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Organizational Design and Structure
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
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 of
vertical differentiation
across 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 and
mutual adjustmentamong people
Simple Structure – acentralized form oforganization that
emphasizes the upperechelon and direct
supervision
Machine Bureaucracy – a moderately
decentralized form oforganization thatemphasizes the
technical staff andstandardization ofwork processes
Divisional Form – amoderately decentralized
form of organization that emphasizes the
middle level and standardization of outputs
ProfessionalBureaucracy –a decentralized
form oforganization thatemphasizes theoperating level
and 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 andHorizontal
DecentralizationDivisionalized
FormStandardization
of OutputsMiddleLevel
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
Strategyand Goals
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 of
Structural & 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.
Strategyand Goals
Context of the organizationCorrect sizeCurrent technologyPerceived environmentCurrent strategy and goals
The Relationship among Key Organizational Design Elements
Structural dimensionsLevel of formalizationLevel of centralizationLevel of specializationLevel of standardizationLevel of complexityHierarchy of authority
Influences how manager perceive structural needs
Which characterize the organizational processes
Context of the organization
PurposesDesignate formal lines of authorityDesignate formal information- processing patterns
Differentiation and Integration
Which influence how well the structure meets its
Which influence how well the structure fits the
Forces Reshaping Organizations
• Organization 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
Roles of Managers Today
1. 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 and flexibility7. Coaching one’s workers
Management Review, January 1991, Thomas R. Horton.
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 reaching right people in right format
No coordinating effort
Departments work against each other, not for organizational goals
Group Activity
• Design an organizational structure for a startup departmental store
• Make the necessary realistic assumptions