14
Nelson Chapter & Quick
Organizational Design
& Structure
Copyright 2005 by South-Western, a division of Thomson Learning. All rights
Organizational Design
Organizational Design - the process of constructing
and adjusting an organizations structure to achieve its
organizations structure
goals.
the linking of
departments and
jobs within an
organization
H. Mintzberg, The Structuring of Organizations, Prentice Hall, 1979, 301.
Reprinted by permission of Prentice-Hall, Inc, Upper Saddle River, NJ.
Key Organizational Design
Processes
The process of deciding
how to divide the work
in an organization
Four Dimensions
Managers goal orientation
Time orientation
Interpersonal orientation
Formality of structure
Horizontal
Differentiation
The degree of differentiation between
organizational subunits
Based on employees specialized knowledge,
education, or training
Vertical
Differentiation
The difference in authority and responsibility in the
organizational hierarchy
Greater in tall, narrow organizations than in flat,
wide organizations
Spatial
Differentiation
Geographic dispersion of an organizations
offices, plants, and personnel
Complicates organizational design, but may
simplify goal achievement or protection
Differentiation Between
Marketing and Engineering
Basis for Difference
Marketing
Goal orientation
Time orientation
Interpersonal
orientation
Structure
Sales volume
Long run
People
oriented
Less formal
Engineering
Design
Medium run
Task
oriented
More formal
The process of coordinating
the different parts
of an organization
Designed to achieve unity among individuals and
groups
Supports a state of dynamic equilibrium - elements of
organization are integrated, balanced
Vertical
Integration
Hierarchical referral
Rules and procedures
Plans and schedules
Positions added to the organization structure
Management information systems
Horizontal
Integration
Liaison roles
Task forces
Integrator positions
Teams
Formalization - the degree
to which the organization
has official rules,
regulations, and procedures
Hierarchy of
Authority the degree of
vertical
differentiation
across
levels of
management
Centralization - the degree
to which decisions are
made at the top of the
organization
Basic
Design
Dimensions
Complexity - the degree to
which many different types
of activities occur in the
organization
Specialization the degree to
which jobs are
narrowly
defined and
depend on
unique
expertise
Standardization - the
degree to which work
activities are accomplished
in a routine fashion
Simple Structure - a
centralized form of
organization that
emphasizes the upper
echelon & direct
supervision
Adhocracy - a
selectively
decentralized
form of
organization that
emphasizes the
support staff &
mutual adjustment
among people
Structural
Configurations
of
Organizations
Machine Bureaucracy a moderately
decentralized form of
organization that
emphasizes the
technical staff &
standardization of
work processes
Divisional Form - a
moderately decentralized
form of organization
that emphasizes the
middle level &
standardization of outputs
Professional
Bureaucracy a decentralized
form of
organization that
emphasizes the
operating level
& standardization
of skills
Five Structural Configurations of Organization
Prime
Structural
Type of
Key Part of
Configuration Coordinating Organization Decentralization
Mechanism
Simple
Structure
Direct
Supervision
Upper
Echelon
Machine
Bureaucracy
Standardization
of Work
Processes
Technical
Staff
Centralization
Professional Standardization
Bureaucracy
of Skills
Operating
Level
Divisionalized Standardization
Form
of Outputs
Middle
Level
Limited
Horizontal
Decentralization
Vertical &
Horizontal
Decentralization
Limited Vertical
Decentralization
Support
Staff
Selective
Decentralization
Adhocracy
Mutual
Adjustment
Mintzbergs Five
Basic Parts
of an Organization
Strategic
Strategic
Apex
Apex
Teec
Tc
hhno
ortt
por
ssrru no-t tucc
upp f
Sup ff
S ta
tuure
t re
S
Staf
Middle
Line
Operating Core
Operating Core
From H. Mintzberg, The Structuring of Organizations (Upper Saddle
River, N.J.: Prentice-Hall, 1979): 20. Reprinted with permission.
Size
Technology
Contextual Variables a set of characteristics that
influences the organizations
design processes
Strategy
& Goals
Environment
Size
Basic Design
Dimensions
Organizations
Formalization
Centralization
Specialization
Standardization
Complexity
Hierarchy of authority
Small
Organizations
Less
High
Low
Low
Low
Flat
Large
More
Low
High
High
High
Tall
Technology
Technological
Interdependence degree the of interrelatedness
of the organizations various
technological elements
Problem Analyzability
Relationship Between
Technology and Basic
Design Dimensions
Task Variability
Few Exceptions
Craft
Ill-defined &
Unanalyzable 1. Moderate
2. Moderate
3. Moderate
4. Low-moderate
5. High
6. Low
Well-defined & Routine
1. High
Analyzable
2. High
3. Moderate
Key
1 Formalization 4 Standardization
4. High
2 Centralization 5 Complexity
5. Low
3 Specialization 6 Hierarchy of Authority
6. High
Many Exceptions
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
Built from C. Perrow, A Framework for the Comparative Analysis of Organization, American Sociological Review, April 1967, 194-208
Environment - anything outside the boundaries
of an organization
Task Environment - the elements of an
organizations environment that are related to
its goal attainment
Environmental Uncertainty - the
amount and rate of change
in the organizations
environment
Environment
Extremes of Environmental
Uncertainty
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
Strategic Dimension
Predicted Structural
Characteristics
Innovationto understand
Low formalization
and manage new processes
Decentralization
and technologies
Flat hierarchy
Market differentiationto
Moderate to high complexity
specialize in customer
Moderate to high
preferences
formalization
Moderate centralization
Cost controlto produce
High formalization
standardized products
High centralization
efficiently
High standardization
Low complexity
Strategy
& Goals
Millers 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.
The Relationship
among Key
Organizational
Design
Elements
Context of the organization
Correct size
Current technology
Perceived environment
Current strategy & goals
Influences how manager perceive structural needs
Structural dimensions
Level of formalization
Level of centralization
Level of specialization
Level of standardization
Level of complexity
Hierarchy of authority
Which characterize the organizational processes
Differentiation & Integration
Which influence how well the structure meets its
Purposes
Designate formal
lines of authority
Designate formal
informationprocessing patterns
Which influence how well the structure fits the
Context of the organization
Forces Reshaping
Organizations
Organizational Life Cycle - the differing stages of
an organizations life from birth to death
Globalization
Changes in Information-Processing Technologies
Demands on Organizational Processes
Emerging Organizational Structures
Structural Roles of Managers Today
versus Managers of the Future
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 crossfunctional collaboration
6. Emphasizing speed &
flexibility
7. Coaching ones workers
Management Review, January 1991, Thomas R. Horton.
HDs Circle Organization
Create
Demand
Produce
Product
Provide
Support
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.
Four Symptoms of Structural
Weakness
Delay in decision Overloaded hierarchy; information
funneling limited to too few channels
making
Poor quality
Right information not reaching
decision making
right people in right format
Lack of innovative
No coordinating effort
response to changing
environment
Departments work against each
High level of
other, not for organizational goals
conflict
Paranoid
Depressive
Dysfunctional
Personality/Organization
Combinations
Schizoid
Dramatic
Compulsive