ORGANIZATIONAL DESIGN

What is the difference betweenOrganization Design &

Organization Structure? Organization design is the

process of constructing and adjusting an organization's structure to achieve its goals.

Organization structure is the linking of departments and jobs within an organization.

KEY ORGANIZATIONAL DESIGN PROCESSES

Differentiation is the process of deciding how to divide the work in an organization. Differentiation is a check to ensure that all aspects of the tasks are assigned and will be accomplished. One of the earlier studies found four dimensions (1) manager's goal orientation, (2) time orientation, (3) interpersonal orientation, and (4) formality of structure.

Integration is the process of coordinating the different parts of an organization.

BASIC DESIGN DIMENSIONS

Formalization is the degree to which the organization has official rules, regulations, and procedures. An organization may have a formal structure, but may operate informally.

Centralization is the degree to which decisions are made at the top of the organization. The quality movement and programs that stress delegating responsibility and decision making to lower levels result in decentralization. At the same time, reductions in organizations have altered the middle management tier of the organization by eliminating part of the central reporting structure. Typically, the larger and longer the organization has been in existence, the more centralized will be its structure.

Specialization is the degree to which jobs are narrowly defined and depend on unique expertise.

Standardization is the extent to which work activities are described and performed routinely in the same way.

Complexity refers to the number of different types of activities that occur in the organization.

Hierarchy of Authority

The hierarchy of authority is the degree of vertical differentiation across levels of management.

Organizations that are highly specialized, formalized, and centralized, typically have a tall hierarchy of authority, and are highly bureaucratic. The term bureaucracy has not always had the negative connotation that it carries today. Max Weber coined the expression to mean a complex organization, based on hierarchy of authority and adherence to rules.

MINTZBERG STRUCTURAL CONFIGURATIONS

Simple Structure Machine Bureaucracy Professional

Bureaucracy Adhocracy Divisionalized Form

FIVE STRUCTURAL CONFIGURATIONS

The simple structure is a centralized form of organization that emphasizes the upper echelon and direct supervision. Most organizations pass through the simple structure in their formative years. It is the riskiest structure because success is often based on whims.

The machine bureaucracy is a moderately decentralized form of organization that emphasizes the technical staff and standardization of work processes. 

The professional bureaucracy is a decentralized form of organization that emphasizes the operating level and standardization of skills. One of the difficulties that hospitals face is the professional bureaucracy. Physicians typically are loyal to their profession rather than to the hospitals in which they practice. 

The divisionalized form is a moderately decentralized form of organization that emphasizes the middle level and standardization of outputs.

The adhocracy is a selectively decentralized form of organization that emphasizes the support staff and mutual adjustment among people.

CONTEXTUAL VARIABLES

SizeThe larger the organization, the more likely the basic design dimension will be

formalized, central, specialized, standardized, and complex. Additionally, the hierarchy of authority is typically a tall structure. Large organizations also reap the efficiency advantages of economies of scale.

TechnologyJoan Woodward classified technologies by their complexity. Others considered the rate

of change of the technology to determine the best organizational structure. Technological interdependence is the degree of interrelatedness of the organization’s various technological elements.

EnvironmentThe organizational environment is considered anything outside the boundaries of an organization. The task environment includes elements that are specifically related to the attainment of the organization's goals. Burns and Stalker compared the rate of change and determined that organizations with stable technologies typically have an organic or flexible structure. Those with low rates of change were mechanistic structures. The perception of environmental uncertainty or the perception of the lack of environmental uncertainty is how the contextual variable of environment most influences organizational design.

FORCES RESHAPING ORGANIZATIONS

Life Cycles in OrganizationsThe organizational life cycle is comprised of differing stages of an organization's

development from birth to death. The initial stages of the life cycle exhibit aspects of organic structures. As organizations progress through the stages they become more mechanistic.

GlobalizationAs organizations develop globally, they often change their structures to accommodate

the decentralization necessary because of geographic boundaries. As companies become transnational in perspective they are likely to have two or more headquarters. Changes in Information-Processing Technologies

Technology serves to share resources and can enhance either a structure of centralization or decentralization. Demands on Organizational Processes

Organizations must adapt quickly to changes at a pace unprecedented in organizational history.

Emerging Organizational StructuresEmerging structures will necessarily consider the dynamics and issues surrounding

total quality management.

COMMON ORGANIZATIONAL

DESIGNS

SIMPLE STRUCTUREAn organizational form in which the owner-manager makes most

of the decisions and controls activities, and the staff serve as an extension of the top executive.

Advantageso Highly informalo Centralized decision

makingo Little specialization

Disadvantageso Employees may not

understand their responsibilities

o May take advantage of lack of regulation

FUNCTIONAL STRUCTUREAn organizational form in which the major functions of the firm,

such as production, marketing,R&D, and accounting, are grouped internally.

Advantages– Enhanced coordination and control– Centralized decision making– Enhanced organizational-level perspective– More efficient use of managerial and

technical talent– Facilitated career paths and development

in specialized areas

Disadvantages Impeded communication and coordination

due to differences in values and orientations May lead to short-term thinking (functions

vs. organization as a whole) Difficult to establish uniform performance

standards

DIVISIONAL STRUCTUREAn organizational form in which products, projects, or product markets are

grouped internally.Also called multidivisional structure or M-Form

• Advantages• Separation of strategic and

operating control• Quick response to important

changes in external environment• Minimal problems of sharing

resources across functional departments

• Development of general management talent is enhanced

• Disadvantages• Can be very expensive• Can be dysfunctional

competition among divisions• Differences in image and quality

may occur across divisions• Can focus on short-term

performance

MATRIX STRUCTUREan organizational form in which there are multiple lines of authority

and some individuals report to at least two managers.

Advantageso Facilitates the use of specialized

personnel, equipment and facilitieso Provides professionals with a broader

range of responsibility and experience

Disadvantageso Can cause uncertainty and lead to

intense power struggleso Working relationships become more

complicatedo Decisions may take longer

Contemporary Organizational Designs

o Team structures• The entire organization is made up of work groups or self-managed

teams of empowered employees.o Matrix and project structures

• Specialists for different functional departments are assigned to work on projects led by project managers.

• Matrix participants have two managers.o Project structures

• Employees work continuously on projects; moving on to another project as each project is completed.

o Boundaryless Organization• An flexible and unstructured organizational design that is intended to

break down external barriers between the organization and its customers and suppliers.

• Removes internal (horizontal) boundaries• Eliminates the chain of command• Has limitless spans of control• Uses empowered teams rather than departments

• Eliminates external boundaries• Uses virtual, network, and modular organizational structures to get closer

to stakeholders.

Every organization needs a structure in order to

operate systematically. The organizational structures can be used by any organization if the structure fits into the nature and the maturity of the organization.

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