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Organizational Design
the process of constructing and adjusting an organization’s structure to achieve its goals. © 2011 Cengage Learning. All rights reserved. 2
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Organizational Design
the linking of departments within an organization © 2011 Cengage Learning. All rights reserved. 2
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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 © 2011 Cengage Learning. All rights reserved. 3
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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 © 2011 Cengage Learning. All rights reserved.
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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. © 2011 Cengage Learning. All rights reserved.
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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 © 2011 Cengage Learning. All rights reserved.
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© 2011 Cengage Learning. All rights reserved.
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 © 2011 Cengage Learning. All rights reserved.
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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 © 2011 Cengage Learning. All rights reserved.
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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 © 2011 Cengage Learning. All rights reserved.
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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? © 2011 Cengage Learning. All rights reserved.
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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 © 2011 Cengage Learning. All rights reserved.
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Five Structural Configurations of Organization
© 2011 Cengage Learning. All rights reserved.
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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. © 2011 Cengage Learning. All rights reserved.
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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 © 2011 Cengage Learning. All rights reserved. 4
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SIZE Measured in number of employees
Formalization, specialization and standardization greater in larger organizations As size increases, complexity increases © 2011 Cengage Learning. All rights reserved. 4
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TECHNOLOGY The relationship between technology and structure is complex… …different departments employ different technologies… © 2011 Cengage Learning. All rights reserved. 4
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© 2011 Cengage Learning. All rights reserved.
Woodward Three types of technology: Unit – small batch manufacturing technology Mass – large-batch manufacturing Process production – continuous-production process © 2011 Cengage Learning. All rights reserved.
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Technological interdependence
Thompson Technological interdependence the degree of interrelatedness of the organization’s various technological elements Greater technological interdependence leads to greater complexity. © 2011 Cengage Learning. All rights reserved.
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© 2011 Cengage Learning. All rights reserved.
Environment anything outside the boundaries of an organization © 2011 Cengage Learning. All rights reserved. 4
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© 2011 Cengage Learning. All rights reserved.
Strategy TECHNOLOGY Provides legitimacy to the organization, employee direction, decision guidelines, and criteria for performance. © 2011 Cengage Learning. All rights reserved. 4
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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 © 2011 Cengage Learning. All rights reserved.
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© 2011 Cengage Learning. All rights reserved.
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 © 2011 Cengage Learning. All rights reserved. 4
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Relationships Among Organizational Design Elements
© 2011 Cengage Learning. All rights reserved.
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Forces Reshaping Organizations
Organizational life cycles Globalization Changes in Information-Processing Technologies Demands on Organizational Processes © 2011 Cengage Learning. All rights reserved.
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Organization Life Cycle
the differing stages of an organization’s life from birth to death © 2011 Cengage Learning. All rights reserved.
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© 2011 Cengage Learning. All rights reserved.
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 © 2011 Cengage Learning. All rights reserved.
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Harley Davidson’s Circle Organization
© 2011 Cengage Learning. All rights reserved.
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Four Symptoms of Structural Weakness
Delay in decision making Poor quality decision making Lack of innovative response to changing environment High level of conflict © 2011 Cengage Learning. All rights reserved.
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Personality/Organization
Paranoid Depressive Dysfunctional Personality/Organization Combinations Schizoid Dramatic Compulsive © 2011 Cengage Learning. All rights reserved.
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