PowerPoint Presentation by Charlie Cook The University of West Alabama © 2010 South-Western,...

PowerPoint Presentation by Charlie CookThe University of West Alabama

PowerPoint Presentation by Charlie CookThe University of West Alabama

© 2010 South-Western, Cengage Learning, Inc. All rights reserved.© 2010 South-Western, Cengage Learning, Inc. All rights reserved.

© 2010 South-Western, Cengage Learning, Inc. All rights reserved. 12–2

The Nature of Organization DesignThe Nature of Organization Design

• Organization DesignOrganization Design The structural elements and the relationships among The structural elements and the relationships among

the elements used to manage the organization.the elements used to manage the organization.

A means to implement strategies and plans to A means to implement strategies and plans to achieve organizational goals.achieve organizational goals.

• Organization Design ConceptsOrganization Design Concepts Organizations are not designed and then left intact.Organizations are not designed and then left intact.

Organizations are in a continuous state of change.Organizations are in a continuous state of change.

Designs for larger organizations are extremely Designs for larger organizations are extremely complex and have many nuances and variations.complex and have many nuances and variations.


Perspectives on Organization Design Perspectives on Organization Design • Bureaucratic Model (Max Weber)Bureaucratic Model (Max Weber)

A logical, rational, and efficient organization design A logical, rational, and efficient organization design based on a legitimate and formal system of authority.based on a legitimate and formal system of authority.

Characteristics:Characteristics: A division of labor with each position filled by an expert.A division of labor with each position filled by an expert. A consistent set of rules ensuring uniformity in task A consistent set of rules ensuring uniformity in task

performance.performance. A hierarchy of positions that creates a chain of command.A hierarchy of positions that creates a chain of command. Impersonal management; with the appropriate social Impersonal management; with the appropriate social

distance between superiors and subordinates.distance between superiors and subordinates. Employment and advancement based on technical expertise, Employment and advancement based on technical expertise,

and employees protected from arbitrary dismissal.and employees protected from arbitrary dismissal.


Bureaucratic ModelBureaucratic Model

Efficiency in function

Prevention of favoritism

Recognition of and requirement for expertise

Advantages

Organizational inflexibility and rigidity

Neglect of social and human processes

Belief in “one best way” to design organizations

Disadvantages


Management Challenge QuestionManagement Challenge Question

• What characteristics of a bureaucratic structure What characteristics of a bureaucratic structure help an organization in meeting its diversity help an organization in meeting its diversity goals?goals?

• What characteristics of a bureaucratic would What characteristics of a bureaucratic would hinder an organization in meeting its diversity hinder an organization in meeting its diversity goals?goals?


SystemSystem

11

ExploitativeExploitative

AuthoritativeAuthoritative

Job-centered Job-centered leader leader

behaviorbehavior

SystemSystem

22

BenevolentBenevolent

AuthoritativeAuthoritative

SystemSystem

33

ConsultativeConsultative

SystemSystem

44

ParticipativeParticipative

Employee-Employee-centered leader centered leader

behaviorbehavior

Behavioral Model: Likert SystemBehavioral Model: Likert System

• Renesis LikertRenesis Likert Organizations that pay attention to work groups and Organizations that pay attention to work groups and

interpersonal processes are more effective than bureaucratic interpersonal processes are more effective than bureaucratic organizations.organizations.


Situational Influences on Organization Design Situational Influences on Organization Design

EnvironmentTechnology

Organizational Life Cycle

OrganizationDesign

Size


Organization Design and TechnologyOrganization Design and Technology• Core TechnologyCore Technology

Is the conversion processes used to transform inputs Is the conversion processes used to transform inputs into outputs.into outputs.

Is an organization’s most important technology.Is an organization’s most important technology.

• Joan WoodwardJoan Woodward Initially sought a correlation between organization Initially sought a correlation between organization

size and design; instead, she found a potential size and design; instead, she found a potential relationship between technology and design:relationship between technology and design: As the complexity of technology increases, so do the number As the complexity of technology increases, so do the number

of levels of management.of levels of management.


