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BA105-1: BA105-1: Organizational BehaviorOrganizational Behavior
Professor Jim LincolnProfessor Jim Lincoln
Week 2: LectureWeek 2: Lecture
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Organization design I:Session objectives
• Introduce organization design as the clearest case of the “manager as engineer” perspective
• Understand the legacy of classical (“one best way”) design theory
• Understand principles of grouping and linking• Get a feel for strategic organization design from the
congruence or “fit” perspective – There is no “one best way”– Every design must be aligned with the organization’s
environment, strategy, & internal architecture.
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Strategy (diversification; innovation)
Input
Environment(Competition, change)
Resources(munificence)
History (age, conditions at founding)
OutputSystems
Unit
Individual
InformalOrganization(culture, leadership, networks, politics)
Tasks (technologies, work flows)
People(ability, skills, motivation, biases)
FormalOrganization
(job titles, departments,
reporting hierarchy, IT & HR systems
Organizational Design
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What is formal organization?Bureaucracy! Meaning what exactly…?• Formal structure
– Grouping (or division of labor or differentiation)• Divide work and group people doing similar tasks into distinct jobs and
work units
– Linking (or coordination or integration)• Devise mechanisms of control and coordination to direct activity and
create an integrated whole
• Formal rules & measurement systems – Accounting & finance– Inventory and process control– Human resource
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What should structure do?• Provide efficiency in the
accomplishment of tasks
• Coordinate and integrate activities across the organization
• Allow for flexibility– adjust quickly and smoothly to
new conditions– Support creativity & innovation
• Channel individual behavior in cooperative & productive ways
• Economize on information processing
• Empower people to undertake and accomplish challenging tasks
• Fit the organization’s strategy and environment
• Align with & support the organization’s culture, networks, incentive systems, etc.
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What shouldn’t structure do?• Cause overspecialization leading
to unmanageable coordination problems
• Balkanize the organization into warring fiefdoms
• Disempower and demotivate people
• Become a weapon in organizational politics
• Become sacred and ceremonial
• Breed “bureaucratic personalities”
• Be a residue or holdover from the past
• Mire the organization in “red tape”
• Divert or smother alternative means of channeling & coordinating action
• Provide a safe haven for the incompetent or unmotivated
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• This week:– Classical and mainstream design
perspectives
• Next week:– Modern “new economy” design
perspectives
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SCIENTIFIC MANAGEMENT :“Systems so perfect that no one will need to be good”Frederick W. Taylor: The Principles of Scientific Management, 1911. Frank B. Gilbreth: Motion Study, a Method for Increasing the Efficiency of the Workman.
New York, D. Van Nostrand Company, 1911.
Which always brings to mind….
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The Scientific Management Program:The Origin of Industrial Engineering
• Time and motion study
• Reduce physical tasks to elemental units (“therbligs”). Recombine in maximally efficient way
• Fixed rules & standards for physical task performance
• Pay geared to performance (piece rates)
• Production scheduling, equipment design, shop layout
• Scientific method (measure, experiment)
• Functional foremanship
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Oper-ations
Foreman
Worker A Worker B Worker C
Main-tenance
Foreman
Quality Assurance Foreman
Taylor’s Functional Foremanship
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Line Foreman
Worker A Worker B Worker C
Main-tenance
Quality Assurance
The Line and Staff Alternative
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CLASSICAL ADMINISTRATIVE THEORY
• Principles of horizontal structuring – Specialization (divide tasks)– Unity of direction (group tasks into departments)
• Principles of vertical structuring– Unity of command– Scalar chain
• “Go through channels”– Span of control
• Principles of authority and decision-making– Centralization:
• Fit authority to responsibility • Delegate routine decisions; manage exceptions
Henry Fayol: General and Industrial Management, 1949L. Gulick and L. Urwick: Papers on the Science of Administration, 1937J. Mooney: The Principles of Organization, 1947
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Specialization(Division of Labor)
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Unity of Direction(Grouping)
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Principles of Hierarchy:Unity of Command, Scalar Chain, Span of Control
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CEO
“A”
Logical flaws in CM: The trade-off between hierarchy & span of control
CEO
“A”
Case 1 Case 2
Herbert Simon: “The proverbs of administration.” Public Administration Review 6 (1946):53-67.
