Learning organization

Flow of presentation• Devika Shinde P-34

• Pradnya Bhalerao C-03

• Sukhada Kulkarni P-17

• Puja Govekar P-09

• Dhanraj Koli P-16

• Anandita Singh C-34

• Jayashree Prabhu C-43

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DEVIKA SHINDERoll No. – p-34

General introduction to Organizational theories and

design

What is Organizational Design

What is Organizational Design

• Developments in or changes to the structure of an organization

• Organization Design refers to the process of coordinating the structural elements of an organization in the most appropriate manner

Key elements of organizational designs:

DepartmentalizationSpan of Control

WorkSpecialization

Chainof Command

Authority and Responsibility

Centralization vs. Decentralization

Organizational Theories

The current state of organization theory is the result of an evolutionary process. Theories have been introduced, evaluated and refined over time ; new insights tend to reflect the limitations of earlier theories.

Classical & Neoclassical Theory

• Classical organizational theorists (such as Weber, Taylor ) believed that a universally best way to design organizations exists, an approach based on high efficiency.

• Neoclassical organizational theorists (such as McGregor,Argyris ) their approach emphasizes the need to pay attention to basic human needs to succeed and express oneself.

Differentiation

Differentiation

• The process by which an organization allocates people and resources to organizational tasks and establishes the task & authority relationships that allows organization to achieve its goal.

• Process of establishing division of labour.

Example

• Differentiation at B.A.R. and Grille restaurant.

Organizational Role

• The basic building block of differentiation.

• It is the set of task – related behaviors required of a person by his or her position in an organization.

• Example of B.A.R. and Grille restaurant.

Contd…..

• Authority

• Control

Sub units

• Function: is a sub-unit composed of group of people, working together, who possess similar skills or use same kind of knowledge, tools or techniques to perform their jobs– Support functions

– Production function

– Maintenance

– Adaptive

– Managerial

Sub-units

• Division: A sub unit that consists of a collection of functions or departments that share responsibility for producing a particular good or service.

Vertical and horizontal differentiation

• Hierarchy

• Vertical differentiation

• Horizontal differentiation

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Balancing differentiation &

integration

What is differentiation?

The process by which an organization allocates people & resources to organizational tasks & establishes the tasks & authority relationships that allow the organization to achieve its goal.

Challenges of horizontal differentiation

• Development of subunit orientation• Communication gap Production team VS Research team

E.g. Xerox computer system, Wal-mart television linkups

What is integration?

• The process of coordinating various tasks, functions and divisions so that they work together and not at cross-purpose.

7-integrating mechanism1) Hierarchy of authority

2) Direct contact

3) Liaison role

4) Task force

5) Team

6) Integrating role

7) Integrating department

Hierarchy of authority

• Simplest device

• Allocation of authority

• E.g. Becton Dickinson

Liaison team

MarketingProductio

n

Team Force or Team

Engineering

Engineering

Marketing

Marketing

R & DR & D

SalesSales

Production

Production

Integrating Role or Department

Computer Hardwar

eDivision

IntegrationRole or

Department

ApplicationDivision

ComputerSoftwareDivision

Differentiation & Integration-key aspects

Differentiation Integration

A highly complex, highly differentiated organization needs high level of integration

An organization that has a relatively simple, clearly defined role structure needs to use only simple integrating mechanism

Expensive –in terms of the number of managers employed & the amount of managerial time spent on coordinating organizational activities.

Unnecessary investment

Summary • Carefully guide the process of differentiation so that

it develops the core competencies that give the organization a competitive advantage

• Carefully integrate the organization by choosing

appropriate integration mechanism that allow subunits to cooperate & that build up the organization’ core competencies

Balancing Centralization & Decentralization

What is Centralization?• Organizational setup whereby the authority to

make important decision is retained by managers at the top of the hierarchy

What is Decentralization?• An organizational setup whereby the authority

to make important decision about organizational resources and to initiate new projects is delegated to managers at all levels in the hierarchy…

Centralization Advantages Disadvantages

Top managers coordinate organizational activities effectively & keep the organization focused on its goal.

