© 2009 Cengage Learning. All rights reserved. Chapter 15 Organizational Design and Structure 1 Define differentiation and integration as organizational

© 2009 Cengage Learning. All rights reserved.

Chapter 15Organizational Design

and Structure

1 Define differentiation and integration as organizational design processes.

2 Discuss the basic design dimensions managers must consider in structuring an organization.

3 Describe five structural configurations for organizations.

4 Describe four contextual variables that influence organizational structure.

5 Explain the forces reshaping organizations.

6 Discuss emerging organizational structures.

7 Identify two cautions about the effect of organizational structures on people.L

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Define differentiation and integration as organizational design processes.

Learning Objective1


the process of constructing and adjusting an

organization’s structure to achieve its goals.

Organizational Design-Evan


Organizational Design – the process of constructing and adjusting an organization’s structure to achieve its goals.organization’s structure

the linking of departments and

jobs within an organization

Organizational Design-Evan


Key Organizational Design Processes


Four Dimensions• Manager’s goal orientation• Time orientation• Interpersonal orientation• Formality of structure

The process of deciding how to divide the work in an organization-Katie


Horizontal Differentiation-Katie

• The degree of differentiation between organizational subunits

• Based on employee’s specialized knowledge, education, or training


Vertical Differentiation-Katie

• The difference in authority and responsibility in the organizational hierarchy

• Greater in tall, narrow organizations than in flat, wide organizations


Spatial Differentiation-Katie

• Geographic dispersion of an organization’s offices, plants, and personnel

• Complicates organizational design, but may simplify goal achievement or protection

Differentiation Between Marketing and Engineering

Basis for DifferenceBasis for Difference MarketingMarketing EngineeringEngineering

Goal orientationTime orientationInterpersonal orientationStructure

DesignMedium runTask orientedMore formal

Sales volumeLong runPeople orientedLess formal


• Designed to achieve unity among individuals and groups

• Supports a state of dynamic equilibrium – elements of organization are integrated, balanced

The process of coordinating the different parts of an organization-Robin


Vertical Integration-Robin

• Hierarchical referral• Rules and procedures• Plans and schedules• Positions added to the

organization structure• Management information

systems


HorizontalIntegration-Robin

• Liaison roles• Task forces• Integrator positions• Teams


Discuss the basic design dimensions managers must consider in structuring an organization.

Learning Objective2


2 Ways to Approach-Justin

Iestablish desired level of each structural dimension on a high-low continuum and develop structure that meets desired configuration

Organizational Design Process


2 Ways to Approach-Justin

IIdescribe what is

or is not important to the success of the

organization rather than worry

about specific characteristics

Organizational Design Process

Hierarchy ofAuthority – the degree of

vertical differentiation

across levels of

management

Specialization –the degree towhich jobs are

narrowlydefined anddepend on

uniqueexpertise

BasicDesign

Dimensions

Formalization – the degree to which the organization

has official rules, regulations, and procedures

Standardization – the degree to which work

activities are accomplished in a routine fashion

Complexity – the degree towhich many different types

of activities occur in theorganization

Centralization – the degree to which decisions aremade at the top of the

organization

Ben M.


Describe five structural configurations for organizations.

Learning Objective3

Adhocracy – a selectively

decentralized form of

organization thatemphasizes thesupport staff and

mutual adjustmentamong people

Simple Structure – acentralized form oforganization that

emphasizes the upperechelon and direct

supervision

Machine Bureaucracy – a moderately

decentralized form oforganization thatemphasizes the

technical staff andstandardization ofwork processes

Divisional Form – amoderately decentralized

form of organization that emphasizes the

middle level and standardization of outputs

ProfessionalBureaucracy –a decentralized

form oforganization thatemphasizes theoperating level

and standardizationof skills

Structural Configurations

ofOrganizations

Kyle P

Five Structural Configurations of Organization-Kyle P

StructuralConfiguration

Prime CoordinatingMechanism

Key Part ofOrganization

Type ofDecentralization

Simple Structure

DirectSupervision

UpperEchelon

Centralization

Machine Bureaucracy

Standardization of Work Processes

TechnicalStaff

Limited Horizontal

Decentralization

ProfessionalBureaucracy

Standardizationof Skills

OperatingLevel

Vertical andHorizontal

DecentralizationDivisionalized

FormStandardization

of OutputsMiddleLevel

Limited VerticalDecentralization

Adhocracy Mutual Adjustment

SupportStaff

SelectiveDecentralization


MiddleLine

StrategicApex

StrategicApex

Operating CoreOperating Core

Support

StaffSupport

StaffTechno-structure

Techno-structure

Mintzberg’s Five Basic Parts of an Organization

From H. Mintzberg, The Structuring of Organizations (Upper SaddleRiver, N.J.: Prentice-Hall, 1979): 20. Reprinted with permission.


Describe four contextual variables that influence organizational structure.

