1. PowerPoint Presentation by Charlie Cook The University of West Alabama © 2010 South-Western, Cengage Learning, Inc. All rights reserved.

2. 12–2 The Nature of Organization Design Organization DesignOrganization Design  The structural elements and the relationships among the elements used to manage the organization.  A means to implement strategies and plans to achieve organizational goals. Organization Design ConceptsOrganization Design Concepts  Organizations are not designed and then left intact.  Organizations are in a continuous state of change.  Designs for larger organizations are extremely complex and have many nuances and variations.

3. © 2010 South-Western, Cengage Learning, Inc. All rights reserved.12–3 Perspectives on Organization Design Bureaucratic Model (Max Weber)Bureaucratic Model (Max Weber)  A logical, rational, and efficient organization design based on a legitimate and formal system of authority.  Characteristics:  A division of labor with each position filled by an expert.  A consistent set of rules ensuring uniformity in task performance.  A hierarchy of positions that creates a chain of command.  Impersonal management; with the appropriate social distance between superiors and subordinates.  Employment and advancement based on technical expertise, and employees protected from arbitrary dismissal.

4. © 2010 South-Western, Cengage Learning, Inc. All rights reserved.12–4 Bureaucratic Model Efficiency in function Prevention of favoritism Recognition of and requirement for expertise Advantages Organizational inflexibility and rigidity Neglect of social and human processes Belief in “one best way” to design organizations Disadvantages

5. © 2010 South-Western, Cengage Learning, Inc. All rights reserved.12–5 Management Challenge Question What characteristics of a bureaucratic structure help an organization in meeting its diversity goals?What characteristics of a bureaucratic structure help an organization in meeting its diversity goals? What characteristics of a bureaucratic would hinder an organization in meeting its diversity goals?What characteristics of a bureaucratic would hinder an organization in meeting its diversity goals?

6. © 2010 South-Western, Cengage Learning, Inc. All rights reserved.12–6 System 1ExploitativeAuthoritative Job-centered leader behavior System2BenevolentAuthoritativeSystem 3ConsultativeSystem 4Participative Employee- centered leader behavior Behavioral Model: Likert System Renesis LikertRenesis Likert  Organizations that pay attention to work groups and interpersonal processes are more effective than bureaucratic organizations.

7. © 2010 South-Western, Cengage Learning, Inc. All rights reserved.12–7 Situational Influences on Organization Design EnvironmentTechnology Organizational Life Cycle Organization Design Size

8. © 2010 South-Western, Cengage Learning, Inc. All rights reserved.12–8 Organization Design and Technology Core TechnologyCore Technology  Is the conversion processes used to transform inputs into outputs.  Is an organization’s most important technology. Joan WoodwardJoan Woodward  Initially sought a correlation between organization size and design; instead, she found a potential relationship between technology and design:  As the complexity of technology increases, so do the number of levels of management.

9. © 2010 South-Western, Cengage Learning, Inc. All rights reserved.12–9 Core Technology and Organization Design Unit or small-batch technology Large batch/mass production Continuous process Woodward’s Basic Forms of Technology

10. © 2010 South-Western, Cengage Learning, Inc. All rights reserved.12–10 Situational Influences on Organization Design (cont’d) Burns and Stalker Burns and Stalker  Forms of the organizational environment  Stable environments that remain constant over time.  Unstable environments subject to uncertainty and rapid change.  Organization Designs  Mechanistic organizations are similar to bureaucratic or System 1 models; found most frequently in stable environments.  Organic organizations are flexible and informal models; usually found in unstable and unpredictable environments.

11. © 2010 South-Western, Cengage Learning, Inc. All rights reserved.12–11 Situational Influences on Organization Design (cont’d) Lawrence and LorschLawrence and Lorsch  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.

12. © 2010 South-Western, Cengage Learning, Inc. All rights reserved.12–12 Situational Influences on Organization Design (cont’d) Organizational SizeOrganizational Size  Defined as the total number of full-time or full-time equivalent employees  Research findings:  Small firms tend to focus on their core technology.  Large firms have more job specialization, standard operating procedures, rules and regulations, and are more decentralized. Organizational Life CycleOrganizational Life Cycle  Organizations progressively evolve as they grow and mature—birth, youth, midlife, and maturity.

13. © 2010 South-Western, Cengage Learning, Inc. All rights reserved.12–13 Strategy and Organization Design Corporate-Level StrategiesCorporate-Level Strategies  Single-product strategy  Related or unrelated diversification  Portfolio approach to managing strategic business units Organizational FunctionsOrganizational Functions  Major functions of the organization can influence an organization’s design.

14. © 2010 South-Western, Cengage Learning, Inc. All rights reserved.12–14 Organizational Strategies Defender Prospecting Analyzer Business-Level Strategies Differentiation Cost Leadership Focus Generic Competitive Strategies

15. © 2010 South-Western, Cengage Learning, Inc. All rights reserved.12–15 Basic Organization Designs Functional or U-form (Unitary) DesignFunctional or U-form (Unitary) Design  Organizational members and units are grouped into functional departments such as marketing and production.  Coordination is required across all departments.  Design approach resembles functional departmentalization in its advantages and disadvantages.

