DETERMINANTS OFORGANIZATION STRUCTURE

AND CULTURE Submitted by:Saurabh Ghai

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Design ContingenciesDesign Contingencies The organization’s The organization’s

environmentenvironment The technology the The technology the

organization usesorganization uses The organization’s The organization’s

strategystrategy

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Organizational Organizational EnvironmentEnvironment

The The organizational environmentorganizational environment is the set is the set of forces surrounding an organization that of forces surrounding an organization that determine its ability to obtain resources.determine its ability to obtain resources.

Because resources are often scarce and many Because resources are often scarce and many organizations compete for the same organizations compete for the same resources, obtaining them is a difficult and resources, obtaining them is a difficult and uncertain process.uncertain process.

The structure and culture of an organization The structure and culture of an organization must be designed in a way that allows must be designed in a way that allows organizational members to secure and protect organizational members to secure and protect the organization’s access to the resources it the organization’s access to the resources it needs to achieve its goals.needs to achieve its goals.

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Differentiation and Differentiation and IntegrationIntegration

Managers of organizations have to create a Managers of organizations have to create a structure with the right levels of both structure with the right levels of both differentiation and integration to match the differentiation and integration to match the uncertainty of the environment in which it uncertainty of the environment in which it operates.operates.

DifferentiationDifferentiation measures the degree to measures the degree to which a function or division develops which a function or division develops orientations that allow its members to orientations that allow its members to manage the specific environmental force manage the specific environmental force that each function or division is dealing with.that each function or division is dealing with.

IntegrationIntegration measures the degree of measures the degree of coordination or mutual adjustment between coordination or mutual adjustment between functions.functions.

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Mechanistic and Organic Mechanistic and Organic StructuresStructures

A A mechanistic structuremechanistic structure is an is an organizational structure that is designed organizational structure that is designed so that individuals and functions behave in so that individuals and functions behave in predictable ways and can be held predictable ways and can be held accountable for their actions.accountable for their actions.

An An organic structureorganic structure is an organizational is an organizational structure that is designed so that structure that is designed so that individuals and functions can behave individuals and functions can behave flexibly and respond quickly to frequently flexibly and respond quickly to frequently changing and unusual situations.changing and unusual situations.

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Organizational CultureOrganizational CultureOrganizations with organic structures Organizations with organic structures develop very different cultures than develop very different cultures than organizations with mechanistic structures.organizations with mechanistic structures.Typical instrumental values in a Typical instrumental values in a mechanistic organization stress being mechanistic organization stress being cautious, obeying superior authority, and cautious, obeying superior authority, and the importance of staying inside one’s role the importance of staying inside one’s role and respecting tradition.and respecting tradition.Typical instrumental values in an organic Typical instrumental values in an organic organization stress being creative, taking organization stress being creative, taking risks, and challenging established traditions risks, and challenging established traditions and opinions.and opinions.

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Advice to ManagersAdvice to Managers Analyze the set of forces in the environment Analyze the set of forces in the environment

surrounding your organization and the degree surrounding your organization and the degree of uncertainty associated with each force.of uncertainty associated with each force.

Evaluate the way your organizational Evaluate the way your organizational structure and culture are designed to manage structure and culture are designed to manage these forces. Are the levels of differentiation these forces. Are the levels of differentiation and integration appropriate? Is your and integration appropriate? Is your organization sufficiently mechanistic or organization sufficiently mechanistic or organic?organic?

Implement organizational design changes that Implement organizational design changes that will improve your organization’s ability to will improve your organization’s ability to respond to its environment.respond to its environment.

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TechnologyTechnologyThe combination of The combination of human resources human resources and raw materials and raw materials and equipment that and equipment that workers use to workers use to convert raw convert raw materials into materials into finished goods and finished goods and services.services.

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Woodward’s Model of Woodward’s Model of TechnologyTechnology

Small-batch technologySmall-batch technology relies on the skills relies on the skills and knowledge of individual workers to produce and knowledge of individual workers to produce one-of-a-kind, customized goods and services or one-of-a-kind, customized goods and services or small quantities of goods and services.small quantities of goods and services.

Mass production technologyMass production technology results in the results in the production of large numbers of identical production of large numbers of identical products.products.

Continuous-process technologyContinuous-process technology is one in is one in which the manufacturing process is entirely which the manufacturing process is entirely mechanized and the workers’ role is to monitor mechanized and the workers’ role is to monitor the machines and computers that actually the machines and computers that actually produce the goods.produce the goods.

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Perrow’s Model of Perrow’s Model of TechnologyTechnology

Task Variety:Task Variety: The number of The number of new and different demands that new and different demands that a task places on an individual or a task places on an individual or a function.a function.

Task Analyzability:Task Analyzability: The degree The degree to which standardized solutions to which standardized solutions are available to solve problems are available to solve problems that arise.that arise.

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The Effects of New The Effects of New Information TechnologyInformation Technology

IT has increased the IT has increased the mechanistic sidemechanistic side of of organizations because it has made it organizations because it has made it much easier to coordinate between jobs much easier to coordinate between jobs and functions and has given managers and functions and has given managers much more power to monitor and control much more power to monitor and control organizational activities.organizational activities.

IT has increased the IT has increased the organic sideorganic side of of organizations because people and teams organizations because people and teams far down the hierarchy have access to far down the hierarchy have access to more information so that they can more information so that they can perform their jobs more autonomously.perform their jobs more autonomously.

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Advice to ManagersAdvice to Managers Use Woodward’s, Thompson’s, and Perrow’s Use Woodward’s, Thompson’s, and Perrow’s

frameworks to identify the main contingencies frameworks to identify the main contingencies associated with operating the technologies in associated with operating the technologies in your organization.your organization.

Decide whether your organization’s current Decide whether your organization’s current structure and culture are matched to the structure and culture are matched to the needs of your technology.needs of your technology.

Implement any changes in organizational Implement any changes in organizational design, such as decentralizing authority or design, such as decentralizing authority or raising the level of integration by empowering raising the level of integration by empowering workers, that may allow you to operate your workers, that may allow you to operate your technology more effectively.technology more effectively.

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StrategyStrategyAn organization pursues An organization pursues a strategy to develop a strategy to develop the skills, knowledge, the skills, knowledge, and capabilities that will and capabilities that will allow it to compete allow it to compete successfully in its successfully in its environment for environment for resources and gain a resources and gain a competitive advantage, competitive advantage, outperforming its outperforming its competitors.competitors.

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Types of Organizational Types of Organizational StrategiesStrategies

Cost-Leadership StrategyCost-Leadership Strategy - aims to - aims to attract customers with low prices that are attract customers with low prices that are made possible by low costs.made possible by low costs.Differentiation StrategyDifferentiation Strategy - aims to attract - aims to attract customers with unique or distinctive goods customers with unique or distinctive goods and services.and services.Focused Cost-Leadership StrategyFocused Cost-Leadership Strategy - - aims to attract one kind of customer or aims to attract one kind of customer or group of customers with a low-cost product.group of customers with a low-cost product.Focused Differentiation StrategyFocused Differentiation Strategy - aims - aims to attract one kind of customer or group of to attract one kind of customer or group of customers with a differentiated product.customers with a differentiated product.

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2020

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