Organization Design u What is the managerial relevance of organization design? u What are the antecedents and consequences of organization design? u What are the critical structural elements of organization design? u What are critical design parameters? u How is overall structure designed? u How is coordination achieved?

M anagerial Relevance of Organization design u give the organization a competitive advantage u help the organization deal with its stakeholders u increase the organization’s efficiency u give the organization more control over its environment u allow the organization to better coordinate and motivate employees u help the organization to develop and implement its strategy

The Gillette Company: A Success Story

The Gillette Company: New Structure Exec. V.Pres Global Business Exec. V.Pres Global Business Exec. V.Pres Com. Operations Exec. V.Pres Com. Operations N. America Com. Operations S. America Com. Operations Europe Com. Operations Asia Pacific Com. Operations Africa, ME, E. Eur Braun Oral-B Stationery Blades & Razors Toileries Batteries Chairman CEO President COO

What is organizational structure? u The formal system of rules and tasks and authority relationships that control how people cooperate and use resources to achieve the organization’s goals. (Barnard, 1948) u The sum total of the ways in which its labor is divided and then its coordination is achieved among these tasks. (Mintzberg, 1983) u The groupings of related activities performed in an organization into meaningful components to insure effective communication, coordination, and control for accomplishing the organization’s strategic objectives.

Core parts of organizational structure Board of directors President Executive Committee Strategic Planning Controller Operations Research Production Scheduling Personnel Training Legal Counsel Public Relations Industrial Relations Payroll Mailroom Basic Research VP Operations Plant Managers VP Marketing Regional Sales Mngs. Foremen District Sales Staff Purchasing Agents Machine Operators Assemblers Sales Personnel Shippers The Operating Core Strategic Apex Techno Structure Support Staff MiddleLine

Environment Age and Life-cycle Technology Top-Mngt. Strategy Organizational Design: Antecedents & Consequences Contextual Factors Organization Design Consequences of Design Differentiation Integration Innovation Ability to Adapt Decision-making Power & Politics Conflict

Elements of Organization Design DESIGN DIFFERENTIATION INTEGRATION Allocation of TASKS RESOURCES AUTHORITY COORDINATION CONTROL

Design Parameters Design of Positions Job specialization Job formalization Job standardization Design of Superstructure Unit groupings Unit size Design of Lateral Linkages Planning & Control Systems Liaison devices Design of Decision-making Vertical decentralization Horizontal decentralization

Design of Superstructure Reasons for grouping activities are: to establish common supervision to share common resources more efficiently to develop common performance measures to facilitate mutual adjustment to manage interdependencies among activities

Criteria for grouping positions and units u Work-flow interdependencies u Functional interdependencies u Scale interdependencies u Social interdependencies

What are the most common bases for grouping activities? v Grouping by knowledge and skill v Grouping by work process and function v Grouping by time v Grouping by output (product) v Grouping by client (customer) v Grouping by place (geographical)

Five mechanisms to achieve coordination M A OO M A OO M A OO Mutual AdjustmentDirect Supervision InputsWork ProcessOutputs Standardization of

Integration Mechanisms u Direct Contact u Liaison Role u Task Force u Full-time Integrators u Permanent Teams u Integrating Department u Hierarchical Referral u Rules and Plans u New Hierarchical Levels u Vertical Information Systems Horizontal IntegrationVertical Integration Simple Complex