PowerPoint Presentation by Charlie CookThe University of West Alabama

PowerPoint Presentation by Charlie CookThe University of West Alabama

© 2013 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.© 2013 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

Learning Objectives

1. Describe the basic nature of organization design.

2. Identify and explain two basic universal perspectives on organization design.

3. Identify and explain key situational influences on organization design.

4. Discuss how an organization’s strategy and its design are interrelated.

5. Describe the basic forms of organization design.

6. Describe emerging issues in organization design

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The Nature of Organization Design

• Organization DesignThe structural elements and the relationships

among the elements used to manage the organization.

A means to implement strategies and plans to achieve organizational goals.

• Organization Design ConceptsOrganizations are not designed and then left

intact.

Organizations are in a continuous state of change.

Designs for larger organizations are extremely complex and have many nuances and variations.

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Perspectives on Organization Design

• Bureaucratic Model (Max Weber)A logical, rational, and efficient organization

design based on a legitimate and formal system of authority.

Characteristics:1. A division of labor with each position filled by an

expert.

2. A consistent set of rules ensuring uniformity in task performance.

3. A hierarchy of positions that creates a chain of command.

4. Impersonal management; with the appropriate social distance between superiors and subordinates.

5. Employment and advancement based on technical expertise, and employees protected from arbitrary dismissal.

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Bureaucratic Model

Efficiency in function

Prevention of favoritism

Recognition of and requirement for expertise

Advantages

Organizational inflexibility and rigidity

Neglect of social and human processes

Belief in “one best way” to design organizations

Disadvantages

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Management Challenge Question

• What characteristics of a bureaucratic structure help an organization in meeting its diversity goals?

• What characteristics of a bureaucratic would hinder an organization in meeting its diversity goals?

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System 1

ExploitativeAuthoritative

System 2

BenevolentAuthoritative

System 3

Consultative

System 4

Participative

Behavioral Model: Likert System

• Renesis Likert Organizations that pay attention to work groups and

interpersonal processes are more effective than bureaucratic organizations.

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Bureaucratic Behavioral

Job-centered leader behavior

Employee-centered leader behavior

Situational Influences on Organization Design

EnvironmentTechnology

Organizational Life Cycle

OrganizationDesign

Size

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Organization Design and Technology

• Core TechnologyIs the conversion processes used to transform

inputs into outputs.Is an organization’s most important

technology.• Joan Woodward

Initially sought a correlation between organization size and design; instead, she found a potential relationship between technology and design: As the complexity of technology increases, so do

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Core Technology and Organization Design

Unit or small-batch

Large-batch/mass-production

Continuous-process

Woodward’s Basic Forms of Technology

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Situational Influences on Organization Design (cont’d)

• The Environment (Burns and Stalker) Forms of the organizational environment

Stable environments that remain constant over time. Unstable environments subject to uncertainty and rapid

change.

Organization Designs Mechanistic organizations are similar to bureaucratic or

System 1 models; found most frequently in stable environments.

Organic organizations are flexible and informal models; usually found in unstable and unpredictable environments.

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Situational Influences on Organization Design (cont’d)

• Organization Dimensions (Lawrence and Lorsch) Differentiation

The extent to which the organization is broken down into subunits.

Integration The degree to which the various subunits must work together

in a coordinated fashion.

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Situational Influences on Organization Design (cont’d)

• Organizational Size (Ashton Studies) Defined as the total 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, rules and regulations, and are more decentralized.

• Organizational Life Cycle Organizations progressively evolve as they grow and

mature—birth, youth, midlife, and maturity.

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Strategy and Organization Design

• Corporate-Level StrategiesSingle-product strategyRelated or unrelated diversificationPortfolio approach to managing

strategic business units• Organizational Functions

Major functions of the organization can influence an organization’s design.

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Organizational Strategies

Defender

Prospector

Analyzer

Business-Level Strategies

Differentiation

Cost Leadership

Focus

Generic Competitive Strategies

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Basic Forms of Organization Designs

• Functional or U-form (Unitary) DesignOrganizational 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.

© 2013 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 12–16

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12.1 Functional or U-form Design for a Small Manufacturing Company

Basic Organization Designs (cont’d)

• Conglomerate or H-form (Holding) DesignOrganization is a set of unrelated businesses

with a general manager for each business.Holding-company design is similar to product

departmentalization.Coordination is based on the allocation of

resources across companies in the portfolio.Design has produced only average to weak

financial performance; has been abandoned for other approaches.

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Semiconductors Telecommunications Appliances Media

CEO

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12.2 Conglomerate (H-form) Design at Samsung

Basic Organization Designs (cont’d)

• Divisional or M-form (Multidivisional) Design Multiple businesses in related areas operating

within a larger organizational framework.

Results from a strategy of related diversification.

Activities are decentralized down to the divisional level; others are centralized at the corporate level.

Design advantage is in opportunities for coordination and sharing of resources.

Successful M-form organizations can out perform U-form and H-form organizations.

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12.3 Multidivisional (M-form) Design at Hilton Hotels

Basic Organization Designs (cont’d)

• Matrix DesignTwo overlapping bases of

departmentalization: A set of product groups or temporary departments

are superimposed across the functional departments.

Employees in the matrix belong to their departments and the project team: A multiple command structure in which an

employee reports to both departmental and project managers.

A matrix design is useful when: There is strong environmental pressure. There are large amounts of information to be

processed. There is pressure for shared resources.

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12.4 A Matrix Organization

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Matrix Design Advantages

• Enhances organizational flexibility.• Creates high motivation and increased organizational commitment for team members.

• Gives team members opportunity to learn new skills.

• Provides an efficient way for the organization to use its human resources.

• Uses team members as bridges to their departments for the team.

• Useful as a vehicle for decentralization.12–24

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Matrix Design Disadvantages

• Employees 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.

12–25

Basic Organization Designs (cont’d)

• Hybrid DesignsBased on two or more common forms of

organization design—may have a mixture of related divisions and a single unrelated division.

Most organizations use a modified form of organization design that permits them to have sufficient flexibility to make adjustments for strategic purposes.

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The Future of Organization Design

The Team Organization

The Virtual Organization

The Learning Organization

EmergingOrganization Design

Issues

The International/Global Organization

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International Organization Design Issues

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Establish an international operating group?

Make international operations an autonomous subunit?

Create an international division?

Competing Effectivelyin Global Markets

A. Separate InternationalDivision

CEO

Production Marketing FinanceInternationaldivision

B. Location Departmentalization

NorthAmericanoperations

Europeanoperations

Asianoperations

CEO

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12.5a Common Organization Designs for International Organizations

C. Product Departmentalization

ProductManager A

CEO

ProductManager B

ProductManager C

AsiaNorthAmerica

Europe

D. Multidivisional Structure

CEO

Subsidiary A(Germany)

Subsidiary C(France)

Subsidiary E(China)

Subsidiary D(Japan)

Subsidiary B

(U.S.)

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12.5b Common Organization Designs for International Organizations

KEY TERMS

• organization design• bureaucracy• behavioral model• System 1 design• System 4 design• situational view of

organization design• technology• mechanistic organization• organic organization• differentiation

• integration• organization size• organizational life cycle• functional design• conglomerate design• divisional design• matrix design• hybrid design• team organization• virtual organization• learning organization

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