Chapter 12 Managing Organization Design.ppt

Managing Organization DesignChapter 12

Chapter 12City University of Science and Information TechnologyFaisal Ghani

The Nature of Organization DesignOrganization DesignThe overall set of structural elements and the relationships among those elements used to manage the total organization.

Organizations are in a continuous state of change.Organization design for larger organizations is extremely complex.


Universal Perspective on Organization DesignUniversal perspective of organizational design is based on two models:Bureaucratic ModelBehavioral Model


Universal Perspective on Organization DesignBureaucratic ModelA model of organization design based on a legitimate and formal system of authority.

Max Weber the German Sociologist, who was the pioneer of Behavioral Model of organization, gave the idea of bureaucratic Model of organization.


Universal Perspective on Organization DesignBureaucratic ModelAccording to Weber, the ideal bureaucracy exhibits five basic characteristics:Division of labor Rules and proceduresOrganizational hierarchyImpersonal Relationships among workersExpertise-based promotions


Universal Perspective on Organization DesignBureaucratic ModelAdvantagesEfficiency in function due to well-defined practices and procedures.Organizational rules prevent favoritism.Recognition of and requirement for expertise stresses the value of an organizations employees.


Universal Perspective on Organization DesignBureaucratic ModelDisadvantagesOrganizational inflexibility and rigidity due to rules and procedures.Neglects the social and human processes within the organization.Belief in one best way to design an organization does not apply to all organizations and their environments.


Universal Perspective on Organization DesignBehavioral ModelA model of organization design consistent with human relations movement and stressing attention to developing work groups and concern with interpersonal processes.

Rensis Likert, a management researcher.


Universal Perspective on Organization DesignBehavioral ModelLikert developed a framework that characterized organization in terms of eight important process:LeadershipMotivationCommunicationInteractionDecision makingGoal settingControl and Performance goals


Universal Perspective on Organization DesignBehavioral ModelSystem 1

ExploitativeAuthoritativeJob-centered leader behaviorSystem2

BenevolentAuthoritative

System 3

ConsultativeSystem 4Participative

Employee-centered leader behaviorFor details see page 378 table 12.1


Situational Influences on Organization DesignSituational View of Organizational DesignBased on the assumption that the optimal design for any given organization depends on a set of relevant situational factors.


Situational Influences on Organization DesignSituational View of Organizational DesignORGANIZATIONDESIGNEnvironmentCore TechnologyOrganizational SizeOrganizational Life Cycle


Situational Influences on Organization DesignCore TechnologyTechnologyConversion processes used to transform inputs into outputs.

A core technology is an organizations most important technology.


Situational Influences on Organization DesignCore TechnologyWoodwards Basic Forms of TechnologyUnit or Small-Batch TechnologyProduce custom-made products to customer specifications, or else produce in small quantities.Large Batch/Mass ProductionUses assembly-line production methods to manufacture large quantities of products.Continuous ProcessUse continuous-flow processes to convert raw materials by process or machine into finished products.


Situational Influences on Organization DesignEnvironmentTwo kinds of design emerges from the environment:Mechanist OrganizationsSimilar to the bureaucratic or system 1 model, most frequently found in stable environment.Organic Organizations Very flexible and informal model of organization design, most often found in unstable and unpredictable environment.


Situational Influences on Organization DesignEnvironmentRigid hierarchical relationshipsFixed dutiesMany rulesFormalized communications channelsCentralized decision authorityTaller structuresCollaborationAdaptable rulesInformal communicationDecentralized decision authorityFlatter structuresMechanisticOrganic


Situational Influences on Organization DesignEnvironmentOrganizations could be characterized along two primary dimensions:DifferentiationExtent to which the organization is broken down into subunits.IntegrationDegree to which the various subunits must work together in a coordinated fashion.


Situational Influences on Organization DesignOrganizational SizeTotal 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, more rules and regulations.


Situational Influences on Organization DesignOrganizational Life CycleA progression through which organizations evolve as they grow and maturebirth, youth, midlife, and maturity.


Strategy and Organization DesignCorporate-Level StrategySingle-product strategyRelated or unrelated diversificationPortfolio approach to managing strategic business units


Strategy and Organization DesignBusiness-Level StrategyDefenderProspecting AnalyzerDifferentiationCost leadershipFocus


Strategy and Organization DesignOrganizational FunctionsMajor functions of the organization (e.g. marketing, finance, research and development, & manufacturing) influence an organizations design.


Basic Forms of Organization DesignOrganization design fall into four categories:Functional (U-Form) Design Unitary Conglomerate (H-Form) Design Holding Company Divisional (M-Form) Design Multidivisional Matrix Design


Basic Forms of Organization DesignFunctional (U-Form) Design Unitary Based on the functional approach to departmentalization.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.


Basic Forms of Organization DesignFunctional (U-Form) Design Unitary


Basic Forms of Organization DesignConglomerate (H-Form) Design Holding Used by an organization made up of a set of unrelated businesses.Based on product based departmentalizationEach business unit will have its own general manager who is responsible for its profits and losses.Each manager functions independently then others.Complexity is associated with diversification nature of the design.


Basic Forms of Organization DesignConglomerate (H-Form) Design Holding SamsungElectronics Co.SemiconductorsTele-communicationsAppliancesMedia


Basic Forms of Organization DesignDivisional (M-Form) Design Multidivisional Based on multiple businesses in related areas operating within a larger organizational framework.The design results from a strategy of related diversification.Some activities are extremely decentralized down to the divisional level; others are centralized at the corporate level.The largest advantages of the M-form design are the opportunities for coordination and sharing of resources.


Basic Forms of Organization DesignDivisional (M-Form) Design Multidivisional HPComputersPrintersScannersElec MedicalEquipmentOtherElectronics


Basic Forms of Organization DesignMatrix Design Based on two overlapping bases of departmentalization The design results from a strategy of related diversification.A set of product groups or temporary departments are superimposed across the functional departments.Employees in the resulting matrix are members of both their departments and a project team under a project manager.The matrix creates a multiple command structure in which an employee reports to both departmental and project managers.


Basic Forms of Organization DesignMatrix Design Matrix Design AdvantagesEnhances organizational flexibility.Involvement creates high motivation and increased organizational commitment.Team members have the opportunity to learn new skills.Provides an efficient way for the organization to use its human resources.Team members serve as bridges to their departments for the team.Useful as a vehicle for decentralization.


Basic Forms of Organization DesignMatrix Design Matrix Design DisadvantagesEmployees are uncertain about reporting relationships.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.More time may be required for coordinating task-related activities.


Basic Forms of Organization DesignMatrix Design CEOVPMarketingVPFinanceVP ProductionVPEngineeringProjectManager AProjectManager BProjectManager C


Basic Forms of Organization DesignHybrid DesignsAn organizational arrangement based on two or more common forms of organization design.An organization may have a mixture of related divisions and a single unrelated division.Most organizations use a modified form of organization design that permits it to have sufficient flexibility to make adjustments for strategic purposes.


Emerging Issues in Organization DesignThe Team OrganizationAn approach to organizational design that relies almost exclusively on project-type teams, with little or no underlying functional hierarchy.The Virtual OrganizationAn organizational design that has little or no format structure with few permanent employees, leased facilities, and outsourced basic support services.It may conduct its business entirely on-line and exists only to meet for a specific and present need.


Emerging Issues in Organization DesignThe Learning OrganizationAn organization that works to facilitate the lifelong learning and development of its employees while transforming itself to respond to changing demands and needs.

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Chapter 12 Managing Organization Design.ppt