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5/28/2018 Changing Organizational Models
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Changing Organizational Models
Shoaib Ul-Haq
LUMS
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What Is Organizational Structure?
Key Elements:
Work specialization
Departmentalization
Chain of command
Span of control
Centralization and
decentralization
Formalization
Organizational Structure
How job tasks are formallydivided, grouped, andcoordinated.
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3
Depicting the Organization
Organization Chart
A chart that shows thestructure of the
organization includingthe title of eachmanagers position and,by means of connecting
lines, who is accountableto whom and who hasauthority for each area.
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Organization Chart
Information Services Group
Cataloger
Cataloger
Customer Liaison
Taxonomy Designer
Knowledge Architecture Lead
Developer
Developer
Systems Admin
Search/Systems Lead
Assistant Designer
Design Lead
Knowledge Architecture Manager
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Key Design Questions and Answers for Designing the Proper
Organization Structure
The Key Question The Answer Is Provided By
1. To what degree are articles Work specialization
subdivided into separate jobs?
2. On what basis will jobs be grouped Departmentalizationtogether?
3. To whom do individuals and groups Chain of command
report?
4. How many individuals can a manager Span of control
efficiently and effectively direct?
5. Where does decision-making Centralization
authority lie? and decentralization
6. To what degree will there be rules Formalization
and regulations to direct employees
and managers?
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What Is Organizational Structure?
(contd)
Division of labor:
Makes efficient use of employee skills
Increases employee skills through repetition
Less between-job downtime increases productivity
Specialized training is more efficient.
Allows use of specialized equipment.
Work Specialization
The degree to which tasks in the organization aresubdivided into separate jobs.
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Economies and Diseconomies of
Work Specialization
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What Is Organizational Structure?
(contd)
Grouping Activities By:
Function
Product
Geography Process
Customer
Departmentalization
The basis by which jobs are grouped together.
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What Is Organizational Structure?
(contd)
Chain of Command
The unbroken line of authority that extends from thetop of the organization to the lowest echelon andclarifies who reports to whom.
Authority
The rights inherent in a managerial position to giveorders and to expect the orders to be obeyed.
Unity of Command
A subordinate should have only one superior to whomhe or she is directly responsible.
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What Is Organizational Structure?
(contd)
Narrow Span Drawbacks:
Expense of additional layers of management.
Increased complexity of vertical communication.
Encouragement of overly tight supervision anddiscouragement of employee autonomy.
Concept:
Wider spans of management increase organizationalefficiency.
Span of ControlThe number of subordinates a manager can efficientlyand effectively direct.
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Contrasting Spans of Control
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April 18, 2006 LIS580- Spring 2006 12
FIGURE 69
Spans of Control in Country-Based
Organization
G.Dessler, 2003
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What Is Organizational Structure?
(contd)Centralization
The degree to which decision making isconcentrated at a single point in the organization.
Formalization
The degree to which jobs withinthe organization are standardized.
Decentralization
The degree to which decision making isspread throughout the organization.
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Source: S. Adams, Dogberts Big Book of Business, DILBERT reprinted by
permission of United Features Syndicate, Inc.
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Common Organization Designs
A Simple Structure:
Jack Golds Mens Store
Simple Structure
A structure characterized by a low degree ofdepartmentalization, wide spans of control, authoritycentralized in a single person, and little
formalization.
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Common Organization Designs (contd)
Bureaucracy
A structure of highly operatingroutine tasks achieved throughspecialization, very formalized
rules and regulations, tasks thatare grouped into functionaldepartments, centralizedauthority, narrow spans of
control, and decision makingthat follows the chain ofcommand.
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The Bureaucracy
Strengths
Functional economies of
scale
Minimum duplication of
personnel and
equipment
Enhanced
communication
Centralized decision
making
Weaknesses
Subunit conflicts with
organizational goals
Obsessive concern with
rules and regulations
Lack of employee
discretion to deal with
problems
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Functional Departmentalization
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Divisional Organization
for a Pharmaceuticals Company
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Functional vs. Divisional Organizations
Functional Organization Advantages1. It is simple, obvious, and logical.
