Organisational Structure 2

7/30/2019 Organisational Structure 2

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OB Model developed by Margie Parikh

Understanding Individuals

in organisationsPerception/Attitude/Motivation/personaity

Understanding groups

in organisationsThresholds ofinterpersonbehaviour/understanding groups andteams/communication/Conflict,stress andnegotiation/decisionmaking/power andpolitics

Understanding howorganisations shape

behaviourOrganisational design/Organisationalstructure/Organisational roles/organisationalculture

Effectivenessthroughmanaging andleading humanbehaviour at

work

Individual effectiveness

Effectiveness of groupRelationships

Effectiveness ofOrganisational roles

Groupeffectiveness

Organisationaleffectiveness

Effectiveness of systems

and process Prof. Mary Bodra.


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ORGANIZATIONAL STRUCTURES

The key is to match structures to goals


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Organizational Structures

Organizational structure is the way in which

the interrelated groups of an organization are

constructed.

The main concerns are effective

communication and coordination

Prof. Mary Bodra.


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Organizational Structures

Several aspects determine the organizationalstructure

DETERMINANTS OF ORGANIZATIONAL

STRUCTURE

Strategy

Technology

Size

Environment Differentiation-Integration

Power and Control-Chain and span of control

Prof. Mary Bodra.


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Contingency Factors

Structural decisions are influenced by: Overall strategy of the organization

Organizational structure follows strategy.

Size of the organization

Firms change from organic to mechanistic organizationsas they grow in size.

Technology use by the organization

Firms adapt their structure to the technology they use.

Degree of environmental uncertainty Dynamic environments require organic structures;

mechanistic structures need stable environments.

Prof. Mary Bodra.


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Contingency Factors

Strategy Frameworks: Innovation

Pursuing competitive advantage through meaningful and

unique innovations favors an organic structuring.

Cost minimization Focusing on tightly controlling costs requires a

mechanistic structure for the organization.

Imitation

Minimizing risks and maximizing profitability by copyingmarket leaders requires both organic and mechanistic

elements in the organizations structure.

Prof. Mary Bodra.


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Contingency Factors

Strategy and Structure

Achievement of strategic goals is facilitated by changes

in organizational structure that accommodate andsupport change.

Size and Structure

As an organization grows larger, its structure tends to

change from organic to mechanistic with increased

specialization, departmentalization, centralization, andrules and regulations.

Prof. Mary Bodra.


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Contingency Factors

Technology and Structure Organizations adapt their structures to their technology.

Woodwards classification of firms based on the complexity

of the technology employed:

Unit production of single units or small batches

Mass production of large batches of output

Process production in continuous process of outputs

Routine technology = mechanistic organizations

Non-routine technology = organic organizations

Prof. Mary Bodra.


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Woodwards Findings on Technology, Structure,

and Effectiveness

Prof. Mary Bodra.


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Contingency Factors

Environmental Uncertainty and Structure

Mechanistic organizational structures tend to be

most effective in stable and simple environments.

The flexibility of organic organizational structures

is better suited for dynamic and complex

environments.

Prof. Mary Bodra.


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Strategy and Goals of Organisation

Strategy and goals are closely linked

Strategy of the firm starts with selecting some

goals over others

Prof. Mary Bodra.


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What is Strategy ?

Strategy is the process of positioning theorganisation in the competitive environment and

implementing actions to complete successfully

Prof. Mary Bodra.


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What are the different types of

organizational goals?

Societal goals

Reflect an organizations intended contributions to the

broader society

By contributing to the larger society organizations gain

legitimacy-a social right to operate

By claiming to provide specific types of societalcontributions an organisation can claims over

resources, individuals, markets, and products

Example Tobacco firm(heavily taxed social contribution

highly questionable)

Prof. Mary Bodra.


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organizational goals? Mission statement

Often a social contribution of the firm is a part of

its mission statement A written statement of organizational purpose

A good mission statement identifies whom thefirm will serve and how it will go about

accomplishing its societal purpose A mission statement is often the first visible

outcome in developing a strategy

Prof. Mary Bodra.


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organizational goals? Output goals

Define the type of business the organization is

pursuing Provide some substance to the more general

aspects of mission statements

Example for a bank the out goals will be retail

banking ,commercial banking ,investmentadvisory services and electronic payment

processing

Prof. Mary Bodra.


