changing organizational models

5/28/2018 Changing Organizational Models

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Changing Organizational Models

Shoaib Ul-Haq

LUMS

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What Is Organizational Structure?

Key Elements:

Work specialization

Departmentalization

Chain of command

Span of control

Centralization and

decentralization

Formalization

Organizational Structure

How job tasks are formallydivided, grouped, andcoordinated.

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Depicting the Organization

Organization Chart

A chart that shows thestructure of the

organization includingthe title of eachmanagers position and,by means of connecting

lines, who is accountableto whom and who hasauthority for each area.


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Organization Chart

Information Services Group

Cataloger

Cataloger

Customer Liaison

Taxonomy Designer

Knowledge Architecture Lead

Developer

Developer

Systems Admin

Search/Systems Lead

Assistant Designer

Design Lead

Knowledge Architecture Manager


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Key Design Questions and Answers for Designing the Proper

Organization Structure

The Key Question The Answer Is Provided By

1. To what degree are articles Work specialization

subdivided into separate jobs?

2. On what basis will jobs be grouped Departmentalizationtogether?

3. To whom do individuals and groups Chain of command

report?

4. How many individuals can a manager Span of control

efficiently and effectively direct?

5. Where does decision-making Centralization

authority lie? and decentralization

6. To what degree will there be rules Formalization

and regulations to direct employees

and managers?

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(contd)

Division of labor:

Makes efficient use of employee skills

Increases employee skills through repetition

Less between-job downtime increases productivity

Specialized training is more efficient.

Allows use of specialized equipment.

Work Specialization

The degree to which tasks in the organization aresubdivided into separate jobs.

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Economies and Diseconomies of

Work Specialization

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(contd)

Grouping Activities By:

Function

Product

Geography Process

Customer

Departmentalization

The basis by which jobs are grouped together.

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(contd)

Chain of Command

The unbroken line of authority that extends from thetop of the organization to the lowest echelon andclarifies who reports to whom.

Authority

The rights inherent in a managerial position to giveorders and to expect the orders to be obeyed.

Unity of Command

A subordinate should have only one superior to whomhe or she is directly responsible.

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(contd)

Narrow Span Drawbacks:

Expense of additional layers of management.

Increased complexity of vertical communication.

Encouragement of overly tight supervision anddiscouragement of employee autonomy.

Concept:

Wider spans of management increase organizationalefficiency.

Span of ControlThe number of subordinates a manager can efficientlyand effectively direct.

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Contrasting Spans of Control

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April 18, 2006 LIS580- Spring 2006 12

FIGURE 69

Spans of Control in Country-Based

Organization

G.Dessler, 2003


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(contd)Centralization

The degree to which decision making isconcentrated at a single point in the organization.

Formalization

The degree to which jobs withinthe organization are standardized.

Decentralization

The degree to which decision making isspread throughout the organization.

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Source: S. Adams, Dogberts Big Book of Business, DILBERT reprinted by

permission of United Features Syndicate, Inc.

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Common Organization Designs

A Simple Structure:

Jack Golds Mens Store

Simple Structure

A structure characterized by a low degree ofdepartmentalization, wide spans of control, authoritycentralized in a single person, and little

formalization.

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Common Organization Designs (contd)

Bureaucracy

A structure of highly operatingroutine tasks achieved throughspecialization, very formalized

rules and regulations, tasks thatare grouped into functionaldepartments, centralizedauthority, narrow spans of

control, and decision makingthat follows the chain ofcommand.

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The Bureaucracy

Strengths

Functional economies of

scale

Minimum duplication of

personnel and

equipment

Enhanced

communication

Centralized decision

making

Weaknesses

Subunit conflicts with

organizational goals

Obsessive concern with

rules and regulations

Lack of employee

discretion to deal with

problems

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Functional Departmentalization


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Divisional Organization

for a Pharmaceuticals Company


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Functional vs. Divisional Organizations

Functional Organization Advantages1. It is simple, obvious, and logical.

