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extremely challenging. Committee structures give authority and responsibility to a group rather than to an
individual. Committees are part of a line-and-staff organization and often fulfill only an advisory role. Team-
based structures also involve assigning authority and responsibility to groups rather than individuals, but,
different from committees, team-based structures give these groups autonomy to carry out their work.
7.3 Using Teams to Enhance Motivation and Performance
3. Why are companies using team-based organizational structures?
Work groups share resources and coordinate efforts to help members better perform their individual duties
and responsibilities. The performance of the group can be evaluated by adding up the contributions of the
individual group members. Work teams require not only coordination but also collaboration, the pooling of
knowledge, skills, abilities, and resources in a collective effort to attain a common goal. Four types of work
teams are used: problem solving, self-managed, cross-functional, and virtual teams. Companies are using
teams to improve individual and group motivation and performance.
7.4 Authority—Establishing Organizational Relationships
4. What tools do companies use to establish relationships within their organizations?
The managerial hierarchy (or the management pyramid) comprises the levels of management within the
organization, and the managerial span of control is the number of employees the manager directly supervises.
In daily operations, individuals in line positions are directly involved in the processes used to create goods and
services. Individuals in staff positions provide the administrative and support services that line employees
need to achieve the firm’s goals. Line positions in organizations are typically in areas such as production,
marketing, and finance. Staff positions are found in areas such as legal counseling, managerial consulting,
public relations, and human resource management.
7.5 Degree of Centralization
5. How can the degree of centralization/decentralization be altered to make an organization more
successful?
In a highly centralized structure, top management makes most of the key decisions in the organization, with
very little input from lower-level employees. Centralization lets top managers develop a broad view of
operations and exercise tight financial controls. In a highly decentralized organization, decision-making
authority is pushed down the organizational hierarchy, giving lower-level personnel more responsibility and
power to make and implement decisions. Decentralization can result in faster decision-making and increased
innovation and responsiveness to customer preferences.
7.6 Organizational Design Considerations
6. How do mechanistic and organic organizations differ?
A mechanistic organization is characterized by a relatively high degree of work specialization, rigid
departmentalization, many layers of management (particularly middle management), narrow spans of control,
centralized decision-making, and a long chain of command. This combination of elements results in a tall
organizational structure. In contrast, an organic organization is characterized by a relatively low degree of
work specialization, loose departmentalization, few levels of management, wide spans of control,
decentralized decision-making, and a short chain of command. This combination of elements results in a flat
organizational structure.
7.7 The Informal Organization
7. How does the informal organization affect the performance of a company?
The informal organization is the network of connections and channels of communication based on the
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informal relationships of individuals inside the organization. Informal relationships can be between people at
the same hierarchical level or between people at different levels and in different departments. Informal
organizations give employees more control over their work environment by delivering a continuous stream of
company information throughout the organization, thereby helping employees stay informed.
7.8 Trends in Organizational Structure
8. What trends are influencing the way businesses organize?
Reengineering is a complete redesign of business structures and processes in order to improve operations.
The goal of reengineering is to redesign business processes to achieve improvements in cost control, product
quality, customer service, and speed.
The virtual corporation is a network of independent companies (suppliers, customers, even competitors)
linked by information technology to share skills, costs, and access to one another’s markets. This network
structure allows companies to come together quickly to exploit rapidly changing opportunities.
Many companies are now using technology to create virtual teams. Team members may be down the hall or
across the ocean. Virtual teams mean that travel time and expenses are eliminated and the best people can be
placed on the team regardless of where they live. Sometimes, however, it may be difficult to keep virtual team
members focused and motivated.
Outsourcing business functions—both globally and domestically—continues to be a regular business practice
for companies large and small. Companies choose to outsource either as a cost-saving measure or as a way to
gain access to needed human resource talent and innovation. To be successful, outsourcing must solve a
clearly articulated business problem. In addition, managers must use outsourcing providers that fit their
company’s actual needs and strive to engage these providers as strategic partners for the long term. A recent
phenomenon known as the gig economy has taken on more importance as it pertains to the U.S. labor force
and outsourcing. More people are working as freelancers on a per-project basis, either because they can’t get
hired as full-time employees or because they prefer to work as self-employed individuals.
Global mergers raise important issues in organizational structure and culture. The ultimate challenge for
management is to take two organizations and create a single, successful, cohesive organization.
