formalization/informalization c. centralization/decentralization d. specialization/enlargement (c; Moderate; Exh 15-1; p. 453) 8. The basis by which jobs are grouped together is termed: a. departmentalization. b. bureaucracy. c. specialization. d. centralization. (a; Easy; Exh. 15-1; p. 453) 9. Grouping jobs on the basis of function, product, geography, process, or customer is a form of: a. departmentalization. b. specialization. c. centralization. d. bureaucracy. (a; Moderate; p. 454) 10. One of the most popular ways to group activities is by: a. product. b. function. c. geography. d. process. (b; Challenging; p. 454) 11. Proctor & Gamble departmentalizes by Tide, Pampers, Charmin, and Pringles. This is an example of departmentalization by: a. function. b. process. c. geography. d. product. (d; Easy; p. 455)

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A plant manager who organizes the plant by separating engineering, accounting, manufacturing, personnel, and purchasing into departments is practicing _____ departmentalization. a. target customer b. product c. functional d. geographic (c; Moderate; p. 454) 13. _____ departmentalization achieves economies of scale by placing people with common skills and orientations into common units. a. Functional b. Process c. Product d. Geographic (a; Moderate; p. 454) 14. At an Alcoa aluminum tubing plant in New York, production is organized into five departments: casting; press; tubing; finishing; and inspecting; packing; and shipping. This is a. functional departmentalization. b. process departmentalization. c. product departmentalization. d. none of the above. (b; Moderate; p. 455) 15. The unbroken line of authority that extends from the top of the organization to the lowest echelon and clarifies who reports to whom is termed: a. chain of command. b. authority. c. span of control. d. unity of command. (a; Moderate; p. 456) 16. The right inherent in a managerial position to give orders and expect orders to be obeyed is termed: a. chain of command. b. authority. c. power. d. unity of command. (b; Moderate; p. 456) 17. The _____ principle helps preserve the concept of an unbroken line of authority. a. span of control b. chain of command c. unity of command d. centralization (c; Moderate; p. 456)

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The _____ principle states that a person should have one and only one superior to whom he or she is directly responsible. a. span of control b. chain of command c. unity of command d. authority (c; Moderate; p. 456) 19. The _____ refers to the number of subordinates a manager can efficiently and effectively direct. a. span of control b. unity of command c. chain of command d. decentralization principle (a; Moderate; p. 456) 20. Which of the following is a drawback of a narrow span of control? a. It reduces effectiveness. b. It is more efficient. c. It encourages overly tight supervision and discourages employee autonomy. d. It empowers employees. (c; Challenging; p. 457) 21. Which of the following is not a drawback of a narrow span of control? a. It is expensive. b. It makes vertical communication in the organization more complex. c. Supervisors may loose control of their employees. d. It encourages overly tight supervision. (c; Challenging; p. 457) 22. The trend in recent years has been toward: a. narrower spans of control. b. wider spans of control. c. a span of control of four. d. an ideal span of control of six to eight. (b; Moderate; p. 457) 23. If you have a narrow span of control, you have a(n) _____ organization. a. efficient b. short c. tall d. matrix (c; Moderate; p. 457)

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_____ are consistent with recent efforts by companies to reduce costs, cut overhead, speed up decision making, increase flexibility, get closer to customers, and empower employees. a. Wider spans of control b. Narrower spans of control c. Matrix structures d. Simple structures (a; Moderate; p. 457) 25. The best definition for centralization is: a. decision making is pushed down to lower level employees. b. decision making is concentrated at a single point in the organization. c. decision making depends on the situation. d. decision making is done in each department and then sent to the president for the final decision. (b; Moderate; p. 458) 26. In an organization that has high centralization: a. the corporate headquarters is located centrally to branch offices. b. all top level officials are located within the same geographic area. c. top managers make all the decisions and lower level managers merely carry out directions. d. action can be taken more quickly to solve problems. (c; Moderate; p. 457-458) 27. The more that lower-level personnel provide input or are actually given the discretion to make decisions, the more _____ there is. a. centralization b. decentralization c. work specialization d. departmentalization (b; Moderate; p. 458) 28. If a job is highly formalized, it would not include which of the following? a. clearly defined procedures on work processes b. explicit job description c. high employee job discretion d. a large number of organizational rules (c; Moderate; p. 458) 29. Explicit job descriptions, lots of rules, and clearly defined procedures concerning work processes are consistent with: a. high formalization. b. high specialization. c. high centralization. d. bureaucracy. (a; Moderate; p. 458)

