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© 2013 Cengage Learning
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. Identify and describe emerging organizational structures.
7. Identify factors that can adversely affect organizational structure.Lea
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Organizational Design
the process of constructing and adjusting
an organization’s structure to achieve its
business strategy and goals
© 2013 Cengage Learning
Organizational Structure
the linking of departments and jobs within
an organization
© 2013 Cengage Learning
Learning OutcomeLearning Outcome
Define differentiation and integration as organizational design processes.
© 2013 Cengage Learning
1
Key Organizational Design Processes
DifferentiationThe process of deciding how to
divide the work in an organization
• Manager’s goal orientation• Time orientation
• Interpersonal orientation•Formality of structure
© 2013 Cengage Learning
© 2013 Cengage Learning
DifferentiationHorizontal differentiation
Degree of differentiation between organizational subunits.
Vertical differentiationThe difference in authority and responsibility
in the organizational hierarchy
Spatial differentiationGeographic dispersion of an organization’s offices,
plants and personnel
Beyond the Book:Differntiation at Cisco
• At Cisco, the existence of multiple teams, councils, boards, and working groups within Cisco creates a web of internal integrating structures that lead to fast decisions by the right people to ensure that the company is agile.
• Cisco has a complex organizational structure because it allows the firm to enter into new markets quickly.
• An emphasis on horizontal integration and cross-function teaming allows Cisco to be much more agile than before. A key benefit is speed in decision making.
© 2013 Cengage Learning
Key Organizational Design Processes
Integration
The process of coordinating the different parts of an organization
Supports dynamic equilibrium, in which all the parts of an
organization are interrelated and balanced
© 2013 Cengage Learning
Integration
Horizontal Integration
•Liaison roles•Task forces•Integrator positions•Teams
Vertical integration•Hierarchical referral•Rules and procedures•Plans and schedules•Positions added to the organization structure•Management information systems
© 2013 Cengage Learning
Learning OutcomeLearning Outcome
Discuss the basic design dimensions managers must consider in structuring an organization.
© 2013 Cengage Learning
2
© 2013 Cengage Learning
2 Ways to Approach
Iestablish desired level of each structural dimension on a high-low continuum and develop structure that meets desired configuration
IIdescribe what is
or is not important to the success of the
organization rather than worry
about specific characteristics
The Organizational Design Process
Structural Dimensions
• Formalization: the degree to which the organization has official rules, regulations, and procedures
• Centralization: the degree to which decisions are made at the top of the organization
• Specialization: the degree to which jobs are narrowly defined and depend on unique expertise
• Standardization: the degree to which work activities are accomplished in a routine fashion
• Complexity: the degree to which many different types of activities occur in the organization
• Hierarchy of Authority: the degree of vertical differentiation across levels of management
© 2013 Cengage Learning
Importance-Based
1.How many tasks and how specialized? 2.How standardized?3.What skills are required? 4.Basis for grouping of positions?5.How large should each unit be?6.How much standardization?7.What mechanisms to help individuals?8.How centralized?
© 2013 Cengage Learning
Learning OutcomeLearning Outcome
Describe five structural configurations for organizations.
© 2013 Cengage Learning
3
Structural Configurations
• Simple Structure – a centralized form of organization that emphasizes a small technical and support staff, strong centralization of decision making in the upper echelon, and a minimal middle level
• Machine Bureaucracy – a moderately decentralized form of organization that emphasizes a support staff differentiated from the line operations of the organization, limited horizontal decentralization of decision making, and a well-defined hierarchy of authority
• Professional Bureaucracy – a decentralized form of organization that emphasizes the expertise of the professionals in the operating core of the organization
© 2013 Cengage Learning
Structural Configurations
• Divisionalized Form – a loosely coupled, composite structural configuration composed of divisions, each of which may have its own structural configuration
• Adhocracy – a selectively decentralized form of organization that emphasizes the support staff and mutual adjustment among people
© 2013 Cengage Learning
Five Basic Parts of an Organization
SOURCE: From H. Mintzberg, The Structuring of Organizations, © 1979, 20. Reprinted by permission of Pearson Education, Inc., Upper Saddle River, N.J.
