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Chapter 15 Organizational Design and StructureDefine differentiation and integration as organizational design processes. Discuss the basic design dimensions managers must consider in structuring an organization. Describe five structural configurations for organizations. Describe four contextual variables that influence organizational structure. Explain the forces reshaping organizations. Identify and describe emerging organizational structures. Identify factors that can adversely affect organizational structure. Learning Outcomes © 2013 Cengage Learning
Organizational Designthe process of constructing and adjusting an organization’s structure to achieve its business strategy and goals © 2013 Cengage Learning 2
Organizational Structurethe linking of departments and jobs within an organization © 2013 Cengage Learning 2
Learning Outcome 1 Define differentiation and integration as organizational design processes. © 2013 Cengage Learning 2
Key Organizational Design ProcessesDifferentiation The process of deciding how to divide the work in an organization Manager’s goal orientation Time orientation Interpersonal orientation Formality of structure © 2013 Cengage Learning 3
Differentiation Horizontal differentiationDegree of differentiation between organizational subunits. Vertical differentiation The difference in authority and responsibility in the organizational hierarchy Spatial differentiation Geographic dispersion of an organization’s offices, plants and personnel © 2013 Cengage Learning
Beyond the Book: Differntiation at CiscoAt Cisco, the existence of multiple teams, councils, boards, and working groups within Cisco creates a web of internal integrating structures that lead to fast decisions by the right people to ensure that the company is agile. Cisco has a complex organizational structure because it allows the firm to enter into new markets quickly. An emphasis on horizontal integration and cross-function teaming allows Cisco to be much more agile than before. A key benefit is speed in decision making. Cisco Systems’ organizational structure is so complex that it can take fifteen minutes and a whiteboard to fully explain. John Chambers describes the benefits simply: speed, skill, and flexibility. The core structural unit at the heart of Chambers’ concept is the management team. Cisco managers, employees, and senior leaders are on more than one management team, actually many more. The existence of multiple teams, councils, boards, and working groups within Cisco creates a web of internal integrating structures that lead to fast decisions by the right people to ensure that the company is agile, with the potential to grow even in difficult times. Manny Rivelo is a senior vice president at Cisco and at one point was embedded in at least fourteen internal teams: three councils, six boards, and five working groups, all within the company. What led Chambers to this complex organizational structure was the realization that the company’s hierarchical structure precluded it from moving quickly into new markets. By restructuring with an emphasis on horizontal integration and cross-functional teaming, Chambers flattened Cisco and increased the company’s agility. A key benefit is speed of decision making. Fast decision making is good when the right skilled people are engaged in the process. The team approach through councils, boards, and working groups ensures that the right people are in the right place at the right time to make good decisions, quickly. SOURCE: M. Kimes, “Cisco Systems Layers It On,” Fortune 158 (December 8, 2008): 24. © 2013 Cengage Learning
Key Organizational Design ProcessesIntegration The process of coordinating the different parts of an organization Supports dynamic equilibrium, in which all the parts of an organization are interrelated and balanced © 2013 Cengage Learning
Integration Vertical integration Hierarchical referralRules and procedures Plans and schedules Positions added to the organization structure Management information systems Horizontal Integration Liaison roles Task forces Integrator positions Teams © 2013 Cengage Learning
Learning Outcome 2 Discuss the basic design dimensions managers must consider in structuring an organization. © 2013 Cengage Learning 2
The Organizational Design Process2 Ways to Approach The Organizational Design Process I establish desired level of each structural dimension on a high-low continuum and develop structure that meets desired configuration II describe what is or is not important to the success of the organization rather than worry about specific characteristics © 2013 Cengage Learning
Structural DimensionsFormalization: the degree to which the organization has official rules, regulations, and procedures Centralization: the degree to which decisions are made at the top of the organization Specialization: the degree to which jobs are narrowly defined and depend on unique expertise Standardization: the degree to which work activities are accomplished in a routine fashion Complexity: the degree to which many different types of activities occur in the organization Hierarchy of Authority: the degree of vertical differentiation across levels of management © 2013 Cengage Learning
Importance-Based How many tasks and how specialized? How standardized?What skills are required? Basis for grouping of positions? How large should each unit be? How much standardization? What mechanisms to help individuals? How centralized? © 2013 Cengage Learning
Learning Outcome 3 Describe five structural configurations for organizations. © 2013 Cengage Learning 2
Structural ConfigurationsSimple Structure – a centralized form of organization that emphasizes a small technical and support staff, strong centralization of decision making in the upper echelon, and a minimal middle level Machine Bureaucracy – a moderately decentralized form of organization that emphasizes a support staff differentiated from the line operations of the organization, limited horizontal decentralization of decision making, and a well-defined hierarchy of authority Professional Bureaucracy – a decentralized form of organization that emphasizes the expertise of the professionals in the operating core of the organization © 2013 Cengage Learning
Structural ConfigurationsDivisionalized Form – a loosely coupled, composite structural configuration composed of divisions, each of which may have its own structural configuration Adhocracy – a selectively decentralized form of organization that emphasizes the support staff and mutual adjustment among people © 2013 Cengage Learning
Five Structural Configurations of Organization© 2013 Cengage Learning
Five Basic Parts of an OrganizationSOURCE: From H. Mintzberg, The Structuring of Organizations, © 1979, 20. Reprinted by permission of Pearson Education, Inc., Upper Saddle River, N.J. © 2013 Cengage Learning
