ORGANIZATIONAL ORGANIZATIONAL DESIGNDESIGN

Organizations: A DefinitionOrganizations: A Definition

An organization is defined as two or An organization is defined as two or more people, working together more people, working together cooperatively within identifiable cooperatively within identifiable boundaries, to accomplish a common boundaries, to accomplish a common goal or objectivegoal or objective

Four Concepts Implicit in Four Concepts Implicit in Organizational DefinitionOrganizational Definition

Organizations are made up of peopleOrganizations are made up of people The necessity of the division of laborThe necessity of the division of labor Organizations have identifiable Organizations have identifiable

boundariesboundaries Organizations are purposeful, goal Organizations are purposeful, goal

seeking work arrangementsseeking work arrangements

Organizations: A Revised Organizations: A Revised DefinitionDefinition

Organizations are human Organizations are human systems of cooperation and systems of cooperation and

coordination assembled coordination assembled within identifiable within identifiable

boundaries, to pursue shared boundaries, to pursue shared goals or objectivesgoals or objectives

Importance of Importance of OrganizationsOrganizations

Nearly every aspect of our lives Nearly every aspect of our lives is affected by organizations. is affected by organizations.

Work, family, health care, Work, family, health care, religion, and entertainment—religion, and entertainment—nearly every facet of life takes nearly every facet of life takes

place in, is regulated by, or is a place in, is regulated by, or is a result of organizations and result of organizations and

organizational actionorganizational action..

Characteristics of Characteristics of Effective StructuresEffective Structures

EfficiencyEfficiency: efficient pursuit of goals : efficient pursuit of goals that ensure it does the right thingsthat ensure it does the right things

Innovation:Innovation: encourage innovation encourage innovation by providing the pooling of by providing the pooling of resources and the necessary resources and the necessary communicationscommunications

Flexibility and adaptiveness:Flexibility and adaptiveness: balance the needs for consistency balance the needs for consistency and predictability with the needs for and predictability with the needs for flexibility and responsivenessflexibility and responsiveness

Characteristics of Characteristics of Effective Structures (cont.)Effective Structures (cont.)

Facilitation of Individual Performance and Facilitation of Individual Performance and DevelopmentDevelopment: : offer people the opportunity to perform offer people the opportunity to perform at highest level, encourage growth, and provide a at highest level, encourage growth, and provide a clear career ladderclear career ladder

Facilitate Coordination and CommunicationFacilitate Coordination and Communication: must : must facilitate coordination and communication at the facilitate coordination and communication at the times it is needed mosttimes it is needed most

Facilitate Strategy Formulation and ImplementationFacilitate Strategy Formulation and Implementation: : as organizations adopt new strategies, they may need as organizations adopt new strategies, they may need to modify their designs to modify their designs

What is Organizational Structure?What is Organizational Structure?

The The structurestructure of an organization can be of an organization can be defined simply as the sum total of the defined simply as the sum total of the ways in which its labor is divided into ways in which its labor is divided into distinct tasks and then its coordination distinct tasks and then its coordination is achieved among these tasks.is achieved among these tasks.

What is an Organizational Chart?What is an Organizational Chart?

Boxes show how work and responsibilities Boxes show how work and responsibilities are clustered into units such as divisions, are clustered into units such as divisions, departments, sections, and teams.departments, sections, and teams.

Lines show the management structure: Lines show the management structure: Who reports to whom, how the boxes Who reports to whom, how the boxes relate to each other in the hierarchy.relate to each other in the hierarchy.

Why Organizational Structure Why Organizational Structure Matters?Matters?

Structure affects:Structure affects: What employees pay attention toWhat employees pay attention to Ease of coordinating activitiesEase of coordinating activities Speed of producing goods/servicesSpeed of producing goods/services Cost of running the businessCost of running the business Nature and extent of supervision requiredNature and extent of supervision required Whom employees interact and build Whom employees interact and build

relationships withrelationships with

Organizational StructureOrganizational Structure

Organizational designOrganizational design Selecting the structure and control Selecting the structure and control

systems that are most strategically systems that are most strategically effective for pursuing sustainable effective for pursuing sustainable competitive advantage.competitive advantage.

The role of structure and controlThe role of structure and control To coordinate strategy implementation.To coordinate strategy implementation. To motivate and provide incentives for superior To motivate and provide incentives for superior

performance.performance.

The Role of Organizational The Role of Organizational StructureStructure

Building blocks of organizational structureBuilding blocks of organizational structure Differentiation in the allocation of people and Differentiation in the allocation of people and

resources to create value.resources to create value. Vertical differentiation in the Vertical differentiation in the

distribution of decision-making distribution of decision-making authority.authority.

Horizontal differentiation in Horizontal differentiation in dividing up people and tasks dividing up people and tasks into functions and divisions. into functions and divisions.

IntegrationIntegration The means used in coordinating people and The means used in coordinating people and

functions to accomplish organizational tasks.functions to accomplish organizational tasks.

How OrganizationalHow OrganizationalDesign IncreasesDesign Increases

ProfitabilityProfitability

Enhances a company’s