© 2013 Cengage Learning
Learning OutcomeLearning Outcome
Describe four contextual variables that influence organizational structure.
© 2013 Cengage Learning
4
Contextual Variables – a set of characteristics that
influences the organization’s design processes
Size
Environment
Technology
Strategyand Goals
© 2013 Cengage Learning
SIZE
• Measured in number of employees
• Formalization, specialization and standardization greater in larger organizations
• As size increases, complexity increases
© 2013 Cengage Learning
TECHNOLOGY
•The relationship between technology and structure is complex…•…different departments employ different technologies…
© 2013 Cengage Learning
Joan Woodward
Three types of technology:•Unit – small batch manufacturing technology
•Mass – large-batch manufacturing
•Process production – continuous-production process
© 2013 Cengage Learning
James Thompson
Technological interdependence
the degree of interrelatedness of the organization’s various
technological elements
Greater technological interdependence leads to
greater complexity.
© 2013 Cengage Learning
© 2013 Cengage Learning
Environment - anything
outside the boundaries of an
organization
© 2013 Cengage Learning
Environment
Task Environment – the part of the environment that is directly relevant to the organization
Environmental Uncertainty – the amount and rate of changein the organization’senvironment
TECHNOLOGYEnvironment
© 2013 Cengage Learning
Extremes of Environmental Uncertainty
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
© 2013 Cengage Learning
© 2013 Cengage Learning
Provides legitimacy to the organization, employee direction, decision guidelines, and criteria for performance.
TECHNOLOGYStrategy
Learning OutcomeLearning Outcome
Explain the forces reshaping organizations.
© 2013 Cengage Learning
5
Forces Reshaping Organizations
• Organizational life cycles
• Globalization
• Changes in Information-Processing Technologies
• Demands on Organizational Processes
© 2013 Cengage Learning
Organization Life Cycle
the differing stages of an organization’s
life from birth to death
© 2013 Cengage Learning
Learning OutcomeLearning Outcome
Identify and discuss emerging organizational structures.
© 2013 Cengage Learning
6
Emerging Structures• Network organizations – web-like structures that
contract some or all operations to other organizations, then coordinate activities.
• Virtual organizations – temporary networks of organizations consisting of independent enterprises.
• Circle organizations – open system, organic structure for customer responsiveness
© 2013 Cengage Learning
Learning OutcomeLearning Outcome
Identify factors that can adversely affect organizational structure.
© 2013 Cengage Learning
7
Four Symptoms of Structural Weakness
• Delay in decision making • Poor quality decision making • Lack of innovative response to
changing environment • High level of conflict
© 2013 Cengage Learning
Dysfunctional
Personality/Organization
Combinations
ParanoidParanoid
DramaticDramatic
CompulsiveCompulsive
SchizoidSchizoid
DepressiveDepressive
© 2013 Cengage Learning
© 2013 Cengage Learning
Rendition
1. Review the section, “Basic Design Dimensions.” Which dimensions does this scene show or imply?
2. Can you sense the division of labor represented by Senator Hawkins and Alan Smith? Corrine Whitman does not appear in this scene but is also part of a division of labor.
3. Review the five structural configurations described in the chapter. Which of those configurations best describes the likely structure of Senator Hawkins’ office? Which configurations do not apply? Why?
© 2013 Cengage Learning
Modern Shed
1. How did Ryan Smith determine whether his company needed a mechanistic structure with a tall vertical hierarchy or an organic one involving free-flowing partnerships?
2. What are the advantages and disadvantages of Modern Shed’s organizational structure?
3. Give an example of how Modern Shed’s structure enables fast response to rapidly changing market opportunities.
© 2013 Cengage Learning