FOREIGN TRADE UNIVERSITY

BUSINESS ADMINISTRATION FACULTY

REPORT

ANALYZING THE STRUCTURE OF ORGANIZATION

Course: QTRE303(HK1-2324)1.3
Group: 9

Student name Student ID

Nguyễn Thị Ngọc Lan 2211250606

Nguyễn Ngọc Anh 2212250009

Mai Khánh Linh 2212250053

Vũ Thị Hải Yến 2211250615
Phan Diệp Anh 2212250012
Nguyễn Thị Thảo Vân 2213250099

Hanoi, September 2023

 TABLE OF CONTENTS

1. WORK SPECIALIZATION 2

2. CHAIN OF COMMAND 3

3. SPAN OF CONTROL 6

4. DECISION MAKING: CENTRALIZATION AND DECENTRALIZATION 7

5. DEPARTMENTALIZATION 10

6. FORMALIZATION 13

REFERENCES 15

1
Organizational structure: the arrangement of people and tasks to accomplish goals

1. WORK SPECIALIZATION
 Work specialization: (also called division of labor): is the degree to which
organizational tasks are subdivided into separate jobs

 The pros and cons of job specialization:

Pros of Work Specialization Cons of Work Specialization

Increase productivity Sometimes lead to boredom
Cost savings Higher absence rate
Time savings Low effort
Quality improvement Lose overall sight

2
  The rationale for specialization:
- Necessary in every organization because the “job” of most organizations is too large for one.
- A worker learning one specific, highly specialized task, can learn it quickly and perform it
efficiently
- A worker repeating the same job does not lose time changing operations

- The more specialized the job, the easier it is to design specialized equipment, and the easier
the job training.

 The alternatives for job specialization:

- Job rotation: including retaining interest, learning new skills, identifying new roles.
- Job enlargement: adding additional activities within the same level to an existing role.
- Job enrichment: a process that is characterized by adding dimensions to existing jobs to
make them more motivating

2. CHAIN OF COMMAND

 Definition: The line of authority extending from upper organizational levels to lower
levels, which clarifies who reports to whom. It helps employees with questions such as
“Who do I report to?” or “Who do I go to if I have a problem?

 What is authority? : Authority refers to the rights inherent in a managerial position to

give orders and expect the orders to be obeyed, related to one’s position within an
organization and has nothing to do with the personal characteristics of an individual
manager.

 What is responsibility? : When managers delegate authority, they must allocate

commensurate responsibility. That is, when employees are given rights, they also assume
a corresponding obligation to perform.

3
  Different types of authority:
- Line authority: Authority that entitles a manager to direct the work of an employee. As a
link in the chain of command, a manager with line authority has the right to direct the work of
employees and to make certain decisions without consulting anyone.
- Staff authority: Positions with some authority that have been created to support, assist, and
advise those holding line authority

4
  Unity of command: Structure in which each employee reports to only one manager,
suitable for simple-structured organization. But advances in technology, for instance,
allow access to organizational information that was once accessible only to top managers.
And employees can interact with anyone else in the organization without going through
the formal chain of command. Thus, in some instances, strict adherence to unity of
command creates a degree of inflexibility that hinders an organization’s performance and
ability to respond to changing circumstances.

 What is the difference between power and authority?

- Authority is a right. Its legitimacy is based on an authority figure’s position in the
organization. Authority goes with the job
- Power, on the other hand, refers to an individual’s capacity to influence decisions.
 Authority is part of the larger concept of power. That is, the formal rights that come with an
individual’s position in the organization are just one means by which an individual can affect the
decision process.

The influence one holds in the organization is defined by the vertical dimension in the structure.
The higher one is in the organization, the greater one’s authority.

5
- Although authority is defined by one’s vertical position in the hierarchy, power is made up of
both one’s vertical position and one’s distance from the organization’s power core or center.
- The center of the cone is the power core. The closer you are to the power core, the more
influence you have on decisions.
- The top of the cone corresponds to the top of the hierarchy, the middle of the cone to the
middle of the hierarchy, and so on. Similarly, the functional groups in A become wedges in
the cone. Each wedge represents a functional area.

(1) The higher one moves in an organization (an increase in authority), the closer one moves to
the power core
(2) It is not necessary to have authority in order to wield power because one can move
horizontally inward toward the power core without moving up.