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Employee discretion is inversely related to: a. complexity. b. standardization. c. specialization. d. departmentalization. (b; Challenging; p. 458-459) Common Organizational Designs 31. Which of the following is not a common organizational design? a. simple structure b. bureaucracy c. centralized structure d. matrix structure (c; Moderate; p. 459) 32. The _____ is characterized by a low degree of departmentalization, wide spans of control, authority centralized in a single person, and little formalization. a. bureaucracy b. matrix organization c. simple structure d. team structure (c; Moderate; p. 460) 33. Which one of the following is consistent with a simple structure? a. high centralization b. high horizontal differentiation c. high employee discretion d. standardization (a; Moderate; p. 460) 34. The ____ is a flat organization. a. bureaucracy b. centralized structure c. matrix structure d. none of the above (d; Moderate; p. 460) 35. Simple structures are characterized by: a. shared authority. b. a narrow span of control. c. standardization. d. a low degree of departmentalization. (d; Moderate; p. 460)

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This is most widely practiced in small businesses. a. simple structure b. standardization c. centralized structure d. span of control (a; Easy; p. 460) 37. The bureaucracy is characterized by all of the following except: a. highly routine operating tasks. b. formalized rules and regulations. c. tasks that are grouped into functional departments. d. decentralized decision making. (d; Moderate; p. 461) 38. The key underlying all bureaucracies is: a. flexibility. b. standardization. c. dual lines of authority. d. wide span of control. (b; Easy; p. 460) 39. The ____ is characterized by highly routine operating tasks achieved through specialization. a. simple structure b. bureaucracy c. centralized structure d. matrix structure (b; Moderate; p. 461) 40. The strength of the simple structure lies in its: a. efficiency. b. simplicity. c. centralization. d. span of control. (b; Easy; p. 460) 41. Which of the following is not a weakness of the simple structure? a. It is risky. b. information overload c. There is little unity of command. d. slower decision making (c; Moderate; p. 460)

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The structure that creates dual lines of authority and combines functional and product departmentalization is the: a. organizational structure. b. bureaucracy. c. matrix structure. d. virtual organization. (c; Moderate; p. 462) 43. The matrix structure combines which two forms of departmentalization? a. process and functional b. functional and product c. product and process d. none of the above (b; Challenging; p. 462) 44. The _____ violates the unity of command concept. a. simple structure b. virtual structure c. matrix structure d. team structure (c; Challenging; p. 462) 45. Which one of the following problems is most likely to occur in a matrix structure? a. decreased response to environmental change b. decreased employee motivation c. loss of economies of scale d. employees receiving conflicting directives (d; Moderate; p. 463) 46. The strength of the matrix structure is its: a. ability to facilitate coordination. b. economies of scale. c. adherence to chain of command. d. standardization. (a; Moderate; p. 463) 47. The major disadvantage of the matrix structure is: a. the confusion it creates. b. its propensity to foster power struggles. c. the stress it places on individuals. d. all of the above (d; Challenging; p. 463)

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New Design Options 48. The primary characteristics of the _____ structure are that it breaks down departmental barriers and decentralizes decision making to the level of the work team. a. virtual b. team c. boundaryless d. organizational (b; Moderate; p. 463-464) 49. In larger organizations, the team structure complements what is typically a: a. virtual organization. b. bureaucracy. c. formal structure. d. boundaryless organization. (b; Challenging; p. 464) 50. A small, core organization that outsources major business functions is the _____ organization. a. team b. virtual c. boundaryless d. matrix (b; Moderate; p. 464) 51. The ____ is also called the network or modular organization. a. virtual organization b. team structure c. pyramid d. boundaryless organization (a; Moderate; p. 464) 52. The prototype of the virtual structure is todays: a. appliance manufacturers. b. movie-making organizations. c. fast-food restaurants. d. software companies. (b; Challenging; p. 464) 53. The major advantage of the virtual organization is its: a. control. b. predictability. c. flexibility. d. empowerment. (c; Moderate; p. 465)

