Organizing in the Twenty-First Century Chapter Ten Organizing in the Twenty-First Century

Chapter Objectives Explain the concept of contingency organization design. Distinguish between mechanistic and organic organizations. Discuss the roles that differentiation and integration play in organization structure. Identify and briefly describe the five basic departmentalization formats.

Chapter Objectives (cont’d) Describe how a highly centralized organization differs from a highly decentralized one. Define the term delegation and list at least five common barriers to delegation. Explain how the traditional pyramid organization is being reshaped.

Contingency Design Organizing Contingency Design 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 subunits to the situation How much environmental uncertainty is there? What combination of structural characteristics is most appropriate? There is no single best organization design.

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, have participative communication patterns, and are successful in adapting to change in unstable and uncertain environments

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.

The Lawrence and Lorsch Model A dynamic equilibrium exists between two opposing structural forces and environmental complexity. Differentiation: The tendency of specialists to think and act in restricted ways Integration: The collaboration among specialists needed to achieve a common purpose A dynamic equilibrium between differentiation and integration is necessary for a successful organization. Both differentiation and integration increase as environmental complexity increases.

Figure 10.1: Differentiation and Integration: Opposing Organizational Factors

Basic Structural Formats Departmentalization 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 divisions, groups, or units in large organizations

Basic Structural Formats (cont’d) Functional Departments Categorizing jobs according to the activity performed Product-Service Departments Grouping jobs around a specific product or service Geographic Location Departments Adopting a structural format based on the physical dispersion of assets, resources, and customers Customer Classification Departments Creating a structural format centered on various customer categories

Figure 10.2: Alternative Departmentalization Formats

Figure 10.2: Alternative Departmentalization Formats (cont’d)

Figure 10.2: Alternative Departmentalization Formats (cont’d)

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

Contingency Design Alternatives Span of Control (Management) Span of control is the number of people who report to a manager. Narrow spans of control foster tall organizations with many organizational/managerial layers. Flat organizations have wider spans of control. Is There an Ideal Span of Control? The right span of control efficiently balances too little and too much supervision.

Figure 10.3: Narrow and Wide Spans of Control

Contingency Design Alternatives (cont’d) 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 are appropriate for departments where many workers work closely together and do the same job. Narrow spans of control are best suited for departments where the work is complex and/or the workers are widely dispersed.

Figure 10.4: Situational Determinants of Span of Control

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

Figure 10.5: Factors in Relative Centralization/Decentralization

Contingency Design Alternatives (cont’d) Decentralization Through Strategic Business Strategic business units (SBU) are organizational subunits that: Serve a specific market outside the parent organization Face outside competitors Are in a position of controlling their own destiny Are profit centers, with their effectiveness measured in terms of profit and loss

Contingency Design Alternatives (cont’d) Line and Staff Organizations Line managers make decisions and staff personnel provide advice and support. Personal staff are assigned to a specific manager in supporting roles. Specialized staff constitute a reservoir of specialized talent available to the entire organization. Functional authority gives staff temporary and limited authority for specified tasks.

Figure 10.6: A Line and Staff Organization

Matrix Organization Matrix Organization A structure with both vertical and horizontal lines of authority Advantages Increases coordination Improves quantity of information flow Disadvantages Violates unity-of-command principle Creates an authority gap (lack of line authority) for project managers Decreases quality of information flow

Figure 10.7: A Simplified Matrix Organization Chart

Effective Delegation Delegation Advantages of Delegation Assigning various degrees of decision-making authority to lower-level employees Advantages of Delegation Frees up managerial time for other important tasks Serves as a training and development tool for lower-level managers Increases subordinates’ commitment by giving them challenging assignments

Effective Delegation (cont’d) Barriers to Delegation Belief that only you can do the job right Lack of confidence and trust in subordinates Low self-confidence Fear of being called lazy Vague job definition Fear of competition from subordinates Reluctance to take risks that depend on others Lack of early warning controls Poor example of bosses who do not delegate

Figure 10.8: The Delegation Continuum

The Changing Shape of Organizations Characteristics of New Organizations Fewer organizational layers More teams Smallness within bigness New Organizational Configurations Hourglass organization: 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

Figure 10.9: Reshaping the Traditional Pyramid Organization

Terms to Understand Organizing Contingency design/plan Mechanistic organizations Organic organizations Differentiation Integration Departmentalization Span of control Centralization Decentralization Strategic business unit Line and staff organization Functional authority Matrix organization Delegation Hourglass organization Cluster organization Virtual organization