©2007 Prentice Hall Organizational Behavior: An Introduction to Your Life in Organizations Chapter 15 Designing Effective Organizations

©2007 Prentice Hall Preview Who designs organizations and, in general, what do these designers do? What are the major factors influencing organizational design? What do managers actually design? How can you predict whether an organizational design will be effective? What are some unconventional approaches to organizational design? How can you identify the fundamental organizational types and anticipate their strengths and weaknesses?

©2007 Prentice Hall Who designs organizations and, in general, what do these designers do? Organizational design is the way in which an organization divides its labor into distinct tasks and then achieves coordination of these tasks Answer the question: What is the optimal combination of organizational characteristics to achieve organizational goals?

©2007 Prentice Hall The three historical factors that drive organizational design 1.Who was the founder? The founder’s influence on company design and culture may last for decades 2.What characterized organizational design during the historic period in which the company was founded? 3.What has been the historic size of the company? An organization’s history, culture, values and entrenched ways of doing things are referred to as its administrative heritage

©2007 Prentice Hall The three business factors (constraints) that drive organizational design The environment in which it does business The work that it performs The people it employs

©2007 Prentice Hall What type of work does the company do? Work can be characterized as programmed (so standardized that it can be described with a formula) or nonprogrammed (work that is creative). Unit work: perform custom work, producing individualized units Mass production: produce hundreds of thousands of identical or nearly identical items Continuous production: continues around the clock and has to be constantly monitored

©2007 Prentice Hall Who are the employees? Formal organizations require people who thrive on formality Flexible organizations require people who thrive on change

©2007 Prentice Hall The theory of organizational design Specialization is differentiating the tasks individuals do in order to produce better work Formalization is the means by which an organization determines who, when and how tasks are performed Centralization is the degree to which organizational members participate in decision making The factors are synergistic

©2007 Prentice Hall The practice of organizational design Inputs to the model are the organizational constraints of environment, type of work, and people Output to the model is organizational effectiveness, usually efficiency, quality of output, quality of work culture or responsiveness Throughputs are five design variables: decision making, structure, control & motivation, work design and organizational culture

©2007 Prentice Hall How synergy is reduced If one or more design factors defy the logic of the rest of the organization Examples:  a highly creative, energetic employee ends up in a highly programmed, scheduled job  a company emphasizes the design characteristics suitable to a flexible organization while trying to compete on cost and quality

©2007 Prentice Hall Should you adopt the contingent design or the fashionable design? Contingency theory of organizational design: the idea that organizations should be designed to meet their unique constraints, states that not all organizations should be enterprises Fashionable design: ideal design for modern times-- the organic/learning/high performance/new organization, e.g. the enterprise

©2007 Prentice Hall What are some unconventional approaches to organizational design? Theory of equifinality: given the same constraints, there is more than one way to design organizations to achieve effectiveness The subjective side of organizational design: Metaphor and the collective paradigm: what actually causes the creation, maintenance and change of organizations is “the invisible agreement in consciousness” of the organization’s members, known as the members’ collective paradigm, sometimes described using metaphors

©2007 Prentice Hall The bureaucracy A highly systematized organization aimed at efficiency Daily work is planned, programmed, prescribed, scheduled, and directed “by the book” Often found in mature markets in which demand for their product is well established or perhaps even falling Efficiency and, often, quality are the main strategies on which they compete

©2007 Prentice Hall The enterprise Adapt quickly in business environments that are dynamic, complex, and uncertain Daily work is extemporaneous, improvised, spontaneous, and directed by discussion and teamwork Goals and results are custom-designed and creative/innovative

©2007 Prentice Hall The hybrid organization An organization which is comprised of distinct elements, some of which are bureaucratic and some of which are enterprising, with one overarching culture Designed to meet the different constraints on its subunits Highly adaptive organizations whose designs match the different types of work performed

©2007 Prentice Hall Apply what you have learned World Class Company: IDEO Product Development Advice from the Pro’s Gain Experience

©2007 Prentice Hall Summary – Who designs organizations and, in general, what do these designers do? Organizational designers are typically top managers or consultants They look for optimal combinations of organizational characteristics to achieve organizational outcomes

©2007 Prentice Hall Summary – What are the major factors influencing organizational design? Three primary factors in the company’s history affect its design: the personality and values of founder, the era in which the company was founded, and the historic size of the company. Company designs are also affected by such constraints as: the company’s (external) environment, the nature of its employees, and the type of work that it does

©2007 Prentice Hall Summary – What do managers actually design? Theoretically, designers consider formalization, centralization, and specialization when designing their organizations Typically, when one of these changes, the others should also change. In practice, organizational designers focus on five factors (called design variables): decision making, structure, control and motivation, work design, and organizational culture

©2007 Prentice Hall Summary – How can you predict whether an organizational design will be effective? In a synergistic organizational design different elements of the company interact together in a coherent pattern Examples of synergistic designs are bureaucracies and enterprises According to contingency theory, as long as its organizational design fits its organizational constraints, either a bureaucracy or an enterprise can be effective

©2007 Prentice Hall Summary – What are some unconventional approaches to organizational design? Theory of equifinality argues that there are many designs that can be effective The collective paradigm states that while the effects of organizational constraints on design are important, it is only through changes in the collective consciousness of organizational members that organization design changes can really be made

©2007 Prentice Hall Summary – How can you identify the fundamental organizational types and anticipate their strengths and weaknesses? A bureaucracy is a highly systematized organization aimed at efficiency Classic bureaucracies differ from professional bureaucracies An enterprise is a highly flexible organization that adapts quickly in dynamic business environments A hybrid is an organization comprised of distinct elements, some of which are bureaucratic and some of which are enterprising