Preparing for Tomorrow's Workplace Skills
1. When people talk of climbing the corporate ladder, they are referring to moving vertically upward
through the organizational structure. Many employees plot career paths that will take them to
increasingly higher levels of management. Do you think you would be more interested in climbing higher
in an organization, or being a middle-management bridge between the employees who do the work and
the executives who set the strategy? Explain the reasons for your choice. (Resources, Interpersonal)
2. Teams are an increasingly popular method of organizing corporations, but not all people are suited for
teamwork. As a manager, what do you do with employees who are talented but unapproachable? Can you
think of a way to involve people who are uncomfortable in team settings so that your teams have the
perspective of these employees as well? (Interpersonal)
3. Think about how gossip and rumors travel through a grapevine. Draw as many grapevines as you can
think of that reflect the different ways rumors move through an organization. Can you think of
information that a manager would want to disseminate through the grapevine? Is there information that
is inappropriate to disseminate through informal channels? Provide examples. (Information)
4. Do you think companies that outsource will inevitably become virtual corporations? Why or why not?
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(Resources, Systems)
5. It used to be that only high-level executives and CEOs were able to work out of the office. Mobile
computing, however, is trickling down the organizational chart. In your opinion, is there a point in the
organizational structure at which working remotely (at home, on the road) should stop? Shouldall
employees in the hierarchy be allowed to work in a virtual environment, or should there be limits? Explain
your reasoning. (Technology, Systems)
6. Team Activity Have you ever worked on a team with an underperforming member, such as a slacker, a
complainer, or a critic? Assemble a team of three to five students and brainstorm a list of “bad” team
members you have experience working with. Once you have a list of types, discuss how that person
affected the work of the team and the outcome the team produced. Brainstorm ways to better manage
and mitigate the negative effects of “bad” team members. Share your results with the class.
(Interpersonal, Systems)
Ethics Activity
Training IT Replacements
Recently the University of California at San Francisco (UCSF) announced it would lay off more than 80 IT
workers and outsource their jobs to India. This change is part of a larger plan by UCSF to increase its
technology outsourcing, which over time could save the organization more than $30 million. A large part of
UCSF’s IT work focuses on its hospital services, and many other health care facilities have already outsourced
these types of “back-end” jobs to foreign countries.
Working through a multinational contractor that will manage the outsourcing process, UCSF has also asked
workers who will soon be out of a job to train their overseas replacements via videoconferencing calls to India.
One such worker remarked, “I’m speechless. How can they do this to us?”
A UCSF spokesperson explained that the organization provides millions of dollars in charity care for the poor,
and that to continue providing those services, the school has to focus on more specialized tech work related to
patients and medical research and send other IT work overseas.
UCSF is not alone in sending IT jobs overseas and making the laid-off workers train their Indian replacements.
Recently ManpowerGroup, a staffing and workforce services firm with more than 3,000 offices worldwide,
issued pink slips to 150 workers in Milwaukee whose jobs were outsourced to India.
Using a web search tool, locate articles about this topic and then write responses to the following questions.
Be sure to support your arguments and cite your sources.
Ethical Dilemma: Are UCSF and other companies justified in outsourcing technology jobs to India? Do they
have any obligation to find other jobs or provide training for displaced workers? Should organizations ask
employees who are being laid off to train their replacements?
Sources: Sam Harnett, “Outsourced: In a Twist, Some San Francisco IT Jobs Are Moving to India,” All Tech
Considered, http://www.npr.org, accessed July 19, 2017; Dan Shafer, “Exclusive: ManpowerGroup HQ Workers
Being Laid Off Required to Train Overseas Replacements,” Milwaukee Business Journal,
https://www.bizjournals.com, March 30, 2017; Bill Whitaker, “Are U.S. Jobs Vulnerable to Workers with H-1B
Visas?” 60 Minutes, http://www.cbsnews.com, March 19, 2017; Louis Hansen, “After Pink Slips, USCF Tech
Workers Train Their Foreign Replacements,” The Mercury News, http://www.mercurynews.com, November 3,
2016.
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Working the Net
1. Using a search engine, look for the term “company organizational charts,” and find at least three
examples of organizational charts for corporations, not-for-profits, or government agencies. Analyze each
entity’s organizational structure. Is it organized by function, product/service, process, customer type, or
geographic location?
2. Search the archives at the Bloomberg Businessweek (https://www.bloomberg.com), Fortune
(http://fortune.com), or Forbes (http://www.forbes.com) website for stories about companies that
have reorganized. Pick two examples, and prepare a summary of their reorganization efforts, including
the underlying reasons the company chose to reorganize, the key elements of the reorganization plan,
and if possible, how successful it has been.
3. Visit the Inc. magazine website, http://www.inc.com, and use the search engine to find articles about
virtual corporations. Using a search engine, find the website of at least one virtual corporation, and look
for information about how the company uses span of control, informal organization, and other concepts
from this module.
4. FlexJobs (http://www.flexjobs.com) is an online company devoted to matching job hunters with flexible
job experiences, whether they are telecommuting jobs, contract work, or part-time gigs. Read more on
how the company started and the void its services have filled over the past decade for people looking for
a flexible job situation. Share your findings with classmates, and lead a discussion on the pros and cons of
the flexible job movement.
