1. Organizational Design & Structure
Chapter 15 Nelson & Quick
Organizational Design & Structure

2. Organizational Design
Organizational Design - the process of constructing and adjusting an organization’s structure to achieve its goals.
organization’s structure
the linking of
departments and
jobs within an
organization
H. Mintzberg, The Structuring of Organizations, Prentice Hall, © 1979, 301.
Reprinted by permission of Prentice-Hall, Inc, Upper Saddle River, NJ. 2

3. Key Organizational Design Processes3

4. The process of deciding
how to divide the work
in an organization
Four Dimensions
Manager’s goal orientation
Time orientation
Interpersonal orientation
Formality of structure

5. Horizontal Differentiation
The degree of differentiation between organizational subunits
Based on employee’s specialized knowledge, education, or training

6. Vertical Differentiation
The difference in authority and responsibility in the organizational hierarchy
Greater in tall, narrow organizations than in flat, wide organizations
The International Association of Machinists and Aerospace Workers serves a very specialized division of labor. Associations like the IAMAW improve the lives of working families through the formation of guilds that exist within larger bureaucratic structures. What benefits does the IAMAW offer its members? What is the relationship between the IAMAW and the companies that employ machinists?

7. Spatial Differentiation
Geographic dispersion of an organization’s offices, plants, and personnel
Complicates organizational design, but may simplify goal achievement or protection

8. Differentiation Between Marketing and Engineering
Basis for Difference
Marketing
Engineering
Goal orientation
Time orientation
Interpersonal
orientation
Structure
Sales volume
Long run
People
oriented
Less formal
Design
Medium run
Task
oriented
More formal

9. The process of coordinating
the different parts
of an organization
Designed to achieve unity among individuals and groups
Supports a state of dynamic equilibrium - elements of organization are integrated, balanced

10. Vertical Integration Hierarchical referral Rules and procedures
Plans and schedules
Positions added to the organization structure
Management information systems

11. Horizontal Integration
Liaison roles
Task forces
Integrator positions
Teams

12. Basic Design 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
Hierarchy of
Authority -
the degree of
vertical
differentiation
across
levels of
management
Specialization -
the degree to
which jobs are
narrowly
defined and
depend on
unique
expertise
Basic
Design
Dimensions
Complexity - the degree to
which many different types
of activities occur in the
organization
Standardization - the
degree to which work
activities are accomplished
in a routine fashion

13. Structural Configurations of Professional Bureaucracy -
Simple Structure - a
centralized form of
organization that
emphasizes the upper
echelon & direct
supervision
Machine Bureaucracy -
a moderately
decentralized form of
organization that
emphasizes the
technical staff &
standardization of
work processes
Structural
Configurations of
Organizations
Adhocracy - a
selectively
decentralized
form of
organization that
emphasizes the
support staff &
mutual adjustment
among people
Professional
Bureaucracy -
a decentralized
form of
organization that
emphasizes the
operating level
& standardization
of skills
Midas has worked hard for over four decades to earn its reputation as “the auto service experts.” Visit the company’s Web site and try to determine the structural configuration of the corporation. Which of Mintzberg’s five structural configurations seem closely related to the organizational structure of Midas?
Divisional Form - a
moderately decentralized
form of organization
that emphasizes the
middle level &
standardization of outputs

14. Standardization of Work Processes
Five Structural Configurations of Organization
Structural
Configuration
Prime
Coordinating
Mechanism
Key Part of
Organization
Type of
Decentralization
Simple Structure
Direct
Supervision
Upper
Echelon
Centralization
Machine
Bureaucracy
Standardization of Work Processes
Technical
Staff
Limited
Horizontal
Decentralization
Professional
Bureaucracy
Standardization
of Skills
Operating
Level
Vertical &
Horizontal
Decentralization
Divisionalized
Form
Standardization
of Outputs
Middle
Level
Limited Vertical
Decentralization
Adhocracy
Mutual Adjustment
Support
Staff
Selective
Decentralization

15. Mintzberg’s Five Basic Parts of an Organization Strategic Apex Techno-
Middle
Line
Strategic
Apex
Operating Core
Support
Staff
Techno-
structure
From H. Mintzberg, The Structuring of Organizations (Upper Saddle
River, N.J.: Prentice-Hall, 1979): 20. Reprinted with permission.