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organizational goals? Systems goals

Concerned with the conditions within the organization that

are expected to increase the organizations survival

potential Typical systems goals include growth, productivity, stability,

harmony, flexibility, prestige, and human resource

maintenance

System goals provide a road map that helps them link

together various units of their organisation to assure

survival

Prof. Mary Bodra.


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organizational goals? Well-defined systems goals can:

Focus managers attention on what needs to be

done Provide flexibility in devising ways to meet

important targets

Be used to balance the demands, constraints, and

opportunities facing the firm Form a basis for dividing the work of the firm-

basis for developing a formal structure

Prof. Mary Bodra.


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Defining Organizational

Structure Successful organizations develop a structure

consistent with the pattern of goals

established by senior management

The formal structure shows the planned

configuration of positions, job duties, and the

lines of authority among different parts of theorganization

Prof. Mary Bodra.


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Defining Organizational Structure

Organizational Structure

The formal arrangement of jobs within anorganization.

Organizational Design

A process involving decisions about six key elements: Work specialization

Departmentalization

Chain of command

Span of control

Centralization and decentralization

Formalization

Prof. Mary Bodra.


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Organizational Structure Work Specialization

The degree to which tasks in the organization aredivided into separate jobs with each step completedby a different person.

Overspecialization can result in humandiseconomies from boredom, fatigue, stress, poorquality, increased absenteeism, and higher turnover.

Prof. Mary Bodra.


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Departmentalization by Type

Functional

Grouping jobs by functions

performed

Product Grouping jobs by product

line

Geographical

Grouping jobs on the basis

of territory or geography

Process

Grouping jobs on the basis

of product or customer flow

Customer Grouping jobs by type of

customer and needs

Prof. Mary Bodra.


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Exhibit 102 Functional Departmentalization

Advantages

Efficiencies from putting together similar specialties and

people with common skills, knowledge, and orientations

Coordination within functional area

In-depth specialization

Disadvantages

Poor communication across functional areas

Limited view of organizational goals

Prof. Mary Bodra.


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Prof. Mary Bodra.


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Product Departmentalization

+ Allows specialization in particular products and services

+ Managers can become experts in their industry+ Closer to customers

Duplication of functions

Limited view of organizational goals

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Geographical Departmentalization

Advantages

More effective and efficient handling of specific

regional issues that arise

Serve needs of unique geographic markets better

Disadvantages

Duplication of functions

Can feel isolated from other organizational areas

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Process Departmentalization

+ More efficient flow of work activities

Can only be used with certain types of products

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Customer Departmentalization

+ Customers needs and problems can be met by specialists

- Duplication of functions

- Limited view of organizational goals

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Organization Structure

Chain of command A listing of who reports to whom up and down the

organization

Unity of command Each person has only one boss and each unit one

leader

Span of control The number individuals reporting to a supervisor

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Span of Control The number of employees who can be effectively and

efficiently supervised by a manager.

Width of span is affected by:

Skills and abilities of the manager

Employee characteristics

Characteristics of the work being done

Similarity of tasks

Complexity of tasks

Physical proximity of subordinates

Standardization of tasks

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Exhibit 103 Contrasting Spans of Control

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Centralization The degree to which decision-making is concentrated at a

single point in the organizations.

Organizations in which top managers make all the

decisions and lower-level employees simply carry out

those orders.

Decentralization

Organizations in which decision-making is pushed down to

the managers who are closest to the action.

Employee Empowerment Increasing the decision-making authority (power) of

employees.

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Factors that Influence the Amount of Centralization

More CentralizationMore Centralization

Environment is stable.Environment is stable.

LowerLower--level managers are not as capable or experienced atlevel managers are not as capable or experienced atmaking decisions as uppermaking decisions as upper--level managers.level managers.

LowerLower--level managers do not want to have a say in decisions.level managers do not want to have a say in decisions. Decisions are relatively minor.Decisions are relatively minor.

Organization is facing a crisis or the risk of company failure.Organization is facing a crisis or the risk of company failure.

Company is large.Company is large.

Effective implementation of company strategies depends onEffective implementation of company strategies depends onmanagers retaining say over what happens.managers retaining say over what happens.

Prof. Mary Bodra.


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Factors that Influence the Amount of Centralization

More DecentralizationMore Decentralization

Environment is complex, uncertain.Environment is complex, uncertain.

