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235 Prepared by Michael K. McCuddy Valparaiso University
Presentation Slides to Accompany Organizational Behavior 10th Edition Don Hellriegel and John W. Slocum, Jr. Chapter 14—Designing Organizations Prepared by Michael K. McCuddy Valparaiso University

236 Slide 14.1 Learning Objectives for Designing Organizations
Explain how environmental, strategic, and technological factors affect the design of organizations State the differences between mechanistic and organic organizations Describe four traditional organization designs—functional, place, product, and multidivisional Describe three contemporary organization designs—multinational, network, and virtual Chapter 14: Designing Organizations

237 Slide 14.2 Important Factors in an Organization’s Environment
Suppliers Distributors Competitors Customers Chapter 14: Designing Organizations

238 Slide 14.3 Strategies for Building a Competitive Advantage
Low-cost strategy Based on an organization’s ability to provide a product or service at a lower cost than its rivals Differentiation strategy Based on providing customers with something unique and makes the organization’s product or service distinctive from its competition Chapter 14: Designing Organizations

239 Slide 14.3 (continued) Strategies for Building a Competitive Advantage
Focused strategy Designed to help an organization target a specific niche in an industry, unlike both the low-cost and differentiation strategies, which are designed to target industrywide markets Chapter 14: Designing Organizations

240 Slide 14.4 Types of Task Interdependence in Organization Design
Pooled Sequential Reciprocal C C C A B A B A B Simple Complex Chapter 14: Designing Organizations

241 Slide 14.5 Organization Design Options
Virtual Design Complex Network Design Multinational Design Multidivisional Design Environmental Factors Product Design Place Design Simple Functional Design Pooled Technological Factors Reciprocal Chapter 14: Designing Organizations

242 Slide 14.6 Mechanistic and Organic Organizations
Mechanistic organization Characterized by a reliance on formal rules and regulations, centralization of decision making, narrowly defined job responsibilities, and a rigid hierarchy of authority Organic organization Characterized by low to moderate use of formal rules and regulations, decentralized and shared decision making, broadly defined job responsibilities, and a flexible authority structure with fewer levels in the hierarchy Chapter 14: Designing Organizations

243 Slide 14.7 Characteristics of Bureaucracy
The organization operates according to a set of rules that are intended to tightly control employees’ behavior All employees must carefully follow extensive impersonal rules and procedures in making decisions Each employee’s job involves a specified area of expertise, with strictly defined obligations, authority, and powers to compel obedience Chapter 14: Designing Organizations

244 Slide 14.7 (continued) Characteristics of Bureaucracy
Each lower-level position is under the tight control and direction of a higher one Candidates for jobs are selected on the basis of “technical” qualifications The organization has a career ladder; promotion is by seniority or achievement and depends on the judgment of superiors Chapter 14: Designing Organizations

245 Slide 14.8 Organic and Mechanistic Design Features
Hierarchy of authority Centralization Division of labor Rules Procedures Impersonality Chain of command Unity of command Span of control Chapter 14: Designing Organizations

246 Slide 14.9 Organizational Uses of Functional Design
Permits clear identification and assignment of responsibilities Employees easily understand the design People doing similar tasks and facing similar problems work together, thus increasing the opportunities for interaction and mutual support Employees tend to lose sight of the organization as a whole Coordination across functional departments often becomes difficult Chapter 14: Designing Organizations

247 Slide 14.9 (continued) Organizational Uses of Functional Design
With the exception of marketing, most employees have no direct contact with customers and may lose sight of the need to meet or exceed customer expectations May be effective when the organization: Has a narrow product line Competes in a uniform environment Pursues a low-cost or focused business strategy Does not have to respond to the pressures of serving different types of customers Chapter 14: Designing Organizations

248 Slide 14.10 Organizational Uses of Place Design
Each department or division is in direct contact with customers in its locale and can adapt more readily to their demands Lower costs for materials, freight, and perhaps labor may result Marketing strategies and tactics can be tailored to geographic regions Control and coordination problems increase Employees may begin to emphasize their own unit’s goals and needs rather than those of the entire organization Chapter 14: Designing Organizations

249 Slide 14.11 United Technologies
CEO Pratt & Whitney * Jet engines * Rocket engines * Industrial gas turbines Carrier * Heating & air conditioning * Building controls * Refriger- ation equipment Otis * Elevators * Escalators * Moving walks UT Auto- motive * Automotive electrical systems * Electric motors interior & exterior trim Flight Systems * Helicopters * Propellers * Space life support systems Source: Chapter 14: Designing Organizations

250 Slide 14.12 Organizational Uses of Product Design
Reduces the information overload that managers face in a purely functional design More effective handling of the business is possible Addition of product lines, diverse customers, and technological advances increases the complexity and uncertainty of an organization’s business environment Product design may incorporate features of functional and place designs into the organization of each product division Chapter 14: Designing Organizations

251 Slide 14.13 Organizational Uses of Multidivisional Design
Eases problems of coordination by focusing functional expertise and knowledge on specific goods or services A firm must have a large number of managerial personnel to oversee all the product lines Higher costs result from the duplication of various functions Often reduces the environmental complexity facing any one team, department, or division Horizontal mechanisms help in dealing with complex environments Chapter 14: Designing Organizations

252 Slide 14.14 Basic Options in Multinational Design
Functions Functions Marketing Manufacturing Product line Finance Human Resources Others Place Country or Region Organization Matrix Global Product Organization Country Responsiveness, Adaptation, Competitors, Manufacture, Customer Global Integration, Products, Competitors, Factories, Customers Chapter 14: Designing Organizations

253 Slide 14.15 Organizational Uses of Multinational Design
Worldwide product-line divisions will be more dominant than geographically based divisions under certain conditions A worldwide product-line division may not be as effective at opening up new territories as a geographically organized division A division operating under a place design often: Can establish relations with host governments Invest in distribution channels Develop brand recognition Build competencies that no single product-line division could afford Chapter 14: Designing Organizations

254 Slide 14.16 Key Elements of Network Design
Distinctive competence Responsibility Goal setting Communication Information technology Organization design Balanced view Chapter 14: Designing Organizations

255 Slide 14.17 Organizational Uses of Network Design
Effective in creating alliances of flexible partnerships Can create successful external relationships through: Importance Investment Interdependence Integration Information Institutionalization Chapter 14: Designing Organizations

256 Slide 14.18 Key Developments in Information Technology
Open systems Distributed computing Real time Global networking Chapter 14: Designing Organizations

257 Slide 14.19 Organizational Uses of Virtual Design
Structure can be changed quickly to meet changing conditions and situations Boundaries between an organization and its customers and suppliers are blurred Employees continually master new manufacturing and information technologies, speeding the production process and the flow of information through the organization Chapter 14: Designing Organizations

258 Slide 14.19 (continued) Organizational Uses of Virtual Design
Employees respond quickly to changing customer demands with customized products and services available at any time and place Employees are reciprocally interdependent Managers delegate authority and responsibility to employees while providing a clear vision of the organization’s purpose and goals Chapter 14: Designing Organizations


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