Top management become overloaded & need to take care of day-to-day activities & cannot focus on long term decision making

Lower hierarchy-afraid to make news or express their ideas

Hierarchy of authority exists , people are constantly looking to their superiors for help.

DecentralizationAdvantages Disadvantages

Promotes flexible & responsiveness by allowing subordinate to make on the spot decisions

Planning & coordination becomes more difficult

Motivates to perform the best Personal goals & objectives can be pursed at the expense of organization

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Standardization

Which is defined by sets of rules and norms, that are considered proper in a given situation

Mutual adjustment.

It is a process in which people use their judgment rather than standardized rules to

address problems

Balancing standardization & Mutual adjustment

• Both are very important.

• But only one can be adopted at a time.

• Eg: IBM policies tranformation.

• The real challenge faced, is to design a structure that achieves right balance between the two.

A right balance between the two is very important.

• Formalization: Use of written rules and procedures to standardize operations.

• Formalization and Mutual adjustment: High level of formalization implies centralization of authority, and lower one implies mutual adjustment and dynamic decision making.

• Rules: Formal and written statements

• Norms: standards and styles of behaviour

Socialization• Process by which organizational members

learn the norms of organization and internalize these unwritten rules of conduct in them.

• Why is behavior rigid when rules change?

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Standardization Vs Mutual adjustment

Manager facing the challenge of balancing the need for standardization

against need for mutual adjustments

PUJA a. govikarRoll no. p-9

Mechanistic and Organic Organizational Structure

`

Mechanistic structure

• It is designed to induce people to behave in predictable, accountable ways.

• Decision-making authority centralized.

• Task associated with role and are coordinated through standardization.

• Each person knows his responsibility.

Mechanistic structure cont.

• At the functional level, each function is separate, and communication and cooperation among functions are the responsibility of someone at the top management.

• Formal written rules and procedures are main means of organizational control.

• Vertical command structure.• Promotion ties to performance• Best suited to organization that face stable,

unchanging environment.

Organic Structure

• It promotes flexibility, so people initiate change and can adapt quickly to changing conditions.

• Decision-making authority decentralized.

• Roles are loosely defined.

• High level of integration needed.

Organic Structure cont.• Co-ordination is achieved through mutual adjustment

as people and functions workout role and responsibility.

• Informal norms and values.• Status conferred by ability not by any formal position

in hierarchy.• Best suited to organization that face unstable, changing

environment.• Eg: Sony (Sony’s Magic Touch)

Mechanistic v/s Organic Structure

Mechanistic Organic

Individual Specialization Joint Specialization

Simple Integration Complex integration

Centralization Decentralization

Standardization Mutual Adjustment

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Mechanistic v/s Organic Structure

• Individual Specialization

• Simple Integration

• Centralization

• Standardization

• Joint Specialization

• Complex integration

• Decentralization

• Mutual Adjustment

Contingency Approach to Organizational Design

• A management approach in which design of an organization's structure is tailored to the sources of uncertainty facing an organization.

• Organization must design internal structure to control the external environment.

• Tom burns and G.M. Stalker theory

Tom burns and G.M. Stalker theory

• They found that organizations need different kinds of structure to control activities when they need to adapt and respond to change in the environment.

• Eg: Mcdonald (Mcdonald’s Changing Environment)

McDonald Changing Environment

• Problems faced by McDonald due changing Environment in early 2000s.

• Consumer taste shifting as health conscious.

• Environmentalist attacking the packaging.

• Increase in competition.

Organizational Structure

• It had Mechanistic structure having standardized operations and formalization.

• The burger and fries served in London tasted & looked same as in New York.

Solution McDonalds came up with..

• McDonalds new approach to production was based on flexibility.

• Designed menu that would appeal to local customer.

• This led to shift McDonald from mechanistic to organic structure

Identify the organization structure

Rayon mill

• Used standard well-understood technology

• Had bureaucratic structure • Factory bible explained all

procedures • A system of hierarchically linked job

positions with clear responsibilities • Treat problem situations as temporary

deviations from the norm • Sometimes ask sales dept to slow

down so as to not overwhelm the production dept.

