organizational design and...

15Organizational

Design and

Structure

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LEARNING OUTCOMES

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1 Define differentiation and integration as organizational design processes

2 Discuss the basic design dimensions managers must consider in structuring an organization

3 Describe five structural configurations for organizations

4 Describe four contextual variables that influence organizational structure

5 Explain the forces reshaping organizations

6 Identify and describe emerging organizational structures

7 Identify factors that can adversely affect organizational structure

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Define Differentiation and Integration as

Organizational Design Processes

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Key Organizational Design Processes:

Differentiation

• Dimensions

• Manager’s goal orientation

• Time orientation

• Interpersonal orientation

• Formality of structure

Deciding how to divide the work in an organization

• Horizontal - Degree of differentiation between organizational subunits

• Vertical - Difference in authority and responsibility in the organizational hierarchy

• Spatial - Geographic dispersion of an organization’s offices, plants, and personnel

Types of Differentiation

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Beyond the Book: Differentiation at Cisco

• At Cisco, the existence of multiple teams, councils, boards, and working groups within the company creates a web of internal integrating structures that lead to fast decisions by the right people to ensure that the firm is agile

• Cisco has a complex organizational structure because it allows the firm to enter into new markets quickly

• An emphasis on horizontal integration and cross-function teaming allows Cisco to be much more agile than before. A key benefit is speed in decision making

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Key Organizational Design Processes:

Integration

• Supports dynamic equilibrium, in which all the parts of an organization are interrelated and balanced

Coordinating the different parts of an organization

• Hierarchical referral

• Rules and procedures

• Plans and schedules

• Positions added to the organization structure

• Management information systems

Vertical integration

• Liaison roles

• Task forces

• Integrator positions

• Teams

Horizontal integration

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Discuss the Basic Design Dimensions Managers Must Consider in Structuring an Organization

LO - 15.2

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Two Ways to Approach the Organizational

Design Process

• Establish desired level of each structural dimension on a high-low continuum• Develop structure that meets desired

configuration

• Describe what is or is not important to the success of the organization

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Structural Dimensions

Formalization

Standardization

Centralization

Degree to which decisions are made

at the top of the organization

Specialization

ComplexityHierarchy of

authority

Degree to which work activities are accomplished in a

routine fashion

Degree to which the organization has

official rules, regulations, and

procedures Degree to which many different

types of activities occur in the organization

Degree to which jobs are narrowly defined and

depend on unique expertiseDegree of vertical

differentiation across levels of management

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Describe Five Structural Configurations for

Organizations

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11

Table

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15.1 Five Structural Configurations of

Organization

12

Figure

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15.2 Mintzberg’s Five Basic Parts of an

Organization

SOURCE: From H. Mintzberg, The Structuring of Organizations (Upper Saddle River, N.J.: Pearson, 1979): 20. Reprinted by permission of Pearson Education, Inc., Upper Saddle River, N.J.

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Describe Four Contextual Variables That

Influence Organizational Structure

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Contextual Variables: Size

• Contextual variables: Characteristics that influence the success of an organization’s design

• Measured in number of employees• Formalization, specialization, and

standardization is greater in larger organizations

• Size increases, complexity increases

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Contextual Variables: Technology

• Transform inputs into outputs

• Different departments employ different technologies

Tools, techniques, and actions used by an organization

• Unit - Small-batch manufacturing technology

• Mass - Large-batch manufacturing technology and made-to-order production

• Process production - Continuous-production process

Types

• Degree of interrelatedness of the organization’s various technological elements

• James Thompson’s research suggests greater technological interdependence leads to greater complexity

Technological interdependence

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Contextual Variables: Environment

• Anything outside the boundaries of an organization

• Task environment: Part of the environment that is directly relevant to the organization

• Environmental uncertainty: Amount and rate of change in the organization’s environment• Extremes of environmental uncertainty

- Mechanistic structure and Organic structure

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Contextual Variables: Strategy and Goals

• Provide:• Legitimacy to the organization

• Employee direction

• Decision guidelines

• Criteria for performance

• Way for the organization to fit into its environment

Role in organization

• Changing the organization’s structure drives up costs and difficulties

• Inefficiency of the structure to perceive environmental changes can lead to organizational failure

Limitations

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Explain the Forces Reshaping

Organizations

LO - 15.5

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Forces Reshaping Organizations

Organizational life cycles

Globalization

Changes in information-processing

technologies

Demands on organizational

processes

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Identify and Discuss Emerging

Organizational Structures

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Emerging Structures

• Web-like structures that contract some or all operations to other organizations and then coordinate activities

Network organizations

• Temporary networks of organizations consisting of independent enterprises

Virtual organizations

• Open system, organic structure for customer responsiveness

Circle organizations

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Identify Factors That can Adversely Affect

Organizational Structure

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Factors Affecting Organizational Structure

• Delay in decision making

• Poor quality decision making

• Lack of innovative response to changing environment

• High level of conflict

Structural weakness

• Paranoid

• Depressive

• Dramatic

• Compulsive

• Schizoid

Dysfunctional Personality/Organization Combinations

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Rendition

• Review the section, “Basic Design Dimensions.” Which dimensions does this scene show or imply?

• Can you sense the division of labor represented by Senator Hawkins and Alan Smith? Corrine Whitman does not appear in this scene but is also part of a division of labor

• Review the five structural configurations described in the chapter. Which of those configurations best describes the likely structure of Senator Hawkins’ office? Which configurations do not apply? Why?

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Modern Shed

• How did Ryan Smith determine whether his company needed a mechanistic structure with a tall vertical hierarchy or an organic one involving free-flowing partnerships?

• What are the advantages and disadvantages of Modern Shed’s organizational structure?

• Give an example of how Modern Shed’s structure enables fast response to rapidly changing market opportunities

KEY TERMS

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• Adhocracy

• Centralization

• Complexity

• Contextual variables

• Differentiation

• Divisionalized form

• Environment

• Environmental uncertainty

• Formalization

• Heirarchy of authority

• Integration

• Machine bureaucracy

• Mechanistic structure

• Organic structure

• Organizational design

• Organizational life cycle

• Organizational structure

• Professional bureaucracy

• Simple structure

• Specialization

• Standardization

• Task environment

• Technological interdependence

SUMMARY

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• Differentiation is how the division of work is done, while integration is coordinating the different parts of an organization

• Structural dimension includes formalization, centralization, specialization, standardization, complexity, and hierarchy of authority

• The structural configurations are: • Simple structure, machine and profession

bureaucracy, divisional form, and adhocracy

SUMMARY

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• Contextual variables influencing organizational structure are size, technology, environment, and strategy and goals

• Forces reshaping organizations are• Life cycles in organizations, globalization,

changes in information-processing technologies, and demands on organizational process

SUMMARY

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• Emerging organizational structures are network, virtual, and circle organizations

• Factors affecting organizational structure• Organizational structure is out of alignment

with its contextual variables

• Negative influence from the chief executive

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