Organizational Design and Structure

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

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 of

vertical differentiation

across 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 and

mutual adjustmentamong people

Simple Structure – acentralized form oforganization that

emphasizes the upperechelon and direct

supervision

Machine Bureaucracy – a moderately

decentralized form oforganization thatemphasizes the

technical staff andstandardization ofwork processes

Divisional Form – amoderately decentralized

form of organization that emphasizes the

middle level and standardization of outputs

ProfessionalBureaucracy –a decentralized

form oforganization thatemphasizes theoperating level

and 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 andHorizontal

DecentralizationDivisionalized

FormStandardization

of OutputsMiddleLevel

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

Strategyand Goals

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 of

Structural & 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.

Strategyand Goals

Context of the organizationCorrect sizeCurrent technologyPerceived environmentCurrent strategy and goals

The Relationship among Key Organizational Design Elements

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

Influences how manager perceive structural needs

Which characterize the organizational processes

Context of the organization

PurposesDesignate formal lines of authorityDesignate formal information- processing patterns

Differentiation and Integration

Which influence how well the structure meets its

Which influence how well the structure fits the

Forces Reshaping Organizations

• Organization 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

Roles of Managers Today

1. 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 and flexibility7. Coaching one’s workers

Management Review, January 1991, Thomas R. Horton.

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 reaching right people in right format

No coordinating effort

Departments work against each other, not for organizational goals

Group Activity

• Design an organizational structure for a startup departmental store

• Make the necessary realistic assumptions