1. © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Chapter 13 Organization Design

2. © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Learning Objectives Discuss the meaning of organization design and the role of organization charts. Describe early approaches to organization design, including the bureaucratic design and System 4 design. Name and discuss several major contingencies that affect organization design.

3. © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Name and discuss several major contemporary organization design alternatives. Define and discuss corporate culture, including its determinants, components, and consequences. Learning Objectives

4. © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. The Role of Organization Charts Organization Chart – Picture or map of the organization. – Useful to outsiders/newcomers to organization. – As organization grows in size, organization charts become more difficult to use because of large number of positions and complex relationships that exist among those positions.

5. © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Early Approaches to Organization Design The Bureaucratic Design – Max Weber coined the term bureaucracy to describe ideal organization design. – Formal and legitimate system of authority to guide rational and efficient organizational activities. See Box 13.1: The Ideal Bureaucracy—Weber’s Organizational Guidelines.

6. © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. System 4 Design – System 4: organization design as continuum. – At one end is hierarchical design, bureaucratic in nature (System 1). – At other end is System 4, a design with openness, flexibility, communication, participation. See Table 13.1: System 1 and System 4 Organization Designs. Early Approaches to Organization Design

7. © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Contingency Factors Affecting Organization Design Size and Life Cycle – Large and small organizations differ from one another in three important ways. Smaller organizations less specialized than larger organizations. Smaller organizations less standardized than large ones. Organizations more centralized when they are small. – Life cycle related to size. – Many organizations cyclical.

8. © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Technology – Set of conversion processes used by organization to transform inputs into outputs. – Unit or small-batch technology: when a product is made in small quantities. – Large-batch or mass-production technology: when product is manufactured in assembly-line fashion. Contingency Factors Affecting Organization Design

9. © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Technology – Continuous-process technology: composition of raw materials, including foods, changed through series of mechanical or chemical processes. – Quality circles: groups of employees who focus on how to improve quality of products. – Semi-autonomous work groups: operate with no direct supervision to perform specific tasks. Contingency Factors Affecting Organization Design

10. © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Environment – Environmental uncertainty dimensions: environmental change and complexity. – Environment changes: dynamic, difficult to predict, high rate of change. – Environment seldom changes: fairly static, easy to predict, low rate of change. – Environment contains many different elements: high level of complexity. Contingency Factors Affecting Organization Design

11. © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Contemporary Organization Design Alternatives The Functional Design (U-Form) – Functional design: based on functional departmentalization. – U-Form: unitary or uniform approach to design. – Every part of organization dependent upon rest; none can survive without the others. – Lends itself to centralized coordination.

12. © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. The Conglomerate Design (H-Form) – Conglomerate design: organization has grown through development of new and unrelated product lines. – H-Form: conglomerates holding companies for groups of diverse products. – Units separate businesses headed by general managers. Contemporary Organization Design Alternatives

13. © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. The Divisional Design (M-Form) – Divisional design Popular with multinational organizations. Combines product approach to departmentalization with strategic business unit strategy. – M-Form Multi-divisional characteristics. Each division strategic business unit, or SBU. Contemporary Organization Design Alternatives

14. © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. The Matrix Design – Superimposing product-based departmentalization on existing functional departmentalization. – Each manager heads up a project that cuts across functional areas. – Functional departments: firm develops and retains unified and competent functional specialists. Contemporary Organization Design Alternatives

15. © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. The Matrix Design – Product-based departments direct special and focused attention to individual products or product groups. – When firm has diverse set of products and complex environment. – When great deal of information to be processed. – When there is pressure for shared resources. Contemporary Organization Design Alternatives

16. © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. The Matrix Design – Very flexible; teams created, changed, dissolved without major disruption. – Improves motivation. – Promotes development of human resources. – Potential conflict by having a number of bosses. – Coordination difficult. – Group work takes longer than individual work. Contemporary Organization Design Alternatives

17. © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Cooperatives – Input cooperatives: purchase feed, seed, fertilizer, fuel, other inputs using co-op size to obtain quantity discounts reducing costs to members. – Output cooperatives: provide marketing and branding for members to increase sales. – Support cooperatives: provide services to members at reduced rates. Contemporary Organization Design Alternatives

18. © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Cooperatives – Owned and controlled by their members. – Objective: to maximize benefits they generate for the members. – Owner-members: limited liability, equal votes, share in profits/benefits, tax benefits. – As they grow larger, individual control diluted. – Difficult and expensive to form and maintain. Contemporary Organization Design Alternatives

19. © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Other Designs – Global – Organic – Mechanistic See Table 13.2: Mechanistic and Organic Designs. – Hybrid – New venture units, or “skunkworks” – Employee Stock Ownership Plans (ESOPs) – Research and Development Limited Partnerships (RDLPs) Contemporary Organization Design Alternatives

20. © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Other Designs – Joint ventures – Equity positions – High involvement organization – Front-end-back-end organizations – Network organization Value-added partnership or a hollow corporation – New plant design Contemporary Organization Design Alternatives

21. © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Horizontal or Vertical – H-Form and M-Form: result from horizontal growth. – Vertical growth or integration: expanding organization’s basic activities. Contemporary Organization Design Alternatives

22. © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Corporate Culture Corporate culture – Shared experiences, stories, beliefs, norms, and actions that characterize an organization and influence its design.

23. © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Corporate Culture

24. © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Chapter Summary Organization design: overall configuration of positions and interrelationships among positions within organization. – Ideal bureaucracy – System 4 Contingencies that affect organization design: – Size – Technology – Environment

25. © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. There is no one best organization design. New designs emerging to deal with differing environments. Major determinants of corporate culture: – Values held by top management of organization – History of firm – Top managers’ vision of firm Chapter Summary