1. © 2009 Cengage Learning. All rights reserved. Chapter 15 Organizational Design and Structure 1 Define differentiation and integration as organizational design processes. 2 Discuss the basic design dimensions managers must consider in structuring an organization. 3 Describe five structural configurations for organizations. 4 Describe four contextual variables that influence organizational structure. 5 Explain the forces reshaping organizations. 6 Discuss emerging organizational structures. 7 Identify two cautions about the effect of organizational structures on people. Learning Outcomes

2. © 2009 Cengage Learning. All rights reserved. Define differentiation and integration as organizational design processes. Learning Objective 1

3. © 2009 Cengage Learning. All rights reserved. the process of constructing and adjusting an organization’s structure to achieve its goals. Organizational Design-Evan

4. © 2009 Cengage Learning. All rights reserved. Organizational Design – the process of constructing and adjusting an organization’s structure to achieve its goals. organization’s structure the linking of departments and jobs within an organization Organizational Design-Evan

5. © 2009 Cengage Learning. All rights reserved. Key Organizational Design Processes

6. © 2009 Cengage Learning. All rights reserved. Four Dimensions Manager’s goal orientation Time orientation Interpersonal orientation Formality of structure The process of deciding how to divide the work in an organization-Katie

7. © 2009 Cengage Learning. All rights reserved. Horizontal Differentiation-Katie The degree of differentiation between organizational subunits Based on employee’s specialized knowledge, education, or training

8. © 2009 Cengage Learning. All rights reserved. Vertical Differentiation-Katie The difference in authority and responsibility in the organizational hierarchy Greater in tall, narrow organizations than in flat, wide organizations

9. © 2009 Cengage Learning. All rights reserved. Spatial Differentiation-Katie Geographic dispersion of an organization’s offices, plants, and personnel Complicates organizational design, but may simplify goal achievement or protection

10. Differentiation Between Marketing and Engineering Basis for Difference Marketing Engineering Goal orientation Time orientation Interpersonal orientation Structure Design Medium run Task oriented More formal Sales volume Long run People oriented Less formal

11. © 2009 Cengage Learning. All rights reserved. Designed to achieve unity among individuals and groups Supports a state of dynamic equilibrium – elements of organization are integrated, balanced The process of coordinating the different parts of an organization-Robin

12. © 2009 Cengage Learning. All rights reserved. Vertical Integration -Robin Hierarchical referral Rules and procedures Plans and schedules Positions added to the organization structure Management information systems

13. © 2009 Cengage Learning. All rights reserved. Horizontal Integration- Robin Liaison roles Task forces Integrator positions Teams

14. © 2009 Cengage Learning. All rights reserved. Discuss the basic design dimensions managers must consider in structuring an organization. Learning Objective 2

15. © 2009 Cengage Learning. All rights reserved. 2 Ways to Approach-Justin I establish desired level of each structural dimension on a high-low continuum and develop structure that meets desired configuration Organizational Design Process

16. © 2009 Cengage Learning. All rights reserved. 2 Ways to Approach-Justin II describe what is or is not important to the success of the organization rather than worry about specific characteristics Organizational Design Process

17. Hierarchy of Authority – the degree of vertical differentiation across levels of management Specialization – the degree to which jobs are narrowly defined and depend on unique expertise Basic Design Dimensions Formalization – the degree to which the organization has official rules, regulations, and procedures 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 Centralization – the degree to which decisions are made at the top of the organization Ben M.

18. © 2009 Cengage Learning. All rights reserved. Describe five structural configurations for organizations. Learning Objective 3

19. Adhocracy – a selectively decentralized form of organization that emphasizes the support staff and mutual adjustment among people Simple Structure – a centralized form of organization that emphasizes the upper echelon and direct supervision Machine Bureaucracy – a moderately decentralized form of organization that emphasizes the technical staff and standardization of work processes Divisional Form – a moderately decentralized form of organization that emphasizes the middle level and standardization of outputs Professional Bureaucracy – a decentralized form of organization that emphasizes the operating level and standardization of skills Structural Configurations of Organizations Kyle P

20. Five Structural Configurations of Organization-Kyle P Structural Configuration Prime Coordinating Mechanism Key Part of Organization Type of Decentralization Simple Structure Direct Supervision Upper Echelon Centralization Machine Bureaucracy Standardization of Work Processes Technical Staff Limited Horizontal Decentralization Professional Bureaucracy Standardization of Skills Operating Level Vertical and Horizontal Decentralization Divisionalized Form Standardization of Outputs Middle Level Limited Vertical Decentralization Adhocracy Mutual Adjustment Support Staff Selective Decentralization

21. © 2009 Cengage Learning. All rights reserved. Middle Line Strategic Apex Operating Core Support Staff Techno- structure Mintzberg’s Five Basic Parts of an Organization From H. Mintzberg, The Structuring of Organizations (Upper Saddle River, N.J.: Prentice-Hall, 1979): 20. Reprinted with permission.

