1. Chapter 14 Nelson & Quick Organizational Design & Structure Copyright ©2005 by South-Western, a division of Thomson Learning. All rights reserved.

2. 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 Organizational Design H. Mintzberg, The Structuring of Organizations, Prentice Hall, © 1979, 301. Reprinted by permission of Prentice-Hall, Inc, Upper Saddle River, NJ.

3. Key Organizational Design Processes

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

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

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 MarketingEngineering Goal orientation Time orientation Interpersonal orientation Structure Design Medium run Task oriented More formal Sales volume Long run People oriented Less formal

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

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. 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 Dimension s Formalization - the degree to which the organization has official rules, regulations, and procedures 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 Centralization - the degree to which decisions are made at the top of the organization

13. Adhocracy - a selectively decentralized form of organization that emphasizes the support staff & mutual adjustment among people 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 Divisional Form - a moderately decentralized form of organization that emphasizes the middle level & standardization of outputs Professional Bureaucracy - a decentralized form of organization that emphasizes the operating level & standardization of skills Structural Configurations of Organizations

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

16. Contextual Variables - a set of characteristics that influences the organization’s design processes Size Environment Technology Strategy & Goals

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

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

19. Relationship Between Technology and Basic Design Dimensions Key 1 Formalization 4 Standardization 2 Centralization 5 Complexity 3 Specialization 6 Hierarchy of Authority Craft 1. Moderate 2. Moderate 3. Moderate 4. Low-moderate 5. High 6. Low Routine 1. High 2. High 3. Moderate 4. High 5. Low 6. High Nonroutine 1. Low 2. Low 3. Low 4. Low 5. High 6. Low Engineering 1. Moderate 2. Moderate 3. High 4. Moderate 5. Moderate 6. Moderate Few Exceptions Many Exceptions Task Variability Ill-defined & Unanalyzable Well-defined & Analyzable Problem Analyzability Built from C. Perrow, “A Framework for the Comparative Analysis of Organization,” American Sociological Review, April 1967, 194-208

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

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. 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 preferencesformalization 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): 55-76. Copyright @ John Wiley & Sons Limited. Reproduced with permission.

23. Context of the organization Correct size Current technology Perceived environment Current strategy & goals The Relationship among Key Organizational Design Elements 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 Which influence how well the structure meets its Purposes Designate formal lines of authority Designate formal information- processing patterns Differentiation & Integration Which influence how well the structure fits the Context of the organization

25. Forces Reshaping Organizations  Organizational 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 Roles of Managers Today 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 From R. Teerlink and L. Ozley, More than a Motorcycle: The Leadership Journey at Harley-Davidson. Boston, MA, 2000. P. 139. Copyright © 2000 by the Harvard Business School Publishing Corporation; all rights reserved. Create Demand Produce Product Provide Support

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 effortDepartments work against each other, not for organizational goals

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