Introduction to Organization Design and Dynamics

Major Stakeholder Groups and What They Expect

3

•Difference between Individual and Group Dynamics and Organizational Design

Levels in the Study of OB

4

OD vs OB• Organizational Dynamics

• Macro

• Behavior of organization

• Organization’s ability to learn, adapt and achieve its goals

• Individual and Group Dynamics • Micro

• Behavior in organization

• Individual and small groups

• Employee productivity, absenteeism, turnover, job satisfaction

• Learning motivation personality

• Role status, leadership, power, communication, interpersonal conflict

5

Reasons of Organizational Failure

6

• Failure to respond to external elements

• Inappropriate Strategy and Structure

• Inability to achieve internal efficiency

• Slow decision making

• Negative use of power and politics

• ethical lapses

• outmoded corporate culture

• Inability to manage internal conflicts

• Inability to change and innovate

7

What is an Organization?

Social entities that are goal-directed

Designed as deliberately structured and coordinated activity systems

Linked to the external environment

Includes large multinational corporations, family owned businesses as well as nonprofits

Interacting Structural Dimensions of Design and Contingency Factors

• Two sets of factors merge into interactive systems, that the design parameters “cause” the so called

contingency factors just as much of the contingency factors influence the choice of design parameters

Environment

• Environment: the set of forces surrounding an organization that have the potential to affect the way it operates and its access to scarce resources

Two ways environment influences organizations

The Need for information about the environment

The need for resources from the environment

(a) Competitors, industry size and

competitiveness, related issues

(b) Suppliers,

manufacturers, real

estate, services

(c) Labor market,

employment agencies,

universities, training

schools, employees

in other companies,

unionization

(d) Stock markets,

banks, savings and

loans, private

investors

(e) Customers, clients,

potential users of products

and services

(f) Techniques of production, science,

computers, information technology

(g) Recession, unemployment rate,

inflation rate, rate of investment,

economics, growth

(h) City, state laws

and regulations, taxes,

services, court system,

political processes

(i) Age, values, beliefs,

education, religion,

work ethic, consumer

and green

movements

(j) Competition from

and acquisition by

foreign firms,

entry into overseas

markets, foreign

customs, regulations,

exchange rates

An Organization’s Environment

(j)

International

Sector

(d)

Financial

Resources

Sector

(e)

Market

Sector

(f)

Technology

Sector

(g)

Economic

Conditions

Sector

(a)

Industry

Sector

(h)

Government

Sector

(c)

Human

Resources

Sector

(b)

Raw Materials

Sector

(i)

Sociocultural

Sector

ORGANIZATION

DOMAIN

Goal and Strategy

• Goal –Company intent

• Strategy –a plan of action that describes resource allocation and activities for dealing with the organization and for reaching the organization’s goals

• Low Cost• Differentiation

• Organizational culture: the set of shared values and norms that controls organizational members’ interactions with each other and with people outside the organization

Culture

• Refers to the tools, techniques, and actions used to produce the organization’s products or services

Technology

Differences Between Large and Small Organizations

organization's magnitude as reflected in the number of people in the organization

Organization Size: Is Bigger Better?

Pressures for Growth• Companies in all industries strive for growth to acquire the

size and resources needed to compete globally• Size enables companies to take risks

Dilemmas of Large Size• Large organizations are able to get back to business more

quickly following a disaster• Large companies are standardized, mechanistic, and

complex• Small companies are flexible and can be responsive• Many companies aim to have a big company/small-

company hybrid

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Structural Dimensions

• Formalization• Specialization

• Horizontal specialization –number of task and breadth of it• Vertical specialization – control of these task

• Unskilled job – highly specialized in both vertical and horizontal dimensions

• Professionals – specialized horizontally but enlarged vertically

• Hierarchy of Authority• Centralization

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The Evolution of Organization Theory and Design

Historical perspectives provide insight into

how organization design and management

practices have varied over time in response

to changes in society.

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Historical Perspectives

• Efficiency is Everything

• Scientific Management: Pioneered by Frederick Winslow Taylor

• How to Get Organized

• Administrative Principles

• Contributed to Bureaucratic Organizations

• What about People?

• Hawthorne Studies

• Can Bureaucracies Be Flexible?

• Flexible and lean; focused on service, quality, and engaged employees (1908s)

• It All Depends: Key Contingencies

• Contingency: there is no “one best way”

Henry Mintzberg(Canada, 1939)

• Organization Design: Fashion or Fit? (HBR, 1981)

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Mintzberg distinguished five components of an organization:

The strategic apex: ensuring that the organization serve its mission in an effective way, and also that it serve the needs of those people who controls.

The operational core: Those who perform the basic work related directly to the production of products and services

The technostructure: The analysts who serve the organization by affecting the work of others. They may design it, plan it, change it, or train the people who do it, but they do not do it themselves.

The supporting staff: Composed of specialized units that exist to provide support to the organization outside the operating work flow

The Middle Line: Form a chain joining the strategic apex to the operating core by the use of delegated formal authority

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Each of these five parts has a tendency to direct the organization in a particular direction.