16. © 2010 South-Western, Cengage Learning, Inc. All rights reserved.12–16 12.1 Functional or U-form Design for a Small Manufacturing Company

17. © 2010 South-Western, Cengage Learning, Inc. All rights reserved.12–17 Basic Organization Designs (cont’d) Conglomerate or H-form (Holding) DesignConglomerate or H-form (Holding) Design  Organization is a set of unrelated businesses with a general manager for each business.  Holding-company design is similar to product departmentalization.  Coordination is based on the allocation of resources across companies in the portfolio.  Design has produced only average to weak financial performance; has been abandoned for other approaches.

18. © 2010 South-Western, Cengage Learning, Inc. All rights reserved.12–18 12.2 Conglomerate (H-form) Design at Samsung SemiconductorsTelecommunications Appliances Media CEO

19. © 2010 South-Western, Cengage Learning, Inc. All rights reserved.12–19 Basic Organization Designs (cont’d) Divisional or M-form (Multidivisional) DesignDivisional or M-form (Multidivisional) Design  Multiple businesses in related areas operating within a larger organizational framework.  Results from a strategy of related diversification.  Activities are decentralized down to the divisional level; others are centralized at the corporate level.  Design advantage is in opportunities for coordination and sharing of resources.  Successful M-form organizations can out perform U-form and H-form organizations.

20. © 2010 South-Western, Cengage Learning, Inc. All rights reserved.12–20 12.3 Multidivisional (M-form) Design at Limited Brands

21. © 2010 South-Western, Cengage Learning, Inc. All rights reserved.12–21 Basic Organization Designs (cont’d) Matrix DesignMatrix Design  Two overlapping bases of departmentalization:  A set of product groups or temporary departments are superimposed across the functional departments.  Employees in the matrix belong to their departments and the project team:  A multiple command structure in which an employee reports to both departmental and project managers.  A matrix design is useful when:  There is strong environmental pressure.  There are large amounts of information to be processed.  There is pressure for shared resources.

22. © 2010 South-Western, Cengage Learning, Inc. All rights reserved.12–22 12.4 A Matrix Organization

23. © 2010 South-Western, Cengage Learning, Inc. All rights reserved.12–23 Matrix Design Advantages Enhances organizational flexibility.Enhances organizational flexibility. Creates high motivation and increased organizational commitment for team members.Creates high motivation and increased organizational commitment for team members. Gives team members opportunity to learn new skills.Gives team members opportunity to learn new skills. Provides an efficient way for the organization to use its human resources.Provides an efficient way for the organization to use its human resources. Uses team members as bridges to their departments for the team.Uses team members as bridges to their departments for the team. Useful as a vehicle for decentralization.Useful as a vehicle for decentralization.

24. © 2010 South-Western, Cengage Learning, Inc. All rights reserved.12–24 Matrix Design Disadvantages Employees are uncertain about reporting relationships.Employees are uncertain about reporting relationships. Managers may view design as an anarchy in which they have unlimited freedom.Managers may view design as an anarchy in which they have unlimited freedom. The dynamics of group behavior may lead to slower decision making, one-person domination, compromise decisions, or a loss of focus.The dynamics of group behavior may lead to slower decision making, one-person domination, compromise decisions, or a loss of focus. More time may be required for coordinating task-related activities.More time may be required for coordinating task-related activities.

25. © 2010 South-Western, Cengage Learning, Inc. All rights reserved.12–25 Basic Organization Designs (cont’d) Hybrid DesignsHybrid Designs  Based on two or more common forms of organization design—may have a mixture of related divisions and a single unrelated division.  Most organizations use a modified form of organization design that permits them to have sufficient flexibility to make adjustments for strategic purposes.

26. © 2010 South-Western, Cengage Learning, Inc. All rights reserved.12–26 The Future of Organization Design Team-based organizations Virtual organizations Learning organizations Emerging Organization Design Issues International/global organizations

27. © 2010 South-Western, Cengage Learning, Inc. All rights reserved.12–27 International Organization Design Issues Establish an international operating group? Make international operations an autonomous subunit? Create an international division? Competing Effectively in Global Markets

28. © 2010 South-Western, Cengage Learning, Inc. All rights reserved.12–28 12.5a Common Organization Designs for International Organizations A.Separate International Division CEO ProductionMarketingFinance International division B.Location Departmentalization North American operations European operations Asian operations CEO

29. © 2010 South-Western, Cengage Learning, Inc. All rights reserved.12–29 12.5b Common Organization Designs for International Organizations C. Product Departmentalization Product Manager A CEO Product Manager B Product Manager C Asia North America Europe D. Multidivisional Structure CEO Subsidiary A (Germany) Subsidiary C (France) Subsidiary E (China) Subsidiary D (Japan) Subsidiary B (U.S.)