6
 3. SPAN OF CONTROL

 Definition: The number of employees a manager can efficiently and effectively supervise
within an organization.
 Nowadays, many companies are increasing their spans of control. Modern organizational
experts claim that each supervisor or manager should have approximately 15 to 20
subordinates.

 WIDE OR NARROW SPAN OF CONTROL?

Wide span of control Narrow span of control

Advantages  Cost-effectiveness  Easier to complete managerial
 Faster decision-making tasks
 Freedom  Opportunities for promotion
 More vital specialization
Disadvantage  Burnout  Communication difficulties
s  Fewer opportunities for  Higher expenses
promotion  Less employee satisfaction
 Weak relationship

 A wider span of control might be more appropriate and can help increase the organizational
efficiency.

Factors influencing effective and efficient span of control:

 Skills and abilities of the manager

 Similarity and complexity of employee tasks
 Employee characteristics
 Characteristics of the work being done
 Standardization of tasks
 Strength of the organization’s management information system and value system

7
 4. DECISION MAKING: CENTRALIZATION OR DECENTRALIZATION

Decision-making is about authority. A key question is whether authority should rest with senior
management at a center of a business (centralized) or whether it should be delegated further
down the hierarchy, away from the center (decentralized).
a. Centralized decision-making
 Businesses with a centralized structure keep decision-making firmly at the top of the
hierarchy (among the most senior management)

 Potential benefits of centralization

- Easier to implement common policies and practices for the whole business
- Prevent other parts of the business from becoming too independent.
- Easier to coordinate and control from the center e.g. with budgets
- Economies of scale and overhead savings easier to achieve

- Quicker decision-making (usually) -easier to show strong leadership

 Potential drawbacks of centralization

- More bureaucratic - often extra layers in the hierarchy
- Local or junior managers are likely to be much closer to customer’s needs
- Lack of authority down the hierarchy may reduce manager motivation

- Customer service: lost flexibility and speed of local decision-making

8
 b. Decentralized decision-making

 In a decentralized structure, decision-making is spread out to include more junior

managers in the hierarchy, as well as individual business units or trading locations

 Possible benefits of decentralization:

- Decisions are made closer to the customer
- Better able to respond to local circumstances
- Improve the level of customer service
- Can enable a flatter hierarchy
- Good way of training and developing junior management

- Facilitates empowerment: should improve staff motivation

 Possible drawbacks of decentralization:

- Decision-making is not necessarily “strategic”
- Harder to ensure consistent practices and policies at each location
- May be some diseconomies of scale - e.g. duplication of roles
- Who provides strong leadership when needed (e.g. in a crisis)?
- Harder to achieve tight financial control - risk of cost-overruns

9
 5. DEPARTMENTALIZATION
- Departmentalization is the process of subdividing total work into departments

a) Functional departmentalization

 Functional structure is the grouping of positions into departments based on similar skills,
expertise, and resource use.
 A manager might organize the workplace by separating engineering, accounting,
information systems, human resources, and purchasing into departments.
 The major advantage is the achievement of economies of scale by placing people with
common skills and specializations into common units.

b) Product departmentalization

 It focuses attention on major product areas in the corporation.

 A team is responsible for the creation and completion of a product or service from start to
finish.
 The advantage is that it increases accountability for product performance because all
activities related to a specific product are under the direction of a single manager.
 This strategy is suitable for business organizations that produce various types of products
in large quantities.
 One company that uses product departmentalization is Nike. Its structure is based on its
varied product lines, which include athletic and dress/casual footwear, sports apparel and
accessories, and performance equipment.

10
 c) Customer departmentalization

 Customers in each department have a common set of problems and needs that can best be
met by specialists
 The sales activities in an office supply firm, for instance, can be divided into three
departments that serve retail, wholesale, and government customers.
 The particular type of customer an organization seeks to reach can also dictate employee
grouping.

d) Geographic departmentalization

 It is an arrangement of departments according to the geographic area or territory served

 Geographic areas can be districts, countries, provinces, continents
 For every separate location, a specific department is created and a regional or divisional
manager is appointed with the necessary authority and responsibilities.
 For instance, the organization structure of Coca-Cola reflects the company’s operations in
two broad geographic areas: the North American sector and the international sector (which
includes the Pacific Rim, the European Community, Northeast Europe and Africa, and
Latin America).

