Post on 03-Apr-2018
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Organization design:
fashion or fit?
Submitted by:GROUP - 10
Ashish Gupta 12P191
Rahul Kumar 12P224Rajan Mishra 12P225
Naveen Babu 12P228
Satish Kumar 12P230
Shivam Singh 12P232
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Agenda
1. Why Organizational structure is important?
Internal Issues
External Issues
2. Simple Structure
Apex corporation example
3. Machine bureaucracy
Maruthi and Bajaj example
4. Professional bureaucracy Health care Industry, Lawyers and consultants
5. Divisionalised form
Good Year India example
6. Adhocracy
Sumaprojekt example
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Why Organizational design is
important?
Internal Issues
Organizational structure is thefundamental design of a company.
A company's organizational structure
can determine its success or failure
Organizational structure can have a
large influence on the culture within
the organization.
It helps to improve the decision
making process and employee
performance.
External Issues
If structure doesn't reflect the businessgoals, employees may have a hard
time working successfully for the
company.
As the size and reach of the business
increases, it is necessary to realign the
organization structure business
strategy to achieve its goals.
An effective organizational structure
helps the company to communicate,
distribute responsibility and adapt to
change.
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Five configurations of Organizational
Structure
Simple Structure Machine bureaucracy
Professional bureaucracy
Divisionalised form
Adhocracy
The organization should select one or combination (of two or three) organizational structure
based on its strategy, complexity and importance of the organization.
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Simple Structure
The simple structure, typically, has
little or no techno structure, few support staffers,
a loose division of labour, minimal differentiation among its units, and a small
managerial hierarchy.
The behaviour of simple structure is not formalised and planning, training, and
liaison devices are minimally used in such structures.
Example
New companies, one-person companies, family companies
Often many startup companies which have simple organic structure arevulnerable to sudden heart attack.
The entrepreneurial organization is fast, flexible, and lean, and it's a model that
many companies want to copy. However, as organizations grow, this structure
can be inadequate as decision-makers can become so overwhelmed that they
start making bad decisions. This is when they need to start sharing power and
decision-making. Also, when a company's success depends on one or two
individuals, there's significant risk if they sell up, move on to newentrepreneurial ventures, or retire
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Example:
The Apex corporation case discussed in class gives a example of simple structure
In the case, Initially there are a group of 25 employees with no-clear cut job
responsibilities but as the organization began to grow they found the need to form
hierarchical, functional structure to align with the business strategy.
A simple structure may fail if the size of the organization grows and hence every
organization has to transform itself into other structure as it grows.
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Machine Bureaucracy
Emphasis on the standardization of work and stability in the organization.
Mechanistic bureaucracy will be successful when the jobs are routine and repetitive.
Example 1: Manufacturing companies like Maruthi follow mechanistic structure and has been very
successful in practicing it. However the same mechanistic bureaucratic organizational
structure restricted Maruthi from creativity and innovation. It imports technology from
Japan and outsources few manufacturing parts to other vendors.
In this model, importance is given to efficiency and should be praticised low uncertainty.
Example 2: Bajaj followed mechanistic structure in producing scooters to meet high demand
efficiently in 1990s and not able to catch-up new technologies and product innovations in
early 2000s. It lost its market share to Hero Honda.
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Professional bureaucracy:
Professional bureaucracy divide the work according to the professional groups, and taskcollaboration is done by standardizing the knowledge and skills of the professions.
Example 1: Healthcare is a professional bureaucracy in the Mintzberg Model. The departments are
all organized by the professionsthe nurses are all in nursing, the pharmacists are all inthe pharmacy, and the lab technologists are all in the laboratory.
A professional bureaucracy has a tiny techno-structure. Decisions on methods are madeby the operating core, the very same people doing operations.
Professional organizations are typically staffed by well educated and qualified
individuals who deliver highly specialized and valuable services and charge accordingly.This high complexity of task leads to relatively low centralisation.
