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Chapter 14Nelson & Quick
Organizational Design & Structure
Copyright ©2005 by South-Western, a division of Thomson Learning. All rights reserved.
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
H. Mintzberg, The Structuring of Organizations, Prentice Hall, © 1979, 301. Reprinted by permission of Prentice-Hall, Inc, Upper Saddle River, NJ.
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 ofvertical
differentiationacross
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 &
mutual adjustmentamong people
Simple Structure - acentralized form oforganization that
emphasizes the upperechelon & direct
supervision
Machine Bureaucracy - a moderately
decentralized form oforganization thatemphasizes the technical staff &
standardization ofwork processes
Divisional Form - amoderately decentralized
form of organization that emphasizes the
middle level & standardization of outputs
ProfessionalBureaucracy -a decentralized
form oforganization thatemphasizes theoperating level
& 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 &Horizontal
Decentralization
DivisionalizedForm
Standardizationof Outputs
MiddleLevel
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
Strategy& Goals
Size
Basic Design Small Large Dimensions Organizations Organizations
FormalizationCentralization SpecializationStandardizationComplexityHierarchy of authority
LessHighLowLowLowFlat
MoreLowHighHighHighTall
Technology
Technological Interdependence - the degree of interrelatednessof the organization’s various technological elements
Relationship Between Technology and Basic Design Dimensions
Key1 Formalization 4 Standardization2 Centralization 5 Complexity3 Specialization 6 Hierarchy of Authority
Craft1. Moderate2. Moderate3. Moderate4. Low-moderate5. High6. LowRoutine1. High2. High3. Moderate4. High5. Low6. High
Nonroutine1. Low2. Low3. Low4. Low5. High6. LowEngineering1. Moderate2. Moderate3. High4. Moderate5. Moderate6. Moderate
Few Exceptions Many Exceptions
Task Variability
Ill-defined &Unanalyzable
Well-defined &Analyzable
Pro
ble
m A
nal
yzab
ilit
y
Built from C. Perrow, “A Framework for the Comparative Analysis of Organization,” American Sociological Review, April 1967, 194-208
Environment
Environment - anything outside the boundariesof an organizationTask Environment - the elements of an organization’s environment that are related toits goal attainmentEnvironmental Uncertainty - the amount and rate of changein the organization’senvironment
Extremes of Environmental Uncertainty
Mechanistic Structure - an organizational design that emphasizes structured activities, specialized tasks, and centralized decision making
Organic Structure - an organizational design that emphasizes teamwork, open communication, and decentralized decision making
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 ofStructural & 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.
Context of the organizationCorrect sizeCurrent technologyPerceived environmentCurrent strategy & goals
The Relationshipamong KeyOrganizationalDesignElements
Influences how manager perceive structural needs
Structural dimensionsLevel of formalizationLevel of centralizationLevel of specializationLevel of standardizationLevel of complexityHierarchy of authority
Which characterize the organizational processes
Which influence how well the structure meets its
PurposesDesignate formal lines of authorityDesignate formal information- processing patterns
Differentiation & Integration
Which influence how well the structure fits the
Context of the organization
Forces Reshaping Organizations
Organizational 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 Today versus Managers of the Future
Roles of Managers Today1. 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 & flexibility7. Coaching one’s workers
Management Review, January 1991, Thomas R. Horton.
HD’s Circle Organization
From R. Teerlink and L. Ozley, More than a Motorcycle: The Leadership Journey at Harley-Davidson. Boston, MA, 2000. P. 139.Copyright © 2000 by the Harvard Business School Publishing Corporation; all rights reserved.
CreateDemand
ProduceProduct
ProvideSupport
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 reachingright people in right format
No coordinating effort
Departments work against each other, not for organizational goals
Dysfunctional
Personality/Organization
Combinations
ParanoidParanoid
DramaticDramatic
CompulsiveCompulsive
SchizoidSchizoid
DepressiveDepressive