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Challenges of Organizational Design

Balancing Differentiation / Integration

Balancing Centralization / Decentralization

Mechanistic versus Organic Structures

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Differentiation

Design Challenge 1

People in this organization take on new tasks as the need arises and it’s very unclear who is responsible for what and who is supposedto report to whom. This makes it difficult to know whom to call on when the needarises and difficult to coordinate people’s activities so they work together as a team.

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Differentiation: assigning people and resourcesto tasks

simple organization -> low differentiation

complex organization -> high differentiation

Differentiation

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The basic building blocks of differentiation areorganizational roles.

An organizational role is a set of task-relatedbehaviors required of a person by his orher position in an organization.

For example: • Maintenance Technician• Design Engineer

Differentiation

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As the division of labor increases, managersspecialize in some roles and hire people to specialize in others.

Specialization allows people to develop their individual abilities and knowledge withintheir specific role.

The identification of roles leads to authorityand control issues.

Differentiation

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Authority is the power to hold peopleaccountable for their actions and to makedecisions concerning the use of resources.

Control is the ability to coordinate andmotivate people to work in an organization’sinterests.

Differentiation

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In most organizations, people with similar roles are grouped into a subunit.

The main subunits that develop in organizations are:

• functions (or departments) • divisions

Differentiation

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A function is a subunit composed of a group ofpeople who possess similar skills and knowledge to perform their jobs.

marketing dept. maintenance dept.

A division is a subunit that consists of a collection of functions that are related to a particular good or service.

Motorola’s semiconductor division

Differentiation

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The number of functions and divisions in an organization is a measure of its complexity.

Differentiation increases control and allowsan organization to accomplish tasks effectively.

Differentiation

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As organizations grow in size, they differentiateinto five different kinds of functions:

1) Support functions facilitate relations with the environment and stakeholders

purchasing salesmarketing legal affairspublic relations

Differentiation

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As organizations grow in size, they differentiateinto five different kinds of functions:

2) Production functions manage the efficiency of the conversion processes

production operationsproduction controlquality control

Differentiation

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As organizations grow in size, they differentiateinto five different kinds of functions:

3) Maintenance functions enable an organization to keep its departmentsin operation

personnelengineeringjanitorial services

Differentiation

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As organizations grow in size, they differentiateinto five different kinds of functions:

4) Adaptive functions allow adjustment to changes in the environment

research and developmentmarket researchlong-range planning

Differentiation

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As organizations grow in size, they differentiateinto five different kinds of functions:

5) Managerial functions facilitate the control and coordination of activities withinand among departments.

top managementmiddle managerslower-level managers

Differentiation

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An organization chart is a drawing that shows the end result of organizational differentiation.

The organization chart is a snapshot of the way things are “divided up” along two dimensions:

vertical horizontal

Differentiation

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Vertical differentiation refers to the way an organization designs its hierarchy ofauthority (i.e., reporting relationships).

Horizontal differentiation refers to the way anorganization groups tasks into roles androles into subunits (i.e., functions and divisions).

Differentiation

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Design Challenge 2

We can’t get people to communicate and coordinate in this organization. Specifyingtasks and roles is supposed to help coordinate the work process, but here it builds barriers between people and functions.

Integration

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Integrating Mechanisms

1) Hierarchy of Authority: “who reports to whom”

2) Direct Contact: subunit representatives meet face to face

3) Liaison Role: a specific person coordinates with other subunits

Integration

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4) Task Force: temporary committee to coordinate cross-functional activities

5) Team: permanent committee

6) Integrating Role: A new role is establishedto coordinate the activities of two or morefunctions or divisions

7) Integrating Department: A new departmentis created to coordinate the activities of functions or divisions

Integration

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Balance differentiation and integration.

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Decision Making

Centralized•High managerial control•Low employee empowerment

Decentralized •Low managerial control•High employee empowerment•Crucial in fast-changing environments

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Types of Structures

Two general categories of structure types:

organic and mechanistic

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Mechanistic Structures

Designed to induce people to behave in predictable ways.

Decision making is centralizedSubordinates are closely supervisedInformation flows downward in the hierarchyTasks are clearly definedIntegrating mechanisms are simpleWork is very standardized

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Organic Structures

Promote flexibility, so people initiate change and can adapt quickly

Decision making is decentralizedRoles are loosely definedIntegrating mechanisms are complexTasks rely on mutual adjustmentInformation flows freely

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Design GoalDesign Goal

Anticipate environmental, social, and Anticipate environmental, social, and procedural constraints and procedural constraints and opportunitiesopportunities

Satisfy interests of primary Satisfy interests of primary stakeholdersstakeholders