High-Tech Electronics Firm • Creating new industries, such as

computers, space technologies, equipment, etc.,

• There was an even more fluid organizational style

• Jobs allowed to shape themselves • People hired for general expertise and

brains and then allowed/encouraged to find their own place in the organization to make their contribution

• As situations changed, people would take on different activities but without changing jobs

• People continually inquiring into what they should be doing and then acting

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Functional structure

A design that group people on the basis of their common expertise and experience or because they uses the same resources.

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Functional structure

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Functional structure Advantages

• Specialization – each department focuses on its own work

• Accountability – someone is responsible for the section

• Clarity – know your and others’ roles

• Learning- from one another

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Functional structure

  Disadvantages

• Closed communication could lead to lack  of focus.

• Departments can become resistant  to change.

• Coordination .

• Customer problem.

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Control problems

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continue

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Divisional structure

• Divisional structure is one in which set of relatively autonomous units or divisions are governed by central corporate office, but each operation division has its own functional specialist who provides product and services different from those of other divisions

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Types of Divisional structure

• Product structure– Divisions by the product group or category

• Market structure– Divisions by type of customer

• Geographic structure– Global or regional divisions

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ANANDITAC 34

Divisional Structures

Functions according to the specific demands of products, markets, or customers.

Divisional Structures

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Divisional Structure I• A structure in which functions are

grouped together according to the specific demands of products,

markets, or customers.

• The type of divisional structure selected is driven by the specific type of control problem experienced.

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I) Product structures

A divisional structure in which products are grouped into separate divisions, according to their similarities or differences.

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Types of product structures

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a) Product Division Structure

• Characterized by splitting of the manufacturing function into different product lines or divisions.

• Centralized support functions.• Service needs of a number of different

product lines.• Typically used by organizations whose

products are broadly similar and aimed at the same market.

• E.g. Food processors, furniture makers, personal care products, paper products, etc.

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Product Division Structure

4-19

Large Food Processor – E.g. Heinz

Vice PresidentSales and Marketing

Vice President

Research and Development

Vice President Materials

Management

CEO

Vice President Finance

PDM PDM PDM PDM

Centralized support functions

Divisions04/08/23 73

Product Division Structure – Contd.

• Design decision increases horizontal differentiation within the organization.

• For each division, there is a separate manufacturing unit that has it’s own hierarchy .

• Each division is headed by a product division manager (PDM).

• Each PDM is responsible for the division’s product activities and coordinating with the central support functions.

• Increases vertical hierarchy in an organization. 04/08/23 74

b) Multidivisional Structure• To manage complex and diverse value

creation activities.

• Support functions are placed in self-contained divisions.

• Typically used by an organization whose products are very different and that operates in several different industries.

• E.g. Cars and fast food industries.

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Multidivisional Structure.

Consumer Products Company.

CorporateManagers

CEO

Divisional Managers

Senior VP

Marketing

Senior VP

Finance

Senior VP

Materials

Management

Senior VP

Research and

Development

Functional Managers

Corporate Headquarters Staff

Division B

Support functions

Division D

Support functions

Division A

Support functions Support functions

Division C

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COMPARISON

MULTIDIVISIONAL STRUCTURE

PRODUCT DIVISION STRUCTURE

Independence of each division – self contained.

Divisions shares the services of a set of centralized functions.

New level of management – a corporate head quarters staff – adds more control.

No such level – control is lesser.

Structure is designed to allow a Company to operate in many different businesses.

Structure can only be used to control the activities of a Company that is operating in one business or Industry.

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ADVANTAGES

• Increased Organizational Effectiveness.

• Increased control.

• Profitable growth.

• Internal Labour Market.

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DISADVANTAGES• Managing the Corporate- Divisional

relationship.

• Coordination problems between divisions.

• Transfer pricing.

• Bureaucratic costs.

• Communication Problems.

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Product Team Structure• Specialists from the support functions are combined

into product development teams.

• Typically used by an organization whose products are

very technologically complex.

• Or whose characteristics change rapidly to suit

customer needs.

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Product Team Structure.

