Chapter 14Nelson & Quick

Organizational Design & Structure

Copyright ©2005 by South-Western, a division of Thomson Learning. All rights reserved.

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

organization’s structure

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 Manager’s 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, but may simplify goal achievement or protection

Differentiation Between Marketing and Engineering

Basis for DifferenceBasis for Difference MarketingMarketing EngineeringEngineering

Goal orientationTime orientationInterpersonal orientationStructure

DesignMedium runTask orientedMore formal

Sales volumeLong runPeople orientedLess formal

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 added to the organization structure Management information systems

HorizontalIntegration

Liaison roles Task forces Integrator positions Teams

Hierarchy ofAuthority -

the degree ofvertical

differentiationacross

levels of management

Specialization -the degree towhich jobs are

narrowlydefined anddepend on

uniqueexpertise

BasicDesign

Dimensions

Formalization - the degree to which the organization

has official rules, regulations, and procedures

Standardization - the degree to which work

activities are accomplished in a routine fashion

Complexity - the degree towhich many different types

of activities occur in theorganization

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

organization

Adhocracy - a selectively

decentralized form of

organization thatemphasizes thesupport staff &

mutual adjustmentamong people

Simple Structure - acentralized form oforganization that

emphasizes the upperechelon & direct

supervision

Machine Bureaucracy - a moderately

decentralized form oforganization thatemphasizes the technical staff &

standardization ofwork processes

Divisional Form - amoderately decentralized

form of organization that emphasizes the

middle level & standardization of outputs

ProfessionalBureaucracy -a decentralized

form oforganization thatemphasizes theoperating level

& standardizationof skills

Structural Configurations

ofOrganizations

Five Structural Configurations of Organization

StructuralConfiguration

Prime CoordinatingMechanism

Key Part ofOrganization

Type ofDecentralization

Simple Structure

DirectSupervision

UpperEchelon

Centralization

Machine Bureaucracy

Standardization of Work

Processes

TechnicalStaff

Limited Horizontal

Decentralization

ProfessionalBureaucracy

Standardizationof Skills

OperatingLevel

Vertical &Horizontal

Decentralization

DivisionalizedForm

Standardizationof Outputs

MiddleLevel

Limited VerticalDecentralization

Adhocracy Mutual Adjustment

SupportStaff

SelectiveDecentralization

MiddleLine

StrategicApex

StrategicApex

Operating CoreOperating Core

Support

StaffSupport

StaffTechno-structure

Techno-structure

Mintzberg’s Five Basic Parts

of an Organization

From H. Mintzberg, The Structuring of Organizations (Upper SaddleRiver, N.J.: Prentice-Hall, 1979): 20. Reprinted with permission.

Contextual Variables - a set of characteristics that

influences the organization’s design 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 of Authority

Craft1. Moderate2. Moderate3. Moderate4. Low-moderate5. High6. LowRoutine1. High2. High3. Moderate4. High5. Low6. High

Nonroutine1. Low2. Low3. Low4. Low5. High6. LowEngineering1. Moderate2. Moderate3. High4. Moderate5. 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

Extremes of Environmental Uncertainty

Mechanistic Structure - an organizational design that emphasizes structured activities, specialized tasks, and centralized decision making

Organic Structure - an organizational design that emphasizes teamwork, open communication, and decentralized decision making

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 preferences formalization

Moderate centralizationCost control—to produce High formalizationstandardized products High centralizationefficiently High standardization Low complexity

Strategy& Goals

Miller’s Integrative Framework ofStructural & Strategic Dimensions

D. Miller, “The Structural and Environmental Correlates of Business Strategy,” Strategic Management Journal 8 (1987): 55-76. Copyright @ John Wiley & Sons Limited. Reproduced with permission.

Context of the organizationCorrect sizeCurrent technologyPerceived environmentCurrent strategy & goals

The Relationshipamong KeyOrganizationalDesignElements

Influences how manager perceive structural needs

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

Which characterize the organizational processes

Which influence how well the structure meets its

PurposesDesignate formal lines of authorityDesignate formal information- processing patterns

Differentiation & Integration

Which influence how well the structure fits the

Context of the organization

Forces Reshaping Organizations

Organizational Life Cycle - 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 –employee 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 subordinated2. 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.

HD’s Circle Organization

From R. Teerlink and L. Ozley, More than a Motorcycle: The Leadership Journey at Harley-Davidson. Boston, MA, 2000. P. 139.Copyright © 2000 by the Harvard Business School Publishing Corporation; all rights reserved.

CreateDemand

ProduceProduct

ProvideSupport

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