1. Four basic organizational design challenges
Addressing these challenges for a high performing structure
Distinguish among the design choices that underlie the creation of either a mechanistic or an organic structure
Contingency theory to design a structure that fits an organization’s environment

2. Structure Descriptors
Differentiation
Vertical
Horizontal
Spatial
Integration
Standardisation
Formalisation
Socialisation
Mutual Adjustment
Centralisation
Decentralisation
Recall these in Acme and Omega

3. Differentiation
Allocation of people and resources to organizational tasks
Establishment of the task and authority relationships
Division of labor: the degree of specialization in the organization
Simple organization = Low differentiation
Complex Organization = High differentiation

9. Organizational Roles
Set of task-related behaviors required of a person by his or her position in an organization
As the division of labor increases, managers specialize in some roles and hire people to specialize in others
Specialization allows people to develop their individual abilities and knowledge within their specific role
Organizational structure is based on a system of interlocking roles

10. Authority & Control
Authority: the power to hold people accountable for their actions and to make decisions concerning the use of organizational resources
Control: the ability to coordinate and motivate people to work in the organization’s interests

11. Subunits: Functions and Divisions
Function: a subunit composed of a group of people, working together, who possess similar skills or use the same kind of knowledge, tools, or techniques to perform their jobs
Division: a subunit that consists of a collection of functions or departments that share responsibility for producing a particular good or service
Organizational complexity: the number of different functions and divisions possessed by an organization
Degree of differentiation

12. Bases of Differentiation

13. Vertical and Horizontal Differentiation
Vertical differentiation: the way an organization designs its hierarchy of authority and creates reporting relationships to link organizational roles and subunits
Establishes the distribution of authority between levels
Horizontal differentiation: the way an organization groups organizational tasks into roles and roles into subunits (functions and divisions)
Roles differentiated according to their main task responsibilities

15. Organizational Design Challenges

16. Balancing Differentiation and Integration
Horizontal differentiation: Enables people to specialize and become more productive
Specialization often limits communication between subunits
People develop subunit orientation
Subunit orientation: a tendency to view one’s role in the organization strictly from the perspective of the time frame, goals, and interpersonal orientations of one’s subunit

17. Balancing Differentiation and Integration
Integration: the process of coordinating various tasks, functions, and divisions so that they work together and not at cross-purposes

18. Types of Integration Mechanisms
Hierarchy of authority: dictates “who reports to whom”
Direct contact: managers meet face to face to coordinate activities
Problematic that a manager in one function has no authority over a manager in another
Liaison roles: a specific manager is given responsibility for coordinating with managers from other subunits on behalf of their subunits

19. Types of Integration Mechanisms
Task force: managers meet in temporary committees to coordinate cross-functional activities
Task force members responsible for taking coordinating solutions back to their respective functions for further input and approval
Teams: a permanent task force used to deal with ongoing strategic or administrative issues

21. Balancing Differentiation and Integration
Guide process of differentiation to develop core competence
Carefully use integrating mechanisms to build up core competences

22. Balancing Centralization and Decentralization
Centralized organization: the authority to make important decisions is retained by top level managers
Top managers able to coordinate activities to keep the organization focused on its goals
Decentralized organization: the authority to make important decisions is delegated to managers at all levels in the hierarchy
Promotes flexibility and responsiveness

23. Balancing Centralization and Decentralization
Ideal balance entails:
Enabling middle and lower managers who are at the scene of the action to make important decisions
Allowing top managers to focus on long-term strategy making

24. Balancing Standardization and Mutual Adjustment
Standardization: conformity to specific models or examples that are considered proper in a given situation
Defined by rules and norms
Mutual adjustment: the process through which people use their judgment rather than standardized rules to address problems, guide decision making, and promote coordination
Formalization: the use of rules and procedures to standardize operations

25. Balancing Standardization and Mutual Adjustment
Socialization: Understood Norms
Rules: formal, written statement that specify the appropriate means for reaching desired goals
Norms: standards or styles of behavior that are considered typical for a group of people
May arise informally
External rules may become internalized norms
Socialization: the process by which organizational members learn the norms of an organization and internalize these unwritten rules of conduct

26. Standardization versus Mutual Adjustment
Challenge facing managers is:
To find a way of using rules and norms to standardize behavior, and
to allow for mutual adjustment to give managers opportunity to discover new and better ways to achieve goals

27. Mechanistic and Organic Organizational Structures
Mechanistic structures: structures that are designed to induce people to behave in predictable, accountable ways
Emphasis on the vertical command structure
Roles are defined narrowly
Promotion is slow and steady
Best suited to organizations that face stable, unchanging environments

28. Mechanistic and Organic Organizational Structures
Organic structures: structures that promote flexibility, so people initiate change and can adapt quickly to changing conditions
Less emphasis on vertical command structure
Roles are defined loosely
Status conferred by ability to provide creative leadership
Encourages innovative behavior
Suited to dynamic environments

29. Contingency Approach
A management approach in which the design of an organization’s structure is tailored to the sources of uncertainty facing an organization
Organization should design its structure to fit its environment

30. Lawrence & Lorsch: Differentiation, Integration, and the Environment
Investigated how companies in different industries differentiate and integrate their structures to fit the environment
Three industries that experienced different levels of uncertainty:
The plastics industry
The food-processing industry
The container or can-manufacturing industry

31. Findings: Lawrence and Lorsch
When environment is perceived as more unstable and uncertain:
Effective organizations are less formalized, more decentralized and rely more on mutual adjustment
When environment is perceived as stable and certain:
Effective organizations have a more centralized, standardized, and formalized structure

32. Lawrence & Lorsch: Environment & Structure
Measure of External Environment = Degree of Uncertainty (rate of change in environment, time taken to get feedback from environment, clarity of information that management held about environment)
Measure of Internal Environment = Differentiation and Integration
H0: More successful organizations within each industry will have a better match between the two compared to less successful ones

33. Lawrence & Lorsch: Environment & Structure
Sub-Parts of organization deals with sub-parts of environments
Basic reason for differentiation was for departments to deal more effectively with sub-environments
Hypotheses: Complex, diverse, turbulent environment = High differentiation, high integration
Plastics: Successful firms highly differentiated, sales and R&D functions less rigid than production

34. The Effect of Uncertainty, Differentiation and Integration

36. Burns and Stalker
Also found that organizations need different kinds of structure to control their activities based on the environment
Organic structures are more effective when the environment is unstable and changing
Mechanistic structures are more effective in stable environments

37. Relationship Between Environmental Uncertainty and Structure