Organizational Design, Diagnosis, and Development Session 3 Environmental Considerations

Objectives –To explore the organization’s environment and its relationship to structure –To compare mechanistic and organic structures –To consider contingency theory of organizations and the fit of structure to environment

Elements of the Environment The Organization Technology The Marketplace Raw Materials Financial Government Legal Labor Market Economy Other Industries Natural Forces International Forces

Internal Unit for External Elements Internal Units Production Sales Purchasing Accounting Government Relations Corporate Lawyers Management Team Market Research Sales or Competitive Intelligence External Elements Technology Market Raw Materials Finance Government Legal Labor Markets Economic Competition

Environmental Uncertainty & Resources Uncertainty: The unpredictability or uncertainty in dealing with the environmental elements. Resources: The environment as a provider of needed commodities

Boundary Roles Represent the organization to outside Scan and monitor environmental events Protecting the organization from threats Information processing and gatekeeping Transacting with other organizations Linking and coordinating activities between organizations

Mechanistic Structure Jobs are narrow, permits specialization to flourish Task are well defined by procedure manuals. Standardization is a feature. Responsibilities are spelled out. Expectation are clear There is a clear chain of command, reporting line are clear, and you have only one boss. Reward are linked to job performance Selection is based on ability

Organic Structure Broadly defined jobs covering a variety of tasks. Jobs do not have standardized procedures for doing them Responsibilities can be shared by a team so they are often ambiguous The hierarchy of authority is not rigidly adhered to, there may be bypassing of the chain of command to get to expertise The reward system is often less formalized Selection is both on ability and on intangible factors

Environment & Structural Fit Adjusting mechanistic forms –More rule –narrow span of control –Add staff Adjusting organic forms –Increase professionalization & discretion –Increase communication channels –Add output controls

Backwards & Forwards Summing up : Today we explored the factors that make the environment of the organization, and ways that is can cope with uncertainty in the environment, including creation of boundary roles. Both mechanistic and organic structures were examined along with ways to adjust those structures to change. Looking ahead: Next time we will examine technology and its impact on organizational design.