2. It fosters efficiency.
3. It can simplify executive hiring and training.
4. It can facilitate the top managers control.
Functional Organization Disadvantages1. It increases the workload on the executive to
whom the functional department heads report.
2. It may reduce the firms sensitivity to and serviceto the customer.
3. It produces fewer general managers.
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Functional vs. Divisional Organizations
Divisional Organization Advantages
1. The product or service gets the single-minded attention of its own general
manager and unit, and its customers mayget better, more responsive service.
2. Its easier to judge performance.
3. It develops general managers.
4. It reduces the burden for the companysCEO.
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Functional vs. Divisional Organizations
Divisional Organization Disadvantages
1. It creates duplication of effort.
2. It may diminish top managements
control.
3. It requires more managers with general
management abilities.
4. It can breed compartmentalization.
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Common Organization Designs (contd)
Key Elements:
+ Gains the advantages of functional and productdepartmentalization while avoiding their weaknesses.
+ Facilitates coordination of complex and interdependentactivities.
Breaks down unity-of-command concept.
Matrix Structure
A structure that creates dual lines of authority andcombines functional and product departmentalization.
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Matrix Structure (College of Business Administration)
(Dean)
(Director)
Employee
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Matrix Organizations
Advantages
Access to expertise.
Stability of permanent
departmentassignments foremployees.
Allows for focus on
specific projects,products, orcustomers.
Disadvantages
Confusion of
command.
Power struggles andconflicts.
Lost time in
coordinating.
Excess overhead for
managing matrix
functions.
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New Design Options
Characteristics:
Breaks down departmental barriers.
Decentralizes decision making to the team level.
Requires employees to be generalists as well as specialists. Creates a flexible bureaucracy.
Team Structure
The use of teams as the central device to coordinatework activities.
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New Design Options (contd)
Concepts:
Advantage: Provides maximum flexibility while concentrating
on what the organization does best.
Disadvantage: Reduced control over key parts of the
business.
Virtual Organization
A small, core organization that outsources its majorbusiness functions.
Highly centralized with little or no departmentalization.
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A Virtual Organization
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Network-based Organizations
Organizational Network
A system of interconnected or cooperating
individuals.
Informal Networks
Communication pathways and relationships
between individuals in an organization that do not
necessarily conform to the formal chain ofcommand and communication networks of an
organization.
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Network-based Organizations (contd)
Formal Organizational Network
A recognized group of managers or otheremployees assembled by the CEO and the other
senior executive team, drawn from across thecompanys functions, business units, geography,and levels.
Electronic Organizational Networks
Networking through technology-supporteddevices such as e-mail, video-conferencing, andcollaborative computing software like Lotus Notes.
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The Horizontal Corporation
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Building Horizontal Organizations
Make responsibilities overlap. Design individual jobs
as broadly as possible, and keep the number of jobtitles to a minimum.
Base rewards on unit performance to emphasize the
importance of working together.
Change the physical layout to promote collectiveresponsibility. Let people see each others work.
Redesign work procedures, provide computer
terminals, use the e-mail network, and make suremanagers are available.
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How to Create a Horizontal Corporation
Source:Source: Reprinted from the December 20, 1993, issue of Business Weekby special
permission. Copyright 1993 by the McGraw-Hill Companies, Inc.
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New Design Options (contd)
T-form Concepts:
Eliminate vertical (hierarchical) and horizontal
(departmental) internal boundaries.
Breakdown external barriers to customers and
suppliers.
Boundaryless Organization
An organization that seeks to eliminate the chain ofcommand, have limitless spans of control, andreplace departments with empowered teams.
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Why Do Structures Differ?
Mechanistic ModelA structure characterized by extensivedepartmentalization, high formalization,a limited information network, and
centralization.
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Why Do Structures Differ?
Organic Model
A structure that is flat, uses cross-hierarchical andcross-functional teams, has low formalization,possesses a comprehensive information network, and
relies on participative decision making.
