MultiMedia by Stephen M. Peters © 2002 South-Western

Organizational Design

MultiMedia by Stephen M. Peters © 2002 South-Western

OrganizationsCommon Elements

Operate with authority

Have departments

Use line and staff positions

MultiMedia by Stephen M. Peters © 2002 South-Western

Organizational Design Objectives

Respond to change

Integrate new

elements

Encourage flexibility

Coordinate the

components

MultiMedia by Stephen M. Peters © 2002 South-Western

Mechanistic Structure is Characterized By

Rigidly defined tasks

Formalization

Rules and regulations

Centralized decision making

Emphasis on control from top levels down

Vertical communication

MultiMedia by Stephen M. Peters © 2002 South-Western

Mechanistic versus Organic Structures

MultiMedia by Stephen M. Peters © 2002 South-Western

Organic Structure

1. Free flowing.2. Has few rules and regulations.3. Decentralizes decision making.4. Referred to as the horizontal structure.5. Allows changes to be made rapidly as the needs require.6. Frequently redefines tasks to fit employee and environmental needs.

MultiMedia by Stephen M. Peters © 2002 South-Western

Contingency Factors

MultiMedia by Stephen M. Peters © 2002 South-Western

Influence of Strategy on Structure

MultiMedia by Stephen M. Peters © 2002 South-Western

Uncertain Environment Calls For

— Organic structure that emphasizes:

• coordination

• less formal procedures

• flexibility

MultiMedia by Stephen M. Peters © 2002 South-Western

Small Organizations

Little divisionof labor

Few rules and regulations

Informal performance appraisals

Informal budget development procedures

MultiMedia by Stephen M. Peters © 2002 South-Western

Large Organizations

Mechanistic Greater division of labor

More elaborate internal systems

More rules and regulations

MultiMedia by Stephen M. Peters © 2002 South-Western

Organizational Life Cycle and Structural Characteristics

MultiMedia by Stephen M. Peters © 2002 South-Western

Producing Goods in Small Quantities

Unit production technology

Small batch technology

MultiMedia by Stephen M. Peters © 2002 South-Western

Large Volume of Standardized Products Technology

Large batch technology

Mass production technology

MultiMedia by Stephen M. Peters © 2002 South-Western

MultiMedia by Stephen M. Peters © 2002 South-Western

Functional Structure• Groups positions into departments based on similar skills,

expertise, and resources.Advantages– Economics of scale– Minimizes duplication of personnel and equipment– Simplifies trainingDisadvantages– Employees may have little understanding of and concern for

the specialty areas outside their own functional area– Barriers in communication, cooperation, and coordination– Functional structure response time to changes may be slow

MultiMedia by Stephen M. Peters © 2002 South-Western

Divisional Structure

Groups departments based on organizational outputs.

Self-contained strategic business units.

Creates a set of autonomous mini-companies.

MultiMedia by Stephen M. Peters © 2002 South-Western

Divisional Structure

Advantages– Focuses the attention of employees and managers on

results for the product, the customer, or the geographical area.

– Flexible and responsive to change.– Singleness of purpose.– Responsibility and accountability for performance

are easier to target.

MultiMedia by Stephen M. Peters © 2002 South-Western

Divisional Structure

Disadvantages– Duplication of activities and resources.– Loses efficiency and economies of scale.– Lack of technical specialization, expertise, and

training can result.– Coordination may suffer.

MultiMedia by Stephen M. Peters © 2002 South-Western

Matrix Structure

Combines the advantages of functional specialization with the focus and accountability of the divisional

structure.

Employs dual lines of authority.

MultiMedia by Stephen M. Peters © 2002 South-Western

Matrix Design Used in One ofTwo Situations

First, it is used when a firm offers a diverse set of products, has a complex environment, and requires functional expertise.

Second, it is used when managers want to maximize economies of scale and shared resources.

MultiMedia by Stephen M. Peters © 2002 South-Western

Team StructureAdvantages—Breaks down barriers across departments.—Speeds up decision making and response time.—Employees are strongly motivated.—Improvement over the matrix structure.

Disadvantages—Depends on employees who learn and train for

success.—A large amount of time may be required for team

meetings.

MultiMedia by Stephen M. Peters © 2002 South-Western

Network Structure Known as “Dynamic Network”

• A small central organization relies on other organizations to perform critical functions on a contract basis.Advantages– Provides flexibility.– Overhead remains low.Disadvantages– Lack of control.