Copyright © Houghton Mifflin Company. All rights reserved Chapter 10 Organizing in the 21st Century

Copyright © Houghton Mifflin Company. All rights reserved Chapter Outline Contingency Design u The Burns and Stalker Model u The Lawrence and Lorsch Model

Copyright © Houghton Mifflin Company. All rights reserved Chapter Outline (continued) Basic Structural Formats u Functional Departments u Product-Service Departments u Geographic Location Departments u Customer Classification Departments u Work Flow Process Departments in Re- engineered Organizations

Copyright © Houghton Mifflin Company. All rights reserved Chapter Outline (continued) Contingency Design Alternatives u Span of Control u Centralization and Decentralization u Line and Staff Organizations u Matrix Organizations

Copyright © Houghton Mifflin Company. All rights reserved Chapter Outline (continued) Effective Delegation u The Advantages of Delegation u Barriers to Delegation

Copyright © Houghton Mifflin Company. All rights reserved Chapter Outline (continued) The Changing Shape of Organizations u Characteristics of the New Organizations u New Organizational Configurations

Copyright © Houghton Mifflin Company. All rights reserved CONTINGENCY DESIGN Contingency design: the process of determining the degree of environmental uncertainty and adapting the organization and its subunits to the situation.

Copyright © Houghton Mifflin Company. All rights reserved CONTINGENCY DESIGN (continued) Dimensions of Environmental Uncertainty 1.Strength of social, political, and economic pressures on the organization. 2.Frequency of technological breakthroughs in the industry. 3.Reliability of resources and suppliers. 4.Stability of demand for the organization’s products or services.

Copyright © Houghton Mifflin Company. All rights reserved CONTINGENCY DESIGN (continued) For Discussion: Is the general trend today toward more or less environmental uncertainty? Explain with specific examples.

Copyright © Houghton Mifflin Company. All rights reserved THE BURNS AND STALKER MODEL (Contingency Organization Design) Two Ends of a Structural Continuum u Mechanistic organizations: rigid in design and have strong bureaucratic qualities. u Organic organizations: flexible in structure and adaptive to change.

Copyright © Houghton Mifflin Company. All rights reserved THE BURNS AND STALKER MODEL (Contingency Organization Design) (continued) Key Research Findings: 1.Successful organizations in relatively stable and certain environments tended to be mechanistic. 2.Relatively organic organizations tended to be the successful ones when the environment was unstable and uncertain.

Copyright © Houghton Mifflin Company. All rights reserved THE BURNS AND STALKER MODEL (Contingency Organization Design) (continued) Practical Conclusion: “Mechanistic design is appropriate for environmental stability, and organic design is appropriate for high environmental uncertainty.”

Copyright © Houghton Mifflin Company. All rights reserved THE LAWRENCE AND LORSCH MODEL Opposing Organizational Forces u Differentiation: tendency among specialists to think and act in restricted ways. (Tends to fragment the organization.) u Integration: in direct opposition to differentiation, it involves the collaboration among specialists needed to achieve a common purpose. (Tends to coordinate the organization.)

Copyright © Houghton Mifflin Company. All rights reserved THE LAWRENCE AND LORSCH MODEL (continued) Key Research Findings: 1.Every organization requires an appropriate dynamic equilibrium between differentiation and integration. 2.In successful firms, both differentiation and integration increased as environmental complexity increased.

Copyright © Houghton Mifflin Company. All rights reserved THE LAWRENCE AND LORSCH MODEL (continued) Practical Conclusions: u “These findings suggest that organizational failure in the face of environmental complexity probably results from a combination of high differentiation and inadequate integration.” u Needed organizational integration (coordination) can be achieved through formal hierarchy, standard policies and rules, departmentalization, computer networks, cross-functional teams, human relations training, and liaison individuals.

Copyright © Houghton Mifflin Company. All rights reserved BASIC STRUCTURAL FORMATS Departmentalization: related jobs, activities, or processes are grouped into major organizational subunits.

Copyright © Houghton Mifflin Company. All rights reserved BASIC STRUCTURAL FORMATS (continued) Five Types of Departmentalization u Functional Departments (most common) u Product-service departments (organic alternative to functional departments) u Geographic location departments (communication can be strained)

Copyright © Houghton Mifflin Company. All rights reserved BASIC STRUCTURAL FORMATS (continued) Five Types of Departmentalization u Customer classification departments (needs of different customers better served u Work flow process departments (found in horizontal organizations resulting from reengineering)

Copyright © Houghton Mifflin Company. All rights reserved SPAN OF CONTROL (Contingency Design Alternatives) Span of control: the number of people who report directly to a manager. Is There an Ideal Span of Control? “ The relevant question is no longer how wide spans of control should be but instead, ‘How wide can one’s span of control be?’ Wider spans of control mean less administrative expense and more self- management, both popular notions today.”