Core Technology and Organization DesignCore Technology and Organization Design

Unit or small-batch technology

Large batch/mass production

Continuous process

Woodward’s Basic Forms of Technology


Situational Influences on Organization Design (cont’d)Situational Influences on Organization Design (cont’d)

• Burns and StalkerBurns and Stalker Forms of the organizational environmentForms of the organizational environment

Stable environments that remain constant over time.Stable environments that remain constant over time. Unstable environments subject to uncertainty and rapid Unstable environments subject to uncertainty and rapid

change.change.

Organization DesignsOrganization Designs Mechanistic organizationsMechanistic organizations are similar to bureaucratic or are similar to bureaucratic or

System 1 models; found most frequently in stable System 1 models; found most frequently in stable environments.environments.

Organic organizationsOrganic organizations are flexible and informal models; are flexible and informal models; usually found in unstable and unpredictable environments.usually found in unstable and unpredictable environments.



• Lawrence and LorschLawrence and Lorsch DifferentiationDifferentiation

The extent to which the organization is broken down into The extent to which the organization is broken down into subunits.subunits.

IntegrationIntegration The degree to which the various subunits must work together The degree to which the various subunits must work together

in a coordinated fashion.in a coordinated fashion.



• Organizational SizeOrganizational Size Defined as the total number of full-time or full-time Defined as the total number of full-time or full-time

equivalent employeesequivalent employees Research findings:Research findings:

Small firms tend to focus on their core technology.Small firms tend to focus on their core technology. Large firms have more job specialization, standard operating Large firms have more job specialization, standard operating

procedures, rules and regulations, and are more procedures, rules and regulations, and are more decentralized.decentralized.

• Organizational Life CycleOrganizational Life Cycle Organizations progressively evolve as they grow and Organizations progressively evolve as they grow and

mature—birth, youth, midlife, and maturity.mature—birth, youth, midlife, and maturity.


Strategy and Organization DesignStrategy and Organization Design

• Corporate-Level StrategiesCorporate-Level Strategies Single-product strategySingle-product strategy Related or unrelated diversificationRelated or unrelated diversification Portfolio approach to managing strategic business Portfolio approach to managing strategic business

unitsunits

• Organizational FunctionsOrganizational Functions Major functions of the Major functions of the

organization can influence organization can influence an organization’s design.an organization’s design.


Organizational StrategiesOrganizational Strategies

Defender

Prospecting

Analyzer

Business-Level Strategies

Differentiation

Cost Leadership

Focus

Generic Competitive Strategies


Basic Organization DesignsBasic Organization Designs

• Functional or U-form (Unitary) DesignFunctional or U-form (Unitary) Design Organizational members and units are grouped into Organizational members and units are grouped into

functional departments such as marketing and functional departments such as marketing and production.production.

Coordination is required across all departments.Coordination is required across all departments.

Design approach resembles functional Design approach resembles functional departmentalization in its advantages and departmentalization in its advantages and disadvantages.disadvantages.


12.1 Functional or U-form Design for a Small Manufacturing Company


Basic Organization Designs (cont’d)Basic Organization Designs (cont’d)

• Conglomerate or H-form (Holding) DesignConglomerate or H-form (Holding) Design Organization is a set of unrelated businesses with a Organization is a set of unrelated businesses with a

general manager for each business.general manager for each business.

Holding-company design is similar to product Holding-company design is similar to product departmentalization.departmentalization.

Coordination is based on the allocation of resources Coordination is based on the allocation of resources across companies in the portfolio.across companies in the portfolio.

Design has produced only average to weak financial Design has produced only average to weak financial performance; has been abandoned for other performance; has been abandoned for other approaches.approaches.


12.2 Conglomerate (H-form) Design at Samsung

Semiconductors Telecommunications Appliances Media

CEO



• Divisional or M-form (Multidivisional) DesignDivisional or M-form (Multidivisional) Design Multiple businesses in related areas operating Multiple businesses in related areas operating

within a larger organizational framework.within a larger organizational framework.