11
 e) Process departmentalization

 Groups activities on the basis of work or customer flow like that found in many
government offices or in health care clinics.
 Units are organized around common skills needed to complete a certain process.
 With separate departments to handle applications, testing, information and photo
processing, and payment collection, customers “flow” through the various departments in
sequence to get their licenses

12
 6. FORMALIZATION

Formalization in organizational structure refers to the extent to which rules, procedures, and
processes are clearly outlined and defined in an organization. It determines the level of
standardization and uniformity in how tasks are performed, decisions are made, and
communication channels are established.

Levels of formalization
There are different levels of formalization that can be applied to an organization's management,
each with its own advantages and disadvantages.

 High formalization: This level of formalization involves strict rules and guidelines for
decision making, as well as a clear hierarchy of roles and responsibilities. Advantages
include clear lines of communication, consistency in decision making, and reduced
potential for errors or misunderstandings. However, it can also lead to inflexibility, lack of
autonomy for employees, and a lack of creativity.

 Moderate formalization: This level of formalization involves a balance between clear

rules and guidelines and flexibility in decision making. It allows for a clear structure and
clear lines of communication, but also allows for some autonomy for employees and
encourages creativity.
13
  This level of formalization involves minimal rules and guidelines for decision making,
and a more decentralized structure with few defined roles and responsibilities. Advantages
include flexibility, autonomy for employees, and creativity. However, it can also lead to
confusion and inefficiency, as well as lack of clear lines of communication.

Advantages and disadvantages of formalization

Advantages of formalization in organizational structures:
 Consistency: Formalization ensures that processes and procedures are consistently
followed, leading to uniformity and reliability in operations.
 Clarity: Clear guidelines and documented procedures reduce ambiguity, ensuring that
employees understand their roles and responsibilities.
 Efficiency: Formalization promotes efficiency by providing standardized methods for
completing tasks and reducing the chances of errors and duplication of efforts.
 Communication: Clearly defined processes and roles facilitate effective communication
within the organization, improving coordination and collaboration among teams.
 Control: Formalization helps establish control mechanisms by clearly defining authority,
decision-making processes, and accountability.

Drawbacks of formalization in organizational structures:

 Rigidity: Excessive formalization can lead to a rigid and inflexible organizational
structure, making it difficult to adapt to changing external environments or innovate.
 Reduced creativity: Highly formalized structures may stifle creativity and hinder
employees from thinking outside the box or proposing innovative ideas.
 Slower decision-making: Formalization can sometimes result in slow decision-making
processes as approvals may need to go through multiple hierarchical levels.
 Resistance to change: Organizations with high formalization may face difficulties in
adopting changes due to the established processes and resistance from employees.
 Lack of agility: Over-reliance on formal processes can inhibit the organization's ability to
respond quickly and effectively to unexpected situations or market shifts.
It's important for organizations to strike a balance between formalization and flexibility to reap
the advantages while mitigating the drawbacks. The optimal level of formalization may vary
based on the organization's industry, size, and desired outcomes.

 A formalized structure is associated with reduced motivation and job satisfaction as well
as a slower pace of decision making (Frederickson, 1986; Oldham & Hackman, 1981;
Pierce & Delbecq, 1977; Wally & Baum, 1994). The service industry is particularly
susceptible to problems associated with high levels of formalization. Sometimes
employees who are listening to a customer’s problems may need to take action, but the
answer may not be specified in any procedural guidelines or rulebook. For example, while
a handful of airlines such as Southwest do a good job of empowering their employees to
handle complaints, in many airlines, lower-level employees have limited power to resolve
a customer problem and are constrained by stringent rules that outline a limited number of
acceptable responses"
14
 REFERENCES

1. Stephen P.Robbins, Marry A.Coulter, David A.De Cenzo. Fundamentals of

management

2. Hitesh Bhasin (2021). Span Of Control – Definition, Meaning, Factors, Examples

3. Gaurav Akrani (2012). Bases Methods Types of Departmentalization

4. Samuel Olu Adeyoyin (2003). Aspects of Job Specialization and

Departmentalization.

5. Niederhoffer (2012). Specialization and Division of Labour

15