2. It fosters efficiency.

3. It can simplify executive hiring and training.

4. It can facilitate the top managers control.

Functional Organization Disadvantages1. It increases the workload on the executive to

whom the functional department heads report.

2. It may reduce the firms sensitivity to and serviceto the customer.

3. It produces fewer general managers.


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Divisional Organization Advantages

1. The product or service gets the single-minded attention of its own general

manager and unit, and its customers mayget better, more responsive service.

2. Its easier to judge performance.

3. It develops general managers.

4. It reduces the burden for the companysCEO.


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Divisional Organization Disadvantages

1. It creates duplication of effort.

2. It may diminish top managements

control.

3. It requires more managers with general

management abilities.

4. It can breed compartmentalization.


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Common Organization Designs (contd)

Key Elements:

+ Gains the advantages of functional and productdepartmentalization while avoiding their weaknesses.

+ Facilitates coordination of complex and interdependentactivities.

Breaks down unity-of-command concept.

Matrix Structure

A structure that creates dual lines of authority andcombines functional and product departmentalization.

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Matrix Structure (College of Business Administration)

(Dean)

(Director)

Employee

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Matrix Organizations

Advantages

Access to expertise.

Stability of permanent

departmentassignments foremployees.

Allows for focus on

specific projects,products, orcustomers.

Disadvantages

Confusion of

command.

Power struggles andconflicts.

Lost time in

coordinating.

Excess overhead for

managing matrix

functions.


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New Design Options

Characteristics:

Breaks down departmental barriers.

Decentralizes decision making to the team level.

Requires employees to be generalists as well as specialists. Creates a flexible bureaucracy.

Team Structure

The use of teams as the central device to coordinatework activities.

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New Design Options (contd)

Concepts:

Advantage: Provides maximum flexibility while concentrating

on what the organization does best.

Disadvantage: Reduced control over key parts of the

business.

Virtual Organization

A small, core organization that outsources its majorbusiness functions.

Highly centralized with little or no departmentalization.

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A Virtual Organization

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Network-based Organizations

Organizational Network

A system of interconnected or cooperating

individuals.

Informal Networks

Communication pathways and relationships

between individuals in an organization that do not

necessarily conform to the formal chain ofcommand and communication networks of an

organization.


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Network-based Organizations (contd)

Formal Organizational Network

A recognized group of managers or otheremployees assembled by the CEO and the other

senior executive team, drawn from across thecompanys functions, business units, geography,and levels.

Electronic Organizational Networks

Networking through technology-supporteddevices such as e-mail, video-conferencing, andcollaborative computing software like Lotus Notes.


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The Horizontal Corporation


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Building Horizontal Organizations

Make responsibilities overlap. Design individual jobs

as broadly as possible, and keep the number of jobtitles to a minimum.

Base rewards on unit performance to emphasize the

importance of working together.

Change the physical layout to promote collectiveresponsibility. Let people see each others work.

Redesign work procedures, provide computer

terminals, use the e-mail network, and make suremanagers are available.


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How to Create a Horizontal Corporation

Source:Source: Reprinted from the December 20, 1993, issue of Business Weekby special

permission. Copyright 1993 by the McGraw-Hill Companies, Inc.


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New Design Options (contd)

T-form Concepts:

Eliminate vertical (hierarchical) and horizontal

(departmental) internal boundaries.

Breakdown external barriers to customers and

suppliers.

Boundaryless Organization

An organization that seeks to eliminate the chain ofcommand, have limitless spans of control, andreplace departments with empowered teams.

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Why Do Structures Differ?

Mechanistic ModelA structure characterized by extensivedepartmentalization, high formalization,a limited information network, and

centralization.

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Organic Model

A structure that is flat, uses cross-hierarchical andcross-functional teams, has low formalization,possesses a comprehensive information network, and

relies on participative decision making.