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The _____ organization stands in sharp contrast to the typical bureaucracy that has many vertical levels of management and where control is sought through ownership. a. virtual b. team c. limitless d. matrix (a; Moderate; p. 465) 55. The boundaryless organization relies heavily on: a. information technology. b. functional and product departmentalization. c. the simple structure. d. none of the above. (a; Moderate; p. 466) 56. An organization that seeks to eliminate the chain of command, have limitless spans of control, and replace departments with empowered teams is the: a. virtual organization. b. boundaryless organization. c. matrix organization. d. team structure. (b; Moderate; p. 466) 57. The one common technological thread that makes the boundaryless organization possible is: a. reengineering. b. MBAs. c. networked computers. d. mainframes. (c; Moderate; p. 468) Why Do Structures Differ? 58. The _____ is a structure characterized by extensive departmentalization, high formalization, a limited information network, and centralization. a. mechanistic model b. organic model c. traditional model d. bureaucracy organization (a; Moderate; p. 468) 59. Which of the following is not a characteristic of a mechanistic structure? a. extensive departmentalization b. high formalization c. limited information network d. flexibility (d; Easy; p. 468) 60. If there is low formalization, a comprehensive information network, and high participation in decision making, one would expect a(n): 95

a. simple structure. b. mechanistic structure. c. organic structure. d. stable structure. (c; Challenging; p. 468-469) 61. All of the following are characteristics of the organic model except: a. cross-functional teams. b. cross-departmentalization. c. cross-hierarchical teams. d. high participation. (b; Moderate; p. 468-469) 62. Which of the following is not a determinant of an organizations structure? a. strategy b. organization size c. innovation d. technology (c; Moderate; p. 469-472) 63. Changes in corporate strategy precede and lead to: a. changes in the environment. b. better communication. c. increased productivity. d. changes in an organizations structure. (d; Challenging; p. 469) 64. A strategy that emphasizes the introduction of major new products and services is a(n) _____ strategy. a. innovation b. enhancement c. progressive d. organic (a; Moderate; p. 469) 65. The innovation strategy is characterized by: a. unorthodox structures. b. a mixture of loose with tight properties. c. low specialization and low formalization. d. high technology. (c; Moderate; p. 469)

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_____ refers to how an organization transfers its inputs into outputs. a. Production b. Technology c. Operations d. Process (b; Challenging; p. 470) 67. Which of the following is not part of the organizations environment? a. public pressure groups b. customers c. technology d. competitors (c; Moderate; p. 471) 68. The _____ of an environment refers to the degree to which it can support growth. a. capacity b. qualifications c. potential d. capability (a; Moderate; p. 472) 69. _____ refers to the degree of instability of an environment. a. Instability b. Volatility c. Irregularity d. Unpredictability (b; Moderate; p. 472) 70. Three key dimensions to any organizations environment have been found. Which of the following is not one of these key dimensions? a. volatility b. capability c. complexity d. capacity (b; Moderate; p. 472) 71. The _____ of an environment refers to the degree of heterogeneity and concentration among environmental elements. a. density b. simplicity c. complexity d. intricacy (c; Moderate; p. 472)

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Organization Designs and Employee Behavior 72. Which of the following generalizations about organizational structures and employee performance and satisfaction is most true? a. There is fairly strong evidence linking decentralization and job satisfaction. b. It is probably safe to say that no evidence supports a relationship between span of control and employee performance. c. The evidence generally indicates that work specialization contributes to lower employee productivity. d. No one wants work that makes minimal intellectual demands and is routine. (b; Challenging; p. 474) 73. There is research evidence to suggest that: a. employees with high self-esteem are more satisfied with decentralized organizations. b. a managers job satisfaction increases along with the number of employees he or she supervises c. centralized organizations tend to have more satisfied employees. d. a managers job satisfaction is inversely related to the number of employees he or she supervises (b; Challenging; p. 474) TRUE/FALSE 74. Organizations have different structures, but the structure has little bearing on employee attitudes and behavior. (False; Easy; p. 452) What is Organizational Structure? 75. Specialization defines how job tasks are formally defined, grouped, and coordinated. (False; Moderate; p. 452) 76. Managers need to address six key elements when they design their organizations structure: work specialization, departmentalization, chain of command, chain of control, centralization and decentralization, and formalization. (False; Challenging; p. 452) 77. The degree to which tasks in the organization are subdivided into separate jobs is termed departmentalization. (False; Moderate; p. 452-453) 78. Work specialization and division of labor are the same thing. (True; Easy; p. 452-453) 79. Work specialization may result in employee boredom, stress, and absenteeism. (True; Easy; p. 454) 80. For much of the first half of this century, managers viewed departmentalization as an unending source of increased productivity. (False; Moderate; p. 454) 81. The strength of functional departmentalization is putting similar specialists together. 98