16. Size Technology Strategy & Goals Environment Contextual Variables -
a set of characteristics that
influences the organization’s
design processes
Pixar Animation Studios is an award-winning computer-animation studio famous for the production of films such as Toy Story and Monsters, Inc. Analyze Pixar’s role within the larger Disney Corporation using the contextual variables of size, technology, environment, and strategy and goals. How does Disney benefit from Pixar’s specialization and relationship to the Walt Disney Studios division?
Strategy
& Goals
Environment 4

17. Size Basic Design Small Large Dimensions Organizations Organizations
Formalization
Centralization
Specialization
Standardization
Complexity
Hierarchy of authority
Less
High
Low
Flat
More
Low
High
Tall 4

18. Technology Technological Interdependence -
the degree of interrelatedness
of the organization’s various
technological elements 4

19. Problem Analyzability
Relationship Between
Technology and Basic
Design Dimensions
Task Variability
Few Exceptions Many Exceptions
Ill-defined &
Unanalyzable
Craft
1. Moderate
2. Moderate
3. Moderate
4. Low-moderate
5. High
6. Low
Routine
1. High
2. High
4. High
5. Low
6. High
Nonroutine
1. Low
2. Low
3. Low
4. Low
Engineering
3. High
4. Moderate
5. Moderate
6. Moderate
Problem Analyzability
Well-defined &
Analyzable
Key
1 Formalization 4 Standardization
2 Centralization 5 Complexity
3 Specialization 6 Hierarchy of Authority
Built from C. Perrow, “A Framework for the Comparative Analysis of Organization,” American Sociological Review, April 1967,

20. Environment Environment - anything outside the boundaries
of an organization
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
Environment 4

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

22. Strategy & Goals Strategic Dimension Predicted Structural
Characteristics
Innovation--to understand Low formalization
and manage new processes Decentralization
and technologies Flat hierarchy
Market differentiation--to Moderate to high complexity
specialize in customer Moderate to high preferences formalization
Moderate centralization
Cost control--to produce High formalization
standardized products High centralization
efficiently High standardization
Low complexity
Strategy
& Goals
Miller’s Integrative Framework of
Structural & Strategic Dimensions
D. Miller, “The Structural and Environmental Correlates of Business Strategy,” Strategic Management Journal 8 (1987): Copyright
@ John Wiley & Sons Limited. Reproduced with permission. 4

23. The Relationship among Key Organizational Design Elements
Context of the organization
Correct size
Current technology
Perceived environment
Current strategy & goals
Influences how manager perceive structural needs
Structural dimensions
Level of formalization
Level of centralization
Level of specialization
Level of standardization
Level of complexity
Hierarchy of authority

24. Which characterize the organizational processes
Differentiation & Integration
Which influence how well the structure meets its
Purposes
Designate formal
lines of authority
information-
processing patterns
Which influence how well the structure fits the
Context of the organization

25. Forces Reshaping Organizations
Organization Life Cycle - the differing stages of an organization’s life from birth to death
Globalization
Changes in Information-Processing Technologies
Demands on Organizational Processes
Emerging Organizational Structures

26. Structural Roles of Managers Today versus Managers of the Future
1. Strictly adhering to boss
-employee relationships
2. Getting things done by
giving orders
3. Carrying messages up
and down the hierarchy
4. Performing a set of tasks
according to a job description
5. Having a narrow functional
focus
6. Going through channels,
one by one by one
7. Controlling subordinates
Roles of Future Managers
1. Having hierarchical
relationships subordinated
2. Getting things done by
negotiating
3. Solving problems and
making decisions
4. Creating the job through
entrepreneurial projects
5. Having a broad cross-
functional collaboration
6. Emphasizing speed &
flexibility
7. Coaching one’s workers
Management Review, January 1991, Thomas R. Horton.

27. HD’s Circle Organization
Create
Demand
Produce
Product
Provide
Support
From R. Teerlink and L. Ozley, More than a Motorcycle: The Leadership Journey at Harley-Davidson. Boston, MA, P. 139.
Copyright © 2000 by the Harvard Business School Publishing Corporation; all rights reserved.

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
Overloaded hierarchy; information
funneling limited to too few channels
Right information not reaching
right people in right format
No coordinating effort
Departments work against each
other, not for organizational goals

29. Personality/Organization
Paranoid
Depressive
Dysfunctional
Personality/Organization
Combinations
Schizoid
Dramatic
Compulsive