1. Ch 12 Managing Organization Design
Functional Structure of Abercrombie & Fitch
Divisional Structure of the “Limited”

2. The Nature of Organizational Design
What is organizational design?
The overall set of structural elements and relationships among those elements used to manage the total organization.
Organizations change continuously
For large organization, it can be incomprehensibly complex

3. Why Are There Different Types of Organizations?
Depending on what the product or service is, the management has to structure the organization to met the customer’s needs.
Two universal (one best way) perspectives of OD
Bureaucratic model & Behavioral model

4. Bureaucracy: Based on a Legitimate and Formal System of Authority
The organization should adopt a distinct division of labor.
Develop a consistent set of rules.
Establish a hierarchy of positions.
Managers should conduct business impersonally to maintain social distance.
Employment and promotion should be based on technical expertise, and employees should be protected from arbitrary dismissal.
Weber
Red Tape | Logical!, Rational! Efficient!
Ex: Government, University (form processing)

5. Behavioral Model A model of organization design
consistent with the human relations movement and
stressing attention to developing work groups and
concern about interpersonal process.
More Effective!

6. Character of Org.: System 1 Design
Leadership process includes no perceived confidence and trust.
Motivational process taps only physical, security, and economic motives.
Communication process is such that information flows downward.
Interaction process is closed.
Decisions occur at the top.
Goal setting occurs at top.
Control is centralized.
Performance goals are low.

7. System 4 Organization (Based on Behavioral Model)
Leadership process includes perceived confidence and trust.
Motivational process taps a full range of motives through participatory methods.
Communication flows freely.
Interaction process is open.
Decisions occur at all levels.
Goal setting encourages group participation.
Control process is dispersed.
Performance goals are high.

8. System 3, System 2

9. Situational Influences on OD
Idea: Optimal design depends on a set of relevant situational factors.
Situational factors play a role in determining the best organization design for any particular circumstance.
There are four basic situational factors.

10. The Basic Situational Factors
1. Core Technology:
Most Important Conversion processes used to transform inputs into outputs.
2. Environment:
Organizations in stable environments tend to have different kind of design from organizations in unstable environments.

11. Two Designs Emerged from Stable and Unstable Environments
Mechanistic organization:
Similar to the bureaucratic or system 1 model; most frequently found in stable environments.
Organic organization:
Very flexible and informal model of organization design; most often found in unstable and unpredictable environments.

12. Organizations Characterized by Two Primary Factors:
Differentiation:
The extent to which the organization is broken down into subunits.
Integration:
The degree to which the various subunits must work together in a coordinated fashion.

13. Organizational Size
The total number of full-time or full-time equivalent employees.
Impact of style and technology
Large Vs. Small firms

14. Organizational life cycle
Progression through which organizations evolve as they grow and mature.
Stages | Birth  Youth  Midlife  Maturity.
Design issues
Who deals with it?
Bigger
Mechanistic, Decentralized

16. Two Strategy Levels Corporate-level Strategy (Companywide)
Specifies actions taken by the firm to gain a competitive advantage by selecting and managing a group of different businesses competing in several industries and product markets.
Vs. Business level strategy

17. Strategy and Organization Designs
Organizations can adopt a variety of corporate level strategies. The chosen strategy affects the organizational design. such as:
Single-product strategy
Functional Departmentalization
Mechanistic Design
Related diversification
High coordination (synergy)
Unrelated Diversification
Strong Hierarchical reporting system
Portfolio approach
Arrange various unit under a single umbrella
How much decision making
Design fits Strategy

18. Business Level Strategy
Business-level Strategy (Competitive)
Each business unit in a diversified firm chooses a business-level strategy as its means of competing in individual product markets.
These strategies can affect the design of individual businesses within the organization as well the overall organization itself.
Possible outcomes? Centralized, decentralized.
Defender Strategy
Tall, Centralized, Narrow Span, Functional Departmentalization = Bureaucratic
Prospecting Strategy~ Opposite!
Analyzer Strategy~ in the middle!
Competitive Strategy- Focus

19. Organizational Functions
Aggressive marketing strategy calls for separate departments such as advertising, direct sales, and sales promotion.
A production strategy can call for manufacturing in diverse locations.
Human resource strategy may call for a lesser degree of decentralization.
Develop skills of new managers
Functional: Marketing, Low Debt!

20. Basic Forms of Organizational Design
U-Form or Functional design:
An organizational arrangement based on the functional approach to departmentalization.
H-Form or Conglomerate design:
An arrangement used by an organization made up of a set of unrelated businesses.

21. Figure 12.1: Functional or U-Form Design for a Small Manufacturing Company
An organizational arrangement based on the functional approach to departmentalization.
Coordination!, Dependency!,
Advantages similar to Functional Depart.
CEO on top of functional areas

22. Figure 12.2: Conglomerate (H-Form) Design at Pearson PLC
An arrangement used by an organization made up of a set of unrelated businesses.
Unrelated diversification (Holding company)
Independent responsibility
Performance Evaluation | Resource Allocation
Complexity | Performance!

23. M-Form or Divisional Design
An organizational arrangement based on multiple businesses in related areas operating within a larger organizational framework.
Matrix design: (see Figure 12.4)
An organizational design based on two overlapping bases of departmentalization.
Hybrid design:
The use of two or more common forms of organizational design.
Related and unrelated diversification

24. Figure 12.3: Multidivisional (M-Form) Design at The Limited, Inc.
based on multiple businesses in related areas operating within an org. framework.
Some Centralization!
Autonomy and Coordination
Market Research | Purchasing
Internal competition
Cooperation
Performance A+

25. Figure 12.4: A Matrix Organization
two overlapping bases of departmentalization
Functional Departments
Superimposing Product Group
Multiple command structure
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26. Emerging Issues in Organizational Design
Team organization:
Relies almost exclusively on project type teams, with little or no underlying functional hierarchy.
Floating within organization
Split large units to smaller units
Virtual organization:
Has little or no formal structure
Few permanent employee and need-based temporary employees, facilities, outsourcing ….
Ex: GRC- Global Research Consortium

27. Emerging Issues in Organizational Design
Learning organization:
Works to facilitate the lifelong learning and personal development of all its employees while transforming itself to respond to changes and demands
Achieve continuous improvement
Shell learning center

28. International Organizational Design
International markets create an organization design that fits unique circumstances:
Separate international divisions.
Extension of product departmentalization.
Extension of the multidivisional structure.

29. Figure 12.5 : Common Organization Designs for International Organizations, A
Simple: Levi Strauss

30. Location departmentalization: Ford
Figure 12.5 : Common Organization Designs for International Organizations, B
Location departmentalization: Ford

31. Figure 12.5 : Common Organization Designs for International Organizations, C
Location departmentalization as an extension of Product departmentalization

32. Multidivisional Structure: Branches in Various area!
Figure 12.5 : Common Organization Designs for International Organizations, D
Multidivisional Structure: Branches in Various area!