Organizational Structure & Design

An organization is a formal group of people with one or more shared goals. The word itself is derived from the Greek word ὄργανον (organon) meaning tool.

The Issues Definitions: Design & structure Differentiation The integration challenge Centralization Formalization Rules & norms Multi-organization design & structure

Organizational Design

Definition: The process of defining and coordinating organizational structure elements. This is an architectural task.

Purpose: To create a design that will coordinate organizational tasks & motivate people to achieve objectives.

Challenge: To choose appropriate levels and types of vertical and horizontal differentiation and integration.

Horizontal differentiation

Integration Centralization Formalization

Challenges

Organizational Structure

The definition, distribution, and arrangement of interlocking roles (i.e., who does what). This is created by “building” what the architects designed.

Authority Control Sub-units Vertical

differentiation

Impact of Design& Structure

Physical appearance of organization Nature of jobs Efficiency of organization Effectiveness of organization Relationships with other organizations Nature and quality of work experience for

organizational members Organizational culture

Differentiation(Division of Labor)

Definition: Allocation of people and resources to tasks & establishment of task & authority relationships

Identifies total set of organizational tasks Divides tasks into jobs, departments,

divisions Assigns authority & authority relationships

Sub-Unit ChoicesDepartments, Divisions, etc.

Functional: Based on functions performed (e.g., production, sales, research)

Product: Based on products and services produced (e.g., food, cleaning supplies, pharmaceuticals)

Customer: Based on customers served (e.g., convenience stores, supermarkets)

Geography: Based on physical location Matrix: Based on a combination of function, product,

customer and/or geography. Creates dual authority and dual responsibility

Vertical Differentiation

Vertical differentiation: Design of hierarchy with reporting relationships to link roles and sub-units Defines who reports to whom Defines areas of responsibility

Hierarchy: Classification of people according to authority and rank

Hierarchy of Authority

Tall organizations have many levels

Flat organizations have few levels

Span of Control

The number of organizational members who report to a manager

Wide span of control means one manager supervises many members

Narrow span of control means one manager supervises a small number of members

Horizontal Differentiation

Horizontal differentiation: The way an organization groups tasks into jobs/roles and jobs/roles into sub-units

Establishes the division of labor and level of specialization Defines personal tasks & responsibilities Highly specialized jobs have narrow range

of tasks Less specialized jobs have broad range of

tasks

The Integration Challenge

Integration: The process of coordinating tasks, functions, sub-units so they work effectively together & not at cross-purposes

Challenge: Now that we have differentiated both vertically and horizontally, how do we integrate?

Cont.

Integrating Mechanisms Hierarchy of authority: Ranking of

employees specifies who reports to whom Direct Contact: Face-to-face meetings to

coordinate activities Liaison Role: Person assigned responsibility

for coordinating his/her unit with persons from other units (part of job)

Task Force: Temporary committees with members from multiple units coordinate activities

Integrating Mechanisms (cont.)

Team: Permanent committees with members from multiple units coordinate activities

Integrating role: Person assigned responsibility for coordinating activities of multiple units (person’s entire job)

Highly Centralized Authority Authority given to a few top

managers, allowing decisions to be made by those with the “big picture”

Facilitates development of a few “masters of knowledge”

Provides non-decision makers the freedom to perform technical tasks with fewer distractions

Decentralized Authority

Authority distributed throughout the organization

Allows leaner organizations and fewer levels Allows those closest to problems and

opportunities to make decisions Is received favorably by many

organizational members

Formalization

High formalization: Formal rules and procedures used to standardize operations (Do it “by the book”) Usually associated with centralized authority

Low formalization: Coordination by mutual adjustment rather than formal rules & procedures Usually associated with decentralized

authority

Rules and Norms Rules: Formal, written statements

that specify appropriate behavior & means for reaching desired goals

Norms: Unwritten but generally agreed upon standards of behavior that are considered acceptable and appropriate & means for reaching desired goals

Multi-Organization Design& Structure Issues Conglomerate: Separate companies without

close product or service relationship that are overseen by a single parent company

Strategic alliance: Two or more firms combine competitive capabilities to operate a business without sharing ownership or general management

Network design: Very small central organizational structure contracts with other organizations to develop and deliver the network organization's products and services

Matrix Structure

Note the duplication of core functional skills across each product line.

