1. Slide content created by Charlie Cook, The University of West Alabama Copyright © Houghton Mifflin Company. All rights reserved. Chapter Twelve Managing Organizational Design

2. Copyright © Houghton Mifflin Company. All rights reserved.12–2 The Nature of Organization Design Organization Design –The overall set of structural elements and the relationships among those elements used to manage the total organization. –A means to implement strategies and plans to achieve organizational goals. Organization Design Concepts –Organizations are not designed and then left intact. –Organizations are in a continuous state of change. –Designs for larger organizations are extremely complex and have many nuances and variations.

3. Copyright © Houghton Mifflin Company. All rights reserved.12–3 Universal Perspectives on Organization Design Bureaucratic Model (Max Weber) –A logical, rational, and efficient organization design based on a legitimate and formal system of authority. –Characteristics A division of labor with each position filled by an expert. A consistent set of rules that ensure uniformity in task performance. A hierarchy of positions which creates a chain of command. Impersonal management; with the appropriate social distance between superiors and subordinates. Employment and advancement is based on technical expertise, and employees are protected from arbitrary dismissal.

4. Copyright © Houghton Mifflin Company. All rights reserved.12–4 Situational Influences on Organization Design Forms of the organizational environment Stable environments that remain constant over time. Unstable environments subject to uncertainty and rapid change. Organization Designs Mechanistic organizations that are similar to bureaucratic or System 1 models; found most frequently in stable environments. Organic organizations that are flexible and informal models; usually found in unstable and unpredictable environments.

5. Copyright © Houghton Mifflin Company. All rights reserved.12–5 Strategy and Organization Design Corporate-Level Strategy –Single-product strategy –Related or unrelated diversification –Portfolio approach to managing strategic business units

6. Copyright © Houghton Mifflin Company. All rights reserved.12–6 Strategy and Organization Design (cont’d) Business-Level Strategy –Defender –Prospecting –Analyzer Generic Competitive Strategies –Differentiation –Cost leadership –Focus

7. Copyright © Houghton Mifflin Company. All rights reserved.12–7 Basic Forms of Organization Design Functional or U-form (Unitary) Design –Organizational members and units are grouped into functional departments such as marketing and production. –Coordination is required across all departments. –Design approach resembles functional departmentalization in its advantages and disadvantages.

8. Copyright © Houghton Mifflin Company. All rights reserved.12–8 Functional or U-form Design for a Small Manufacturing Company

9. Copyright © Houghton Mifflin Company. All rights reserved.12–9 Basic Forms of Organization Design (cont’d) Conglomerate or H-form (Holding) Design –Organization consists of a set of unrelated businesses with a general manager for each business. –Holding-company design is similar to product departmentalization. –Coordination is based on the allocation of resources across companies in the portfolio. –Design has produced only average to weak financial performance; has been abandoned for other approaches.

10. Copyright © Houghton Mifflin Company. All rights reserved.12–10 Conglomerate (H-form) Design at Samsung

11. Copyright © Houghton Mifflin Company. All rights reserved.12–11 Basic Forms of Organization Design (cont’d) Divisional or M-form (Multidivisional) Design –Multiple businesses in related areas operating within a larger organizational framework. –Results from a strategy of related diversification. –Some activities are decentralized down to the divisional level; others are centralized at the corporate level. –M-form design advantages are the opportunities for coordination and sharing of resources. –Successful M-form organizations can out perform U-form and H-form organizations.

12. Copyright © Houghton Mifflin Company. All rights reserved.12–12 Multidivisional (M-form) Design at Limited Brands

13. Copyright © Houghton Mifflin Company. All rights reserved.12–13 Basic Forms of Organization Design (cont’d) Matrix Design –Two overlapping bases of departmentalization: A set of product groups or temporary departments are superimposed across the functional departments. –Employees in the matrix belong to their departments and the project team: A multiple command structure in which an employee reports to both departmental and project managers. –A matrix design is useful when: There is strong environmental pressure. There are large amounts of information to be processed. There is pressure for shared resources.

14. Copyright © Houghton Mifflin Company. All rights reserved.12–14 A Matrix Organization

15. Copyright © Houghton Mifflin Company. All rights reserved.12–15 Basic Forms of Organization Design (cont’d) Hybrid Designs –Based on two or more common forms of organization design—may have a mixture of related divisions and a single unrelated division. –Most organizations use a modified form of organization design that permits them to have sufficient flexibility to make adjustments for strategic purposes.

16. Copyright © Houghton Mifflin Company. All rights reserved.12–16 Emerging Issues in Organization Design The Team Organization –Relies almost exclusively on project-type teams, with little or no underlying functional hierarchy. The Virtual Organization –Has little or no format structure with few permanent employees, leased facilities, and outsourced basic support services. –May conduct its business entirely on-line and exists only to meet for a specific and present need. The Learning Organization –Works to facilitate the lifelong learning and development of its employees while transforming itself to respond to changing demands and needs.