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Adapting Organizations to Today's Market

Theodore Levitt

"All organisations are heirarchical... If it is not structured, it is a mob. Mobs do not get things done, they destroy things"

Tall Structure

Multiple layers of management and bureaucratic processes. Make communication and decision process less efficient

Flat Structure

Less Layers of management with greater power provided to lower level employees. Makes responding to customer demands faster.


Dividing functions of the organization into separate units (or departments).

Span of Control

The maximum amount of subordinates a manager can effectively supervise at any given time.

How to measure Span of Control

Capabilities of the manager, Capabilities of subordinates and Complexity of the Job

Centralized authority

Authority is limited to a small number of top level managers.

Decentralized authority

Decision-making authority is delegated to lower-level managers and employees

Variables Affecting Organization Structure

Organizational Capabilities, Technology, Organization Size and Environmental Uncertainty

Organizational Acitivites

The activities that the company performs best should be integrated in the structure. e.g. if a company is good at making cars, they should make cars!

How Technology affects structure

Types of technology used affect design of the organization. Effective company would use technology to gain benefits of speed, cost reduction and access to new competencies

How Organization Size affects its Structure

Smaller companies need less levels of management. Fewer levels of management, empowered workers and fewer differences in responsibility increase speed and decision making

How Environmental Uncertainty affects structure

Rapidly changing environments require organizations to be flexible and capable of adapting to changes.

Organization Chart

Shows the structure of an organization in terms of relationships among personnel or functional departments.

Heirarchical organizational chart structure

Cheif Officer/ President at the top. Then underneath are high-level managers or executives etc.

Standard Organizational Chart Structure

Shaped similar to a pyramid, but there are solid lines telling us direct relationships between positions. A dash line means it is on the same level and either advises of indirect relationship, whereas an arrow indicates the flow of communication.

What Categorizes a Bureaucracy

Strict Chain of Command, Formal patterns of delegation, Specific rules to follow, Departmentalaization based on function, Narrow span of management, TALL organization and minimal communication between departments.

Line Organization

Vertical relationships of power within organization. emplyees report to a single manager. Good because clearly defined lines of authority, bad because decision making left to the top management

Line/Staff Structure

Assists personelle but no direct line of authority. Do background research and provide advice to their line managers. E.g. Legal Counsel

Matrix Structure

temporary or long term structural configuration bringing specialists from various functional areas of the organization to work on a specific project. Better flexibility, teamwork. However, causes confusion and costly and complex.

Cross-Functional Teams

Moving eomplyees from one department to another. This improves communication and coordination and increases conceptual knowledge.

Henry Fayol's Principles of Organization

Unity of Command, Heirarchy of Authority, Division of Labor, Authotiry, Degree if Centralization, Clear communication channels, Order, Equity and Esprit De Corps.

Adapting to Change

Inverted Organizations, Restructuring, Reeingineering, Benchmarking and Outsourcing

Inverted Organizations

When the organization is turned upside down with empowered front line workers at the top and the top managers at the bottom


Redesign of the organisation in order to effectively and efficiently service customers.


Rethinking and radical redesign of organisational process to achieve dramatic improvements in performance.


Achieving superiority by constantly measuring the firms oerformance against outstanding performers within the industry. (setting high standards)

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