Matrix organizations provide clear accountability within a specific business function and allow more efficient allocation of specialized skills across the entire business. By taking advantage of the shared services and skills and not having to develop and manage those skills themselves, the divisional or product line organizations can better focus on their core business objectives

Weak/Functional Matrix – A project with only limited authority is assigned to oversee the cross-functional aspects of the project. The functional managers maintain control over their resources and project areas.

Balanced Functional Matrix – A project manager is assigned to oversee the project. Power is shared equally between the project manager and the functional managers.

Proponents of this structure believe it strikes the correct balance, bringing forth the best aspects of functional and projectized organizations. However, this is the most difficult system to maintain as the sharing of power is a very delicate proposition.

Strong/Project Matrix – A project manager is primarily responsible for the project. Functional managers provide technical expertise and assign resources on an as-needed basis.

Because project resources are assigned as necessary there can be conflicts between the project manager and the functional manager over resource assignment. The functional manager has to staff multiple projects with the same experts.

VIRTUAL ORGANISATION

Growing complexity in the business environment makes "business as usual" ineffective. Globalization extends the need for communication and coordination across different time zones and locations. Change has become the norm, an unpredictable basic reality. Corporations are evolving into virtual enterprises using integrated computer and communications technologies. These collaborative networks are not defined by concrete walls or physical space, but make it possible to draw upon vital resources as needed, regardless of where they are physically located and regardless of who owns them.

A boundary less environment is required by learning organizations to facilitate team collaboration and the sharing of information. When an organization develops the continuous capacity to adapt and survive in an increasingly competitive environment because all members take an active role in identifying and resolving work-related issues, it has developed a learning culture.

A learning organization is one that is able to adapt and respond to change. This design empowers employees because they acquire and share knowledge and apply this learning to decision-making. They are pooling collective intelligence and stimulating creative thought to improve performance. Supervisors facilitate learning by sharing and aligning the organization's vision for the future and sustaining a sense of community and strong culture.

Learning Organization

REORGANIZATION

Customer Focused

Organizational Redesign is structuring an organization, division or department to optimize how it supplies products and services to its clients and customers.

Traditional

Steps in Reorganization

Determining How the Company Goes to Market Sketch how the current organizational structure (e.g.,

departments, roles, responsibilities, information flow, decision-making, etc.) supports how the company goes to market. Include:

What the current structure does well. What the current structure does not do well. If possible, "numbers" that put a value to what is

done well and what not.

Draw an ideal organizational structure.

Focus on: How it can improve upon the current situation (in

"numbers") What it can improve upon. How it will affect the organization and its parts,

processes and people.

Planning

Determine who should be involved in the planning process, in particular "RACI", i.e. who is Responsible, Accountable, Consulting and who should be kept Informed.

List the major players who perform or are involved in the key processes that support the current structure.

What would the ideal organization (processes, roles, people) look like (first draft)? Who would fill what position? How can the current players be utilized in this new schema?

What new equipment, technology, resources, people, skills or systems would be needed in the new structure?

Implementation

Develop a schedule (dates and RACI) for the change from the current situation to the ideal state. Create flowcharts that capture the changeover. Be specific about:

When and how the change from the old to the new will occur.

Impediment that might appear during the transition .Create scenarios of what might occur and how they can be handled.

Create a program that would prepare employees for the change.

Administrative Issues

Regular communication to staff regarding the progress, decisions, plans, etc., of the project.

A written plan that is shared with key personnel, that is referred to periodically, updated when necessary and referred to continually.

Scheduled "monitoring" meetings between the Project Team, Sponsor, Oversight Committee.

MUL

Shinzo NakanishiChairman

Jagdish KhattarM.D

HirofumiJMD

Kinji Saito

Kumar Mangalam Birla

Osamu Suzuki

Amal Ganguli

R C Bhargava

Pallavi Shroff

S V Bhave

Infosys