Organizational Design and Change

irst most important thing to know about

Organizational Design

“…there is no best structure available anywhere. There are no good or bad structures. There are only structures that match or do not match with the requirements of a strategy…”

The purpose of the organizational design is to create the right structure, that fits the requirements of the strategy to be implemented.

Organizational change is meant to modify existing structures that have gone wrong over a period of time and no longer fit the requirements of the strategy being implemented.

Organization DesignDimensions

1. Structural Dimensions “…describe the internal characteristics of an organization…”

2. Contextual Dimensions

“…describes the organizational setting that influence and shapes the structural dimensions…”

sub-dimensions of Structural Dimensioni. Formalization is the amount of written documentation, including procedures, job

descriptions, regulations and policy manuals.ii. Specialization is the degree to which organizational tasks are subdivided into

separate jobs.iii. Hierarchy of authority describes who reports to whom and the span of control for

each manager. Span of control is the number of subordinates reporting to superior.iv. Centralization is the extent to which decision-making is done by the top

management. Decentralization is the extent to which authority to make decision is delegated to lower levels of management.

v. Professionalism is the level of formal education and training of employees.vi. Personnel Ratios refer to deployment of people to various functions and

departments. There could be administrative ratio, clerical ratio or ratio of indirect to direct labor employees.

sub-dimensions of Contextual Dimensionvii. Environmentviii. Goals and Strategyix. Culturex. Technologyxi. Size

Steps to development of an organizational design

1. Identification of key activities necessary to be performed for the achievement of objectives and realization of mission through the formulated strategy.

2. Grouping of activities that are similar in nature and need a common set of skills to be performed.

3. Choice of structure that could accommodate the different group activities.

4. Creation of departments, divisions, etc. to which the group of activities could be assigned.

5. Establishing interrelationship between different departments for the purpose coordination and communication.

Organizational Change

Change, rather than stability, is the norm in contemporary organizations in India and the world.

Organizational change is the one major area where change is effected within organizations; the others being technology, products and services and culture.

Organizational change takes place along two broad dimensions: the structural changes and the accompanying behavioral changes.

Structural changes are related to modifications in structural relationships or creation or disbandment of departments or managerial positions.

The second type of change relates to the concomitant behavioral modifications, that are essential to absorb the impact of organizational changes.

In the past, when the environment was relatively stable , managers were content with making small, incremental, continual changes to resolve problems as they occurred. The perspective of the past may not be suitable in current environment that often requires big, radical and sudden changes.

Traditional organizational design characteristics Emerging organizational design characteristics

Vertical communication patterns Horizontal communication patter

Centralized top-down decision-making Decentralized participative decision-making

Vertical integration Horizontal integration

Functional work teams Cross functional work teams

Minimum training Extensive training

Individual-focused specialized job design Value-chain team-focused job design

Organizational design for attaining Cost leadership Organizational design for attaining differentiation

Efficiency orientation Learning orientation

Strong central authority Flexible, loosely-knit organization

Tight cost control and detailed control reports stress on horizontal coordination that vertical control

Highly efficient procurement and distribution system

Lots of leeway for employees to be creative and innovative

Close supervision Rewards for risk-taking

Limited or no employee empowerment Liberal amount of employee empowerment

Structure for Business Strategies CEO

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CEO

R&D Mkt

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Structure for Corporate Strategies of integration, diversification, internationalization, cooperation, digitalization and retrenchment

Structures for Diversification strategy

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Diversification

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Legal PR

Corporate HRM

Corporate Marketing

Corporate Operations

Corporate Finance

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Corporate PR

Corporate Finance

DivisionB

DivisionC

DivisionD

DivisionA

Structures for Diversification strategy

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Diversification

Structure for Corporate Strategies of integration, diversification, internationalization, cooperation, digitalization and retrenchment

Structure for internationalization strategies

Global Strategy

Global ProductStructure

Transnational Strategy

Global MatrixStructure

International Strategy

International Division Structure

Multidomestic Strategy

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Pressure for local responsiveness

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International Strategy: International Division Structure

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Finance HRM Marketing Operations InternationalDivision

Global Strategy : Global Product Structure

Multidomestic Strategies

Global Geographic Structure

CEO

COO

Corporate Staff

Region A

Region B

Region C

Region D

Transnational Strategies

Global MatrixStructure

CEO

Region A Region B Region C Region D

SBU 2

SBU 3

SBU 4

SBU 1

ORGANIZATIONAL DESIGN AND CHANGE

Design Changed &

Corrupted by:

Ankur Chandel

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