Chapter 15Organizational Design

& StructureNelson & Quick

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

the linking of departments and

jobs within an organization

Organizational Design

H. Mintzberg, The Structuring of Organizations, Prentice Hall, © 1979, 301. Reprinted by permission of Prentice-Hall, Inc, Upper Saddle River, NJ.

Key Organizational Design Processes

Four Dimensions

• Goal orientation

• Time orientation

• Interpersonal orientation

• Formality of structure

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

Horizontal Differentiation

• The degree of differentiation between organizational subunits

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

Vertical Differentiation

• The difference in authority and responsibility in the organizational hierarchy

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

Spatial Differentiation

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

• Complicates organizational design, may simplify goal achievement or protection

• 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

Vertical Integration

• Hierarchical referral• Rules and procedures• Plans and schedules• Positions add to the organization structure• Management information system

HorizontalIntegration

• Liaison roles

• Task forces

• Integrator positions

• Teams

Hierarchy ofHierarchy ofAuthority - Authority -

the degree ofthe degree ofvertical vertical

differentiationdifferentiationacross across

levels of levels of managementmanagement

Specialization -Specialization -the degree tothe degree towhich jobs arewhich jobs are

narrowlynarrowlydefined anddefined anddepend ondepend on

uniqueuniqueexpertiseexpertise

BasicDesign

Dimensions

Formalization -Formalization - the degree the degree to which the organizationto which the organization

has official rules, has official rules, regulations and proceduresregulations and procedures

Standardization -Standardization - the the degree to which work degree to which work

activities are accomplished activities are accomplished in a routine fashionin a routine fashion

Complexity -Complexity - the degree to the degree towhich many different typeswhich many different types

of activities occur in theof activities occur in theorganizationorganization

Centralization -Centralization - the degree the degree to which decisions areto which decisions aremade at the top of themade at the top of the

organizationorganization

Adhocracy -Adhocracy - a a selectivelyselectively

decentralized decentralized form ofform of

organization thatorganization thatemphasizes theemphasizes thesupport staff &support staff &

mutual adjustmentmutual adjustmentamong peopleamong people

Simple Structure -Simple Structure - aacentralized form ofcentralized form oforganization thatorganization that

emphasizes the upperemphasizes the upperechelon & directechelon & direct

supervisionsupervision

Machine Bureaucracy -Machine Bureaucracy - a moderately a moderately

decentralized form ofdecentralized form oforganization thatorganization thatemphasizes the emphasizes the technical staff &technical staff &

standardization ofstandardization ofwork processeswork processes

Divisional Form -Divisional Form - aamoderately decentralizedmoderately decentralized

form of organization form of organization that emphasizes the that emphasizes the

middle level & middle level & standardization of outputsstandardization of outputs

ProfessionalProfessionalBureaucracy -Bureaucracy -a decentralizeda decentralized

form ofform oforganization thatorganization thatemphasizes theemphasizes theoperating leveloperating level

& standardization& standardizationof skillsof skills

Structural Configurations

ofOrganizations

Prime CoordinatingMechanism

DirectSupervision

Standardization of Work

ProcessesStandardization

of Skills

Standardizationof Outputs

Mutual Adjustment

Key Part ofOrganization

UpperEchelon

TechnicalStaff

OperatingLevel

MiddleLevel

SupportStaff

Type ofDecentralization

Centralization

Limited Horizontal

DecentralizationVertical &Horizontal

DecentralizationLimited VerticalDecentralization

SelectiveDecentralization

StructuralConfiguration

Simple Structure

Machine Bureaucracy

ProfessionalBureaucracy

DivisionalizedForm

Adhocracy

Five Structural Configurations of Organization

Contextual Variables -Contextual Variables - a set of characteristics thata set of characteristics that

influences the organization’sinfluences the organization’s design processesdesign processes

Size

Environment

Technology

Strategy& Goals

Size

Basic Design Small Large Dimensions Organizations Organizations

FormalizationCentralization SpecializationStandardizationComplexityHierarchy of authority

LessHighLowLowLowFlat

MoreLowHighHighHighTall

Technology

Technological Interdependence - the degree of interrelatednessof the organization’s various technological elements

Relationship Between Technology and Basic Design Dimensions

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

CraftCraft1. Moderate1. Moderate2. Moderate2. Moderate3. Moderate3. Moderate4. Low moderate4. Low moderate5. High5. High6. Low6. LowRoutineRoutine1. High1. High2. High2. High3. Moderate3. Moderate4. High4. High5. Low5. Low6. High6. High

NonroutineNonroutine1. Low1. Low2. Low2. Low3. Low3. Low4. Low4. Low5. High5. High6. Low6. Low

EngineeringEngineering1. Moderate1. Moderate2. Moderate2. Moderate3. High3. High4. Moderate4. Moderate5. Moderate5. Moderate6. Moderate6. Moderate

Few Exceptions Many Exceptions

Task Variability

Ill-defined &Unanalyzable

Well-defined &Analyzable

Pro

ble

m A

nal

yzab

ilit

y

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

Environment

Environment - anything outside the boundariesof an organizationTask environment - the elements of an organization’s environment that are related toits goal attainmentEnvironmental uncertainty - the amount and rate of changein the organization’senvironment

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 formalization Moderate centralizationpreferencesCost control--to produce High formalizationstandardized products High centralizationefficiently High standardization Low complexity

Strategy& Goals

Integrative Framework ofStructural & Strategic Dimensions

Context of the organizationCorrect sizeCurrent technologyPerceived environmentCurrent strategy & goals

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

Influences how manager perceive structural needs

The Relationshipamong KeyOrganizationalDesignElements

Differentiation & Integration

PurposesDesignate formal lines of authorityDesignate formal information- processing patterns

Which characterize the organizational processes

Which influence how well the structure meets its

Which influence how well the structure fits the

Context of the organization

Forces Reshaping Organizations

• Life cycles in organizations - the differing stages of an organization’s life from birth to death

• Globalization

• Changes in Information Processing Technologies

• Demands on Organizational Processes

• Emerging Organizational Structures

Structural Roles of Managers Today versus Managers of the Future

Roles of Managers Today1. Strictly adhering to boss -employer 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 subordinate2. Getting things done by negotiating3. Solving problems and making decisions4. Creating the job through entrepreneurial projects5. Having a broad cross- functional collaboration6. Emphasizing speed & flexibility7. Coaching one’s workers

Management Review, January 1991, Thomas R. Horton.

Four Symptoms of Structural Weakness

• 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 reachingright people in right format

No coordinating effort

Departments work against each other, not for organizational goals

Dysfunctional

Personality/Organization

Combinations

ParanoidParanoid

DramaticDramatic

CompulsiveCompulsive

SchizoidSchizoid

DepressiveDepressive