(True; Moderate; p. 454) 82. Only one form of departmentalization can effectively be implemented in an organization at a time. (False; Moderate; p. 455) 83. The inherent right in a managerial position to give orders and expect the orders to be obeyed is termed power. (False; Moderate; p. 456) 84. Departmentalization answers questions for employee such as To whom do I go if I have a problem? (False; Moderate; p. 456) 85. The unbroken line of authority that extends from the top of the organization to the lowest echelon is termed the command line of authority. (False; Easy; p. 456) 86. The principle of unity of command suggests that managers should support one another. (False; Easy; p. 456) 87. The trend in recent years has been toward wider spans of control. (True; Easy; p. 457) 88. Span of command determines the number of levels and managers an organization has. (False; Moderate; p. 456) 89. All things being equal, the wider or larger the span, the more profitable the organization. (False; Challenging; p. 456) 90. Flat organizational structures result from narrow spans of control. (False; Challenging; Exh. 15-3; p. 457) 91. Narrow spans of control can result in lack of supervision, causing performance to suffer. (False; Moderate; p. 457) 92. Having too many people report to you can undermine your effectiveness. (True; Easy; p. 457) 93. The more that lower-level personnel provide input or are actually given the discretion to make decisions, the more decentralized the organization. (True; Moderate; p. 458) 94. A decentralized organization is more likely to result in a feeling of alienation by employees than a centralized organization. (False; Challenging; p. 458) 95. There has been a marked trend toward centralized decision making. (False; Moderate; p. 458)

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96. Increase in the number of rules and regulations results in increased formalization. (True; Easy; p. 458-459) 97. The greater the formalization, the more input an employee has into how his or her work is done. (False; Challenging; p. 458) 98. Autonomy and formalization are positively related. (False; Moderate; p. 458) Common Organizational Designs 99. The simple structure is flexible and inexpensive to maintain, but the chain of command is often ambiguous. (False; Moderate; p. 460) 100. The strength of the bureaucracy lies in its ability to perform standardized activities. (True; Challenging; p. 461) 101. A major strength of the simple structure is that it easily adapts to any size organization. (False; Challenging; p. 460) 102. The simple structure is risky. (True; Challenging; p. 460) 103. Standardization is the key that underlies the simple structure. (False; Easy; p. 460) 104. The matrix structure is characterized by highly routine operating tasks achieved through specialization. (False; Challenging; p. 461) 105. A major weakness of the bureaucracy is that it creates sub-unit conflicts. (False; Moderate; p. 462) 106. The bureaucracy is efficient only as long as employees confront problems that they have previously encountered. (True; Easy; p. 462) 107. A structure that creates dual lines of authority and combines functional and product departmentalization is the matrix structure. (True; Easy; p. 462)

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The strength of the bureaucracy is its ability to facilitate coordination when the organization has complex and interdependent activities. (False; Moderate; p. 462) 109. The matrix structure facilitates the allocation of specialists. (True; Challenging; p. 462) 110. The major disadvantages of the matrix lie is that it creates sub-unit conflicts and that functional unit goals can override the organizational goals. (False; Challenging; p. 463) New Design Options 111. The team structure breaks down department barriers and decentralizes decision making. (True; Moderate; p. 463-464) 112. Often the team structure complements what is typically a bureaucracy. (True; Moderate; p. 464) 113. The primary characteristics of the virtual organization are that it breaks down department barriers and decentralizes decision. (False; Moderate; p. 463-464) 114. You have decided to hire a small shop to do all your duplicating and printing. This is an example of outsourcing. (True; Moderate; p. 465) 115. The matrix organization is also called the network or modular organization. (False; Challenging; p. 464) 116. The major advantage to the virtual organization is its flexibility. (True; Easy; p. 466) 117. The virtual organization is effective in obtaining organizational stability. (False; Moderate; p. 465-466) 118. Jack Welch coined the term virtual organization. (False; Easy; p. 466) 119. An organization that seeks to eliminate the chain of command is a boundaryless organization. (True; Easy; p. 466) 120. Status and rank are minimized in the borderless organization. (False; Challenging; p. 466) 121. Globalization is easier in a borderless organization. (False; Challenging; p. 466) 122. The technological thread that makes the boundaryless organization possible is networked computers. 101

