1. Chapter 21
Organization
Design

2. Objectives Distinguish between mechanistic and organic structures
Describe the three traditional types of organizational structures and their advantages and disadvantages
Describe horizontal and network structures and their advantages and disadvantages
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3. …Objectives
Distinguish between formal and informal organizational structure
Describe the boundaryless organization
Explain the differentiation-integration issue in organization design
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4. The 7-S Model Structure Systems Strategy Style Skills Staff Shared
Values/Goals
Systems
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5. Mechanistic Vs. Organic Structures
Specialized
Rigidly Defined
Centralized
Vertical
Rigid Departmentalization
Clean Chain of Command
Narrow
High
Tasks
Authority
Communication
Unit
Hierarchy
Span of Control
Formalization
Common
Broadly Defined
Decentralized
Horizontal
Cross-Functional Teams
Cross-Hierarchical Teams
Wide
Low
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6. Organizational Structure - Defined
Organizational structure refers to the pattern of roles, authority, and communication that determines the coordination of the technology and people within an organization
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7. Functional Structure Marketing Manufacturing Accounting 21 -6
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8. Functional Structure Advantages Disadvantages
Develop functional expertise
Loyalty to function and standards of performance
Can assign specialists where needed reducing duplication
Promote standardization
Facilitates centralized
purchasing
Disadvantages
Integration and coordination difficulties
Slow decision making
Information sharing and collaboration can be problematic
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9. When to Use a Functional Structure?
Size: small
Product or service: single
Number of markets: small
Cycle time: long
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10. Divisional Structure Product Division 1 Product Division 2 Marketing
Manufacturing
Accounting
Marketing
Manufacturing
Accounting
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11. Divisional Structure Disadvantages Advantages
Duplication of effort and resources
May require more equipment
Lost economies of scale
Decreased opportunity for technical specialization
Standardization is harder
Coordination and collaboration problems
Client service?
Advantages
Focus leads to improvements
Customer satisfaction
Responsiveness to market and environment
Coordination across functions
Decentralized decision making
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12. When to Use a Divisional Structure?
Products or services: several
Environment: rapidly changing and unpredictable
Technology: nonroutine and depends on several functional areas
Size: large
Strategy: adaptive, customer service
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13. Matrix Structure Marketing Manufacturing Accounting Product Division 1
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14. Matrix Structures - Defined
Matrix structures have a dual focus, usually
products and functions. It is an attempt to
profit from the advantages of both functional
and product structures
However, having both a product boss and a functional boss can cause confusion and conflict
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15. When to Use a Matrix Structure?
Pressure to share scarce resources across product lines
Environmental pressure for two or more critical outputs
Environment is both complex and uncertain
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16. Horizontal Structures - Defined
Horizontal corporations are flat structures
with minimal layers of management and
self-managing multidisciplinary teams
organized around core processes
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17. Horizontal Hospital Structure
Senior
Management
Nurse Coordinators
Team
Team
Team
Patient Flow
Nurse Coordinators
Team
Team
Team
Patient Flow
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18. When to Use Horizontal Structures?
Short product life and development cycles
Customer satisfaction is a goal
Environment is uncertain
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19. Network Structure - Defined
Network organizations consist of brokers
who subcontract needed services to
designers, suppliers, producers, and
distributors linked by full-disclosure
information systems and coordinated by
market mechanisms
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20. Network Organization Structure
Designers
Producers
Brokers
Suppliers
Marketers &
Distributors
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21. When to Use Network Structures?
Need to concentrate on core function and can subcontract the rest
Can’t afford large start-up costs
Fast-paced changing industries
Environment is uncertain
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22. Network Idealists - Defined
Networked idealists are initially non-
profit entrepreneurs who develop
organic, cellular distributed network
structures to accomplish their work
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23. Characteristics of Networked Idealists
Guerilla infrastructures and radical architectures – bypass traditional entry barriers
Winning by not trying – “a different game”
Value-based motivation – do good and make $
Attack strengths – attack strong incumbents
Knowledge from the people – partners and customers add value
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24. Networked Idealists Inner circle Founder Active users Passive users
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25. Characteristics of Boundaryless Organizations
Permeable internal and external boundaries
Good ideas welcomed regardless of their source
Cross-functional customer service teams
Delegated authority
Shared information
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26. Informal Structures - Defined
The informal structure refers to natural
formations, informal leadership, and
communication patterns that evolve in an
organization and run parallel to the formal
structure
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27. Differentiation Vs. Integration - Defined
The differences in
cognitive and
emotional orientations
among managers in
different functional
departments, and the
difference in formal
structure among
these departments
Integration:
The behaviors and
structures used by
differentiated
organizational subunits
to coordinate their work
activities
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28. Differentiation High Low Formality of structure Social Task
Mostly task
Interpersonal orientation
Short
Long
Time horizon
Customer satisfaction
Efficient production
New developments, quality
Goals
Sales Department
Manufacturing Department
R&D Department
Characteristic
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29. Contingencies That Influence Design
Strategy
Environment
Technology
Size
National culture
People and their shared values
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30. Environmental Characteristics and Recommended Organizational Designs
Complex
Simple
High Uncertainty
Decentralized, organic structure; participation and teamwork; numerous departments and boundary spanners
Moderate Uncertainty
Decentralized, organic structure with participation and teamwork; few departments; boundary spanning roles
Unstable
Formal, centralized mechanistic structure with many depts. and integration roles
Low Uncertainty
Formal, centralized mechanistic structure with few departments
Stable
Environmental Rate of Change
Environmental Complexity
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31. International Structures – Strategic Alliances
Licensing – allow products to be sold for a fee by foreign firms with access to global markets and distribution channels
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32. …International Structures – Strategic Alliances
Joint ventures – separate business entities designed to enter new markets, formed by two or more firms that share development and production costs
Consortia – groups of independent companies that join together to share skills, resources, costs, and access to one another’s markets
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33. International Structures - Integrated Network Models
Distributed, specialized resources and capabilities
Large flows of components, products, resources, people, and information among interdependent units
Complex processes of coordination and cooperation in an environment of shared decision making
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34. International Structures – The Family Business
Most common structure worldwide is the family business
Dominant values in Chinese family businesses are: patrimonialism, paternalism, hierarchy, mutual obligations, responsibility, familialism, personalism, and connections
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35. Keiretsu and Chaebols - Defined
Japanese keiretsu – complex inter-firm networks that combine market exchange and non-economic social relations
Korean chaebols – business group consisting of large companies owned and managed by family members or relatives in many diversified business areas
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36. When Does Culture Matter in Design?
High power distance cultures tend toward structures with centralized decision making. Low PD cultures prefer decentralization
High uncertainty avoidance generally correlates with greater formalization and more formal structures
Matrix structures did not fit the French respect for hierarchy and unity of command
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