Organizational Behavior- II |
Chapter 5 : Designing Organizational structure : Authority and Control
Chapter Summary – By Group 12 |
| GROUP 12 |
B13146 | Francis Kurian Thomas |
B13144 | Dhruv Wali |
B13149 | Harish Goel |
B13179 | Varun Anand |
B13181 | Vipul Singla |
Designing Organizational Structure: Authority and Control
To protect shareholders goals, managers must constantly analyze organizational structure. This chapter examines the vertical dimension of structure—the hierarchy of authority created to control an organization’s members.
How and why does vertical differentiation occur?
The Emergence of the Hierarchy
The hierarchy ...view middle of the document...
Tall hierarchies have high bureaucratic costs; a company pays a middle manager an average of $300,000 a year, so a cut of 1,000 extra managers saves $300 million. Layoffs become necessary if management pays no attention to its hierarchy. A company grows and hires managers without considering long-term costs. To avoid layoffs, a company must continually evaluate its hierarchy.
D) The Parkinson’s Law Problem. Parkinson’s theory is that managers want to increase the number of subordinates, not rivals, so they make work for each other. In other words, “Work expands so as to fill the time available.”
The Ideal Number of Hierarchical Levels: The Minimum Chain of Command
Managers should base hiring decisions on whether the value added exceeds the cost. The minimum chain of command principle states that a company should choose the minimum number of hierarchical levels needed for goal achievement.
Span of Control
To avoid becoming too tall, an organization can increase the span of control, the number of subordinates a manager directly oversees. Different companies have different spans of control.
A manager’s span of control is limited to the number of subordinates that can be adequately supervised. An increase in subordinates exponentially increases the subordinate relationships to be managed. A manager with two subordinates manages three relationships, but a manager with three subordinates manages six .If the span of control becomes too wide, a manager loses control over subordinates.
An effective span of control is determined by:-
A. Complexity. For complex, dissimilar tasks, the span of control can be narrow. For routine, similar tasks, the span of control can be wider. A research supervisor has a narrow span of control, but a production supervisor has a wide span of control.
B. Interrelatedness. Interrelated tasks require a narrow span of control because horizontal relationships must be managed. Horizontal relationships are less important if tasks are not interrelated. Most organizations have a pyramid-shaped hierarchy, as tasks are complex and interrelated at the top.
Control: Factors Affecting the Shape of the Hierarchy
An effective span of control must be limited, thus organizations use other design challenges to control activities: horizontal differentiation, centralization, standardization, and the informal organization.
When vertical differentiation cannot be increased, an organization maintains control by increasing horizontal differentiation and establishing specialized functions or divisions. Each subunit also has a hierarchy. Horizontal differentiation allows an organization to remain flat because hierarchies are developed in subunits. But horizontal differentiation causes coordination and motivation problems that are controlled through centralization, standardization, and the informal organization.
The communication and coordination problems of a tall company make a...