A key principle of professional organizations is the autonomy of its agents who areassumed to be sufficiently expert to make serious choices in the actions they undertake
Example:
Lawyers and consultants
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Divisional Configuration
prime coordinating mechanism:standardisation of outputs
key part: middle line main design parameters: market
grouping, performance controlsystem, limited verticaldecentralisation
situational factors: diversifiedmarkets (particularly products orservices); old, large; power needsof middle managers; fashionable
The divisions are fairlyautonomous
There is little interdependence
between divisions Divisions address separate
markets
Divisional leaders are very strong
Headquarters focus onperformance (economic result)
Divisions are driven towards
machine bureaucracy Comes as a result of
diversification or acquisitions
Split in separate organisations is arealistic alternative
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Advantages compared to machine
bureaucracy
Advantage
Better Allocation of capital
Helps training managers
Spreads risk across markets
Strategically responsive
Problems Centralisation of power
Bureaucratisation
Reliance on MIS
Outside private sector: artificialperformance standards
Pure divisionalisation may be a weakeralternative than full split
remember: no environment of its own
Controlled diversity more profitablethan conglomerate
by-product or related-product formsthe more interesting
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Goodyear Tire and Rubber CompanyFunctional to Divisional
with initially there was a Functional organization structure being followed for many
decades in India.
simple, conventional and formal organizational structure
Span of control was different at different levels.
higher at the bottom line of the organization where a sales manager has to manage a
team of 5-6 sales persons.
Moreover, this hierarchy existed in other functions as well like production, customer
service and operations etc.
lack of coordination between different functions of the organization.
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Factors which influenced Structuralchange for Goodyear India
1. Age and Size-
well established in India, (since 1962) deep and solid network of retailers acrossIndian states.
systems and procedures were well formalized in the market from top of themanagement to a retailer.
Marketing strategy was quite obvious and market knew that when and how to dealwith Goodyear. This hampered the speed at which company grew.
2. Technology, Failure to innovate-
The range of Goodyear tyres being marketed up till 2008 had become obsolete
need of new products to compliment rapid developments in automobile sector.
Despite having a wide range globally, Goodyear could not replace new productsbecause of excessive standardization of products, resistance to change fromfactory employees, sales team and retailers.
3. Environment-
common strategy for a diverse country like India was not helping.
competitors(Bridgestone Michelin) entered Indian market with more customerfocused approach in their different product segments this forced Goodyear tolaunch its new product ranges for different types of tyre customers, therebycomplicating the environment.
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Factors which influenced Structuralchange for Goodyear India
4. Strategy-
The Place, Promotion and People for different products marketed byGoodyear, became too obtuse to each other due to growth in market size and
arrival of competitors. The Four Ps of marketing forced Goodyear to change its functional structure
and move to a Product based Unit structure. One single strategy to increasebusiness was not enough to retain or gain overall market share. (Cummins2008)
5. Delays in decision making:
formalized structure resulted in slow decision making process and whichresulted in dissatisfaction and reduced effect and success ratio of a decision.
Disagreement and the inability to resolve issues effectively slowed thecompany response and turned the focus inward rather than on customers.(Dyck 2010)
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Transformation from Functional to Divisional FormProduct Based Unit (PBU) in 2008
all the departments divided in two different product categories
Passenger Business UnitCar tyre and
Commercial Business UnitTruck and Farm tyres.
Both the PBUs had separate set of professionals in different functions from Top
management to bottom line workers.
Two production facilities were also reorganized: one to produce tyres passenger
cars and other to produce tyres for commercial vehicles.
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Results of Product based Unit structure
Direct control vs. Autonomy:
low degree of centralization which meant that there was more power or autonomy at
lower level of organization, however holding the core objectives and purposes of a PBU
intact.
Speed of Response:
Response time improved significantly as employees at each level were given more
authorities. There was significant improvement in After-sales service which provided
higher level of customer satisfaction.
Flexibility:
Sensitive to external factors, companys pricing, logistics and supply (production)
became more flexible and started adjusting swiftly to different markets or marketsegments and also in the event of a change in any of its competitors strategy (pricing,
distribution etc)
Innovation and Predictability:
Resultant of PBU structure, a dedicated R&D for both the PBUs was able to introduce
new technologies for different market segments. This enabled company to gain
significant market share and acquiring more market out of a growing economy in India.