Learning Outcome 4 Describe four contextual variables that influence organizational structure. © 2013 Cengage Learning 2
Contextual Variables – a set of characteristics that Technology Size Contextual Variables – a set of characteristics that influences the organization’s design processes Strategy and Goals Environment © 2013 Cengage Learning 4
SIZE Measured in number of employeesFormalization, specialization and standardization greater in larger organizations As size increases, complexity increases © 2013 Cengage Learning 4
TECHNOLOGY The relationship between technology and structure is complex… …different departments employ different technologies… © 2013 Cengage Learning 4
Joan Woodward Three types of technology:Unit – small batch manufacturing technology Mass – large-batch manufacturing Process production – continuous-production process © 2013 Cengage Learning
Charles Perrow © 2013 Cengage Learning
Technological interdependenceJames Thompson Technological interdependence the degree of interrelatedness of the organization’s various technological elements Greater technological interdependence leads to greater complexity. © 2013 Cengage Learning
Environment Environment - anything outside the boundaries of an organization © 2013 Cengage Learning © 2013 Cengage Learning 4
Environment TECHNOLOGYTask Environment – the part of the environment that is directly relevant to the organization Environmental Uncertainty – the amount and rate of change in the organization’s environment © 2013 Cengage Learning 4
Extremes of Environmental UncertaintyMechanistic Structure – an organizational design that emphasizes structured activities, specialized tasks, and centralized decision making Organic Structure – an organizational design that emphasizes teamwork, open communication, and decentralized decision making © 2013 Cengage Learning
Strategy TECHNOLOGY Provides legitimacy to the organization, employee direction, decision guidelines, and criteria for performance. © 2013 Cengage Learning 4
Relationships Among Organizational Design Elements© 2013 Cengage Learning
5 Learning Outcome Explain the forces reshaping organizations. 2© 2013 Cengage Learning 2
Forces Reshaping OrganizationsOrganizational life cycles Globalization Changes in Information-Processing Technologies Demands on Organizational Processes © 2013 Cengage Learning
Organization Life Cyclethe differing stages of an organization’s life from birth to death © 2013 Cengage Learning
Learning Outcome 6 Identify and discuss emerging organizational structures. © 2013 Cengage Learning 2
Emerging Structures Network organizations – web-like structures that contract some or all operations to other organizations, then coordinate activities. Virtual organizations – temporary networks of organizations consisting of independent enterprises. Circle organizations – open system, organic structure for customer responsiveness © 2013 Cengage Learning
Harley Davidson’s Circle Organization© 2013 Cengage Learning
Learning Outcome 7 Identify factors that can adversely affect organizational structure. © 2013 Cengage Learning 2
Four Symptoms of Structural WeaknessDelay in decision making Poor quality decision making Lack of innovative response to changing environment High level of conflict © 2013 Cengage Learning
Personality/OrganizationParanoid Depressive Dysfunctional Personality/Organization Combinations Schizoid Dramatic Compulsive © 2013 Cengage Learning
Review the section, “Basic Design DimensionsReview the section, “Basic Design Dimensions.” Which dimensions does this scene show or imply? 2. Can you sense the division of labor represented by Senator Hawkins and Alan Smith? Corrine Whitman does not appear in this scene but is also part of a division of labor. 3. Review the five structural configurations described in the chapter. Which of those configurations best describes the likely structure of Senator Hawkins’ office? Which configurations do not apply? Why? Rendition U.S. government operatives haul Anwar El-Ibrahimi (Omar Metwally) off his flight from Cape Town, South Africa, after it arrives in Washington, D.C. He is a suspected terrorist whom the government sends to North Africa for torture and interrogation. CIA analyst Douglas Freeman (Jake Gyllenhaal) reacts negatively to the torture techniques and urges El-Ibrahimi’s release. This scene opens with a night shot of the Washington Monument. It follows Kahlid’s (Moa Khouas) discussion with Hamadi (Hassam Ghancy), the leader of a terrorist group. Congressional aide Alan Smith (Peter Sarsgaard) says in a voice-over, “She called you?” referring to Corrine Whitman (Meryl Streep), head of U.S. intelligence. She authorized the extraordinary rendition of El-Ibrahimi. Alan Smith, earlier in the film, pressed her for El-Ibrahimi’s release and his return to the United States. This scene does not explicitly discuss organizational structure, but you can infer several aspects of structure from the scene. © 2013 Cengage Learning © 2013 Cengage Learning 40
How did Ryan Smith determine whether his company needed a mechanistic structure with a tall vertical hierarchy or an organic one involving free-flowing partnerships? What are the advantages and disadvantages of Modern Shed’s organizational structure? Give an example of how Modern Shed’s structure enables fast response to rapidly changing market opportunities. Modern Shed Like his stylish sheds, Ryan Smith’s company is built to be adaptive, scalable, and suited to the needs of the environment. Modern Shed counts only 12 to 14 full time employees in the firm’s Seattle office; however, at times the company’s output rivals that of a large builder, due to close collaboration with a network of 35 independent contractors who specialize in everything from construction to sales. According to Smith, partnering with outside specialists is the most efficient, effective, and flexible way to run a startup company. Small, flexible, responsive—these are the qualities that have enabled Modern Shed to thrive even during an economic recession. Ask your students: How did Ryan Smith determine whether his company needed a mechanistic structure with a tall vertical hierarchy or an organic one involving free-flowing partnerships? What are the advantages and disadvantages of Modern Shed’s organizational structure? Give an example of how Modern Shed’s structure enables fast response to rapidly changing market opportunities. © 2013 Cengage Learning 41
Copyright ©2009 South-Western, a division of Cengage Learning All rights reserved Chapter 15 Organizational Behavior Nelson & Quick 6th edition Organizational.
MANAGEMENT RICHARD L. DAFT.
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© 2009 Cengage Learning. All rights reserved. Chapter 15 Organizational Design and Structure 1 Define differentiation and integration as organizational.
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