1 Knowledge Objectives 1.Explain the concept of contingency organization design. 2.Distinguish between mechanistic and organic organizations. 3.Discuss the roles that differentiation and integration play in organization structure.

2 Contingency Design Organizing –The structuring of a coordinated system of authority relationships and task responsibilities. Contingency Design –The process of determining the degree of environmental uncertainty and adapting the organization and its sub units to the situation. How much environmental uncertainty is there? What combination of structural characteristics is most appropriate? –There is no single best organization design.

3 Contingency Design (cont’d) The Burns and Stalker Model –Mechanistic organizations are rigid in design, rely on formal communications, and have strong bureaucratic qualities best suited to operating in relatively stable and certain environments. –Organic organizations have flexible structures, participative communication patterns and are successful in adapting to change in unstable and uncertain environments.

4 Contingency Design (cont’d) Joan Woodward’s Study –When task complexity is either high or low, organizations with organic structures are more effective. –When task complexity is moderate, organizations with mechanistic structures are more effective.

5 Contingency Design (cont’d) Differentiation & Integration (Lawrence & Lorsch) –The relationship of two opposing structural forces and environmental complexity. Differentiation: the tendency of specialists to think and act in restricted ways, i.e., building deep functional expertise (e.g., in customer segments, R&D, manufacturing, finance, etc.) Integration: the linkages among specialists necessary to coordinate behavior to achieve the goal. –Both differentiation and integration increase as environmental complexity increases.

6 Basic Structural Formats Departmentalization –The grouping of related jobs or processes into major organizational units. Overcomes some of the effect of fragmentation caused by differentiation (job specialization). Permits coordination (integration) to be handled in the least costly manner. –Sometimes refers to division, group, or unit in large organizations.

7 Basic Structural Formats (cont’d) Functional –Categorizing jobs according to the activity performed (e.g., Marketing, Finance, R&D, etc.) Product-Service –Grouping around a specific product or service. Geographic –Mapping structure to the location of resources & and customers (e.g., NAFTA, EU, APEC). Customer –Mapping structure to customer segments, e.g. for a B2B this could be small business customers, Fortune 500 Customers, State & Local Gov’t, etc.

8 Basic Structural Formats (cont’d) Work Flow Process Departments in Reengineered Organizations –Creating horizontal organizations that emphasize speedy work flow between two points: Identifying customer needs Satisfying customer needs

9 Contingency Design Alternatives The Contingency Approach to Spans of Control –Both overly narrow and overly wide spans of control are counterproductive. –Situational factors dictate the width of spans of control. Wide spans of control for departments where many workers work close together and do the same job. Narrow spans of control for departments where work is complex and/or workers are widely dispersed.

10 Contingency Design Alternatives (cont’d) Centralization –The consolidation of decision-making authority by top management. Decentralization –The distribution of decision-making authority to lower-level employees. The Need for Balance –The challenge is to balance the need for responsiveness to changing conditions (decentralization) with the need to create low- cost shared resources (centralization).

11 The Changing Shape of Organizations New Organizations –Fewer organizational layers –More teams –Smallness within bigness New Organizational Configurations –Hourglass organization: a three-layer structure with constricted middle (management) layer. –Cluster organization: collaborative structure in which teams are the primary unit. –Virtual organizations: internet-linked networks of value-adding subcontractors.