Organisational designs and structures, traditional & contemporary organisational designs

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  • Organisational Designs and StructuresDr. G C Mohanta, BE, MSc(Engg), MBA, PhD(Mgt)Professor

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  • Organizational Structure & Organizational ChartOrganizational Structure: The formal configuration between individuals and groups with respect to the allocation of tasks, responsibilities, and authorities within organizations.Organizational Chart: A diagram representing the connections between the various departments within an organization: a graphic representation of organizational design. *

  • Organizational Structure & Organizational Chart*

  • *Divides work to be done into specific jobs and departmentsAssigns tasks and responsibilities associated with individual jobsCoordinates diverse organizational tasksClusters jobs into unitsEstablishes relationships among individuals, groups, and departmentsEstablishes formal lines of authorityAllocates and deploys organizational resources

  • Elements in Organizational DesignSix key elements:Work specializationDepartmentalizationAuthority & responsibilitySpan of controlCentralization vs . decentralizationFormalization

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  • Work SpecializationThe degree to which tasks in the organization are divided into separate jobs with each step completed by a different personOverspecialization can result in human diseconomies from boredom, fatigue, stress, poor quality, increased absenteeism and higher turnover*

  • DepartmentalizationFunctional Grouping jobs by functions performedProductGrouping jobs by product lineGeographicalGrouping jobs on the basis of territory or geographyProcess Grouping jobs on the basis of product or customer flowCustomerGrouping jobs by type of customer and needs

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  • Departmentalization*

  • Authority & ResponsibilityAuthorityThe rights inherent in a managerial position to tell people what to do and to expect them to do itResponsibilityThe obligation or expectation to perform. Responsibility brings with it accountability (the need to report and justify work to managers superiors)Unity of CommandThe concept that a person should have one boss and should report only to that personDelegationThe assignment of authority to another person to carry out specific duties*

  • Chain of CommandThe continuous line of authority that extends from upper levels of an organization to the lowest levels of the organization and clarifies who reports to whom

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  • Line and Staff AuthorityLine managers are responsible for the essential activities of the organization, including production and sales. Line managers have the authority to issue orders to those in the chain of commandThe president, the production manager, and the sales manager are examples of line managersStaff managers have advisory authority, and cannot issue orders to those in the chain of command (except those in their own department)*

  • Span of ControlThe number of employees who can be effectively and efficiently supervised by a managerWidth of span is affected by:Skills and abilities of the manager and the employeesCharacteristics of the work being doneSimilarity of tasksComplexity of tasksPhysical proximity of subordinatesStandardization of tasksSophistication of the organizations information systemStrength of the organizations culturePreferred style of the manager

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  • Centralization vs DecentralizationCentralizationThe degree to which decision making is concentrated at a single point in the organizationOrganizations in which top managers make all the decisions and lower-level employees simply carry out those ordersDecentralizationThe degree to which lower-level employees provide input or actually make decisionsEmployee EmpowermentIncreasing the decision-making discretion of employees*

  • FormalizationThe degree to which jobs within the organization are standardized and the extent to which employee behaviour is guided by rules and proceduresHighly formalized jobs offer little discretion over what is to be doneLow formalization means fewer constraints on how employees do their work

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  • Organizational Design DecisionsMechanistic OrganizationA rigid and tightly controlled structureHigh specializationRigid departmentalizationNarrow spans of controlHigh formalizationLimited information network (mostly downward communication)Low decision participation by lower-level employeesOrganic OrganizationHighly flexible and adaptable structureNonstandardized jobsFluid team-based structureLittle direct supervisionMinimal formal rulesOpen communication networkEmpowered employees*

  • Structural Contingency FactorsStrategy and StructureAchievement of strategic goals is facilitated by changes in organizational structure that accommodate and support changeSize and StructureAs an organization grows larger, its structure tends to change from organic to mechanistic with increased specialization, departmentalization, centralization, and rules and regulations*

  • Structural Contingency Factors (contd)Strategy Frameworks:InnovationPursuing competitive advantage through meaningful and unique innovations favours an organic structuringCost minimizationFocusing on tightly controlling costs requires a mechanistic structure for the organizationImitationMinimizing risks and maximizing profitability by copying market leaders requires both organic and mechanistic elements in the organizations structure*

  • Structural Contingency Factors (contd)Technology and StructureOrganizations adapt their structures to their technologyWoodwards classification of firms based on the complexity of the technology employed:Unit production of single units or small batchesMass production of large batches of outputProcess production in continuous process of outputsRoutine technology = mechanistic organizationsNonroutine technology = organic organizations*

  • Structural Contingency Factors (contd)Environmental Uncertainty and StructureMechanistic organizational structures tend to be most effective in stable and simple environmentsThe flexibility of organic organizational structures is better suited for dynamic and complex environments*

  • Traditional Organizational Designs*Simple StructureLow departmentalization, wide spans of control, centralized authority, little formalizationFunctional StructureDepartmentalization by functionOperations, finance, human resources, and product research and developmentDivisional StructureComposed of separate business units or divisions with limited autonomy under the coordination and control of the parent corporation

  • Contemporary Organizational DesignsTeam StructuresThe entire organization is made up of work groups or self-managed teams of empowered employeesMatrix StructuresSpecialists for different functional departments are assigned to work on projects led by project managersMatrix participants have two managersProject StructuresEmployees work continuously on projects, moving on to another project as each project is completed*

  • Matrix Organisation Structure*

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  • Contemporary Organizational Designs (contd)Boundaryless OrganizationA flexible and an unstructured organizational design that is intended to break down external barriers between the organization and its customers and suppliersRemoves internal (horizontal) boundaries:Eliminates the chain of commandHas limitless spans of controlUses empowered teams rather than departmentsEliminates external boundaries:Uses virtual, network, and modular organizational structures to get closer to stakeholders*

  • Boundaryless OrganizationVirtual OrganizationAn organization that consists of a small core of full-time employees and that temporarily hires specialists to work on opportunities that ariseNetwork OrganizationA small core organization that outsources its major business functions (e.g., manufacturing) in order to concentrate on what it does bestModular OrganizationA manufacturing organization that uses outside suppliers to provide product components for its final assembly operations*

  • Contemporary Organizational Designs (contd)Learning OrganizationAn organization that has developed the capacity to continuously learn, adapt, and change through the practice of knowledge management by employeesCharacteristics of a learning organization:An open team-based organizational design that empowers employeesExtensive and open information sharingLeadership that provides a shared vision of the organizations future; support and encourageA strong culture of shared values, trust, openness, and a sense of community*

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    *When organizing work, managers need to clarify who reports to whom, which is know as the chain of commandthat is, the line of authority extending from upper to lower organizational levels.

    Authority refers to the rights inherent in a managerial position to give orders and expect the orders to be obeyed. Authority is a major concept discussed by the early management writers, who viewed it as the glue that held an organization together. Each management position had specific inherent rights associated with the positions rank or title.

    When managers delegate authority, they must allocate commensurate responsibility. That is, when employees are given rights they also assume a corresponding obligation to perform and be held accountable for their performance.

    Early management writers distinguished between two forms of authority: line authority and staff authority. Line authority entitles a manager to direct the work of an employee according to the chain of command, which is shown here in Exhibit 6-3. In the chain of command, every manager is subject to the direction of his or her superior.

    Sometimes the term line is used to differentiate line managers from staff managers.