Copyright © Houghton Mifflin Company. All rights reserved SPAN OF CONTROL (Contingency Design Alternatives) (continued) Situational Determinants of Span of Control 1.Similarity of work performed by subordinates 2.Dispersion of subordinates 3.Complexity of work performed by subordinates 4.Direction and control required by subordinates 5.Time spent coordinating with other managers 6.Time required for planning

Copyright © Houghton Mifflin Company. All rights reserved CENTRALIZATION AND DECENTRALIZATION (Contingency Design Alternatives) Two Ends of the Same Continuum u Centralization: the retention of decision- making authority by top management. u Decentralization: management shares decision-making authority with lower-level employees.

Copyright © Houghton Mifflin Company. All rights reserved CENTRALIZATION AND DECENTRALIZATION (Contingency Design Alternatives) (continued) Balance Needed within a Contingency Approach u “The case against extreme decentralization can be summed up in three words, lack of control. Balance helps neutralize this concern.” u “Centralization, because of its mechanistic nature, generally works best for organizations in relatively stable situations.” u “A more organic, decentralized approach is appropriate for firms in complex and changing conditions.”

Copyright © Houghton Mifflin Company. All rights reserved MATRIX ORGANIZATION Matrix organization: vertical and horizontal lines of authority are combined in checkerboard fashion.

Copyright © Houghton Mifflin Company. All rights reserved MATRIX ORGANIZATION (continued) Advantages (increased coordination) u Efficient use of resources u Project integration u Improved information flow u Flexibility u Discipline retention u Improved motivation and commitment

Copyright © Houghton Mifflin Company. All rights reserved MATRIX ORGANIZATION (continued) Disadvantages (project manager’s authority gap) u Power struggles u Heightened conflict u Slow reaction time u Difficulty in monitoring and controlling u Excessive overhead u Experienced stress

Copyright © Houghton Mifflin Company. All rights reserved MATRIX ORGANIZATION (continued) For Discussion: On balance, is matrix design worth the trouble? Why?

Copyright © Houghton Mifflin Company. All rights reserved DELEGATION u Delegation: process of assigning various degrees of decision-making authority to lower-level employess.

Copyright © Houghton Mifflin Company. All rights reserved DELEGATION (continued) A Matter of Degree Low degree of delegation Investigate and report back Investigate and recommend action Investigate and advise on action taken Investigate and take action; advise on action taken Investigate and take action High degree of delegation

Copyright © Houghton Mifflin Company. All rights reserved DELEGATION (continued) For Discussion: 1.Does a high degree of delegation make an organization more mechanistic or more organic? Explain. 2.What is the relationship between delegation and decentralization?

Copyright © Houghton Mifflin Company. All rights reserved BARRIERS TO DELEGATION Why Managers Do Not Delegate as Much as They Should: u Belief in the fallacy, “If you want it done right, do it yourself.” u Lack of confidence and trust in lower-level employees. u Low self-confidence. u Fear of being called lazy.

Copyright © Houghton Mifflin Company. All rights reserved BARRIERS TO DELEGATION (continued) u Vague job definition. u Fear of competition from those below. u Reluctance to take the risks involved in depending on others. u Lack of controls that provide early warning of problems with delegated duties. u Poor example set by bosses who do not delegate.

Copyright © Houghton Mifflin Company. All rights reserved BARRIERS TO DELEGATION (continued) For Discussion: 1.Which three of the above reasons for not delegating do you think are most common? Why? 2.What should managers delegate: What they know best, or what they know least well?

Copyright © Houghton Mifflin Company. All rights reserved THE CHANGING SHAPE OF ORGANIZATIONS Characteristics of the New Organizations u Fewer layers u More teams u Smallness within bigness

Copyright © Houghton Mifflin Company. All rights reserved THE CHANGING SHAPE OF ORGANIZATIONS (continued) New Organizational Configurations u Hourglass organizations u Cluster organizations (teams) u Virtual organizations

Copyright © Houghton Mifflin Company. All rights reserved THE CHANGING SHAPE OF ORGANIZATIONS (continued) For Discussion: 1.Which of the new-style organizations will likely be most common in twenty years? 2.In which of these new organizations would you most like to be a top manager? A middle manager? A first-line supervisor? A nonmanagerial employee?