org design & structure

8/12/2019 Org Design & Structure

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Ms. Neha Goel


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Designing Organizational Structure Organizational Structure: The formal system of task and job

reporting relationships that determines how employees use resourcesto achieve org goals.

Organizational Design: The process by which managers create aspecific type of org structure and culture so that the org can work inmost effective and efficient way.

The challenge: coordinatingthe activities of employees, groups,functions, and divisions.


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Skilled workforce-Flexible structure

Non specialized

employees: FormalStructure

Flexible structure-Differentiation strategy

Formal structure- low cost

strategy

Complicatedtechnology- flexiblestructure

Routine Technology-Formal Structure

Mechanistic Structure Stable environment

Organic Structure-Rapidly changingenviron

OrganizationalEnvironment Technology

HumanResources

Strategy


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The Organizational Environment

Rapidly changing external environment

Greater uncertainty

More problems Scarce resources

Stable external environment

Uncertainty is low

Less coordination and communication is required

Easily available resources


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Strategy Different strategies call for different org structures

Differentiation strategy- develop new and innovative

products Low-cost strategy: driving down costs in all functions

International Strategy


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TechnologyWhat makes technology routine or complicated

Task Variety: no. of new/unexpected problems/situationa person/function encounters in performing a job/task.

Task Analyzability: degree to which programmedsolutions are available

Routine technology: low task variety, high task

analyzability Complicated technology: high task variety, low task

analyzability


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Human Resources Factors that determine org structure:

Needs of the workforce regarding authority and freedom Skill level of employees: Complexity and kind of work

employees perform


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Organizational Design Decisions1. Managers decide how to divide the overall task into

successively smaller jobs

2. Managers decide the bases by which to group the jobs

3. Managers decide the appropriate size of the group reporting

to each superior

4. Managers distribute authority among the jobs


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Division of Labor:

Departmentalization:

Span of Control:

High Low

Homogeneous Heterogeneous

ManyFew

Authority:LowHigh

Specialization

Basis

Number

Delegation

The Four Key Design Decisions


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Division of Work Division of Workconcerns the extent to which jobs are

specialized

It is the process of breakdown of a complex task intocomponents.

It is the process of dividing work into relatively specialized jobsto achieve advantages of specialization

3 ways of dividing work:

- Personal specialties: e.g. accountants, software engineers, graphic

designers, scientists, etc.

- Natural sequence of work: e.g. dividing work in a manufacturing plantinto fabricating and assembly (horizontal specialization)

- Vertical plane: e.g. hierarchy of authority from lowest-level manager tohighest-level manager


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Delegation of Authority Managers decide how much authority should be

delegated to each job and to each jobholder

Delegation of authorityprocess of distributing

authority downward in the hierarchy of an organization

Authority

- Decentralized: Distribution of authority a large extent

- Centralized: less distribution of authority at lower levels


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Reasons to Decentralize Authority1. Relatively high delegation of authority encourages the

development of professional managers

2. High delegation of authority can lead to a competitive

climate within the organization

3. Managers who have relatively high authority can exercise

more autonomy, and thus satisfy their desires to

participate in problem solving


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Reasons to Centralize Authority

1. Managers must be trained to make the decisions thatgo with delegated authority

2. Many managers are accustomed to making decisionsand resist delegating authority to their subordinates

3. Administrative costs are incurred because new controlsystems must be developed to provide top

management with information about the effects ofsubordinates decisions

4. Decentralization means duplication of functions


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Departmentalization process in

which an organization is structurally

divided by combining jobs in

departments according to some

shared characteristic or basis.


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Functional Geographic

Product Market

Departmentalization Bases


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Departmental Bases:

Functional Departmentalization Jobs are combined according to the functions of the

organization

The principal advantage is efficiency

- By having departments of specialists, management

creates efficient units

A major disadvantage is that organizational goals may be

sacrificed in favor of departmental goals


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Engineering Reliability Finance

Manufacturing DistributionHuman

Resources

Public

Relations

Purchasing

OBM Company

Functional Departmentalization Structure


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Departmental Bases:

Geographic Departmentalization Establish groups according to geographic area

Advantageous in large organizations because physical

separation of activities makes centralized coordination

difficult

Provides a training ground for managerial personnel

ABCCompany

Delhi Chennai Mumbai Kolkata


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Departmental Bases:

Product Departmentalization Product becomes the preferred basis as a firm grows by

increasing the number of products it markets

Concentrating authority, responsibility, and accountability in a

specific product department allows top management tocoordinate actions

ABC Industry

RetailOil and

PetroleumTelecom

Financial

services


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Departmental Bases:

Customer Departmentalization The importance of customer satisfaction has stimulated firms

to search for creative ways to serve people better

Each kind of customer is served by a self-contained unit.