LowerLower--level managers are capable and experienced at makinglevel managers are capable and experienced at makingdecisions.decisions.

LowerLower--level managers want a voice in decisions.level managers want a voice in decisions.

Decisions are significant.Decisions are significant.

Corporate culture is open to allowing managers to have a say inCorporate culture is open to allowing managers to have a say inwhat happens.what happens.

Company is geographically dispersed.Company is geographically dispersed.

Effective implementation of company strategies depends onEffective implementation of company strategies depends onmanagers having involvement and flexibility to make decisions.managers having involvement and flexibility to make decisions.

Prof. Mary Bodra.


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Benefits of decentralization

Higher subordinate satisfaction

Quicker response to a series of unrelatedproblems

Assists in on-the-job training of subordinates for

higher-level positions

Encourages participation in decision making

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Formalization

The written documentation of policies, procedures, and

rules to guide behavior and decision making

Standardization

The degree to which the range of allowable actions in a

job or series of jobs is limited so that actions areperformed in a uniform manner

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What are bureaucracies and what

are the common forms? Bureaucracy

Form of organization that emphasizes legal

authority, logic, and order

Relies on a division of labor, hierarchical control,promotion by merit with career opportunities for

employees, and administration by rule

Prof. Mary Bodra.


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are the common forms? Mechanistic type

Emphasizes vertical specialization and control

Stresses rules, policies, and procedures; specifiestechniques for decision making; and use well-documented control systems

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are the common forms? Benefits of the mechanistic type

Efficiency.

Limitations of the mechanistic type Employees dislike rigid designs, which makes work

motivation problematic

Unions may further solidify rigid designs.

Key employees may leave

Hinders organizations capacity to adjust to subtle

environmental changes or new technologies

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are the common forms? Organic type

Emphasizes horizontal specialization

Procedures are minimal, and those that do existare not highly formalized

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are the common forms? Benefits of the organic type

Good for problem solving and serving individual

customer needs

Centralized direction by senior management isless intense

Good at detecting external changes and adjustingto new technologies

Prof. Mary Bodra.


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are the common forms? Limitations of the organic type

Less efficient than mechanistic type

Restricted capacity to respond to centralmanagement direction

Prof. Mary Bodra.


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Organizational Design

Decisions Mechanistic Organization

A rigid and tightly controlled

structure

High specialization

Rigid departmentalization

Narrow spans of control

High formalization

Limited information network

(downward) Low decision participation

Organic Organization

Highly flexible and adaptablestructure

Non-standardized jobs Fluid team-based structure

Little direct supervision

Minimal formal rules

Open communication network

Empowered employees

Prof. Mary Bodra.


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Mechanistic versus Organic Organization

High specialization

Rigid departmentalization

Clear chain of command

Narrow spans of control

Centralization

High formalization

Cross-functional teams

Cross-hierarchical teams

Free flow of information

Wide spans of control

Decentralization

Low formalization

Prof. Mary Bodra.


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Divisional departments

individual and departments are grouped by

products, territories, services, clients, or legalentities

Prof. Mary Bodra.


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Prof. Mary Bodra.


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Matrix departmentation

uses both the functional and divisional forms

simultaneously

Prof. Mary Bodra.


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Prof. Mary Bodra.


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What are the hierarchical

attributes of organizations? Control

The set of mechanisms used to keep actions or

outputs within predetermined limits

Deals with:

Setting standards

Measuring results against standards

Instituting corrective action

Prof. Mary Bodra.


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attributes of organizations? Output controls

Focus on desired targets and allow managers to

use their own methods to reach defined targets

Part of overall method of managing by exception

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attributes of organizations? Process controls

Attempt to specify the manner in which tasks are

accomplished

Types of process controls

Policies, procedures, and rules

Formalization and standardization

Total quality management controls

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attributes of organizations? Policy

Guideline for action that outlines important

objectives and broadly indicates how activities areto be carried out

Procedures

Indicate the best method for performing a task,

show which aspects of a task are most important,or outline how an individual is to be rewarded

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attributes of organizations? Rules

Describe in detail how a task or a series of tasks is

to be performed, or indicate what cannot be done

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attributes of organizations? Total Quality Management

process approach to continual improvement

based on statistical analyses of the firmsoperations

Late W.Edwards Demings modern day founder of

the TQM movement

Demings 14 points

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Strengths and Weaknesses of Traditional

Organizational Designs

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How is work organized and

coordinated? Coordination

The set of mechanisms that an organization uses

to link the actions of its units into a consistentpattern

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coordinated? Personal methods of coordination

Produce synergy by promoting dialogue,

discussion, innovation, creativity, and learning,both within and across units

Common personal methods of coordination are

direct contact between and among organizational

members and committee memberships

Prof. Mary Bodra.