5. Managing change in an organization is no easy task, as you’ve discovered in your new job with a
consulting firm that specializes in change management. To get up to speed, go to Bpubs.com, the
Business Publications Search Engine (http://www.bpubs.com), and navigate to the Change
Management section of the Management Science category. Select three articles that discuss how
companies approached the change process, and summarize their experiences.
6. After managing your first project team, you think you might enjoy a career in project management. The
Project Management Institute is a professional organization for project managers. Its website,
http://www.pmi.org, has many resources about this field. Start at the Professional Practices section to
learn what project management is, then go to the professional Development and Careers pages. What are
the requirements to earn the Project Management Professional designation? Explore other free areas of
the site to learn more about the job of project manager. Prepare a brief report on the career and its
opportunities. Does what you’ve learned make you want to follow this career path?
7. Many companies are outsourcing portions of their IT departments. Should they, and why? Develop a
position on this issue by researching outsourcing trends on Information Week,
(http://www.informationweek.com), or an IT website of your choosing. Then divide the class into two
groups, those that support outsourcing and those that oppose it, and have a debate on this subject.
Critical Thinking Case
Gore’s Flat Structure Works Well
Imagine an organization with more than 10,000 employees working in 30 countries around the world—with no
hierarchy structure. W. L. Gore & Associates, headquartered in Newark, Delaware, is a model of unusual
business practices. Wilbert Gore, who left Dupont to explore new uses for Teflon, started the company in 1958.
Best known for its breathable, weatherproof Gore-Tex fabric, Glide dental floss, and Elixir guitar strings, the
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company has no bosses, no titles, no departments, and no formal job descriptions. There is no managerial
hierarchy at Gore, and top management treats employees, called associates, as peers.
In 2005, the company named 22-year associate Terri Kelly as its new chief executive officer. Unlike large public
corporations, Gore’s announcement was made without much fanfare. Today, more than 12 years later, Kelly
continues as chief executive but is the first to admit that it’s not about the CEO at Gore—it’s about the people
who work there and their relationships with one another.
The company focuses on its products and company values rather than on individuals. Committees, comprised
of employees, make major decisions such as hiring, firing, and compensation. They even set top executives’
compensation. Employees work on teams, which are switched around every few years. In fact, all employees
are expected to make minor decisions instead of relying on the “boss” to make them. “We’re committed to
how we get things done,” Kelly says. “That puts a tremendous burden on leaders because it’s easier to say
‘Just do it’ than to explain the rationale. Butin the long run, you’ll get much better results because people are
making a commitment.”
Because no formal lines of authority exist, employees can speak to anyone in the company at any time. This
arrangement also forces employees to spend considerable time developing relationships. As one employee
described it, instead of trying to please just one “boss,” you have to please everyone. Several years ago the
company underwent a “strategy refresh,” conducting surveys and discussions with employees about how they
fit into the organization’s culture. Not surprisingly, there was a cultural divide based on multiple generations
of workers and length of service stature, which Kelly and her associates have worked hard to overcome. She
realizes that not everyone will become a “lifer” at Gore, but recognizes the importance of younger employees
who have helped the company become more tech-savvy in communications and stay well-connected in a fast-
moving business world.
The informal organizational structure continues to work well. With revenues of $3 billion, the company
produces thousands of advanced technology products for the electronics, industrial, fabrics, and medical
markets. Its corporate structure fosters innovation and has been a significant contributor to associate
satisfaction. Employee turnover is a low 3 percent a year, and the company can choose new associates from
the thousands of job applications it receives annually. In 2017, Gore was named one of the 12 legends on
Fortune’s “100 Best Companies to Work For.” These companies have made Fortune’s list for all 20 years the
magazine has published its annual “Best” rankings.
Critical Thinking Questions
1. Given the lack of formal structure, how important do you think Gore’s informal structure becomes?
2. Is W. L. Gore a mechanistic or an organic organization? Support your answer with examples from the
case.
3. How do you think Gore’s flat organizational structure affects innovation at the company?
Sources: “Our Story,” https://www.gore.com, accessed July 18, 2017; Jeremy Hobson, “What It’s Like to Lead a
Non-Hierarchical Workplace,” http://www.wbur.org, accessed July 18, 2017; Alan Deutschman, “The Un-CEO,”
Fast Company, https://www.fastcompany.com, accessed July 18, 2017; Claire Zillman, “Secrets from Best
Companies All Stars,” Fortune, http://fortune.com, March 9, 2017; Daniel Roberts, “At W.L. Gore, 57 Years of
Authentic Culture,” Fortune, http://fortune.com, March 5, 2015.
@ Hot Links Address Book
Chapter 7 Designing Organizational Structures 283
	Chapter 7. Designing Organizational Structures
	Preparing for Tomorrow's Workplace Skills
	Preparing for Tomorrow's Workplace Skills
	Ethics Activity
	Ethics Activity
	Working the Net
	Working the Net
	Critical Thinking Case
	Critical Thinking Case
	Hot Links Address Book
	Hot Links Address Book