Chapter 15 Nelson Quick Organizational Design Structure Organizational

Chapter 15 Nelson & Quick Organizational Design & Structure

Organizational Design - the process of constructing and adjusting an organization’s to achieve its organization’sstructure goals. the linking of departments and jobs within an organization H. Mintzberg, The Structuring of Organizations, Prentice Hall, © 1979, 301. Reprinted by permission of Prentice-Hall, Inc, Upper Saddle River, NJ.

Key Organizational Design Processes

The process of deciding how to divide the work in an organization Four Dimensions w Manager’s goal orientation w Time orientation w Interpersonal orientation w Formality of structure

Horizontal Differentiation w The degree of differentiation between organizational subunits w Based on employee’s specialized knowledge, education, or training

Vertical Differentiation w The difference in authority and responsibility in the organizational hierarchy w Greater in tall, narrow organizations than in flat, wide organizations

Spatial Differentiation w Geographic dispersion of an organization’s offices, plants, and personnel w Complicates organizational design, but may simplify goal achievement or protection

Differentiation Between Marketing and Engineering Basis for Difference Marketing Engineering Goal orientation Time orientation Interpersonal orientation Structure Sales volume Long run People oriented Less formal Design Medium run Task oriented More formal

The process of coordinating the different parts of an organization w Designed to achieve unity among individuals and groups w Supports a state of dynamic equilibrium - elements of organization are integrated, balanced

Vertical Integration w w w Hierarchical referral Rules and procedures Plans and schedules Positions added to the organization structure Management information systems

Horizontal Integration w w Liaison roles Task forces Integrator positions Teams

Formalization - the degree to which the organization has official rules, regulations and procedures Hierarchy of Authority the degree of vertical differentiation across levels of management Centralization - the degree to which decisions are made at the top of the organization Basic Design Dimensions Complexity - the degree to which many different types of activities occur in the organization Specialization the degree to which jobs are narrowly defined and depend on unique expertise Standardization - the degree to which work activities are accomplished in a routine fashion

Simple Structure - a centralized form of organization that emphasizes the upper echelon & direct supervision “Adhocracy” - a selectively decentralized form of organization that emphasizes the support staff & mutual adjustment among people Structural Configurations of Organizations Machine Bureaucracy a moderately decentralized form of organization that emphasizes the technical staff & standardization of work processes Divisional Form - a moderately decentralized form of organization that emphasizes the middle level & standardization of outputs Professional Bureaucracy a decentralized form of organization that emphasizes the operating level & standardization of skills

Five Structural Configurations of Organization Prime Structural Type of Key Part of Coordinating Configuration Organization Decentralization Mechanism Simple Structure Direct Supervision Upper Echelon Machine Bureaucracy Standardization of Work Processes Technical Staff Centralization Professional Standardization Bureaucracy of Skills Operating Level Divisionalized Standardization Form of Outputs Middle Level Limited Horizontal Decentralization Vertical & Horizontal Decentralization Limited Vertical Decentralization Support Staff Selective Decentralization Adhocracy Mutual Adjustment

Mintzberg’s Five Basic Parts of an Organization Strategic Apex Tec stru hnoctur e rt o p Sup ff Sta Middle Line Operating Core From H. Mintzberg, The Structuring of Organizations (Upper Saddle River, N. J. : Prentice-Hall, 1979): 20. Reprinted with permission.

Size Technology Contextual Variables a set of characteristics that influences the organization’s design processes Strategy & Goals Environment

Size Basic Design Dimensions Formalization Centralization Specialization Standardization Complexity Hierarchy of authority Small Organizations Less High Low Low Flat Large Organizations More Low High Tall

Technology Technological Interdependence the degree of interrelatedness of the organization’s various technological elements

Problem Analyzability Relationship Between Technology and Basic Design Dimensions Task Variability Few Exceptions Craft Ill-defined & Unanalyzable 1. Moderate 2. Moderate 3. Moderate 4. Low-moderate 5. High 6. Low Well-defined & Routine 1. High Analyzable 2. High 3. Moderate Key 4. High 1 Formalization 4 Standardization 2 Centralization 5 Complexity 5. Low 3 Specialization 6 Hierarchy of Authority 6. High Many Exceptions Nonroutine 1. Low 2. Low 3. Low 4. Low 5. High 6. Low Engineering 1. Moderate 2. Moderate 3. High 4. Moderate 5. Moderate 6. Moderate Built from C. Perrow, “A Framework for the Comparative Analysis of Organization, ” American Sociological Review, April 1967, 194 -208

Environment - anything outside the boundaries of an organization Task Environment - the elements of an organization’s environment that are related to its goal attainment Environmental Uncertainty - the amount and rate of change in the organization’s environment Environment

Extremes of Environmental Uncertainty Mechanistic Structure – an organizational design that emphasizes structured activities, specialized tasks, and centralized decision making Organic Structure – an organizational design that emphasizes teamwork, open communication, and decentralized decision making

Strategic Dimension Predicted Structural Characteristics Innovation--to understand Low formalization and manage new processes Decentralization and technologies Flat hierarchy Market differentiation--to Moderate to high complexity specialize in customer Moderate to high preferences formalization Moderate centralization Cost control--to produce High formalization standardized products High centralization efficiently 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.

The Relationship among Key Organizational Design Elements Context of the organization Correct size Current technology Perceived environment Current strategy & goals Influences how manager perceive structural needs Structural dimensions Level of formalization Level of centralization Level of specialization Level of standardization Level of complexity Hierarchy of authority

Which characterize the organizational processes Differentiation & Integration Which influence how well the structure meets its Purposes Designate formal lines of authority Designate formal informationprocessing patterns Which influence how well the structure fits the Context of the organization

Forces Reshaping Organizations w Organization Life Cycle - the differing stages of an organization’s life from birth to death w Globalization w Changes in Information-Processing Technologies w Demands on Organizational Processes w Emerging Organizational Structures

Structural Roles of Managers Today versus Managers of the Future Roles of Managers Today 1. Strictly adhering to boss -employee relationships 2. Getting things done by giving orders 3. Carrying messages up and down the hierarchy 4. Performing a set of tasks according to a job description 5. Having a narrow functional focus 6. Going through channels, one by one 7. Controlling subordinates Roles of Future Managers 1. Having hierarchical relationships subordinated 2. Getting things done by negotiating 3. Solving problems and making decisions 4. Creating the job through entrepreneurial projects 5. Having a broad crossfunctional collaboration 6. Emphasizing speed & flexibility 7. Coaching one’s workers Management Review, January 1991, Thomas R. Horton.

Harley’s Circle Organization Create Demand Produce Product Provide Support From R. Teerlink and L. Ozley, More than a Motorcycle: The Leadership Journey at Harley-Davidson. Boston, MA, 2000. P. 139. Copyright © 2000 by the Harvard Business School Publishing Corporation; all rights reserved.

Four Symptoms of Structural Weakness w Delay in decision Overloaded hierarchy; information funneling limited to too few channels making w Poor quality Right information not reaching decision making right people in right format w Lack of innovative No coordinating effort response to changing environment Departments work against each w High level of other, not for organizational goals conflict

Paranoid Depressive Dysfunctional Personality/Organization Combinations Schizoid Dramatic Compulsive