Group Divisions according to type of customer they serve

Retail

StoresMail Order

On-Line

Sales

Government

Contracts

ABC

Company

Institutional

Sales


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Span of Control

Number of individuals who report to a specific manager

The frequency and intensity of actual relationships is the

critical consideration in determining the managers spanof control

Span of control is important for 2 reasons:

o Span affects work relations in the organizationo Span affects decision making-

- Tall hierarchies: narrow span

- Flat hierarchies: wide span


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Dimensions of Structure

Formalizationthe extent to which expectations

regarding the means and ends of work are specified,

written, and enforced

Centralizationthe location of decision-making

authority in the hierarchy

Complexitythe direct outgrowth of dividing work

and creating departments


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Types of Organization

Patterns for organizing the personnel:

- Line System: Activities at one level are the same, eachperforming same type of work, divisions exist solely for

control and direction

- Functional System: separate departments look after difffunctions,

- Line & Staff System: Staff positions are advisory and linepositions are specialized. Staff managers canrecommend and line managers have the authority.


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Line organization:

- simple,- disciplined,

- flexible,

- prompt decision,

- fixedresponsibility

- overloading,

- Scope forfavourism

GM

Manager:South India

Manager:District 1

Manager:District 2

Manager:north India

Manager:District 3

Manager:District 4


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Line and staff organizations

- Planned specialization, quality decisions, trainedpersonnel, lack of well defined authority, line and staffconflicts.

President

VP finance

Manager:

accounting

Manager cashcontrol

Director R&D VP production

Manager:

Factory

Chief:Assembly

Chief:Maintenance

Manager:

personnel

Director: PR VP Sales

Manager:

Domestic sales

Manager:Foreign Sales


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Organization Design Models

The Mechanistic Model

Emphasizes importance ofachieving high levels of

production and efficiency

through:

- Extensive use of rules andprocedures

- Centralized authority

- High specialization of labor

The Organic Model

Emphasizes importance ofachieving high levels ofproduction and efficiencythrough:

- Limited use of rules and

procedures- Decentralized authority

- Relatively low degrees of

specialization


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Comparison of Mechanistic and OrganicStructures

Process Mechanistic Structure Organic Structure

1. Leadership Includes no perceived

confidence and trust

between superiors and

subordinates.

Includes perceived confidence

and trust between superiors

and subordinates.

2. Motivation Taps only physical, security,

and economic motives,

through use of fear and

sanctions.

Taps a full range of motives

through participatory

methods.

3. Communication Information flows downward

and tends to be distorted,

inaccurate, and viewed with

suspicion by subordinates.

Information flows freely:

upward, downward, and

laterally. The information is

accurate and undistorted.


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Comparison of Mechanistic and Organic

StructuresProcess Mechanistic Structure Organic Structure

4. Interaction Closed and restricted.

Subordinates have little

effect on departmentalgoals, methods, and

activities.

Open and extensive. Both

superiors and subordinates

are able to affectdepartmental goals,

methods, and activities.

5. Decision Relatively centralized.

Occurs only at the top of

the organization.

Relatively decentralized.

Occurs at all levels through

group processes.

6. Goal setting Located at the top of the

organization, discouraging

group participation.

Encourages group

participation in setting high,

realistic objectives.


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Comparison of Mechanistic and Organic

StructuresProcess Mechanistic Structure Organic Structure

7. Control Centralized. Emphasizes

fixing blame for mistakes.

Dispersed throughout the

organization. Emphasizes self-control and problem solving.

8. Performance goals Low and passively sought by

managers, who make no

commitment to developing

the organizations human

resources.

High and actively sought by

superiors, who recognize the

need for full commitment to

developing, through training,

the organizations human

resources.


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Organization Design Models:

The Matrix Model

Matrix organization attempts to maximize the strengths

and minimize the weaknesses of both the functional and

product bases

Simultaneously group people and resources by functions and

by products

Superimpose a horizontal structure of authority, influence,

and communication on the vertical structure

Facilitates the utilization of highly specialized staff and

equipment


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Project or product A

Project or product B

Project or product C

Project or product D

Project or product E

Manufacturing Marketing Engineering FinanceFunctions

Projects, products

Example of the Matrix Organization Model


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Advantages of Matrix Organization

Efficient use of resources

Flexibility in conditions of change and uncertainty

Technical excellence Freeing top management for long-range planning

Improving motivation and commitment

Providing opportunities for personal development


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Thank You!!!!

org design & structure

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