1. Organizational Design
the process of constructing and adjusting an organization’s structure to achieve its goals.
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2. Organizational Design
the linking of departments within an organization
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3. Key Organizational Design Processes
Differentiation
The process of deciding how to
divide the work in an organization
Manager’s goal orientation
Time orientation
Interpersonal orientation
Formality of structure
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4. Differentiation Horizontal differentiation
Degree of differentiation between organizational subunits.
Vertical differentiation
The difference in authority and responsibility
in the organizational hierarchy
Spatial differentiation
Geographic dispersion of an organization’s offices,
plants and personnel
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5. Beyond the Book: Differntiation at Cisco
At Cisco, the existence of multiple teams, councils, boards, and working groups within Cisco creates a web of internal integrating structures that lead to fast decisions by the right people to ensure that the company is agile.
Cisco has a complex organizational structure because it allows the firm to enter into new markets quickly.
An emphasis on horizontal integration and cross-function teaming allows Cisco to be much more agile than before. A key benefit is speed in decision making.
Cisco Systems’ organizational structure is so complex that it can take fifteen minutes and a whiteboard to fully explain. John Chambers describes the benefits simply: speed, skill, and flexibility. The core structural unit at the heart of Chambers’ concept is the management team. Cisco managers, employees, and senior leaders are on more than one management team, actually many more. The existence of multiple teams, councils, boards, and working groups within Cisco creates a web of internal integrating structures that lead to fast decisions by the right people to ensure that the company is agile, with the potential to grow even in difficult times. Manny Rivelo is a senior vice president at Cisco and at one point was embedded in at least fourteen internal teams: three councils, six boards, and five working groups, all within the company. What led Chambers to this complex organizational structure was the realization that the company’s hierarchical structure precluded it from moving quickly into new markets. By restructuring with an emphasis on horizontal integration and cross-functional teaming, Chambers flattened Cisco and increased the company’s agility. A key benefit is speed of decision making. Fast decision making is good when the right skilled people are engaged in the process. The team approach through councils, boards, and working groups ensures that the right people are in the right place at the right time to make good decisions, quickly.
SOURCE: M. Kimes, “Cisco Systems Layers It On,” Fortune 158 (December 8, 2008): 24.
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6. Key Organizational Design Processes
Integration
The process of coordinating the different parts of an organization
Supports dynamic equilibrium, in which all the parts of an organization are interrelated and balanced
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Integration
Vertical integration
Hierarchical referral
Rules and procedures
Plans and schedules
Positions added to the organization structure
Management information systems
Horizontal differentiation
Liaison roles
Task forces
Integrator positions
Teams
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8. Organizational Design Process
2 Ways to Approach
Organizational Design Process I
establish desired level of each structural dimension on a high-low continuum and develop structure that meets desired configuration II
describe what is or is not important to the success of the organization rather than worry about specific characteristics
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9. Structural 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
Specialization: the degree to which jobs are narrowly defined and depend on unique expertise
Standardization: the degree to which work activities are accomplished in a routine fashion
Complexity: the degree to which many different types of activities occur in the organization
Hierarchy of Authority: the degree of vertical differentiation across levels of management
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10. Importance-Based How many tasks and how specialized? How standardized?
What skills are required?
Basis for grouping of positions?
How large should each unit be?
How much standardization?
What mechanisms to help individuals?
How centralized?
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11. Structural Configurations
Simple Structure – a centralized form of organization that emphasizes the upper echelon and direct supervision
Machine Bureaucracy – a moderately decentralized form of organization that emphasizes the technical staff and standardization of work processes
Professional Bureaucracy – a decentralized form of organization that emphasizes the operating level and standardization of skills
Divisional Form – a moderately decentralized form of organization that emphasizes the middle level and standardization of outputs
Adhocracy – a selectively decentralized form of organization that emphasizes the support staff and mutual adjustment among people
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12. Five Structural Configurations of Organization
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13. Five Basic Parts of an Organization
SOURCE: From H. Mintzberg, The Structuring of Organizations, © 1979, 20. Reprinted by permission of
Pearson Education, Inc., Upper Saddle River, N.J.
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14. Contextual Variables – a set of characteristics that
Technology
Size
Contextual Variables –
a set of characteristics that
influences the organization’s
design processes
Strategy
and Goals
Environment
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15. SIZE Measured in number of employees
Formalization, specialization and standardization greater in larger organizations
As size increases, complexity increases
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16. TECHNOLOGY
The relationship between technology and structure is complex…
…different departments employ different technologies…
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Woodward
Three types of technology:
Unit – small batch manufacturing technology
Mass – large-batch manufacturing
Process production – continuous-production process
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18. Technological interdependence
Thompson
Technological interdependence
the degree of interrelatedness of the organization’s various technological elements
Greater technological interdependence leads to greater complexity.
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Environment
anything outside the boundaries of an organization
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Strategy
TECHNOLOGY
Provides legitimacy to the organization, employee direction, decision guidelines, and criteria for performance.
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21. Extremes of Environmental Uncertainty
Mechanistic Structure – an organizational design that emphasizes structured activities, specialized tasks, and centralized decision making
Organic Structure – an organizational design that emphasizes teamwork, open communication, and decentralized decision making
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Strategy
TECHNOLOGY
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
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23. Relationships Among Organizational Design Elements
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24. Forces Reshaping Organizations
Organizational life cycles
Globalization
Changes in Information-Processing Technologies
Demands on Organizational Processes
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25. Organization Life Cycle
the differing stages of an organization’s life from birth to death
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Emerging structures
Network organizations – web-like structures that contract some or all operations to other organizations, then coordinate activities.
Virtual organizations – temporary networks of organizations consisting of independent enterprises.
Circle organizations – open system, organic structure for customer responsiveness
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27. Harley Davidson’s Circle Organization
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28. Four Symptoms of Structural Weakness
Delay in decision making
Poor quality decision making
Lack of innovative response to changing environment
High level of conflict
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29. Personality/Organization
Paranoid
Depressive
Dysfunctional
Personality/Organization
Combinations
Schizoid
Dramatic
Compulsive
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