22. © 2009 Cengage Learning. All rights reserved. Describe four contextual variables that influence organizational structure. Learning Objective 4

23. Contextual Variables – a set of characteristics that influences the organization’s design processes Size Environment Technology Strategy and Goals

24. Basic Design Small Large Dimensions Organizations Organizations Formalization Centralization Specialization Standardization Complexity Hierarchy of authority Less High Low Flat More Low High Tall Implications of Size

25. © 2009 Cengage Learning. All rights reserved. the degree of interrelatedness of the organization’s various technological elements Technological Interdependence

26. Relationship Between Technology and Basic Design Dimensions Key 1 Formalization 4 Standardization 2 Centralization 5 Complexity 3 Specialization 6 Hierarchy of Authority Craft 1. Moderate 2. Moderate 3. Moderate 4. Low moderate 5. High 6. Low Routine 1. High 2. High 3. Moderate 4. High 5. Low 6. High Nonroutine 1. Low 2. Low 3. Low 4. Low 5. High 6. Low Engineering 1. Moderate 2. Moderate 3. High 4. Moderate 5. Moderate 6. Moderate Few Exceptions Many Exceptions Task Variability Ill-defined and Unanalyzable Well-defined and Analyzable Problem Analyzability Built from C. Perrow, “A Framework for the Comparative Analysis of Organization,” American Sociological Review, April 1967, 194-208

27. © 2009 Cengage Learning. All rights reserved. anything outside the boundaries of an organization Environment

28. © 2009 Cengage Learning. All rights reserved. Environment Task Environment – the elements of an organization’s environment that are related to its goal attainment Environmental Uncertainty – the amount and rate of change in the organization’s environment Environment ?

29. © 2009 Cengage Learning. All rights reserved. Extremes of Environmental Uncertainty-Tyson Mechanistic 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

30. © 2009 Cengage Learning. All rights reserved. Key Organizational Design Elements- Tyson Context of the organization Correct size Current technology Perceived environment Current strategy and goals Structural dimensions Level of formalization Level of centralization Level of specialization Level of standardization Level of complexity Hierarchy of authority Influences how manager perceive structural needs

31. © 2009 Cengage Learning. All rights reserved. Strategic Dimension Predicted Structural Characteristics Innovation—to understandLow formalization and manage new processesDecentralization and technologiesFlat hierarchy Market differentiation—to Moderate to high complexity specialize in customer Moderate to high preferences formalization Moderate centralization Cost control—to produceHigh formalization standardized productsHigh centralization efficiently High standardization Low complexity Miller’s Integrative Framework of Structural & Strategic Dimensions D. Miller, “The Structural and Environmental Correlates of Business Strategy,” Strategic Management Journal 8 (1987): 55-76. Copyright @ John Wiley & Sons Limited. Reproduced with permission. Dillin

32. © 2009 Cengage Learning. All rights reserved. Which characterize the organizational processes-Dillin Context of the organization Purposes Designate formal lines of authority Designate formal information- processing patterns Differentiation and Integration Which influence how well the structure meets its Which influence how well the structure fits the

33. © 2009 Cengage Learning. All rights reserved. Explain the forces reshaping organizations. Learning Objective 5

34. © 2009 Cengage Learning. All rights reserved. Organization Life Cycle the differing stages of an organization’s life from birth to death

35. © 2009 Cengage Learning. All rights reserved. Forces Reshaping Organizations Globalization Changes in Information- Processing Technologies Demands on Organizational Processes Emerging Organizational Structures

36. Structural Roles of Managers Roles of Managers Today 1. Strictly adhering to boss– employee relationships 2. Getting things done by giving orders 3. Carrying messages up and down the hierarchy 4. Performing a set of tasks according to a job description 5. Having a narrow functional focus 6. Going through channels, one by one by one 7. Controlling subordinates Roles of Future Managers 1. Having hierarchical relationships subordinated 2. Getting things done by negotiating 3. Solving problems and making decisions 4. Creating the job through entrepreneurial projects 5. Having a broad cross- functional collaboration 6. Emphasizing speed and flexibility 7. Coaching one’s workers Management Review, January 1991, Thomas R. Horton.

37. © 2009 Cengage Learning. All rights reserved. Discuss emerging organizational structures. Learning Objective 6

38. © 2009 Cengage Learning. All rights reserved. Emerging structures Network organizations Virtual organizations Circle organizations

39. © 2009 Cengage Learning. All rights reserved. HD’s Circle Organization From R. Teerlink and L. Ozley, More than a Motorcycle: The Leadership Journey at Harley-Davidson. Boston, MA, 2000. P. 139. Copyright © 2000 by the Harvard Business School Publishing Corporation; all rights reserved. Create Demand Produce Product Provide Support Leadership and Strategy Council (LSC)

40. © 2009 Cengage Learning. All rights reserved. Identify two cautions about the effect of organizational structures on people. Learning Objective 7

41. © 2009 Cengage Learning. All rights reserved. Four Symptoms of Structural Weakness-Zach Delay in decision making Poor quality decision making Lack of innovative response to changing environment High level of conflict Overloaded hierarchy; information funneling limited to too few channels Right information not reaching right people in right format No coordinating effort Departments work against each other, not for organizational goals

42. Dysfunctional Personality/Organization Combinations-Zach Paranoid Dramatic Compulsive Schizoid Depressive