1. Copyright ©2005 by South-Western, a division of Thomson Learning. All rights reserved Chapter 10 1 Organizational Design MANAGEMENT Meeting and Exceeding Customer Expectations EIGHTH EDITION Prepared by Deborah Baker Texas Christian University

2. Copyright ©2005 by South-Western, a division of Thomson Learning. All rights reserved Chapter 10 2 learning objectives 1. Explain the meaning of organizational design 2. Describe the four objectives of organizational design 3. Distinguish between mechanistic and organic organizational structures 4. Discuss the influence that contingency factors—organizational strategy, environment, size, age, and technology—have on organizational design 5. Describe the characteristics, advantages, and disadvantages of functional, divisional, matrix, team, and network structural designs

3. Copyright ©2005 by South-Western, a division of Thomson Learning. All rights reserved Chapter 10 3 Organizational Design Organizational Design Organizational Design The creation of or change to an organization’s structure 1 1. Develop the overall layout of positions and departments. Develop the interrelationships of the departments. Create the means to implement plans, achieve goals, and ultimately satisfy the customer

4. Copyright ©2005 by South-Western, a division of Thomson Learning. All rights reserved Chapter 10 4 Common Elements of Organizations 2 2. They operate with authority. They have departments. They use line and staff positions

5. Copyright ©2005 by South-Western, a division of Thomson Learning. All rights reserved Chapter 10 5 Objectives of Organizational Design 2 2 Respond to Change Respond to Change Integrate New Elements Coordinate Components Encourage Flexibility

6. Copyright ©2005 by South-Western, a division of Thomson Learning. All rights reserved Chapter 10 6 Organizational Structures 3 3 Mechanistic Structure A tight organizational structure characterized by rigidly defined tasks, formalization, many rules and regulations, and centralized decision making Organic Structure A flexible, free-flowing organizational structure that has few rules and regulations and decentralizes decision making right down to the employees performing the job

7. Copyright ©2005 by South-Western, a division of Thomson Learning. All rights reserved Chapter 10 7 Organizational Structures 3 3

8. Copyright ©2005 by South-Western, a division of Thomson Learning. All rights reserved Chapter 10 8 Contingency Factors Affecting Organizational Design 4 4 Strategy Environment Age Size Technology

9. Copyright ©2005 by South-Western, a division of Thomson Learning. All rights reserved Chapter 10 9 Influence of Strategy on Structure 4 4

10. Copyright ©2005 by South-Western, a division of Thomson Learning. All rights reserved Chapter 10 10 Environment 4 4 1. The organization must be able to adapt to change 2. The organization needs greater coordination between departments Requirements for an Unstable Environment

11. Copyright ©2005 by South-Western, a division of Thomson Learning. All rights reserved Chapter 10 11 Environment and Structure 4 4

12. Copyright ©2005 by South-Western, a division of Thomson Learning. All rights reserved Chapter 10 12 Environment 4 4. Mechanistic structure. Centralized decision making. Wide spans of control. Specialization Stable Environment. Organic structure. Flexibility. Coordination. Less formal procedures Unstable Environment

13. Copyright ©2005 by South-Western, a division of Thomson Learning. All rights reserved Chapter 10 13 Size of the Organization 4 4. Organic structure. Little division of labor. Few rules and regulations. Informal procedures Small Organizations. Mechanistic structure. Greater division of labor. More rules and regulations. More elaborate internal systems to control Large Organizations

14. Copyright ©2005 by South-Western, a division of Thomson Learning. All rights reserved Chapter 10 14 Age of the Organization 4 4 Birth Youth Midlife Maturity Organizational Life Cycle

15. Copyright ©2005 by South-Western, a division of Thomson Learning. All rights reserved Chapter 10 15 Organizational Life Cycle 4 4

16. Copyright ©2005 by South-Western, a division of Thomson Learning. All rights reserved Chapter 10 16 Technology 4 4 Small Batch Mass Production Continuous Process Flexible Manufacturing Systems

17. Copyright ©2005 by South-Western, a division of Thomson Learning. All rights reserved Chapter 10 17 Technology 4 4

18. Copyright ©2005 by South-Western, a division of Thomson Learning. All rights reserved Chapter 10 18 Structural Options 5 5 Network Team Matrix Divisional Functional

19. Copyright ©2005 by South-Western, a division of Thomson Learning. All rights reserved Chapter 10 19 Structural Options 5 5

20. Copyright ©2005 by South-Western, a division of Thomson Learning. All rights reserved Chapter 10 20 Functional Structure 5 5. Economies of scale. Minimizes duplication. Comfortable environment for employees. Simplifies training Advantages. Employees have little understanding of or concern for areas outside their own area. Barriers in communication, cooperation, and coordination. Slow response time to changes in the environment Disadvantages

21. Copyright ©2005 by South-Western, a division of Thomson Learning. All rights reserved Chapter 10 21 Functional Structure 5 5

22. Copyright ©2005 by South-Western, a division of Thomson Learning. All rights reserved Chapter 10 22 Divisional Structure 5 5. Focuses the attention on results. Flexible and responsive to change. Responsibility and accountability are easier to target. Excellent vehicle for developing senior executives Advantages. Duplication of activities and resources. Loss of efficiency and economies of scale. Lack of technical specialization, expertise, and training. Different divisions may feel they are competing with one another Disadvantages

23. Copyright ©2005 by South-Western, a division of Thomson Learning. All rights reserved Chapter 10 23 Divisional Structure 5 5

24. Copyright ©2005 by South-Western, a division of Thomson Learning. All rights reserved Chapter 10 24 Matrix Structure 5 5. Flexible. Increase in communication and coordination. Increase in employee motivation. Sense of commitment and satisfaction. Training in functional and management skills. General perspective Advantages. Dual chain of command. Pits divisional objectives against functional objectives. Time loss to meetings. Balance of power between functional and divisional sides Disadvantages

25. Copyright ©2005 by South-Western, a division of Thomson Learning. All rights reserved Chapter 10 25 Matrix Structure 5 5

26. Copyright ©2005 by South-Western, a division of Thomson Learning. All rights reserved Chapter 10 26 Team Structure 5 5. Breaks down departmental barriers. Speeds up decision making. Motivates employees. Lower administrative costs. Does not involve the problem of double reporting. Team membership Advantages. Performance suffers if training is not provided. Time required for team meetings Disadvantages

27. Copyright ©2005 by South-Western, a division of Thomson Learning. All rights reserved Chapter 10 27 Team Structure 5 5

28. Copyright ©2005 by South-Western, a division of Thomson Learning. All rights reserved Chapter 10 28 Network Structure 5 5. Flexibility. Low administrative overhead. Communication by e-mail Advantages. Lack of control. Reliance on contractors. Supply unreliability. Lack of technical expertise Disadvantages

29. Copyright ©2005 by South-Western, a division of Thomson Learning. All rights reserved Chapter 10 29 Network Structure 5 5