Slide 16'1 Learning Objectives for Organization Design

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Slide 16.1Learning Objectives for Organization
Design

• Environmental forces, strategic choices, and
  technological factors that affect the design of
  organizations.
• Differences between mechanistic and organic
  systems.
• Two key functions of organization design
  differentiation and integration.
• Organization designs (differentiationfunctional
  vs. divisional).
• Four newer organization designsmatrix,
  multinational, network, and virtual.

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Slide 16.2Key Factors in Organization Design
Decisions
FACTORS
INDICATORS
Environmental forces
Degree of complexity
Degree of dynamism
Low cost
Business strategy
Differentiation
Focused
Task interdependence
Technology
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Slide 16.3Basic Types of Task Environments
Stable

• Low Uncertainty 1
• Few environmental factors exist.
• Factors are similar to each other.
• Factors remain basically the same.

• Moderate Uncertainty 2
• Many environmental factors exist.
• Factors are not similar to each other.
• Factors remain basically the same.

Degree of Dynamism

• Moderately High Uncertainty 3
• Few environmental factors exist.
• Factors are similar to each other.
• Factors are continually changing.

• High Uncertainty 4
• Many environmental factors exist.
• Factors are not similar to each other.
• Factors are continually changing.

Unstable
Uniform
Varied
Degree of Complexity
Source Adapted from Rasheed, A., and Prescott,
J.E. Dimensions of organizational task
environments Revisited. Paper presented at 1987
Academy of Management meeting, New Orleans, 1987
Duncan, R. What is the right organizational
structure? Decision tree analysis provides the
answer. Organizational Dynamics, Winter 1979,
60-64.
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Slide 16.4Types of Task Interdependencein
Organization Design
Pooled
Sequential
Reciprocal


C
C
C




A
A
A
B
B
B
Complex
Simple
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Slide 16.5Options of Organizational Design
Complex, Dynamic
Network Design
Multinational Design
Matrix Design
Environmental Forces
Product Design
Place Design
Functional Design
Simple, Stable
Simple
Complex
Technological Forces
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Slide 16.6Variables That Differentiate
BetweenMechanistic and Organic Systems

• Hierarchy of authority
• Centralization
• Division of labor
• Rules
• Procedures
• Impersonality
• Chain of command
• Unity of command
• Span of control

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Slide 16.7Organizational Design Differentiation
Functional
Divisional

• Division of labor and specialization.
• When a narrow product line, competes in a uniform
  environment, a low-cost or focused business
  strategy, and does not serve different regions
  and customers.
• ADV. deal more effectively with environmental
  complexity and dynamism, more coordination and
  motivation

• Product, market, and geographic
• When the size and complexity of an organization
  increase, differentiation business strategy
• ADV. Reduces the information overload that
  managers face , Promotes direct contact among
  different organizational units and stakeholders,
  thereby permitting greater adaptability to
  stakeholders demands

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Slide 16.8Organizational Design Differentiation
Functional
Divisional

• Disadvantages Fosters narrow viewpoint,
  Horizontal integration becomes difficult, Most
  employees may lose sight of need to meet or
  exceed customer expectations.

• Disadvantages Control and coordination problems
  increase (operating costs increase), employees
  may overemphasize own units goals and needs at
  expense of entire organization, communication
  difficulties.

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Slide 16.9Callaway Golfs Design by Function and
Process
President
New Products
Manufac- turing
Planning
Finance
Functions
Quality Control
Forging
Assembly
Shipping
Processes
Source Adapted from Callaway Golf 1996 Annual
Report. Carlsbad, Calif., 1997.
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Slide 16.10United Technologies
CEO
Otis Elevators Escalators Moving walks
UT Auto- motive Automotive electrical
systems Electric motors Automotive
interior exterior trim
Flight Systems Helicopters Propellers Space
life support systems
Carrier Heating air conditioning
Building controls Refriger- ation
equipment
Pratt Whitney Jet engines Rocket
engines Industrial gas turbines
Source http//www.utc.com/Annual98/glance.htm.
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Slide 16.11Practical Implications of a
Multidivisional Design

• Eases problems of integration by focusing
  functional expertise and knowledge on specific
  goods or services.
• As with a functional design, an organization with
  a M-design can deal with complex environments. By
  adding horizontal mechanisms (linking roles, task
  force, and cross-functional teams).
• Requires a large number of managers to oversee
  product lines.
• Higher costs result from duplication of various
  functions.

