Chapter 15 Organizational Design & Structure Nelson & Quick

Organizational Design Organizational Design - the process of constructing and adjusting an organization’s structure to achieve its 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. 2

Key Organizational Design Processes 3

Interpersonal orientation Formality of structure The process of deciding how to divide the work in an organization Four Dimensions Goal orientation Time orientation Interpersonal orientation Formality of structure

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

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

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

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

Vertical Integration Hierarchical referral Rules and procedures Plans and schedules Positions add to the organization structure Management information system

Horizontal Integration Liaison roles Task forces Integrator positions Teams

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

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

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

Size Technology Strategy & Goals Environment Contextual Variables - a set of characteristics that influences the organization’s design processes Strategy & Goals Environment 4

Size Basic Design Small Large Dimensions Organizations Organizations Formalization Centralization Specialization Standardization Complexity Hierarchy of authority Less High Low Flat More Low High Tall 4

Technology Technological Interdependence - the degree of interrelatedness of the organization’s various technological elements 4

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

Environment 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 4

Strategy & Goals 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 formalization Moderate centralization preferences Cost control--to produce High formalization standardized products High centralization efficiently High standardization Low complexity Strategy & Goals Integrative Framework of Structural & Strategic Dimensions 4

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

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

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

Structural Roles of Managers Today versus Managers of the Future 1. Strictly adhering to boss -employer 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 by one 7. Controlling subordinates Roles of Future Managers 1. Having hierarchical relationships subordinate 2. Getting things done by negotiating 3. Solving problems and making decisions 4. Creating the job through entrepreneurial projects 5. Having a broad cross- functional collaboration 6. Emphasizing speed & flexibility 7. Coaching one’s workers Management Review, January 1991, Thomas R. Horton.

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

Personality/Organization Paranoid Depressive Dysfunctional Personality/Organization Combinations Schizoid Dramatic Compulsive