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Do organizations have to be hierarchical?
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Market-ing
Market-ing
Engineering
Engineering
Manu-facturing
Manu-facturing
Human Resources
Human Resources
Manage-ment
Manage-ment
Coordination by hierarchy economizes on communication and centralizes control
AccountingAccounting
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Coordination by mutual adjustment maximizes communication and diffuses control
MarketingMarketing
Engineer-ing
Engineer-ing
Manu-facturing
Manu-facturing
Human Resources
Human ResourcesAccountingAccounting
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Market-ing
Market-ing
Engineering
Engineering
Manu-facturing
Manu-facturing
Human Resources
Human Resources
Coordination by rules & standards economizes on hierarchy and communication
AccountingAccounting
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Choose the coordination solution that fits the degree of interdependence
Regional HQ
Aircraft Scheduling
1. Pooled Interdependence
2. Sequential Interdependence
ProductDevelopment Manufacturing Sales
Hotel A Hotel B Hotel C
Operations Maintenance
Need for Integration
Low
Medium
High
Coordinating Mechanism
Rules/standards
Hierarchy
Mutual Adjustment
3. Reciprocal Interdependence
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Strategic grouping:
Functional and Divisional Organization
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Strategic grouping dimensions
• Inputs
– Functions, disciplines, or skills: engineering, finance, manufacturing, marketing, accounting, HR, PR, maintenance, quality, legal, logistics, etc.
• Outputs
– Product: attributes, benefits to customers, underlying technology (what does it do? or how does it work?)
– Customer: attributes or preferences; ways of buying or using products
– Region: (Northeast, midwest; Europe; East Asia)
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Engineer-ing
Manufac-turing
Marketing
General Manager
Human Resources
Account-ing
Functional organization
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Engineer-ing
Manufac-turing
Market-ing
General Manager
Human Resources
Account-ing
ProductA
ProductB
Product C
Functional organization
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CEO
Product A(Cars)
Product B(PrefabHouses)
Product C(Electronics)
HR Mfg Mkt HR Mfg Mkt HR Mfg Mkt
Product division organization
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CEO
North America
Europe Asia Pacific
HR Mfg Mkt HR Mfg Mkt HR Mfg Mkt
Regional division organization
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CEO
Home market
Education market
Corporatemarket
HR Mfg Mkt HR Mfg Mkt HR Mfg Mkt
Customer-type divisions
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OBIR faculty(Chatman, Ding,
Freeman, Lincoln, Staw,
Tetlock)
Undergrad Program
MBA Program
PhD Program
Undergrad
MBA
PhD
Profs. Ding & Lincoln
Profs. Chatman & Staw
Profs. Freeman & Tetlock
Is the Haas teaching mission organized
functionally or divisionally?
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Functional OrganizationPluses
• Lean and simple– Good fit to small, young, focused
organizations
• Functions are efficiently deployed• Breeds strong, highly-developed functions• Good fit to strategy based on functional
capabilities• Good fit to a stable, homogenous
environment• Good coordination of functions across
products & markets
Minuses
• High interdependence – Problem of hand-offs
• & functions becoming “silos”– Puts a heavy coordination burden on top
management
• Poor development of GM skills • Hard to monitor performance• Poor fit to these strategies:
– Diversification– Product, customer, or region focus
• Poor fit to turbulent, heterogeneous environment
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Engineer-ing
Manufac-turing
Market-ing
General Manager
Human Resources
Account-ing
ProductA
ProductB
Product C
Functional organization
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Next time: Allentown Materials Case Steps in preparation:
1. Assess Allentown’s problems in relation to its strategy and environment2. Consider all the issues in the case but focus on the strategic design issues of grouping
(differentiation) and linking (integration).3. Analyze cause and effect relationships behind problems
» Work back from immediate to root causes » Assess importance of cause-and-effect chains
4. Devise solutions that:» Impact causes» Are consistent and realistic
5. Think about an implementation plan that:» Has few negative spillovers (unintended consequences)» That minimizes alignment problems» That minimizes resistance