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Mechanistic Versus Organic Models
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Burns and Stalker
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Summary of Features of Old and
New Models of OrganizationOld Model New Model
Individual position/job as basic unit of Team as a basic unit
organization
Relations with environment handled by Densely networked with environment
specialist boundary-spanners
Vertical flows of information Horizontal and vertical flows of information
Decisions come down, information flows up Decisions made where information resides
Tall (many layers of management) Flat (few layers of management)
Emphasis on structures Emphasis on processes
Emphasis on rules and standard Emphasis on results and outcomes
procedures
Fixed hours Flexible workday, part-time workers
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Summary of Features of Old and
New Models of OrganizationOld Model New Model
Career paths upward, linear Career paths lateral, flexible
Standardized evaluation and Customized evaluation and reward systems
reward systems
Single strong culture with strong Diversity viewpoints and behaviors
expectations of homogeneous behavior
Ethnocentric mindset International/global mindset
Specialist international managers Boundary-crossers at all levels
Local value chains Value chains crossing borders
Environment defined in terms of Environment seen as global
country of location
k f k
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141
Framework for Taking Action
in the New Organization
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Why Do Structures Differ?Strategy
Innovation StrategyA strategy that emphasizes the introduction of majornew products and services.
Imitation Strategy
A strategy that seeks to move into new products ornew markets only after their viability has alreadybeen proven.
Cost-minimization Strategy
A strategy that emphasizes tight cost controls,avoidance of unnecessary innovation or marketingexpenses, and price cutting.
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The Strategy-Structure Relationship
Strategy Structural Option
Innovation Organic: A loose structure; low
specialization, low formalization,
decentralized
Cost minimization Mechanistic: Tight control; extensive work
specialization, high formalization, high
centralization
Imitation Mechanistic and organic: Mix of loose
with tight properties; tight controls overcurrent activities and looser controls for
new undertakings
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Why Do Structures Differ?Size
Characteristics of large organizations:
More specialization
More vertical levels More rules and regulations
Size
How the size of an organization affects its structure.As an organization grows larger, it becomes moremechanistic.
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Why Do Structures Differ?
Technology
Characteristics of routineness (standardized or customized) inactivities:
Routine technologies are associated with tall, departmentalized
structures and formalization in organizations.
Routine technologies lead to centralization when formalization is
low.
Nonroutine technologies are associated with delegated decision
authority.
Technology
How an organization transfers its inputs into outputs.
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Effect of Technology on Structure
h ff ?
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Why Do Structures Differ?
Environment
Key Dimensions-
Capacity: the degree to which an environment can support
growth.
Volatility: the degree of instability in the environment.
Complexity: the degree of heterogeneity and concentration
among environmental elements.
EnvironmentInstitutions or forces outside the organization thatpotentially affect the organizations performance.
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The Three Dimensional Model of the
Environment
Complexity
Volatility
Capacity
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Bureaucracy Is Dead
Characteristics of Bureaucracies
Specialization
Formalization
Departmentalization
Centralization
Narrow spans of control
Adherence to a chain of
command.
Why Bureaucracy Survives
Large size prevails.
Environmental turbulence
can be largely managed.
Standardization achieved
through hiring people
who have undergone
extensive educational
training.
Technology maintains
control.
49
l d
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Organizational Designs and
Employee Behavior
Research Findings:
Work specialization contributes to higher employee productivity, but
it reduces job satisfaction.
The benefits of specialization have decreased rapidly as employees
seek more intrinsically rewarding jobs.
The effect of span of control on employee performance is contingent
upon individual differences and abilities, task structures, and other
organizational factors. Participative decision making in decentralized organizations is
positively related to job satisfaction.
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Organization Structure: Its
Determinants and Outcomes
Implicit Models of Organizational
Structure
Perceptions that people holdregarding structural variablesformed by observing things aroundthem in an unscientific fashion.
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Th F O i ti l B d i Th t
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The Four Organizational Boundaries That
Matter
Source:Reprinted by permission of Harvard Business Review. The Four Organizational Boundaries that Matter, from The
New Boundaries of the Boundaryless Company, by Larry Hirschorn and Thomas Gilmore, MayJune 1992. Copyright 1992 by
the President and Fellows of Harvard College All rights reserved