1. Organizing in the Twenty-First Century
Chapter Ten
Organizing in the Twenty-First Century

2. Chapter Objectives
Explain the concept of contingency organization design.
Distinguish between mechanistic and organic organizations.
Discuss the roles that differentiation and integration play in organization structure.
Identify and briefly describe the five basic departmentalization formats.

3. Chapter Objectives (cont’d)
Describe how a highly centralized organization differs from a highly decentralized one.
Define the term delegation and list at least five common barriers to delegation.
Explain how the traditional pyramid organization is being reshaped.

4. Contingency Design Organizing Contingency Design
The structuring of a coordinated system of authority relationships and task responsibilities
Contingency Design
The process of determining the degree of environmental uncertainty and adapting the organization and its subunits to the situation
How much environmental uncertainty is there?
What combination of structural characteristics is most appropriate?
There is no single best organization design.

6. The Burns and Stalker Model
Mechanistic Organizations
Are rigid in design, rely on formal communications, and have strong bureaucratic qualities best suited to operating in relatively stable and certain environments
Organic Organizations
Have flexible structures, have participative communication patterns, and are successful in adapting to change in unstable and uncertain environments

7. Joan Woodward’s Study
When task complexity is either high or low, organizations with organic structures are more effective.
When task complexity is moderate, organizations with mechanistic structures are more effective.

8. The Lawrence and Lorsch Model
A dynamic equilibrium exists between two opposing structural forces and environmental complexity.
Differentiation: The tendency of specialists to think and act in restricted ways
Integration: The collaboration among specialists needed to achieve a common purpose
A dynamic equilibrium between differentiation and integration is necessary for a successful organization.
Both differentiation and integration increase as environmental complexity increases.

9. Figure 10.1: Differentiation and Integration: Opposing Organizational Factors

10. Basic Structural Formats
Departmentalization
Grouping of related jobs or processes into major organizational units
Overcomes some of the effect of fragmentation caused by differentiation (job specialization)
Permits coordination (integration) to be handled in the least costly manner
Sometimes refers to divisions, groups, or units in large organizations

11. Basic Structural Formats (cont’d)
Functional Departments
Categorizing jobs according to the activity performed
Product-Service Departments
Grouping jobs around a specific product or service
Geographic Location Departments
Adopting a structural format based on the physical dispersion of assets, resources, and customers
Customer Classification Departments
Creating a structural format centered on various customer categories

12. Figure 10.2: Alternative Departmentalization Formats

13. Figure 10.2: Alternative Departmentalization Formats (cont’d)

14. Figure 10.2: Alternative Departmentalization Formats (cont’d)

15. Basic Structural Formats (cont’d)
Work Flow Process Departments in Reengineered Organizations
Creating horizontal organizations that emphasize speedy work flow between two points:
Identifying customer needs
Satisfying customer needs

16. Contingency Design Alternatives
Span of Control (Management)
Span of control is the number of people who report to a manager.
Narrow spans of control foster tall organizations with many organizational/managerial layers.
Flat organizations have wider spans of control.
Is There an Ideal Span of Control?
The right span of control efficiently balances too little and too much supervision.

17. Figure 10.3: Narrow and Wide Spans of Control

18. Contingency Design Alternatives (cont’d)
The Contingency Approach to Spans of Control
Both overly narrow and overly wide spans of control are counterproductive.
Situational factors dictate the width of spans of control.
Wide spans of control are appropriate for departments where many workers work closely together and do the same job.
Narrow spans of control are best suited for departments where the work is complex and/or the workers are widely dispersed.

19. Figure 10.4: Situational Determinants of Span of Control

20. Contingency Design Alternatives (cont’d)
Centralization
The retention of decision-making authority by top management
Decentralization
The sharing of decision-making authority by management with lower-level employees
The Need for Balance
The challenge to balance the need for responsiveness to changing conditions (decentralization) with the need to create low-cost shared resources (centralization)

21. Figure 10.5: Factors in Relative Centralization/Decentralization

22. Contingency Design Alternatives (cont’d)
Decentralization Through Strategic Business
Strategic business units (SBU) are organizational subunits that:
Serve a specific market outside the parent organization
Face outside competitors
Are in a position of controlling their own destiny
Are profit centers, with their effectiveness measured in terms of profit and loss

23. Contingency Design Alternatives (cont’d)
Line and Staff Organizations
Line managers make decisions and staff personnel provide advice and support.
Personal staff are assigned to a specific manager in supporting roles.
Specialized staff constitute a reservoir of specialized talent available to the entire organization.
Functional authority gives staff temporary and limited authority for specified tasks.

24. Figure 10.6: A Line and Staff Organization

25. Matrix Organization Matrix Organization
A structure with both vertical and horizontal lines of authority
Advantages
Increases coordination
Improves quantity of information flow
Disadvantages
Violates unity-of-command principle
Creates an authority gap (lack of line authority) for project managers
Decreases quality of information flow

26. Figure 10.7: A Simplified Matrix Organization Chart

28. Effective Delegation Delegation Advantages of Delegation
Assigning various degrees of decision-making authority to lower-level employees
Advantages of Delegation
Frees up managerial time for other important tasks
Serves as a training and development tool for lower-level managers
Increases subordinates’ commitment by giving them challenging assignments

29. Effective Delegation (cont’d)
Barriers to Delegation
Belief that only you can do the job right
Lack of confidence and trust in subordinates
Low self-confidence
Fear of being called lazy
Vague job definition
Fear of competition from subordinates
Reluctance to take risks that depend on others
Lack of early warning controls
Poor example of bosses who do not delegate

30. Figure 10.8: The Delegation Continuum

31. The Changing Shape of Organizations
Characteristics of New Organizations
Fewer organizational layers
More teams
Smallness within bigness
New Organizational Configurations
Hourglass organization: Three-layer structure with constricted middle (management) layer
Cluster organization: Collaborative structure in which teams are the primary unit
Virtual organizations: Internet-linked networks of value-adding subcontractors

32. Figure 10.9: Reshaping the Traditional Pyramid Organization

33. Terms to Understand Organizing Contingency design/plan
Mechanistic organizations
Organic organizations
Differentiation
Integration
Departmentalization
Span of control
Centralization
Decentralization
Strategic business unit
Line and staff organization
Functional authority
Matrix organization
Delegation
Hourglass organization
Cluster organization
Virtual organization