Topic 10 Organizing for the 21st Century Organizing is the structuring of a coordinated system of authority, relationships, and task responsibilities

Chapter Outline The external environment is changing so rapidly & becoming so complex organizations need to re-organize to meet the contingent open system environment Contingency Design u The Burns and Stalker Model u The Lawrence and Lorsch Model

CONTINGENCY DESIGN Contingency design: the process of determining the degree of environmental uncertainty and adapting the organization and its subunits to the situation.

CONTINGENCY DESIGN (continued) Dimensions of Environmental Uncertainty (the contingencies) 1.Strength of social, political, and economic pressures on the organization. 2.Frequency of technological breakthroughs in the industry. 3.Reliability of resources and suppliers. 4.Stability of demand for the organization’s products or service.

Contingency u How is CMSU effected by increasing environmental uncertainty? u How is your career likely to be effected? u Has your career choice already changed based on contingency?

(One of Two Models) I. THE BURNS AND STALKER MODEL (Contingency Organization Design) Two Ends of a Structural Continuum u Mechanistic organizations: rigid in design and have strong bureaucratic qualities. u Organic organizations: flexible in structure and adaptive to change. See 10.2, T #48

THE BURNS AND STALKER MODEL (Contingency Organization Design) (continued) Key Research Findings: 1.Successful organizations in relatively stable and certain environments tended to be mechanistic. 2.Relatively organic organizations tended to be the successful ones when the environment was unstable and uncertain.

THE BURNS AND STALKER MODEL (Contingency Organization Design) (continued) Practical Conclusion: “Mechanistic design is appropriate for environmental stability, and organic design is appropriate for high environmental uncertainty.” Woodward’s study --in hi & low tech. complexity use organic structure. – But in medium tech. environment use mechanistic structure.

THE LAWRENCE AND LORSCH MODEL Opposing Organizational Forces u Differentiation: tendency among specialists to think and act in restricted ways. (Tends to fragment the organization.) u Integration: in direct opposition to differentiation, it involves the collaboration among specialists needed to achieve a common purpose. (Tends to coordinate the organization.)

THE LAWRENCE AND LORSCH MODEL (continued) Key Research Findings: 1.Every organization requires an appropriate dynamic equilibrium between differentiation and integration. 2.In successful firms, both differentiation and integration increased as environmental complexity increased.

THE LAWRENCE AND LORSCH MODEL (continued) Practical Conclusions: u “These findings suggest that organizational failure in the face of environmental complexity probably results from a combination of high differentiation and inadequate integration.” u Needed organizational integration (coordination) can be achieved through formal hierarchy, standard policies and rules, departmentalization, computer networks, cross-functional teams, human relations training, and liaison individuals. See later slide.

Organizations can use organizational structures and techniques to coordinate differentiated organizations: u Formal hierarchy u SOP, policies, rules u Liaisons u Departmentation u Information networks u Cross-functional teams u Human relations training

BASIC STRUCTURAL FORMATS Departmentalization: related jobs, activities, or processes are grouped into major organizational subunits. (Group, division, unit are other names for putting individuals in groupings as with departmentalization.)

BASIC STRUCTURAL FORMATS (continued) Five Types of Departmentalization u Functional Departments (most common) u Product-service departments (organic alternative to functional departments) u Geographic location departments (communication can be strained) u Customer classification departments (need of different customers better served u Work flow process departments (found in horizontal organizations resulting from reengineering)

Alternative Departmentalization Formats (A)

Alternative Departmentalization Formats (B)

Alternative Departmentalization Formats (C & D)

Alternative Departmentalization Formats (E)

Chapter Outline (continued) Contingency Design Alternatives u Span of Control also called Span of Management u Centralization and Decentralization u Line and Staff Organizations u Matrix Organizations

SPAN OF CONTROL (Contingency Design Alternatives) Span of control: the number of people who report directly to a manager. ( also called span of management) Is There an Ideal Span of Control? “ The relevant question is no longer how wide spans of control should be but instead, ‘How wide can one’s span of control be?’ Wider spans of control mean less administrative expense and more self- management, both popular notions today.”