(True; Moderate; p. 468) Why Do Structures Differ? 123. The organic structure is characterized by extensive departmentalization, high formalization, a limited information network, and centralization. (False; Easy; p. 468) 124. The boundaryless organization is an example of the organic model of organizational design. (True; Easy; p. 468) 125. Mechanistic structures are high in formalization. (True; Easy; p. 468) 126. Mechanistic structures have high participation in decision making. (False; Moderate; p. 468) 127. Strategy does not impact an organizations structure. (False; Easy; p. 469) 128. An innovation strategy works well only for the simple structure. (False; Moderate; p. 469) 129. An organization that controls costs, refrains from incurring unnecessary innovation or marketing expenses, and cuts prices in selling a basic product pursues a price-minimization strategy. (False; Moderate; p. 469) 130. An innovation strategy seeks to quickly move into new products or new markets after their viability has been proven. (False; Moderate; p. 469) 131. Size affects structure at a decreasing rate. (True; Challenging; p. 470) 132. Adding 500 employees to an organization that has only 300 members is likely to result in a shift toward a more organic structure. (False; Challenging; p. 470) 133. Technology refers to how an organization transfers its inputs into outputs. (True; Moderate; p. 470) 134. The three key dimensions to an organizations environment have been found to be: capacity, complexity, and technology. (False; Challenging; p. 472) 135. The environment of an organization needs to be assessed in terms of capacity, which is the degree of heterogeneity and concentration among environmental elements. (False; Challenging; p. 472)

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136. The more scarce, dynamic, and complex the environment, the more organic a structure should be. (True; Challenging; p. 472) Organizational Designs and Employee Behavior 137. Research supports the notion that employees prefer an organic structure. (False; Moderate; p. 474) 138. The evidence generally indicates that work specialization contributes positively to productivity. (True; Easy; p. 473) 139. A review of the research indicates that there is no evidence to support a relationship between span of control and employee performance. (True; Moderate; p. 474) 140. Organizations that are less centralized have a greater amount of participative decision making. (True; Easy; p. 474) SCENARIO-BASED QUESTIONS Application of: What is Organizational Structure? Consultants Exceptional has hired you to develop training materials for their consultants. Your first assignment is to develop a training program that helps their consultants to analyze and understand the organizational structure of the company that they are assisting. They believe that in order to adequately evaluate and understand the company, they need to understand the basic organizational structure. Then they will be able to recommend actions and changes based on that structure. 141. One of the questions you tell the trainees to ask is To what degree are tasks subdivided into separate jobs? This question addresses the issue of: a. formalization. b. work specialization. c. span of control. d. chain of command. (b; Moderate; Exh. 15-1; p. 453) 142. _____ is addressed by asking the question On what basis are jobs grouped together? a. Departmentalization b. Work specialization c. Centralization and decentralization d. Formalization (a; Challenging; Exh. 15-1; p. 453) 143. You instruct the trainees to ask about the degree of rules and regulations that direct employees and managers. You want to help them understand the: a. chain of command. b. degree of formalization. c. span of control. d. degree of departmentalization. 103

(b; Moderate; Exh. 15-1; p. 453) Application of Departmentalization You have divided the jobs done by your department through work specialization and are now trying to decide how to best group them for efficiency and service to the customer. You are considering whether to group activities by function, product, process, geography, or customer. 144. You have decided that since you are a novice at departmentalization, you will go with the most popular method. You will probably choose: a. function. b. product. c. process. d. customer. (a; Moderate; p. 454) 145. You are organizing into southern, midwestern, western, and eastern regions. This is termed ______ departmentalization. a. area b. customer c. geography d. regional (c; Easy; p. 455) 146. Your market is clearly divided between very different types of clients, with different support and other needs. You will probably choose to departmentalize by: a. requirements. b. clients. c. support. d. customers. (d; Easy; p. 455) 147. Your products fall into several categories with very different production methods for each group. Because of this, you might consider departmentalizing by: a. product. b. method. c. production. d. process. (d; Moderate; p. 455)

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Application of Span of Control Matthew is a new divisional manager. In reorganizing his division, he must make some decisions regarding the span of control. 148. The question of span of control determines: a. who reports to whom. b. the number of levels and managers an organization has. c. where decisions are made. d. how jobs will be grouped. (b; Moderate; p. 456) 149. Wider spans are more efficient in terms of cost. At some point: a. employee performance increases substantially. b. supervisors become more efficient at providing support. c. wider spans reduce effectiveness. d. the organization becomes taller. (c; Moderate; p. 457) 150. By keeping the span of control to 5 or 6 employees, which of the following is not a drawback? a. It is expensive. b. Vertical communication is more complex. c. Decision making is slowed down. d. Upper management is more available and in-touch. (d; Moderate; p. 457) Application of Common Designs You are interested in explaining the different types of organizational designs to students of basic management. These students need to know the advantages and disadvantages of each structure as well as the structures characteristics. 151. You describe a structure that is flat, has little formalization and is fast, flexible, and inexpensive to maintain. This describes the: a. matrix structure. b. simple structure. c. bureaucracy. d. team structure. (b; Easy; p. 460) 152. You extol the virtues and benefits of standardization. You are probably promoting the: a. matrix structure. b. simple structure. c. bureaucracy. d. team structure. (c; Moderate; p. 460) 153. The structure that combines functional and product departmentalization is the: a. matrix structure. 105

