1. Managing Organizations
ORGANIZATIONAL DESIGN FOR STRATEGIC COMPETENCY
(OD = THE CONSTRUCTION OR CHANGING OF AN ORGANIZATION’S STRUCTURE)
Objectives:
DESCRIBE AND EXPLAIN THE ORGANIZATION DESIGN OPTIONS
IDENTIFY THE PRINCIPLES OF ORGANIZATION DESIGN (THE CLASSICAL OR THE „OLD MODEL“ OF ORGANIZATION)
CONTRAST MECHANISTIC VERSUS ORGANIC ORGANIZATIONS
EXERCISE – ORGANIZING (XYZ paper company)

2. 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:
ALLOCATING PEOPLE AND RESOURCES TO TASKS
CLARIFYING RESPONSIBILITIES THROUGH JOB DESCRIPTIONS, ORGANIZATIONS CHARTS & LINES OF AUTHORITY
LETTING EMPLOYEES KNOW WHAT IS EXPECTED OF THEM BY ESTABLISHING RULES, REGULATIONS, OPERATING PROCEDURES & PERFORMANCE STANDARDS
CREATING CONDITIONS FOR COLLECTING AND EVALUATING INFORMATION TO HELP MANAGERS MAKE DECISIONS AND SOLVE PROBLEMS

3. 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.

4. 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

5. Basic Principles of Organization Design
1.     DIVISION OF LABOR
2.     UNITY OF COMMAND
3.     AUTHORITY AND RESPONSIBILITY
4.     SPAN OF CONTROL
5.     DEPARTMENTALIZATION

6. Basic Principles of Organization Design
Division of Labor:
INDIVIDUALS SPECIALIZE IN DOING PART OF AN ACTIVITY RATHER THAN THE ENTIRE ACTIVITY

7. 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

8. Basic Principles of Organization Design
Authority & Responsibility:
AUTHORITY IS A RIGHT, THE LEGITIMACY WHICH IS BASED ON THE PERSON’S POSITION IN THE ORGANIZATION (Legitimate power)
POWER – AN INDIVIDUAL’S CAPACITY TO INFLUENCE DECISIONS (Other people)
RESPONSIBILITY - AN OBLIGATION TO PERFORM

9. Basic Principles of Organization Design
Span of Control:
A NUMBER OF SUBORDINATES A MANAGER CAN DIRECT EFFECTIVELY AND EFFICIENTLY

10. Basic Principles of Organization Design
Departmentalization:
THE WAY HOW ACTIVITIES SHOULD BE GROUPED INTO DEPARTMENTS
THERE ARE FIVE WAYS:
·       FUNCTIONAL
·       PRODUCT
·       CUSTOMER
·       GEOGRAPHIC
·       PROCESS

11. Organization Design Concepts
THERE ARE TWO BASIC ORGANIZATION DESIGN CONCEPTS TODAY:
1.     MECHANISTIC ORGANIZATION
2.     ORGANIC ORGANIZATION

12. Mechanistic Organization (Bureaucracy)
STRUCTURE CREATED BY APPLICATION OF THE CLASSICAL PRINCIPLES.
THIS STRUCTURE SCORES HIGH ON:
Complexity
Formalization
Centralization

13. Organic Organization (Adhocracy)
IS A DIRECT CONTRAST TO THE MECHANISTIC FORM
THIS STRUCTURE SCORES LOW ON:
Complexity
Formalization
Centralization (DECENTRALIZED)

14. Mechanistic vs. Organic Concept
KEY CONTINGENCIES (factors that influence the decision what form of the structure is best suitable in certain conditions):
·       ORGANIZATION’S STRATEGY
·       SIZE OF AN ORGANIZATION
·       USED TECHNOLOGY
·       ENVIRONMENT

15. 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

16. Divisional Structure: Major Advantage / Disadvantage
Focus on results
Frees HQ staff from operating details
Duplication of activities & resources

17. Divisional Structure: Example

18. Organic Design Options
·       SIMPLE STRUCTURE
·       MATRIX STRUCTURE
·       NETWORK STRUCTURE
·       TASK FORCE STRUCTURE
·       COMMITTEE STRUCTURE

19. Organization Design Options (Summary)
Strengths
Functional
Economies through specialization
Divisional
High accountability for results
Simple
Speed, economy, flexibility
Matrix
Economies through specialization & accountability for product results
Network
Task Force
Flexibility
Committee