Nature of Organizations Natural versus Rational Systems Natural versus Rational Systems Are organizations organisms that grow change and adapt or are they

Nature of OrganizationsNature of Organizations

Natural versus Rational SystemsNatural versus Rational Systems

Are organizations organisms that grow Are organizations organisms that grow change and adapt or are they tools that change and adapt or are they tools that are designed for a specific purpose?are designed for a specific purpose?

Open versus Closed SystemsOpen versus Closed Systems

What level of interaction do the parts of What level of interaction do the parts of the organization have with each other the organization have with each other and the environment?and the environment?

Rational SystemsRational Systems

Organizations as tools that are Organizations as tools that are controlled as purposeful and controlled as purposeful and coordinated agents for the principalcoordinated agents for the principal

Rational calculationRational calculation Goal SpecificityGoal Specificity

Formalized planningFormalized planning Translation of plans into specific Translation of plans into specific

objectivesobjectives Formalization of structureFormalization of structure

Explicit and visibleExplicit and visible Division of laborDivision of labor

Natural SystemsNatural Systems

Organizations as natural organisms Organizations as natural organisms that exist within an environmentthat exist within an environment

Goal complexity Goal complexity Informal structureInformal structure Irrationality leads to informal norms Irrationality leads to informal norms

and behaviorsand behaviors Functional analysis of organizationsFunctional analysis of organizations Population ecologyPopulation ecology

Closed SystemsClosed Systems

One or few points of contact with the One or few points of contact with the environmentenvironment

No change of systemNo change of system

No intake of energy, material, or No intake of energy, material, or informationinformation

Open SystemsOpen Systems

Connection of many parts that make Connection of many parts that make up the organizationup the organization

Multiple or many points of interaction Multiple or many points of interaction with the environmentwith the environment

Self-maintenanceSelf-maintenance Goal directedGoal directed Reciprocal ties that bind and relate Reciprocal ties that bind and relate

the organization to the environmentthe organization to the environment Environment is ultimate source for Environment is ultimate source for

materials energy and informationmaterials energy and information

ExamplesExamplesN

atur

alR

atio

nal

Open Closed

Prisons

Boarding schools

Military schools

Schools

Franchises

Police Departments

Social clubs

Universities

Corporations

Governments

Hmmmmm?

Chapter 16: Organization Design 7

Options of Organizational DesignOptions of Organizational Design

Functional Design

Simple

Simple,Stable

Complex,Dynamic

ComplexTechnological Forces

En

viro

nm

enta

lF

orce

s

Place Design

Product Design

Matrix Design

Multinational Design

Network Design

Division of Labor and Division of Labor and CoordinationCoordination

Division of laborDivision of labor Subdivision of work into separate Subdivision of work into separate

jobs assigned to different peoplejobs assigned to different people

Coordination of work activitiesCoordination of work activities informal communicationinformal communication formal hierarchyformal hierarchy standardizationstandardization

Span of ControlSpan of Control

Number of people directly Number of people directly reporting to the next levelreporting to the next level

Assumes coordination Assumes coordination through direct supervisionthrough direct supervision

Wider span of control Wider span of control possible when:possible when: other coordinating other coordinating

mechanisms existmechanisms exist people do similar taskspeople do similar tasks tasks are routinetasks are routine

Flatter structures require Flatter structures require narrow span (if same # of narrow span (if same # of people)people)

Mechanistic vs. Organic Mechanistic vs. Organic StructuresStructures

Mechanistic

• High formalizationHigh formalization

• Narrow span of controlNarrow span of control

• High centralizationHigh centralization

Organic

• Low formalizationLow formalization

• Wide span of controlWide span of control

• Low centralizationLow centralization


Variables That Differentiate BetweenVariables That Differentiate BetweenMechanistic and Organic SystemsMechanistic and Organic Systems

Hierarchy of authorityHierarchy of authority CentralizationCentralization Division of laborDivision of labor RulesRules ProceduresProcedures ImpersonalityImpersonality Chain of commandChain of command Unity of commandUnity of command Span of controlSpan of control


Callaway Golf’s Design by Function and Callaway Golf’s Design by Function and ProcessProcess

New Products

Manufac-turing

Planning Finance

Forging AssemblyQuality Control

Shipping

President

Processes

Functions

Source: Adapted from Callaway Golf 1996 Annual Report. Carlsbad, Calif., 1997.


Practical Implications of a Functional Practical Implications of a Functional DesignDesign

Clear identification of Clear identification of responsibilities.responsibilities.

May be effective when May be effective when company has a narrow company has a narrow product line, competes product line, competes in a uniform in a uniform environment, pursues environment, pursues a low-cost or focused a low-cost or focused business strategy, and business strategy, and does not serve does not serve different regions and different regions and customers.customers.