ProductDivision

Product Division

CEO

Functions

Product Development Teams

Product Division

V ice PresidentResearch and Development

V ice PresidentSales and Marketing

V ice President Manufacturing

Vice PresidentFinance

Functional specialist

V ice PresidentMaterials Management

PTM Product Team Manager

PTM PTM PTM

4-2904/08/23 81

Product Team Structure…Contd.

• Each team is a self contained division and is headed by a Product Team Manager (PTM).

• PTM supervises the operational activities associated with developing and manufacturing the product.

• Product teams focus on the needs of one product or few related products.

• Overall functional control – V.P. of the functions.• Decision-making and responsibility for each product

is decentralized to the team.

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Divisional Structure II

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Geographic Structure:

• Used when an organization experiences control problems that are a function of geography.• Such a structure organizes divisions

according to the requirements of different locations.

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Geographic Structure

Regional Operations

Regional Operations

Regional Operations

Regional Operations

CEO

Central Support Functions

Individualstores

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Divisional Structure IIIMarket Structure :

• When an organization experiences control problems that are a function of the differences in the various customer groups being served.

• Such a structure aligns functional skills and activities with different customer needs.

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Market Structure

CommercialDivision

CommercialDivision

ConsumerDivision

ConsumerDivision

GovernmentDivision

GovernmentDivision

CorporateDivision

CorporateDivision

CEOCEO

Central Support FunctionsCentral Support Functions

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JAYASHREEC43

MATRIX STRUCTURE

Matrix Structure

•The search for better and faster ways todevelop products and meet customer needsled to the matrix structure.

•A matrix structure groups people and resources in two ways simultaneously:-by function and -by product

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Matrix StructureCEO

V ice PresidentEngineering

V ice PresidentFinance

V ice PresidentPurchasing

V ice PresidentSales and Marketing

V ice President Research and Development

Product AManager

Product BManager

Product CManager

Product DManager

Product Team

Two-boss employee

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Advantages of a Matrix Structure

1. Uses cross-functional teams.2. Better communication between functional

specialists, opportunity for learning, progress, innovation.

3. Enables organization to maximize its use of skilled professionals, who move from product to product as needed.

4. The dual functional and product focus promotes concern for both cost and quality.

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Disadvantages of a Matrix Structure

1. Lacks the advantages of bureaucratic structure – role ambiguity, role conflict

2. Conflict between function and product teams over the use of resources, power.

3. Lack of coordination, stress, uncertainty.

4. Over a time, people experience a vacuum of authority and responsibility.

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Multidivisional Matrix Structure•A multidivisional matrix structure provides for

more integration between corporate and divisional managers, and between divisional managers.

•This structure makes it easier for top executives from the divisions and fromcorporate headquarters to coordinateorganizational activities.

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Multidivisional Matrix Structure

CEO

Senior Vice PresidentMarketing

Senior Vice PresidentFinance

Senior Vice President Research and Development

Senior VicePresidentMaterials Management

AutomobileProductsDivision

PersonalComputerDivision

ConsumerElectronicsDivision

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Network Structure

•A recent innovation in organizational architecture is the use of network structures.

•A network structure is a cluster of different organizations whose actions are coordinated by contracts and agreementsrather than through a formal hierarchy.

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Network Structure

Network structures often result from outsourcing.

Outsourcing is the process of moving activities that were previously performed inside the organization to the outside (where they are done by other companies).

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Advantages of Network Structure

1. Organization can find a network partner – reduction in production cost.

2. Avoids the high bureaucratic costs of operating a complex organizational structure.

3. Organization acts in organic way.

4. Organization can gain access to low cost foreign sources of inputs and functional expertise.

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Disadvantages of Network Structure

1. Outsourcing ??

2. Coordination problem- different companies perform different parts of the work.

3. Trust among groups, Trust that outsourcing will not leak confidential information of company to it’s competitors.

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Boundaryless Organization

• The boundaryless organization is composed of people who are linked by computers, faxes, computer-aided design systems, and video teleconferencing, and who may rarely or ever see one another face to face.

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CONCLUSION

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Bibliography

• Organizational Theory, design, and Change – Fourth Edition, Gareth R. Jones.

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