b. simple structure. c. bureaucracy. d. team structure. (a; Moderate; p. 462) 154. You describe to your students a new committee within the university that brings together specialists from all different departments to try to develop a new interdisciplinary program. The structure probably best meets the definition of the: a. matrix structure. b. expert structure. c. team structure. d. virtual structure. (a; Challenging; p. 462) Application of New Design Options You have learned about the traditional and new design options for organizational structures. You have decided that one of the designs developed during the last decade or two is probably the most appropriate for your newly formed organization. 155. You have decided to hire other organizations to perform many of the basic functions. You have hired an accounting firm to keep your records, a recruiting firm to handle human resource functions, a computer firm to handle all records, and are looking for other areas in which to outsource operations. You have chosen to operate your business as a: a. matrix organization. b. virtual organization. c. team structure. d. boundaryless structure. (b; Moderate; p. 464-465) 156. Your new organization is looking for maximum flexibility. The most appropriate structure is probably the: a. matrix organization. b. virtual organization. c. team structure. d. decentralized structure. (b; Moderate; p. 464-465) 157. You have eliminated horizontal, vertical, and external barriers. You are operating as a: a. matrix organization. b. virtual organization. c. team structure. d. boundaryless organization. (d; Moderate; p. 466) SHORT DISCUSSION QUESTIONS 158. What is organizational structure?

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An organizational structure defines how job tasks are formally divided, grouped, and coordinated. The elements that must be addressed are work specialization, departmentalization, chain of command, span of control, centralization and decentralization, and formalization. (Page 452) 159. What is work specialization? Work specialization is also known as division of labor. It describes the degree to which tasks in the organization are subdivided into separate jobs. The essence of work specialization is that, rather than an entire job being done by one individual, it is broken down into a number of steps, each step being completed by a separate individual. In essence, individuals specialize in doing part of an activity rather than the entire activity. (Pages 452-453) 160. What is departmentalization? The basis by which jobs are grouped together is called departmentalization. Tasks can be grouped by function performed, the type of product the organization produces, on the basis of geography or territory, process used, or by the particular type of customer the organization seeks to reach. (Pages 454-455) 161. What is chain of command? The chain of command is an unbroken line of authority that extends from the top of the organization to the lowest echelon and clarifies who reports to whom. It answers questions for employees such as To whom do I go if I have a problem? and To whom am I responsible? The two complementary concepts are authority and unity of command. Authority refers to the rights inherent in a managerial position to give orders and expect the orders to be obeyed. The unity of command principle helps preserve the concept of an unbroken line of authority. It states that a person should have one and only one superior to whom he or she is directly responsible. (Page 456) 162. What is span of control? The question of span of control is important because, to a large degree, it determines the number of levels and managers an organization has. It answers the question How many employees can a manager efficiently and effectively direct? All things being equal, the wider or larger the span of control, the more efficient the organization. (Pages 456-457) 163. What is the difference between centralization and decentralization? The term centralization refers to the degree to which decision making is concentrated at a single point in the organization. The concept includes only formal authority, that is, the rights inherent in ones position. The more that lower-level personnel provide input or are actually given the discretion to make decisions, the more decentralization there is. An organization characterized by centralization is an inherently different structural animal from one that is decentralized. In a decentralized organization, action can be taken more quickly to solve problems, more people provide input into decisions, and employees are less likely to feel alienated from those who make the decisions that affect their work lives. (Page 458)

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What is the virtual organization? The virtual organization is sometimes called the network or modular organization. Typically, a small, core organization outsources major business functions. In structural terms, the virtual organization is highly centralized, with little or no departmentalization. Why own when you can rent is the question that captures the essence of the virtual organization. (Pages 464-465)