Results from a strategy of related diversification.Results from a strategy of related diversification.

Activities are decentralized down to the divisional Activities are decentralized down to the divisional level; others are centralized at the corporate level.level; others are centralized at the corporate level.

Design advantage is in opportunities for coordination Design advantage is in opportunities for coordination and sharing of resources.and sharing of resources.

Successful M-form organizations can out perform Successful M-form organizations can out perform U-form and H-form organizations.U-form and H-form organizations.


12.3 Multidivisional (M-form) Design at Limited Brands



• Matrix DesignMatrix Design Two overlapping bases of departmentalization:Two overlapping bases of departmentalization:

A set of product groups or temporary departments are A set of product groups or temporary departments are superimposed across the functional departments.superimposed across the functional departments.

Employees in the matrix belong to their departments Employees in the matrix belong to their departments and the project team:and the project team: A multiple command structure in which an employee reports A multiple command structure in which an employee reports

to both departmental and project managers.to both departmental and project managers.

A matrix design is useful when:A matrix design is useful when: There is strong environmental pressure.There is strong environmental pressure. There are large amounts of information to be processed.There are large amounts of information to be processed. There is pressure for shared resources.There is pressure for shared resources.


12.4 A Matrix Organization


Matrix Design AdvantagesMatrix Design Advantages

• Enhances organizational flexibility.Enhances organizational flexibility.

• Creates high motivation and increased organizational Creates high motivation and increased organizational commitment for team members.commitment for team members.

• Gives team members opportunity to learn new skills.Gives team members opportunity to learn new skills.

• Provides an efficient way for the organization to use its Provides an efficient way for the organization to use its human resources.human resources.

• Uses team members as bridges to their departments for Uses team members as bridges to their departments for the team.the team.

• Useful as a vehicle for decentralization.Useful as a vehicle for decentralization.


Matrix Design DisadvantagesMatrix Design Disadvantages

• Employees are uncertain about reporting relationships.Employees are uncertain about reporting relationships.

• Managers may view design as an anarchy in which they Managers may view design as an anarchy in which they have unlimited freedom.have unlimited freedom.

• The dynamics of group behavior may lead to slower The dynamics of group behavior may lead to slower decision making, one-person domination, compromise decision making, one-person domination, compromise decisions, or a loss of focus.decisions, or a loss of focus.

• More time may be required for coordinating task-related More time may be required for coordinating task-related activities.activities.



• Hybrid DesignsHybrid Designs

Based on two or more common forms of organization Based on two or more common forms of organization design—may have a mixture of related divisions and design—may have a mixture of related divisions and a single unrelated division.a single unrelated division.

Most organizations use a modified form of Most organizations use a modified form of organization design that permits them to have organization design that permits them to have sufficient flexibility to make adjustments for strategic sufficient flexibility to make adjustments for strategic purposes.purposes.


The Future of Organization DesignThe Future of Organization Design

Team-based organizations

Virtual organizations

Learning organizations

EmergingOrganization Design

Issues

International/global organizations


International Organization Design IssuesInternational Organization Design Issues

Establish an international operating group?

Make international operations an autonomous subunit?

Create an international division?

Competing Effectivelyin Global Markets


12.5a Common Organization Designs for International Organizations

A. Separate InternationalDivision

CEO

Production Marketing FinanceInternationaldivision

B. Location Departmentalization

NorthAmericanoperations

Europeanoperations

Asianoperations

CEO


12.5b Common Organization Designs for International Organizations

C. Product Departmentalization

ProductManager A

CEO

ProductManager B

ProductManager C

AsiaNorthAmerica

Europe

D. Multidivisional Structure

CEO

Subsidiary A(Germany)

Subsidiary C(France)

Subsidiary E(China)

Subsidiary D(Japan)

Subsidiary B

(U.S.)

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