Learning Objective4

Contextual Variables – a set of characteristics that

influences the organization’s design processes

Size

Environment

Technology

Strategyand Goals

Basic Design Small Large Dimensions Organizations Organizations

FormalizationCentralization SpecializationStandardizationComplexityHierarchy of authority

LessHighLowLowLowFlat

MoreLowHighHighHighTall

Implications of Size


the degree of interrelatedness of the organization’s

various technological elements

Technological Interdependence

Relationship Between Technology and Basic Design Dimensions

Key1 Formalization 4 Standardization2 Centralization 5 Complexity3 Specialization 6 Hierarchy of Authority

Craft1. Moderate2. Moderate3. Moderate4. Low moderate5. High6. LowRoutine1. High2. High3. Moderate4. High5. Low6. High

Nonroutine1. Low2. Low3. Low4. Low5. High6. LowEngineering1. Moderate2. Moderate3. High4. Moderate5. Moderate6. Moderate

Few Exceptions Many Exceptions

Task Variability

Ill-defined andUnanalyzable

Well-defined andAnalyzable

Pro

ble

m A

nal

yzab

ility

Built from C. Perrow, “A Framework for the Comparative Analysis of Organization,” American Sociological Review, April 1967, 194-208


anything outside the boundaries of an organization

Environment


Environment

Task Environment – the elements of an organization’s environment that are related to its goal attainment

Environmental Uncertainty – the amount and rate of changein the organization’senvironment

Environment?


Extremes of Environmental Uncertainty-Tyson

Mechanistic Structure – an organizational design that emphasizes structured activities, specialized tasks, and centralized decision making

Organic Structure – an organizational design that emphasizes teamwork, open communication, and decentralized decision making


Key Organizational Design Elements-Tyson

Context of the organizationCorrect sizeCurrent technologyPerceived environmentCurrent strategy and goals

Structural dimensionsLevel of formalizationLevel of centralizationLevel of specializationLevel of standardizationLevel of complexityHierarchy of authority

Influences how manager perceive structural needs


Strategic Dimension Predicted Structural Characteristics

Innovation—to understand Low formalizationand manage new processes Decentralizationand technologies Flat hierarchyMarket differentiation—to Moderate to high complexityspecialize in customer Moderate to high preferences

formalization Moderate centralization

Cost control—to produce High formalizationstandardized products High centralizationefficiently High standardization Low complexity

Miller’s Integrative Framework of

Structural & Strategic Dimensions

D. Miller, “The Structural and Environmental Correlates of Business Strategy,” Strategic Management Journal 8 (1987): 55-76. Copyright @ John Wiley & Sons Limited. Reproduced with permission.

Dillin


Which characterize the organizational processes-Dillin

Context of the organization

PurposesDesignate formal lines of authorityDesignate formal information- processing patterns

Differentiation and Integration

Which influence how well the structure meets its

Which influence how well the structure fits the


Explain the forces reshaping organizations.

Learning Objective5


Organization Life Cycle

the differing stages of an

organization’s life from birth to death


Forces Reshaping Organizations

• Globalization

• Changes in Information-Processing Technologies

• Demands on Organizational Processes

• Emerging Organizational Structures

Structural Roles of Managers

Roles of Managers Today

1. Strictly adhering to boss– employee relationships2. Getting things done by giving orders3. Carrying messages up and down the hierarchy4. Performing a set of tasks according to a job description5. Having a narrow functional focus6. Going through channels, one by one by one7. Controlling subordinates

Roles of Future Managers

1. Having hierarchical relationships subordinated2. Getting things done by negotiating3. Solving problems and making decisions4. Creating the job through entrepreneurial projects5. Having a broad cross- functional collaboration6. Emphasizing speed and flexibility7. Coaching one’s workers

Management Review, January 1991, Thomas R. Horton.


Discuss emerging organizational structures.

Learning Objective6


Emerging structures

• Network organizations

• Virtual organizations

• Circle organizations


HD’s Circle Organization

From R. Teerlink and L. Ozley, More than a Motorcycle: The Leadership Journey at Harley-Davidson. Boston, MA, 2000. P. 139.Copyright © 2000 by the Harvard Business School Publishing Corporation; all rights reserved.

CreateDemand

ProduceProduct

ProvideSupport

Leadership andStrategy Council(LSC)


Identify two cautions about the effect of organizational structures on people.

Learning Objective7


Four Symptoms of Structural Weakness-Zach

• Delay in

decision making • Poor quality

decision making • Lack of innovative

response to changing

environment • High level of

conflict

Overloaded hierarchy; information funneling limited to too few channels

Right information not reaching right people in right format

No coordinating effort

Departments work against each other, not for organizational goals

Dysfunctional

Personality/Organization

Combinations-Zach

ParanoidParanoid

DramaticDramatic

CompulsiveCompulsive

SchizoidSchizoid

DepressiveDepressive

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© 2009 Cengage Learning. All rights reserved. Chapter 15 Organizational Design and Structure 1 Define differentiation and integration as organizational