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Explain the concept of the boundaryless organization. Jack Welch coined the term boundaryless organization to describe his idea of what he wanted GE to become. He wanted to eliminate vertical and horizontal boundaries within GE and break down external barriers between the company and its customers and suppliers. The boundaryless organization seeks to eliminate the chain of command, have limitless spans of control, and replace departments with empowered teams. Because it relies so heavily on information technology, some have called this structure the T-form or technology-based organization. By removing vertical boundaries, management flattens the hierarchy. Status and rank are minimized. (Page 466)

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What is the difference between the mechanistic model and the organic model? The mechanistic model is generally synonymous with the bureaucracy in that it has extensive departmentalization, high formalization, a limited information network (mostly downward communication), and little participation by low-level members in decision making. At the other extreme is the organic model. This model looks a lot like the boundaryless organization. It is flat, uses cross-hierarchical and cross-functional teams, has low formalization, possesses a comprehensive information network and it involves high participation in decision making. (Page 468)

MEDIUM LENGTH DISCUSSION QUESTIONS 167. What are five common ways that an organization can group activities? Give an example of each. One of the most popular ways to group activities is by functions performed. A manufacturing manager might organize his or her plant by separating engineering, accounting, manufacturing, personnel, and supply specialists into common departments. Tasks can also be departmentalized by type of product the organization produces. Procter & Gamble is organized along these lines. Each major product is placed under the authority of an executive who has complete global responsibility for that product. Another way to departmentalize is on the basis of geography or territory. The sales function, for instance, may have western, southern, mid-western, and eastern regions. Each of these regions is, in effect, a department organized around geography. Process departmentalization can be used to group departments. At an Alcoa aluminum tubing plant in upstate New York, production is organized into five departments: casting; press; tubing; finishing; and inspecting, packing, and shipping. Each department specializes in one specific phase in the production of aluminum tubing. A final category is to use the particular type of customer the organization seeks to reach. Microsoft recently reorganized around four customer markets: consumers, large corporations, software developers, and small businesses. (Pages 454-455) 108

168.

Discuss innovation strategy, cost-minimization strategy, and imitation strategy. An innovation strategy does not mean a strategy merely for simple or cosmetic changes from previous offerings but rather one for meaningful and unique innovations. An organization that is pursuing a cost-minimization strategy tightly controls costs, refrains from incurring unnecessary innovation or marketing expenses, and cuts prices in selling a basic product. Organizations following an imitation strategy try to capitalize on the best of both of the previous strategies. They seek to minimize risk and maximize opportunity for profit. Their strategy is to move into new products or new markets only after viability has been proven by innovators. (Page 469)

169.

Discuss the three key dimensions of an organization's environment: capacity, volatility, and complexity. An organizations environment is composed of those institutions or forces that are outside the organization and potentially affect the organizations performance. These typically include suppliers, customers, competitors, government regulatory agencies, public pressure groups, and the like. The capacity of an environment refers to the degree to which it can support growth. Rich and growing environments generate excess resources, which can buffer the organization in times of relative scarcity. Abundant capacity leaves room for an organization to make mistakes, while scarce capacity does not. The degree of instability in an environment is captured in the volatility dimension. Where there is a high degree of unpredictable change, the environment is dynamic. This makes it difficult for management to predict accurately the probabilities associated with various decision alternatives. At the other extreme is a stable environment. Finally, the environment needs to be assessed in terms of complexity; that is, the degree of heterogeneity and concentration among environmental elements. Simple environments are homogeneous and concentrated. Environments characterized by heterogeneity and dispersion are called complex. Organizations that operate in environments characterized as scarce, dynamic, and complex face the greatest degree of uncertainty. (Page 472)

COMPREHENSIVE ESSAYS 170. Identify and explain the six key elements that define an organizations structure. Include the advantages and problems of each. An organizational structure defines how job tasks are formally divided, grouped, and coordinated. There are six key elements that managers need to address when they design their organizations structure. These are: work specialization, departmentalization, chain of command, span of control, centralization and decentralization, and formalization. The essence of work specialization is that, rather than an entire job being done by one individual, it is broken down into a number of steps, with each step being completed by a separate individual. In essence, individuals specialize in doing part of an activity rather than the entire activity. Management saw this as a means to make the most efficient use of its employees skills. In most organizations, some tasks require highly developed skills and others can be performed by untrained workers. If all workers were engaged in each step of, say, an organizations manufacturing process, all would have to have the skills necessary to perform both the most demanding and the least demanding jobs. The result would be that, 109

