1. Chapter 15 Organizational Design and Structure
Define differentiation and integration as organizational design processes.
Discuss the basic design dimensions managers must consider in structuring an organization.
Describe five structural configurations for organizations.
Describe four contextual variables that influence organizational structure.
Explain the forces reshaping organizations.
Identify and describe emerging organizational structures.
Identify factors that can adversely affect organizational structure.
Learning Outcomes
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2. Organizational Design
the process of constructing and adjusting an organization’s structure to achieve its business strategy and goals
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3. Organizational Structure
the linking of departments and jobs within an organization
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4. Learning Outcome 1
Define differentiation and integration as organizational design processes.
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5. 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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6. 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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7. 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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8. 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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9. Integration Vertical integration Hierarchical referral
Rules and procedures
Plans and schedules
Positions added to the organization structure
Management information systems
Horizontal Integration
Liaison roles
Task forces
Integrator positions
Teams
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10. Learning Outcome 2
Discuss the basic design dimensions managers must consider in structuring an organization.
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11. The Organizational Design Process
2 Ways to Approach
The 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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12. 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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13. 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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14. Learning Outcome 3
Describe five structural configurations for organizations.
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15. Structural Configurations
Simple Structure – a centralized form of organization that emphasizes a small technical and support staff, strong centralization of decision making in the upper echelon, and a minimal middle level
Machine Bureaucracy – a moderately decentralized form of organization that emphasizes a support staff differentiated from the line operations of the organization, limited horizontal decentralization of decision making, and a well-defined hierarchy of authority
Professional Bureaucracy – a decentralized form of organization that emphasizes the expertise of the professionals in the operating core of the organization
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16. Structural Configurations
Divisionalized Form – a loosely coupled, composite structural configuration composed of divisions, each of which may have its own structural configuration
Adhocracy – a selectively decentralized form of organization that emphasizes the support staff and mutual adjustment among people
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17. Five Structural Configurations of Organization
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18. 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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19. Learning Outcome 4
Describe four contextual variables that influence organizational structure.
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20. 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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21. SIZE Measured in number of employees
Formalization, specialization and standardization greater in larger organizations
As size increases, complexity increases
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22. TECHNOLOGY
The relationship between technology and structure is complex…
…different departments employ different technologies…
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23. Joan Woodward Three types of technology:
Unit – small batch manufacturing technology
Mass – large-batch manufacturing
Process production – continuous-production process
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24. Charles Perrow
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25. Technological interdependence
James 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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26. Environment
Environment - anything outside the boundaries of an organization
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27. Environment TECHNOLOGY
Task Environment – the part of the environment that is directly relevant to the organization
Environmental Uncertainty – the amount and rate of change
in the organization’s
environment
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28. 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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29. Strategy
TECHNOLOGY
Provides legitimacy to the organization, employee direction, decision guidelines, and criteria for performance.
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30. Relationships Among Organizational Design Elements
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31. 5 Learning Outcome Explain the forces reshaping organizations. 2
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32. Forces Reshaping Organizations
Organizational life cycles
Globalization
Changes in Information-Processing Technologies
Demands on Organizational Processes
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33. Organization Life Cycle
the differing stages of an organization’s life from birth to death
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34. Learning Outcome 6
Identify and discuss emerging organizational structures.
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35. 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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36. Harley Davidson’s Circle Organization
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37. Learning Outcome 7
Identify factors that can adversely affect organizational structure.
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38. 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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39. Personality/Organization
Paranoid
Depressive
Dysfunctional
Personality/Organization
Combinations
Schizoid
Dramatic
Compulsive
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40. Review the section, “Basic Design Dimensions
Review the section, “Basic Design Dimensions.” Which dimensions does this scene show or imply?
2. Can you sense the division of labor represented by Senator Hawkins and Alan Smith? Corrine Whitman does not appear in this scene but is also part of a division of labor.
3. Review the five structural configurations described in the chapter. Which of those configurations best describes the likely structure of Senator Hawkins’ office? Which configurations do not apply? Why?
Rendition
U.S. government operatives haul Anwar El-Ibrahimi (Omar Metwally)
off his flight from Cape Town, South Africa, after it arrives in
Washington, D.C. He is a suspected terrorist whom the government
sends to North Africa for torture and interrogation. CIA analyst
Douglas Freeman (Jake Gyllenhaal) reacts negatively to the torture
techniques and urges El-Ibrahimi’s release.
This scene opens with a night shot of the Washington Monument. It follows
Kahlid’s (Moa Khouas) discussion with Hamadi (Hassam Ghancy),
the leader of a terrorist group. Congressional aide Alan Smith (Peter
Sarsgaard) says in a voice-over, “She called you?” referring to Corrine
Whitman (Meryl Streep), head of U.S. intelligence. She authorized
the extraordinary rendition of El-Ibrahimi. Alan Smith, earlier in the
film, pressed her for El-Ibrahimi’s release and his return to the United
States. This scene does not explicitly discuss organizational structure,
but you can infer several aspects of structure from the scene.
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41. How did Ryan Smith determine whether his company needed a mechanistic structure with a tall vertical hierarchy or an organic one involving free-flowing partnerships?
What are the advantages and disadvantages of Modern Shed’s organizational structure?
Give an example of how Modern Shed’s structure enables fast response to rapidly changing market opportunities.
Modern Shed
Like his stylish sheds, Ryan Smith’s company is built to be adaptive, scalable, and suited to the needs of the environment. Modern Shed counts only 12 to 14 full time employees in the firm’s Seattle office; however, at times the company’s output rivals that of a large builder, due to close collaboration with a network of 35 independent contractors who specialize in everything from construction to sales. According to Smith, partnering with outside specialists is the most efficient, effective, and flexible way to run a startup company. Small, flexible, responsive—these are the qualities that have enabled Modern Shed to thrive even during an economic recession.
Ask your students:
How did Ryan Smith determine whether his company needed a mechanistic structure with a tall vertical hierarchy or an organic one involving free-flowing partnerships?
What are the advantages and disadvantages of Modern Shed’s organizational structure?
Give an example of how Modern Shed’s structure enables fast response to rapidly changing market opportunities.
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