A short distance south of McAlester, Oklahoma, employees in a vast factory complex make products that must be perfect. These people “are so good at what they do and have been doing it for so long that they have a 100 percent market share.”3 They make bombs for the U.S. military, and doing so requires a work environment that’s an interesting mix of the mundane, structured, and disciplined, coupled with high levels of risk and emotion. The work gets done efficiently and effectively here. Work also gets done efficiently and effectively at San Diego–based videogame maker Psyonix Inc., although not in such a structured and formal way. Like many videogame makers, staffers at Psyonix do the most critical jobs and manage a network of independent contractors scattered around the globe.4 At Psyonix, almost 40 percent of the people who work on the development of video games are contractors, not employees. Both of these organizations get needed work done, although each does so using a different structure.

Organizing is all about that! Recall from Chapter 1 that we defined organizing as the function of management that determines what needs to be done, how it will be done, and who is to do it; in other words, the function that creates the organization’s structure. When managers develop or change the organization’s structure, they’re engaging in organization design. This process involves making decisions about how specialized jobs should be, the rules to guide employees’ behaviors, and at what level decisions are to be made. Although organization design decisions are typically made by top-level managers, it’s important for everyone involved to understand the process. Why? Because each of us works in some type of organization structure, and we need to know how and why things get done. In addition, given the changing environment and the need for organizations to adapt, you should begin understanding what tomorrow’s structures may look like—those will be the settings you’ll be working in.

Few topics in management have undergone as much change in the past few years as that of organizing and organizational structure. Managers are reevaluating traditional approaches and exploring new structural designs that best support and facilitate employees doing the organization’s work—designs that can achieve efficiency but are also flexible.

The basic concepts of organization design formulated by management writers such as Henri Fayol and Max Weber offered structural principles for managers to follow. (Look back at the History Module, p. 31.) Over 95 years have passed since many of those principles were originally proposed. Given that length of time and all the changes that have taken place, you’d think that those principles would be mostly worthless today. Surprisingly, they’re not. They still provide valuable insights into designing effective and efficient organizations. Of course, we’ve also gained a great deal of knowledge over the years as to their limitations. In the following sections, we discuss the six basic elements of organizational structure: work specialization, departmentalization, authority and responsibility, span of control, centralization versus decentralization, and formalization.

1 What Is Work Specialization?

Traditional View

At the Wilson Sporting Goods factory in Ada, Ohio, workers make every football used in the National Football League and most of those used in college and high school football games. To meet daily output goals, the workers specialize in job tasks such as molding, stitching and sewing, lacing, and so forth.5 This is an example of work specialization, which is dividing work activities into separate job tasks. (That’s why it’s also known as division of labor.) Individual employees “specialize” in doing part of an activity rather than the entire activity in order to increase work output.

Work specialization allows organizations to efficiently use the diversity of skills that workers have. In most organizations, some tasks require highly developed skills; others can be performed by employees with lower skill levels. If all workers were engaged in all the steps of, say, a manufacturing process, all would need the skills necessary to perform both the most demanding and the least demanding jobs. Thus, except when performing the most highly skilled or highly sophisticated tasks, employees would be working below their skill levels. In addition, skilled workers are paid more than unskilled workers, and because wages tend to reflect the highest level of skill, all workers would be paid at highly skilled rates to do easy tasks—an inefficient use of resources. This concept explains why you rarely find a cardiac surgeon closing up a patient after surgery. Instead, surgical residents learning the skill usually stitch and staple the patient after the surgeon has finished the surgery.

Early proponents of work specialization believed that it could lead to great increases in productivity. At the beginning of the twentieth century, that generalization was reasonable. Because specialization was not widely practiced, its introduction almost always generated higher productivity. But a good thing can be carried too far. At some point, the human diseconomies—boredom, fatigue, stress, low productivity, poor quality, increased absenteeism, and high turnover—outweigh the economic advantages (see Exhibit 8–1).6

Exhibit 8–1

Economies and Diseconomies of Work

Figure 8–1 Full Alternative Text

Today’s View

Most managers today see work specialization as an important organizing mechanism because it helps employees be more efficient. For example, McDonald’s uses high specialization to get its products made and delivered to customers efficiently. However, managers also have to recognize its limitations. That’s why companies such as Avery-Dennison, Ford Australia, Hallmark, and American Express use minimal work specialization and instead give employees a broad range of tasks to do. Think about this when you’re looking for a job. Are you going to be happiest in a highly specialized job or do you prefer a variety of work tasks?