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© J. Rudy, Organizational Behavior, FMCU, Fall 2007 Managing Organizations ORGANIZATIONAL DESIGN FOR STRATEGIC COMPETENCY (OD = THE CONSTRUCTION OR CHANGING OF AN ORGANIZATIONS STRUCTURE) Objectives: 1.DESCRIBE AND EXPLAIN THE ORGANIZATION DESIGN OPTIONS 2.IDENTIFY THE PRINCIPLES OF ORGANIZATION DESIGN (THE CLASSICAL OR THE OLD MODEL OF ORGANIZATION) 3.CONTRAST MECHANISTIC VERSUS ORGANIC ORGANIZATIONS 4.EXERCISE – ORGANIZING (XYZ paper company)
© J. Rudy, Organizational Behavior, FMCU, Fall 2007 Organization Design Options ORGANIZING AS A MANAGERIAL FUNCTION (P, O, L, C) DEALS WITH ORGANIZATION STRUCTURES Organization structure definitions OS IS A FORMAL SYSTEM OF WORKING RELATIONSHIP THAT BOTH SEPARATES AND INTEGRATES TASKS OS ENABLES EMP-ees TO WORK TOGETHER EFFECTIVELY BY: 1.ALLOCATING PEOPLE AND RESOURCES TO TASKS 2.CLARIFYING RESPONSIBILITIES THROUGH JOB DESCRIPTIONS, ORGANIZATIONS CHARTS & LINES OF AUTHORITY 3.LETTING EMPLOYEES KNOW WHAT IS EXPECTED OF THEM BY ESTABLISHING RULES, REGULATIONS, OPERATING PROCEDURES & PERFORMANCE STANDARDS 4.CREATING CONDITIONS FOR COLLECTING AND EVALUATING INFORMATION TO HELP MANAGERS MAKE DECISIONS AND SOLVE PROBLEMS
© J. Rudy, Organizational Behavior, FMCU, Fall 2007 Basic Elements of OS SPECIALIZATION: The process of identifying specialized tasks and assigning them to individuals or work groups who have been trained specifically to do them STANDARDIZATION: Developing the procedures an organization uses to ensure that employees perform their jobs in a uniform and consistent manner. Standardization promotes predictable behaviors COORDINATION: The formal and informal procedures that integrate both managerial and employee activities AUTHORITY: The right to make decisions and take actions COMPLEXITY: Considers how much differentiation (division of labor, number of vertical levels, etc.) there is in the organization FORMALIZATION: The degree to which an organization relies on rules and procedures to direct the behavior of employees CENTRALIZATION: The concentration of decision-making authority in upper management.
© J. Rudy, Organizational Behavior, FMCU, Fall 2007 Organization Chart DESCRIBES FIVE (5) MAJOR POINTS ABOUT AN ORGANIZATION STRUCTURE: 1. TASKS 2. SUBDIVISIONS 3. TYPE OF WORK 4. LEVEL OF MANAGEMENT 5. LINES OF AUTHORITY
© J. Rudy, Organizational Behavior, FMCU, Fall 2007 Basic Principles of Organization Design 1. DIVISION OF LABOR 2. UNITY OF COMMAND 3. AUTHORITY AND RESPONSIBILITY 4. SPAN OF CONTROL 5. DEPARTMENTALIZATION
© J. Rudy, Organizational Behavior, FMCU, Fall 2007 Basic Principles of Organization Design Division of Labor: INDIVIDUALS SPECIALIZE IN DOING PART OF AN ACTIVITY RATHER THAN THE ENTIRE ACTIVITY
© J. Rudy, Organizational Behavior, FMCU, Fall 2007 Basic Principles of Organization Design Unity of Command: NO PERSON SHOULD REPORT TO TWO OR MORE BOSSES This is the classical view – when organizations were comparatively simple. Strict adherence to this principle creates a degree of inflexibility, and then lower efficiency
© J. Rudy, Organizational Behavior, FMCU, Fall 2007 Basic Principles of Organization Design Authority & Responsibility: AUTHORITY IS A RIGHT, THE LEGITIMACY WHICH IS BASED ON THE PERSONS POSITION IN THE ORGANIZATION (Legitimate power) POWER – AN INDIVIDUALS CAPACITY TO INFLUENCE DECISIONS (Other people) RESPONSIBILITY - AN OBLIGATION TO PERFORM
© J. Rudy, Organizational Behavior, FMCU, Fall 2007 Basic Principles of Organization Design Span of Control: A NUMBER OF SUBORDINATES A MANAGER CAN DIRECT EFFECTIVELY AND EFFICIENTLY
© J. Rudy, Organizational Behavior, FMCU, Fall 2007 Basic Principles of Organization Design Departmentalization: THE WAY HOW ACTIVITIES SHOULD BE GROUPED INTO DEPARTMENTS THERE ARE FIVE WAYS: · FUNCTIONAL · PRODUCT · CUSTOMER · GEOGRAPHIC · PROCESS
© J. Rudy, Organizational Behavior, FMCU, Fall 2007 Organization Design Concepts THERE ARE TWO BASIC ORGANIZATION DESIGN CONCEPTS TODAY: 1. MECHANISTIC ORGANIZATION 2. ORGANIC ORGANIZATION
© J. Rudy, Organizational Behavior, FMCU, Fall 2007 Mechanistic Organization (Bureaucracy) STRUCTURE CREATED BY APPLICATION OF THE CLASSICAL PRINCIPLES. THIS STRUCTURE SCORES HIGH ON: Complexity Formalization Centralization
© J. Rudy, Organizational Behavior, FMCU, Fall 2007 Organic Organization (Adhocracy) IS A DIRECT CONTRAST TO THE MECHANISTIC FORM THIS STRUCTURE SCORES LOW ON: Complexity Formalization Centralization (DECENTRALIZED)
© J. Rudy, Organizational Behavior, FMCU, Fall 2007 Mechanistic vs. Organic Concept KEY CONTINGENCIES (factors that influence the decision what form of the structure is best suitable in certain conditions): · ORGANIZATIONS STRATEGY · SIZE OF AN ORGANIZATION · USED TECHNOLOGY · ENVIRONMENT
© J. Rudy, Organizational Behavior, FMCU, Fall 2007 Mechanistic Design Options FUNCTIONAL structure IS A DESIGN THAT GROUPS SIMILAR OR RELATED OCCUPATIONAL SPECIALITIES TOGETHER DIVISIONAL structure CREATES SELF- CONTAINED, AUTONOMOUS UNITS THAT ARE USUALLY ORGANIZED ALONG MECHANIC LINES Each unit / division is generally autonomous, with a division manager responsible for performance and holding complete strategic and operating decision-making authority
© J. Rudy, Organizational Behavior, FMCU, Fall 2007 Divisional Structure: Major Advantage / Disadvantage Focus on results Frees HQ staff from operating details Duplication of activities & resources
© J. Rudy, Organizational Behavior, FMCU, Fall 2007 Divisional Structure: Example
© J. Rudy, Organizational Behavior, FMCU, Fall 2007 Organic Design Options · SIMPLE STRUCTURE · MATRIX STRUCTURE · NETWORK STRUCTURE · TASK FORCE STRUCTURE · COMMITTEE STRUCTURE
© J. Rudy, Organizational Behavior, FMCU, Fall 2007 Organization Design Options (Summary) DesignStrengths Functional Economies through specialization Divisional High accountability for results Simple Speed, economy, flexibility Matrix Economies through specialization & accountability for product results Network Speed, economy, flexibility Task Force Flexibility Committee Flexibility
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