1. Chapter 15 Organizational Design and Structure

2. Learning Outcomes
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

3. Learning Outcomes Explain the forces reshaping organizations
Identify and describe emerging organizational structures
Identify factors that can adversely affect organizational structure

4. Organizational Design and Structure
The process of constructing and adjusting an organization’s structure to achieve its business strategy and goals
Organizational structure
The linking of departments and jobs within an organization 2

5. Learning Outcome
Define differentiation and integration as organizational design processes
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6. Key Organizational Design Processes
Differentiation: Deciding how to divide the work in an organization
Dimensions
Manager’s goal orientation
Time orientation
Interpersonal orientation
Formality of structure 3

7. Types of Differentiation
Horizontal
Degree of differentiation between organizational subunits
Vertical
Difference in authority and responsibility in the organizational hierarchy
Spatial
Geographic dispersion of an organization’s offices, plants, and personnel

8. Beyond the Book: Differentiation 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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9. Key Organizational Design Processes
Integration: Coordinating the different parts of an organization
Supports dynamic equilibrium, in which all the parts of an organization are interrelated and balanced

10. Horizontal integration
Vertical integration
Horizontal integration
Hierarchical referral
Rules and procedures
Plans and schedules
Positions added to the organization structure
Management information systems
Liaison roles
Task forces
Integrator positions
Teams
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11. Learning Outcome
Discuss the basic design dimensions managers must consider in structuring an organization
©2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

12. Two Ways to Approach the Organizational Design Process
Establish desired level of each structural dimension on a high-low continuum and develop structure that meets desired configuration
Describe what is or is not important to the success of the organization

13. Structural Dimensions
Formalization
Degree to which the organization has official rules, regulations, and procedures
Centralization
Degree to which decisions are made at the top of the organization
Specialization
Degree to which jobs are narrowly defined and depend on unique expertise

14. Structural Dimensions
Standardization
Degree to which work activities are accomplished in a routine fashion
Complexity
Degree to which many different types of activities occur in the organization
Hierarchy of authority
Degree of vertical differentiation across levels of management

15. Describe five structural configurations for organizations
Learning Outcome
Describe five structural configurations for organizations
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16. Table 15.1 - Five Structural Configurations of Organization
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17. Figure 15.2 - Five Basic Parts of an Organization
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18. Learning Outcome
Describe four contextual variables that influence organizational structure
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19. Contextual Variables
Set of characteristics that influences the organization’s design processes
Size
Technology
Strategy and goals
Environment

20. Size Measured in number of employees
Formalization, specialization and standardization greater in larger organizations
Size increases, complexity increases

21. Technology
Tools, techniques, and actions used by an organization to transform inputs into outputs
Different departments employ different technologies
Types
Unit - Small batch manufacturing technology
Mass - Large-batch manufacturing technology and made-to-order production
Process production - Continuous-production process

22. Technology
Technological interdependence: Degree of interrelatedness of the organization’s various technological elements
James Thompson’s research suggests greater technological interdependence leads to greater complexity

23. Figure 15.3 - Summary of Perrow’s Findings

24. Environment Anything outside the boundaries of an organization
Task environment: Part of the environment that is directly relevant to the organization
Environmental uncertainty: Amount and rate of change in the organization’s environment

25. Extremes of Environmental Uncertainty
Mechanistic structure: Organizational design that emphasizes structured activities, specialized tasks, and centralized decision making
Organic structure: Organizational design that emphasizes teamwork, open communication, and decentralized decision making

26. Strategy and Goals
Provide legitimacy to the organization, employee direction, decision guidelines, and criteria for performance
Help the organization fit into its environment
Limitations
Changing the organization’s structure drives up costs and difficulties
Inefficiency of the structure to perceive environmental changes can lead to organizational failure

27. Relationships Among Organizational Design Elements
Context of the organization
Influences how managers perceive structural needs
Structural Dimensions
Which characterize the organizational processes
Differentiation and Integration
Which influence how well the structure meets its
Purposes
Which influence how well the structure fits the
Context of the organization
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28. Explain the forces reshaping organizations
Learning Outcome
Explain the forces reshaping organizations
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29. Forces Reshaping Organizations
Organizational life cycles
Globalization
Changes in information-processing technologies
Demands on organizational processes

30. Identify and discuss emerging organizational structures
Learning Outcome
Identify and discuss emerging organizational structures
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31. Figure 15.5 - Harley-Davidson’s Circle Organization

32. Emerging Structures Network organizations
Web-like structures that contract some or all operations to other organizations and then coordinate activities
Virtual organizations
Temporary networks of organizations consisting of independent enterprises
Circle organizations
Open system, organic structure for customer responsiveness

33. Identify factors that can adversely affect organizational structure
Learning Outcome
Identify factors that can adversely affect organizational structure
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34. Four Symptoms of Structural Weakness
Delay in decision making
Poor quality decision making
Lack of innovative response to changing environment
High level of conflict

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

36. Rendition
Review the section, “Basic Design Dimensions.” Which dimensions does this scene show or imply?
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
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?

37. Modern Shed
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