Boutique advertising firm Nitro relies on an organizational structure that keeps it nimble and responsive to customer needs. Founded in Shanghai, Nitro is a virtual global agency in which each local office has account service staff, but a global creative swat team is parachuted in as required.
Formalization • The degree to which organizations standardize behavior through rules, procedures, formal training, and related mechanisms. • Formalization increases as firms get older, larger, and more regulated • Problems – – – –
Reduces organizational flexibility Work rules can undermine productivity Employees feel disempowered Rules become focus of attention
Effects of Departmentalization 1. Establishes chain of command (supervision structure) 2. Creates common mental models, measures of performance, etc 3. Encourages staff to coordinate through informal communication
Features of Simple Structures • Minimal hierarchy -- staff reports directly to owner • Roles are fairly loosely defined for flexibility • Informal communication for coordination • Centralized structure -- owner makes most decisions
Evaluating Functional Structures • Benefits – Supports professional identity and career paths – Permits greater specialization – Easier supervision --similar issues – Creates an economy of scale --common pool of talent
• Limitations – More emphasis on subunit than organizational goals – Higher dysfunctional conflict – Poorer coordination -- requires more controls
Bioware’s Matrix Structure Ray Muzyka (left) and Greg Zeschuk (right) adopted a matrix organizational structure for their electronic games company, Bioware, because it balances the need for teamwork and information sharing.
Uses resources and expertise effectively Improves communication,flexibility, innovation Focuses specialists on clients and products Supports knowledge sharing within specialty across groups – Solution when two divisions have equal importance
• Limitations – Increases goal conflict and ambiguity – Two bosses dilutes accountability – More conflict, organizational politics, and stress