Chapter 21 Organization Design. Objectives Distinguish between mechanistic and organic structures ...

Chapter 21

OrganizationDesign

Objectives

Distinguish between mechanistic and organic structures

Describe the three traditional types of organizational structures and their advantages and disadvantages

Describe horizontal and network structures and their advantages and disadvantages

21 -1Organizational Behavior: An Experiential Approach 8/EJoyce S. Osland, David A. Kolb, Irwin M. Rubin and Marlene E. Turner

…Objectives

Distinguish between formal and informal organizational structure

Describe the boundaryless organizationExplain the differentiation-integration

issue in organization design

Organizational Behavior: An Experiential Approach 8/EJoyce S. Osland, David A. Kolb, Irwin M. Rubin and Marlene E. Turner

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The 7-S Model

Skills

Strategy

Staff

Structure

Style

SharedValues/Goals

Systems

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Mechanistic Vs. Organic Structures

Tasks

Tasks

Authority

Communication

Unit

Hierarchy

Span of Control

Formalization

Specialized

Rigidly Defined

Centralized

Vertical

Rigid Departmentalization

Clean Chain of Command

Narrow

High

Common

Broadly Defined

Decentralized

Horizontal

Cross-Functional Teams

Cross-Hierarchical Teams

Wide

Low

Mechanistic Organic


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Organizational Structure - Defined

Organizational structure refers to the pattern of roles, authority, and communication that determines the coordination of the technology and people within an organization

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Functional Structure

Marketing Manufacturing Accounting

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Functional Structure Advantages Develop functional

expertise Loyalty to function and

standards of performance Can assign specialists

where needed reducing duplication

Promote standardization Facilitates centralized

purchasing

Disadvantages Integration and

coordination difficulties

Slow decision making

Information sharing and collaboration can be problematic

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When to Use a Functional Structure?

Size: smallProduct or service: singleNumber of markets: smallCycle time: long

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Marketing AccountingAccountingManufacturing

Divisional Structure

Marketing Manufacturing

Product

Division 1

Product

Division 2

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Divisional StructureAdvantages

Focus leads to improvements

Customer satisfaction Responsiveness to

market and environment

Coordination across functions

Decentralized decision making

Disadvantages

Duplication of effort and resources

May require more equipment

Lost economies of scale Decreased opportunity

for technical specialization

Standardization is harder

Coordination and collaboration problems

Client service? 21 -10


When to Use a Divisional Structure?

Products or services: severalEnvironment: rapidly changing and

unpredictableTechnology: nonroutine and depends

on several functional areasSize: largeStrategy: adaptive, customer service

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Matrix Structure

AccountingManufacturingMarketing

Product Division 1

Product Division 2

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Matrix Structures - Defined

Matrix structures have a dual focus, usually

products and functions. It is an attempt to

profit from the advantages of both functional

and product structures

However, having both a product boss and a functional boss can cause confusion and conflict

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When to Use a Matrix Structure?

Pressure to share scarce resources across product lines

Environmental pressure for two or more critical outputs

Environment is both complex and uncertain


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Horizontal Structures - Defined

Horizontal corporations are flat structures

with minimal layers of management and

self-managing multidisciplinary teams

organized around core processes


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Horizontal Hospital StructureSenior

Nurse Coordinators

Nurse Coordinators

Patient Flow

Team Team Team

Management

Patient Flow

Team Team Team

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When to Use Horizontal Structures?

Short product life and development cyclesCustomer satisfaction is a goalEnvironment is uncertain


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Network Structure - Defined

Network organizations consist of brokers

who subcontract needed services to

designers, suppliers, producers, and

distributors linked by full-disclosure

information systems and coordinated by

market mechanisms


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Network Organization Structure

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Marketers & Distributors

Brokers

ProducersDesigners

Suppliers

When to Use Network Structures?

Need to concentrate on core function and can subcontract the rest

Can’t afford large start-up costsFast-paced changing industries Environment is uncertain


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Network Idealists - Defined

Networked idealists are initially non-

profit entrepreneurs who develop

organic, cellular distributed network

structures to accomplish their work


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Characteristics of Networked Idealists

Guerilla infrastructures and radical architectures – bypass traditional entry barriers

Winning by not trying – “a different game”Value-based motivation – do good and make $Attack strengths – attack strong incumbentsKnowledge from the people – partners and

customers add value


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Networked Idealists

Founder

Inner circle

Active users

Passive users


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Characteristics of Boundaryless OrganizationsPermeable internal and external

boundaries Good ideas welcomed regardless of

their sourceCross-functional customer service

teams Delegated authority Shared information

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Informal Structures - Defined

The informal structure refers to natural

formations, informal leadership, and

communication patterns that evolve in an

organization and run parallel to the formal

structure


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Differentiation Vs. Integration -Defined

Differentiation:The differences in cognitive and emotional orientations among managers in different functional departments, and the difference in formal structure among these departments

Integration:

The behaviors and

structures used by

differentiated

organizational subunits

to coordinate their work

activities


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Differentiation

HighHighLowFormality of structure

SocialTaskMostly taskInterpersonal orientation

ShortShortLongTime horizon

Customer satisfaction

Efficient production

New developments, quality

Goals

Sales Department

Manufacturing Department

R&D DepartmentCharacteristic

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Contingencies That Influence Design

StrategyEnvironmentTechnologySizeNational culturePeople and their shared values


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Environmental Characteristics and Recommended

Organizational Designs

Env

iron

men

tal R

ate

of

Cha

nge

Environmental Complexity

ComplexSimple

High Uncertainty

Decentralized, organic structure; participation and teamwork; numerous departments and boundary spanners

Moderate Uncertainty

Decentralized, organic structure with participation and teamwork; few departments; boundary spanning roles

Unstable

Moderate Uncertainty

Formal, centralized mechanistic structure with many depts. and integration roles

Low Uncertainty

Formal, centralized mechanistic structure with few departmentsStable

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International Structures – Strategic Alliances

Licensing – allow products to be sold for a fee by foreign firms with access to global markets and distribution channels


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…International Structures – Strategic Alliances

Joint ventures – separate business entities designed to enter new markets, formed by two or more firms that share development and production costs

Consortia – groups of independent companies that join together to share skills, resources, costs, and access to one another’s markets


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International Structures - Integrated Network Models

1) Distributed, specialized resources and capabilities

2) Large flows of components, products, resources, people, and information among interdependent units

3) Complex processes of coordination and cooperation in an environment of shared decision making


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International Structures – The Family Business

Most common structure worldwide is the family business

Dominant values in Chinese family businesses are: patrimonialism, paternalism, hierarchy, mutual obligations, responsibility, familialism, personalism, and connections


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Keiretsu and Chaebols - Defined

Japanese keiretsu – complex inter-firm networks that combine market exchange and non-economic social relations

Korean chaebols – business group consisting of large companies owned and managed by family members or relatives in many diversified business areas


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When Does Culture Matter in Design?

High power distance cultures tend toward structures with centralized decision making. Low PD cultures prefer decentralization

High uncertainty avoidance generally correlates with greater formalization and more formal structures

Matrix structures did not fit the French respect for hierarchy and unity of command


21 -35

Chapter 21 Organization Design. Objectives Distinguish between mechanistic and organic structures ...

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