Designing Organizational Structure: Authority and Control
Designing Organizational Structure: Authority and Control
Designing Organizational Structure: Authority and Control
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Efficiency versus
Learning Outcomes
Authority: How and Why
Vertical Differentiation Occurs
The hierarchy begins to emerge
when the organization experiences
problems in coordinating and
motivating employees
Division of labor and specialization
make it hard to determine how well
an individual performs
Almost impossible to assess
individual contributions to
performance when employees
cooperate
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Authority: How and Why Vertical
Differentiation Occurs (cont.)
To deal with coordination and
motivation problems, the
organization can:
Increase the number of managers
it uses to monitor, evaluate, and
reward employees
Increase the number of levels in its
managerial hierarchy, thereby
making the hierarchy of authority
taller
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Authority: How and Why Vertical
Differentiation Occurs (cont.)
Size and height limitations
Tall organization: an organization in
which the hierarchy has many levels
relative to the size of the organization
Flat organization: an organization that
has few levels in its hierarchy relative to
its size
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Figure 5.1: Flat and Tall
Organizations
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Authority: How and Why Vertical
Differentiation Occurs (cont.)
By the time an organization has 1,000
members, it has 4 levels in its
hierarchy
At 3,000 members, it likely has 7 levels
Between 10,000 to 100,000,
organizations have 9 or 10 levels
Increase in size of the managerial
component is less than proportional to
increase in size of the organization
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Figure 5.2: Relationship Between
Organizational Size and Number of
Hierarchical Levels
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Figure 5.3: Types of
Managerial Hierarchies
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Figure 5.4: Relationship Between Organizational
Size and the Size of the Managerial Component
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Authority: How and Why Vertical
Differentiation Occurs (cont.)
Problems with tall hierarchies:
Communication problems: communication
takes longer and is likely to be distorted
Information may be manipulated to serve
managers’ own interests
Motivation problems: as hierarchy
increases, the relative difference in the
authority possessed managers at each level
decreases, as does their area of responsibility
Less responsibility and authority could
reduce motivation
Increased bureaucratic costs: managers
cost money
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Authority: How and Why Vertical
Differentiation Occurs (cont.)
Parkinson’s Law Problem
Argues that the number of managers
and hierarchies are based on two
principles
A manager wants to multiply subordinates,
not rivals
Managers make work for one another
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Authority: How and Why Vertical
Differentiation Occurs (cont.)
Ideal number of hierarchical levels
determined by:
Principle of minimum chain of
command: an organization should
choose the minimum number of
hierarchical levels consistent with its goals
and the environment in which it operates
Span of control: the number of
subordinates a manager directly manages
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Figure 5.5: Spans of Control
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Authority: How and Why Vertical
Differentiation Occurs (cont.)
Factors that determine the appropriate
span of control
There seems to be a limit to how wide a
manager’s span of control should be
Dependent on the complexity and
interrelatedness of the subordinates’ tasks
Complex and dissimilar tasks – small span of
control
Routine and similar tasks (e.g., mass
production) – large span of control
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Figure 5.6: The Increasing Complexity of a
Manager’s Job as the Span of Control
Increases
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Figure 5.7: Factors Affecting the
Shape of the Hierarchy
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Control: Factors Affecting the
Shape of the Hierarchy
Horizontal differentiation: an
organization that is divided into subunits
has many different hierarchies, not just
one
Each function or division has its own
hierarchy
Horizontal differentiation is the principal
way an organization retains control over
employees without increasing the
number of hierarchical levels
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Figure 5.8: Horizontal Differentiation
into Functional Hierarchies
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Figure 5.9: Horizontal
Differentiation Within the R&D
Functions
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Control: Factors Affecting the
Shape of the Hierarchy (cont.)
Centralization: with decentralization,
less direct managerial supervision is
needed
Authority is delegated to the lower
levels
Decentralization does not eliminate the
need for many hierarchical levels in
large, complex organizations
Assists relatively tall structures to be more
flexible and reduces the amount of direct
supervision needed
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Control: Factors Affecting the
Shape of the Hierarchy (cont.)
Standardization: reduces the need
for levels of management because
rules substitute for direct supervision
Gain control over employees by making
their behavior and actions more
predictable
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The Principles of Bureaucracy
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The Principles of Bureaucracy
(cont.)
Principle one: a bureaucracy is
founded on the concept of rational-
legal authority
Rational-legal authority: the authority
a person possesses because of his or her
position in an organization
Hierarchy should be based on the needs
of the task, not on personal needs
People’s attitudes and beliefs play no part
in how the bureaucracy operates
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The Principles of Bureaucracy
(cont.)
Principle two: Organizational roles
are held on the basis of technical
competence, not because of social
status, kinship, or heredity
Principles one and two establish the
organizational role as the basic
component of organization structure
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The Principles of Bureaucracy
(cont.)
Principle three: A role’s task
responsibility and decision-making
authority and its relationship to other
roles in the organization should be clearly
specified
Role conflict: when two or more people
have different views of what another person
should do, and as a result, make conflicting
demands on that person
Role ambiguity: the uncertainty that
occurs for a person whose tasks or authority
are not clearly defined
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The Principles of Bureaucracy
(cont.)
Principle four: the organization of
roles in a bureaucracy is such that
each lower office in the hierarchy is
under the control and supervision of
a higher office
Organizations should be arranged
hierarchically so that people can
recognize the chain of command
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The Principles of Bureaucracy
(cont.)
Principle five: rules, standard
operating procedures, and norms
should be used to control the behavior
and the relationships among roles in an
organization
Rules and SOPs are written instructions
that specify a series of actions intended
to achieve a given end
Norms are unwritten
Rules, SOPs, and norms clarify people’s
expectations and prevent
misunderstanding
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The Principles of Bureaucracy
(cont.)
Principle six: administrative acts,
decisions, and rules should be
formulated and put in writing
Bureaucratic structure provides an
organization with memory
Organizational history cannot be altered
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Uniform Written Rules and Policies
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“When I was president of this big corporation,
we lived in a small Ohio town, where the main
plant was located. The corporation specified
who you could socialize with, and on what level.
(His wife interjects: “Who were the wives you
could play bridge with.”) The president’s wife
could do what she wants, as long as it’s with
dignity and grace. In a small town they didn’t
have to keep check on you. Everybody knew.
There are certain sets of rules.”
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Obsession with control also explains
the frequent proliferation of support
staff. Purchasing staff services (e.g.
law office, factory cafeteria) from
outside suppliers exposes the
bureaucracy to the uncertainties of the
open market. So it “makes” rather
than “buys.”
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Standardized Procedures
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Standardized Procedures (cont.)
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The Professional Career
Prevents feeling of
friendship/family/pity etc. get in the
way of tough decisions and enforcing
rules.
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Role of Managers
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“You know, nothing happens in this place until we
produce something.”
Production executive
“Wrong, nothing happens until we design something!”
R&D manager
“What are you talking about? Nothing happens here
until we sell something!”
Marketing executive
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Bureaupathic Pathologies
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Bureaupathic Pathologies (cont.)
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Bureaupathic Pathologies (cont.)
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Bureaupathic Pathologies (cont.)
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The Influence of the
Informal Organization
Decision making and coordination frequently
take place outside the formally designed
channels as people interact
Rules and norms sometimes emerge from
the interaction of people and not from the
formal rules blueprint
Managers need to consider the informal
structure when they make changes as it may
disrupt informal norms that work
Informal organization can actually enhance
organizational performance
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Charles Handy, The Age of Unreason
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