SPAN OF CONTROL (Contingency Design Alternatives) (continued) Situational Determinants of Span of Control 1.Similarity of work performed by subordinates 2.Dispersion of subordinates 3.Complexity of work performed by subordinates 4.Direction and control required by subordinates 5.Time spent coordinating with other managers 6.Time required for planning

Narrow and Wide Spans of Control

Situational Determinants of Span of Control

CENTRALIZATION AND DECENTRALIZATION (Contingency Design Alternatives) Two Ends of the Same Continuum u Centralization: the retention of decision- making authority by top management. u Decentralization: management shares decision-making authority with lower-level employees. When this is done it often called vertical loading.

Factors in Relative Centralization/Decentralization

CENTRALIZATION AND DECENTRALIZATION (Contingency Design Alternatives) (continued) Balance Needed within a Contingency Approach u “The case against extreme decentralization can be summed up in three words, lack of control. Balance helps neutralize this concern.” u “Centralization, because of its mechanistic nature, generally works best for organizations in relatively stable situations.” u “A more organic, decentralized approach is appropriate for firms in complex and changing conditions.”

Line & Staff in Organizations u Line: perform major functions u Staff: advise or support Personal staff - i.e. administrative assistant Specialized staff - i.e. legal counsel

A Line and Staff Organization

Functional Authority u Functional authority is authority of staff or even line people to order others outside of their department to get their job done. u i.e. bookkeeper requiring all departments to keep time cards

MATRIX ORGANIZATION (Contingency Decision Continued) Matrix organization: vertical and horizontal lines of authority are combined in checkerboard fashion. (book example)

A Simplified Matrix Organization Chart

MATRIX ORGANIZATION (continued) Advantages (increased coordination) u Efficient use of resources u Project integration u Improved information flow u Flexibility u Discipline retention u Improved motivation and commitment

MATRIX ORGANIZATION (continued) Disadvantages (project manager’s authority gap) u Power struggles u Heightened conflict u Slow reaction time u Difficulty in monitoring and controlling u Excessive overhead u Experienced stress

MATRIX ORGANIZATION (continued) For Discussion: On balance, is matrix design worth the trouble? Why?

EFFECTIVE DELEGATION u Delegation: process of assigning various degrees of decision-making authority to lower-level employees. Vazzana believes that authority tends to revert back to higher levels of management unless continuously pushed to lower levels. u Given contingencies that indicate delegation should be used– don,t reward or promote those who haven’t trained lower level mangers to accept responsibilities through delegation. Also, hire and train lower level employees in accepting and using authority. Clearly specify what delegation of authority is given to lower level employees and specify when authority is withdrawn.

DELEGATION (continued) A Matter of Degree Low degree of delegation Investigate and report back Investigate and recommend action Investigate and advise on action taken Investigate and take action; advise on action taken Investigate and take action High degree of delegation

DELEGATION (continued) For Discussion: 1.Does a high degree of delegation make an organization more mechanistic or more organic? Explain. 2.What is the relationship between delegation and decentralization?

BARRIERS TO DELEGATION Why Managers Do Not Delegate as Much as They Should: u Belief in the fallacy, “If you want it done right, do it yourself.” u Lack of confidence and trust in lower-level employees. u Low self-confidence. u Fear of being called lazy.

BARRIERS TO DELEGATION (continued) Vague job definition. u Fear of competition from those below. u Reluctance to take the risks involved in depending on others. u Lack of controls that provide early warning of problems with delegated duties. u Poor example set by bosses who do not delegate.

BARRIERS TO DELEGATION (continued) For Discussion: 1.Which three of the above reasons for not delegating do you think are most common? Why? 2.What should managers delegate: What they know best, or what they know least well?

THE CHANGING SHAPE OF ORGANIZATIONS Characteristics of the New Organizations u Fewer layers u More teams u Smallness within bigness

THE CHANGING SHAPE OF ORGANIZATIONS (continued) New Organizational Configurations u Hourglass organizations - little middle management u Cluster organizations (teams) - new collaborative based on logical workflow & teams u Network organizations ( virtual corporations) - farm out functions (Nike)

Reshaping the Traditional Pyramid Organization

THE CHANGING SHAPE OF ORGANIZATIONS (continued) For Discussion: 1.Which of the new-style organizations will likely be most common in twenty years? 2.In which of these new organizations would you most like to be a top manager? A middle manager? A first-line supervisor? A nonmanagerial employee?