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coordinated? Impersonal methods of coordination

Produce synergy by stressing consistency and

standardization so that individual pieces fittogether

Contemporary use of matrix departmentation and

management information systems for

coordination

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Contemporary Organizational Designs

Team StructureTeam Structure

What it is:What it is: A structure in which the entire organization is made up ofA structure in which the entire organization is made up ofwork groups or teams.work groups or teams.

Advantages:Advantages: Employees are more involved and empowered. ReducedEmployees are more involved and empowered. Reducedbarriers among functional areas.barriers among functional areas.

Disadvantages:Disadvantages: No clear chain of command. Pressure on teams to perform.No clear chain of command. Pressure on teams to perform.

MatrixMatrix--Project StructureProject Structure

What it is:What it is: A structure that assigns specialists from different functionalA structure that assigns specialists from different functionalareas to work on projects but who return to their areas whenareas to work on projects but who return to their areas whenthe project is completed. Project is a structure in whichthe project is completed. Project is a structure in whichemployees continuously work on projects. As one project isemployees continuously work on projects. As one project iscompleted, employees move on to the next project.completed, employees move on to the next project.

Advantages:Advantages: Fluid and flexible design that can respond to environmentalFluid and flexible design that can respond to environmentalchanges. Faster decision making.changes. Faster decision making.

Disadvantages:Disadvantages: Complexity of assigning people to projects. Task andComplexity of assigning people to projects. Task andpersonality conflicts.personality conflicts.

Prof. Mary Bodra.


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(contd) Contemporary Organizational Designs

Boundaryless StructureBoundaryless Structure

What it is:What it is: A structure that is not defined by or limited to artificialA structure that is not defined by or limited to artificialhorizontal, vertical, or external boundaries; includes virtualhorizontal, vertical, or external boundaries; includes virtualand network types of organizations.and network types of organizations.

Advantages:Advantages: Highly flexible and responsive. Draws on talent wherever it sHighly flexible and responsive. Draws on talent wherever it sfound..found..

Disadvantages:Disadvantages: Lack of control. Communication difficulties..Lack of control. Communication difficulties..

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New Design options

Contemporary Organizational Designs Team structures

The entire organization is made up of work groups or self-managed teams of empowered employees.

Matrix and project structures

Specialists from different functional departments areassigned to work on projects led by project managers.

Matrix and project participants have two managers.

In project structures, employees work continuously onprojects; moving on to another project as each project iscompleted.

Prof. Mary Bodra.


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Organizational Designs Contemporary Organizational Designs (contd)

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 structuresto get closer to stakeholders.

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Removing External Boundaries

Virtual Organization

An organization that consists of a small core of full-time

employees and that temporarily hires specialists to work on

opportunities that arise. Network Organization

A small core organization that outsources its major business

functions (e.g., manufacturing) in order to concentrate what it

does best.

Modular Organization

A manufacturing organization that uses outside suppliers toprovide product components for its final assembly operations.

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Todays Organizational Design

Challenges Keeping Employees Connected

Widely dispersed and mobile employees

Building a Learning Organization

Managing Global Structural Issues

Cultural implications of design elements

Prof. Mary Bodra.

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Organizational Designs

The Learning Organization

An organization that has developed the capacity tocontinuously learn, adapt, and change through the

practice of knowledge management by employees.

Characteristics of a learning organization:

An open team-based organization design that empowersemployees

Extensive and open information sharing

Leadership that provides a shared vision of the

organizations future, support and encouragement

A strong culture of shared values, trust, openness, and a

sense of community.

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Common types of hybrid structures

Divisional firm

Composed of quasi-independent divisions so that

different divisions can be more or less organic or

mechanistic

Conglomerate

A single corporation that contains a number of

unrelated businesses

Prof Mary Bodra

Organisational Structure 2

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