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Adhocracy
prime coordinating mechanism: mutualadjustment
key part: support staff (together with theoperating core in the operatingadhocracy)
main design parameters: liaison devices,organic structure, selectivedecentralisation, horizontal jobspecialisation, training, functional andmarket grouping concurrently
situational factors: complex, dynamic(sometimes disparate) environment;
young (especially operating adhocracy);sophisticated and often automatedtechnical system (in the administrativeadhocracy); fashionable
Focus on innovation, cannot rely onstandardisation
Goes away from the principle of unity ofcommand
Gives power to experts, but cannot relyon their standardised skills to achievecoordination
Mutual adjustment in and betweenproject teams project coordinators, meetings, etc
Matrix structure common experts formally in functional units
project teams based on (market) needs
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Adhocracy
Features A lot of coordination needed
Managers participate in project teams
Ensuring proper management andanchoring of projects often demanding
Need to monitor and redirect projects
Distinction between line and staffbecomes unclear
Hard to split strategy formulation and
strategy implementation Strategy tends to evolve
formed implicitly by decisionsmade
strategy formation, emergentstrategy, strategising
Conditions Dynamic andcomplex environment
Interdependencies that need to behandled
Frequent product changes
Often young (esp. operatingadhocracies)
Sophisticated and sometimesautomated technical system
An element of fashion all the right words: dynamic,
expertise, projects, etc.
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Types of Adhocracy
operating adhocracy
Solves problems on behalf ofits clients think-tanks
applied R&D institutes
creative advertising companies
manufacturer of prototypes
experimenting theatre company
May easily turn into a
professional bureaucracy if morefocused and with standardisedmethods e.g. from NR to Accenture
administrative adhocracy
Solves problems, runs projects, on behalf
of itself Typically a company where the operating
core is truncated done in a separate organisation
contracted out (outsourcing)
by full automation (c.f. discussion ofmachine bureaucracy)
Tricky issue of combining efficientproduction with high degree ofinnovation machine bureaucracy with a venture team
is not an adhocracy
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SumaprojektFunctional to operational Adhocracy
Sumaprojekt is a stock company for projecting and engineering in wood processing
industry offering consultancy services.
Treating business problems in an innovative way helped company to cope its own
business reality successfully.
It is about the operative form of the adhocrative organizational configuration, because
jobs in Sumaprojekt are carried out exclusively for the clients needs.
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Problems with functional
privatization process just finished (2001)
Functional organizational design was not able to find an answer to emerged changes in
the environment.
All of this led to decrease of activities of the organization that was followed by
decrease of performances and results of business. At the same time business
environment wasradically changed.
The B&H wood processing industry became more sophisticated industry with more
demanding companiesSumaprojekts potential customers.
Some big B&H wood processing companies, the most importantSumaprojekts
customer before the war (Sipad, Sarajevo; Sana, Sanski Most; ...), were disappeared.
On the other side a lot of new companies were bornmostly SMEs companies which
were focused on more sophisticated customer, with higher degree of wood processing.
Their requirements addressed to Sumaprojekt as a consultant company in wood-
processing industry were very demanding.
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Sumaprojekt : Functional Structure
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Sumaprojekt: shift to operational
adhocracy
New organizational structure incorporates project organization in the existing functional
structure creating so-called matrix structure.
all Sumaprojects business activities were being undertaken through ac-hoc projects.
All the business activities of Sumaprojekt were carried out in the form of the project task
for which Project Manager is appointed.
Further on, Project Manager appoints members of the project team.
Board for project is lateral link (meeting) that, due to parallel and simultaneous realization of
numerous projects, manage those projects.
At the same time, parallel existence of the functional organization (static aspect) and project
organization (project managements) promotes the matrix organization as the basic
organizational form.
Multidisciplinary ad-hoc teams are basic element ofSumaprojects organizational structure.
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Sumaprojekt : Operational adhoc
Structure
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THANK YOU