Strategic Apexes – centralization

Support Staff - collaborationTechnostructures - standardization

Middle Line - balkanisation

Operating Core – professionalization

Five Generic Structures

There are five generic organisation structures which can be described in terms of the five-part theory:- Simple structure,- Machine bureaucracy,- Professional bureaucracy,- Divisionalised form,- Adhocracy.

Mintzbergs’ typology

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Simple Structure

The simple structure, typically, has:-little or no technostructure,- few support staffers,-a loose division of labour, -minimal differentiation among its units, -and a small managerial hierarchy.

Most organizations pass through the simple structure in their formative years.

Simple Structure – a

centralized form of

organization that

emphasizes the upper

echelon and direct

supervision

‘Simple Structure’

Machine Bureaucracy

The design of a machine bureaucracy tends to be as follows:-highly specialised routine operating tasks;-very formalised procedures in the operating core;-a proliferation of rules, regulations, & formalised communication;-large-sized units at the operating level;-reliance on the functional basis for grouping tasks;-relatively centralised power for decision making;an elaborate administrative structure with sharp distinctions between line and staff.

The machine bureaucracies are typically found in the mature organizations.

Machine Bureaucracy –

a moderately

decentralized form of

organization that

emphasizes the

technical staff and

standardization of

work processes

"performance organizations" not

"problem solving"

‘Machine Bureaucracy’

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Professional Bureaucracy

The professional bureaucracy relies for coordination on:-The standardization of skills and its associated parameters such as design, training and indoctrination.

-In professional bureaucracy type structures duly trained and indoctrinated specialists -professionals- are hired for the operating core, and then considerable control over their work is given to them.Most of the necessary coordination between the operating professionals is handled by the standardization of skills and knowledge .

The professional bureaucracy emphasizes authority of a professional nature .

"the power of expertise".

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Professional

Bureaucracy –

a decentralized

form of

organization that

emphasizes the

operating level

and standardization

of skills

‘Professional Bureaucracy’

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Divisionalised Form

Divisionalised form type organizations are composed of semi-autonomous units - the divisions. An operational solution to co-ordinate and controls a large conglomerate delivering:-Horizontally diversified products or services-In a straight-forward, stable environment-Where large economies of scale need not apply.

"the power of expertise".

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Divisional Form – a

moderately decentralized

form of organization

that emphasizes the

middle level and

standardization of outputs

Adhocracy

Adhocracy includes a highly organic structure, with:-little formalization of behaviour;-job specialization based on formal training;--a reliance on liaison devices to encourage mutual adjustment, the key coordinating mechanism, within and between these teams

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Adhocracy – a

selectively

decentralized

form of

organization that

emphasizes

mutual adjustment

among people

‘Adhocracy’

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Simple Structure

Machine Bureaucracy

Professional Bureaucracy

Adhocracy

Division of Labor

Functional Functional Functional Project/

Teams

Differentiation Small Large Large Variable

Hierarchy Director/

Founder

Techno-structure

Professionals Experts

Centralization High High High Low

Formalization Low High Low Low

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Organizational Alignment:

The 7-S Model

Organizational Alignment

• Organizational alignment occurs when a firm’s organization is aligned with firm strategy, so that firm’s structure, systems, staffing, etc

supports its strategy

Hard" elements

Easier to define or identify

and management can

directly manipulate and

change them

Can be found in strategy

statements, corporate plans,

organizational charts and

other documentations.Leader first try to change

these in order to improve

performance

soft S’s

Harder to change directly,

and typically take longer to

do so.

They are harder to

describe since capabilities,

values and elements of

corporate culture are

continuously developing and

changing.

The 7-S model

Tool for analysis and action

Emerged from a stream of research that sought to identify the best way to manage and organize firms

Team – McKinsey & company consultants, Harvard Business school, and Stanford business school professors

The 7-S model

Conclusions◦ No single best way to organize

◦ Ideal organization aligned with or “fits” its environment

◦ Organization –complex system with inter-related elements –each contributes to its effectiveness

◦ Seven key elements critical to understanding organization effectiveness

◦ To be effective, an organization must have a high degree of “fit” or internal alignment, among these seven elements

Commonly Found Misalignments

• Strategy Is Out of Line with External Competitive Environment

• Organisation and Competencies Fail to Support Strategy

• Incompatibilities and Tensions Within the Organisation Level

• Rewarding One Thing but Expecting Another

• Failure to Realign Strategy and Organisation with Environmental Changes

Managing Change

A leader is wise to recognize the full range of elements that may need to be changed and focus on the ones that will have the greatest effect

All seven variables are interconnected. It is often difficult to make progress on one without making adjustments in the other as well

The model does not imply any natural starting point for a change effort. Only by going through a diagnosis of the alignment of the organization – determine where you need to focus attention

Hard ‘S’ –Strategy, structure, Systems

Soft ‘S’ – Style, staffing, skills, shared values