Specialized staff Specialized staff departments enable departments enable firm to deal more firm to deal more effectively with effectively with environmental environmental complexity and complexity and dynamism.dynamism.

Most employees may Most employees may lose sight of need to lose sight of need to meet or exceed meet or exceed customer expectations.customer expectations.


Practical Implications of a Place DesignPractical Implications of a Place Design

Promotes direct contact among different Promotes direct contact among different

organizational units and stakeholders organizational units and stakeholders

demands.demands. Lower costs.Lower costs. Marketing tactics can be tailored to Marketing tactics can be tailored to

regions. regions. Control and coordination problems Control and coordination problems

increase.increase. Employees may overemphasize own unit’s Employees may overemphasize own unit’s

goals and needs.goals and needs.


United TechnologiesUnited Technologies

CEO

Otis* Elevators* Escalators* Moving walks

UT Auto-motive* Automotive electrical systems* Electric motors* Automotive interior & exterior trim

FlightSystems* Helicopters* Propellers* Space life support systems

Carrier* Heating & air conditioning* Building controls* Refriger- ation equipment

Pratt &Whitney* Jet engines* Rocket engines* Industrial gas turbines

Source: http://www.utc.com/Annual98/glance.htm.


Practical Implications of a Product DesignPractical Implications of a Product Design

Reduces information overload Reduces information overload

The addition of product lines, diverse The addition of product lines, diverse

customers, and technological advances customers, and technological advances

increases the complexity and uncertainty.increases the complexity and uncertainty.

Incorporates features of functional design.Incorporates features of functional design. Eases problems of integration by focusing Eases problems of integration by focusing

functional expertise and knowledge on functional expertise and knowledge on

specific goods or services.specific goods or services. Higher costs result from duplication of Higher costs result from duplication of

various functions.various functions.


Practical Implications of a Multidivisional Practical Implications of a Multidivisional DesignDesign

Eases problems of integration by focusing Eases problems of integration by focusing

functional expertise and knowledge on functional expertise and knowledge on

specific goods or services.specific goods or services. Higher costs result from duplication of Higher costs result from duplication of

various functions.various functions.


Partial Illustration of Basic Matrix Partial Illustration of Basic Matrix DesignDesign

* These product managers also have full responsibility for the marketing activities associated with their own product lines.

Manager,Personnel

Quality ControlEngineer for

Product Line A

Manager,Product Line A*

Manager,Product Line B*

Manager,Product Line C*


Product Line B


Product Line C

Manager,Production

Manager,Finance andAccounting

Presidentand

Chief Executive Officer


Practical Implications of a Matrix Practical Implications of a Matrix DesignDesign

Enables employees to be Enables employees to be highly responsive to dual highly responsive to dual concerns.concerns.

Enables firm to deal with Enables firm to deal with uncertain environment uncertain environment and technologies.and technologies.

Enables firm to deal Enables firm to deal effectively with multiple effectively with multiple products and limited products and limited resources.resources.

Makes specialized Makes specialized knowledge available to knowledge available to all projects.all projects.

Uses people flexibly.Uses people flexibly. Demands substantial Demands substantial

managerial resources managerial resources while employees learn while employees learn to operate in the new to operate in the new organization.organization.

Learning may be a Learning may be a lengthy process lengthy process because of required because of required attitude changes.attitude changes.

Special training Special training programs may be programs may be needed.needed.


Implications of a Multinational DesignImplications of a Multinational Design

Worldwide product-line divisions will be more dominant than Worldwide product-line divisions will be more dominant than

geographically based divisions under certain conditions.geographically based divisions under certain conditions.

A worldwide product-line division may not be as effective at A worldwide product-line division may not be as effective at

opening up new territories as a geographically organized division.opening up new territories as a geographically organized division. AA division operating under a place design often can establish division operating under a place design often can establish

relations with host governments, invest in distribution channels, relations with host governments, invest in distribution channels,

develop brand recognition, and build competencies that no single develop brand recognition, and build competencies that no single

product-line division could afford.product-line division could afford.


Key Elements of a Network DesignKey Elements of a Network Design

Distinctive competenceDistinctive competence ResponsibilityResponsibility Goal settingGoal setting CommunicationCommunication Information technologyInformation technology Organizational cultureOrganizational culture Balanced viewBalanced view

CoreCoreFirmFirm

(U.S.A.)(U.S.A.)

ProductProductDevelopmentDevelopment

FirmFirm(France)(France)

MarketingMarketingFirmFirm

(U.K.)(U.K.)

CustomerCustomerServiceService

FirmFirm(U.S.A.)(U.S.A.)

ProductionProductionFirmFirm

(China)(China)

AccountingAccountingFirmFirm

(U.S.A.)(U.S.A.)

Network Organizational Network Organizational StructureStructure

Documents

Nature of Organizations Natural versus Rational Systems Natural versus Rational Systems Are organizations organisms that grow change and adapt or are they