except when performing the most skilled or highly complex tasks, employees would be working below their skill levels. And because skilled workers are paid more than unskilled workers and their wages tend to reflect their highest level of skill, it represents an inefficient use of organizational resources to pay highly skilled workers to do easy tasks. Managers also saw other efficiencies that could be achieved through work specialization. Employee skills at performing a task successfully increase through repetition. Less time is spent in changing tasks, in putting away ones tools and equipment from a prior step in the work process, and in getting ready for another. Equally important, training for specialization is more efficient from the organizations perspective. Its easier and less costly to find and train workers to do specific and repetitive tasks. The basis by which jobs are grouped together is called departmentalization. One of the most popular ways to group activities is by functions performed. A manufacturing manager might organize his or her plant by separating engineering, accounting, manufacturing, personnel, and supply specialists into common departments. Of course, departmentalization by function can be used in all types of organizations. Only the functions change to reflect the organizations objectives and activities. The major advantage to this type of grouping is obtaining efficiencies from putting like specialists together. Functional departmentalization seeks to achieve economies of scale by placing people with common skills and orientations into common units. Jobs can also be departmentalized by the type of product the organization produces. The major advantage to this type of grouping is increased accountability for product performance. If an organizations activities are service rather than product related, each service would be autonomously grouped. Another way to departmentalize is on the basis of geography or territory. The sales function, for instance, may have western, southern, midwestern, and eastern regions. Each of these regions is, in effect, a department organized around geography. If an organizations customers are scattered over a large geographic area and have similar needs based on their location, then this form of departmentalization can be valuable. Process departmentalization is when each department specializes in one specific phase in the production of aluminum tubing. Process departmentalization can be used for processing customers as well as products. A final category of departmentalization is to use the particular type of customer the organization seeks to reach. The assumption underlying customer departmentalization is that customers in each department have a common set of problems and needs that can best be met by having specialists for each. (Exh. 15-1; Pages 452-459) 171. Describe the three common organizational designs: simple structure, bureaucracy, and matrix structure. The simple structure is said to be characterized most by what it is not rather than what it is. The simple structure is not elaborate. It has a low degree of departmentalization, wide spans of control, authority centralized in a single person, and little formalization. The simple structure is a flat organization; it usually has only two or three vertical levels, a loose body of employees, and one individual in whom the decision-making authority is centralized. Standardization is the key concept that underlies the bureaucracy. It is characterized by highly routine operating tasks achieved through specialization, very formalized rules and regulations, tasks that are grouped into functional departments, centralized authority, narrow spans of control, and decision making that follows the chain of command. The matrix combines two forms of departmentalization: functional and product. It breaks the unity-ofcommand concept. Employees in the matrix have two bosses their functional department managers and their product managers. Therefore, the matrix has a dual chain of command. 110

(Pages 460-463) 172. Explain the behavioral implications of different organizational designs. A review of the evidence linking organizational structures to employee performance and satisfaction leads to a pretty clear conclusion you cant generalize. Not everyone prefers the freedom and flexibility of organic structures. Individual differences must be addressed. The evidence generally indicates that work specialization contributes to higher productivity but at the price of reduced job satisfaction. Work specialization is not an unending source of higher productivity. Problems start to surface, and productivity begins to suffer, when the human diseconomies of doing repetitive and narrow tasks overtake the economies of specialization. As the workforce has become more highly educated and desirous of jobs that are intrinsically rewarding, the point where productivity begins to decline seems to be reached more quickly than in decades past. Negative behavioral outcomes from high specialization are most likely to surface in professional jobs occupied by individuals with high needs for personal growth and diversity. A review of the research indicates that it is probably safe to say there is no evidence to support a relationship between span of control and employee performance. There is some evidence indicating that a managers job satisfaction increases as the number of employees he or she supervises increases. Fairly strong evidence has linked centralization and job satisfaction. In general, organizations that are less centralized have a greater amount of participative decision making. Participative decision making is positively related to job satisfaction. But, again, individual differences surface. The decentralization-satisfaction relationship is strongest with employees who have low self-esteem. Because individuals with low self-esteem have less confidence in their abilities, they place a higher value on shared decision making, which means that theyre not held solely responsible for decision outcomes. To maximize employee performance and satisfaction, individual differences, such as experience, personality, and the work tasks, should be taken into account. In addition, national culture influences preference for structure so it, too, needs to be considered. There is substantial evidence that individuals are attracted to, selected by, and stay with organizations that suit their personal characteristics. So the effect of structure on employee behavior is undoubtedly reduced where the selection process facilitates proper matching of individual characteristics with organizational characteristics. (Pages 473-475)

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