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Slide 16.12 Organizational Design Integration

• Definition the coordination of the activities of
  different functions and divisions.
• Tools Hierarchy of authority (span of control,
  centralization), mutual adjustment (liason roles,
  teams and task forces, cross-functinal teams,
  integratig roles, and matrix structure), and
  standardization (or formalization)

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Slide 16.13Variables That Affect
HorizontalRelations Between Units
Continuum
Variable
Low
Moderate
High
Differentiation
Units may be
substantially alike
quite different
Integration
Units may need to
have few contacts
work closely together
Uncertainty
Units may need to work together when
there are well-defined ways of doing the job
little knowledge exists about
methods
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Slide 16.14Conditions for Using a Horizontal
Design

• Expend few (if any) resources and use few (if
  any) horizontal integration mechanisms when
• Differentiation, required integration, and
  uncertainty are low.
• Expend considerable resources and use a wide
  variety of formal horizontal mechanisms, and
  behavioral processes when
• Differentiation, required integration, and
  uncertainty are high.

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Slide 16.15Partial Illustration of Basic Matrix
Design
President and Chief Executive Officer
Quality Control Engineer for Product Line A
Manager, Personnel
Manager, Product Line A
Quality Control Engineer for Product Line B
Manager, Product Line B
Manager, Production
Manager, Finance and Accounting
Quality Control Engineer for Product Line C
Manager, Product Line C
These product managers also have full
responsibility for the marketing activities
associated with their own product lines.
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Slide 16.16Practical Implications of a Matrix
Design (combination of functional and divisional
design)

• Enables employees to be highly responsive to dual
  concerns.
• Enables firm to deal with uncertain environment
  and technologies.
• Enables firm to deal effectively with multiple
  products and limited resources.
• Makes specialized knowledge available to all
  projects.

• Uses people flexibly.
• Demands substantial managerial resources while
  employees learn to operate in the new
  organization.
• Learning may be a lengthy process because of
  required attitude changes.
• Special training programs may be needed.

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Slide 16.17Basic Options in Multinational Design
Functions
Functions
Marketing
Manufacturing
Product line
Finance
Human Resources
Others
Place
Country or Region Organization
Global Product Organization
Matrix
Country Responsiveness, Adaptation, Competitors,
Manufacture, Customer
Global Integration, Products, Competitors, Factori
es, Customers
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Slide 16.18Practical Implications of a
Multinational Design

• Worldwide product-line divisions will be more
  dominant than geographically based divisions
  under certain conditions.
• A worldwide product-line division may not be as
  effective at opening up new territories as a
  geographically organized division.
• A division operating under a place design often
  can establish relations with host governments,
  invest in distribution channels, develop brand
  recognition, and build competencies that no
  single product-line division could afford.

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Slide 16.19Key Elements of a Network Design

• Distinctive competence
• Responsibility
• Goal setting
• Communication
• Information technology
• Organizational culture
• Balanced view

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Slide 16.20Practical Implications of a Network
Design

• Is effective in creating alliances of flexible
  partnerships.
• Can create successful external relationships by
• Making those relationships important.
• Promoting long-term investments and commitments.
• Establishing interdependent relationships.
• Maintaining essential points of contact and
  communication.
• Keeping each other informed.
• Establishing a framework for institutionalizing
  relationships.

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Slide 16.21Practical Implications of a Virtual
Organization

• Structure can be changed quickly to meet changing
  conditions and situations.
• Blurred boundaries between organization and its
  customers and suppliers.
• Employees
• Continually master new manufacturing and
  information technologies.
• Respond quickly to changing customer demands.
• Are reciprocally interdependent.
• Managers delegate authority and responsibility to
  employees while providing a clear vision.