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Mechanistic Versus Organic Models

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Burns and Stalker


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Summary of Features of Old and

New Models of OrganizationOld Model New Model

Individual position/job as basic unit of Team as a basic unit

organization

Relations with environment handled by Densely networked with environment

specialist boundary-spanners

Vertical flows of information Horizontal and vertical flows of information

Decisions come down, information flows up Decisions made where information resides

Tall (many layers of management) Flat (few layers of management)

Emphasis on structures Emphasis on processes

Emphasis on rules and standard Emphasis on results and outcomes

procedures

Fixed hours Flexible workday, part-time workers


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Summary of Features of Old and

New Models of OrganizationOld Model New Model

Career paths upward, linear Career paths lateral, flexible

Standardized evaluation and Customized evaluation and reward systems

reward systems

Single strong culture with strong Diversity viewpoints and behaviors

expectations of homogeneous behavior

Ethnocentric mindset International/global mindset

Specialist international managers Boundary-crossers at all levels

Local value chains Value chains crossing borders

Environment defined in terms of Environment seen as global

country of location

k f k


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Framework for Taking Action

in the New Organization


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Why Do Structures Differ?Strategy

Innovation StrategyA strategy that emphasizes the introduction of majornew products and services.

Imitation Strategy

A strategy that seeks to move into new products ornew markets only after their viability has alreadybeen proven.

Cost-minimization Strategy

A strategy that emphasizes tight cost controls,avoidance of unnecessary innovation or marketingexpenses, and price cutting.

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The Strategy-Structure Relationship

Strategy Structural Option

Innovation Organic: A loose structure; low

specialization, low formalization,

decentralized

Cost minimization Mechanistic: Tight control; extensive work

specialization, high formalization, high

centralization

Imitation Mechanistic and organic: Mix of loose

with tight properties; tight controls overcurrent activities and looser controls for

new undertakings

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Why Do Structures Differ?Size

Characteristics of large organizations:

More specialization

More vertical levels More rules and regulations

Size

How the size of an organization affects its structure.As an organization grows larger, it becomes moremechanistic.

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Technology

Characteristics of routineness (standardized or customized) inactivities:

Routine technologies are associated with tall, departmentalized

structures and formalization in organizations.

Routine technologies lead to centralization when formalization is

low.

Nonroutine technologies are associated with delegated decision

authority.

Technology

How an organization transfers its inputs into outputs.

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Effect of Technology on Structure

h ff ?


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Environment

Key Dimensions-

Capacity: the degree to which an environment can support

growth.

Volatility: the degree of instability in the environment.

Complexity: the degree of heterogeneity and concentration

among environmental elements.

EnvironmentInstitutions or forces outside the organization thatpotentially affect the organizations performance.

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The Three Dimensional Model of the

Environment

Complexity

Volatility

Capacity

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Bureaucracy Is Dead

Characteristics of Bureaucracies

Specialization

Formalization

Departmentalization

Centralization

Narrow spans of control

Adherence to a chain of

command.

Why Bureaucracy Survives

Large size prevails.

Environmental turbulence

can be largely managed.

Standardization achieved

through hiring people

who have undergone

extensive educational

training.

Technology maintains

control.

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l d


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Organizational Designs and

Employee Behavior

Research Findings:

Work specialization contributes to higher employee productivity, but

it reduces job satisfaction.

The benefits of specialization have decreased rapidly as employees

seek more intrinsically rewarding jobs.

The effect of span of control on employee performance is contingent

upon individual differences and abilities, task structures, and other

organizational factors. Participative decision making in decentralized organizations is

positively related to job satisfaction.

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Organization Structure: Its

Determinants and Outcomes

Implicit Models of Organizational

Structure

Perceptions that people holdregarding structural variablesformed by observing things aroundthem in an unscientific fashion.

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Th F O i ti l B d i Th t


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The Four Organizational Boundaries That

Matter

Source:Reprinted by permission of Harvard Business Review. The Four Organizational Boundaries that Matter, from The

New Boundaries of the Boundaryless Company, by Larry Hirschorn and Thomas Gilmore, MayJune 1992. Copyright 1992 by

the President and Fellows of Harvard College All rights reserved

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