Management

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Management Organisational Behaviour 2eChapter
15 Organisational Structure and Design
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Learning Outcomes

• After studying this chapter you should be able
  to
• Explain why significant changes in the nature of
  jobs and organisational design are occurring as a
  result of information technology.
• Diagram the four most basic organisational
  designs and cite two advantages and disadvantages
  of each.
• Explain how the issues of autonomy, control, and
  integration affect decisions about centralised
  versus decentralised authority in the design of
  organisations.

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Learning Outcomes (cont.)

• Contrast the characteristics, strengths, and
  weaknesses of bureaucracy with those of organic,
  postmodern organisations.
• State how differences in span of control,
  hierarchical levels, and size yield flatter and
  more lateral networked organisations.
• Compare the similarities and contrast the
  differences among quality circles, self-managed
  teams, and cross-functional teams.

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Why Do Organisational DesignsChange over Time?

• Technology drives changes in structuring work
• Electronic business makes corporate boundaries
  transparent and geography free by connecting
  employees, vendors, and customers.
• Technology encompasses the scientific knowledge,
  processes, and systems used to create
  products/services and help people carry out
  tasks.
• Jobs shift from old industries to new industries.

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Technology Creates a Global Market for Job Skills

• In an economic sense, the worlds boundaries are
  shrinking.
• There are three universal work skills that
  provide high value to consumers.

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Skills

• Problem-solving skills.
• The skill to help consumers understand their
  needs and the solution to their problems.
• The skills to link problem solvers with problem
  identifiers.

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Purposes Served by Organisational Structure

• An organisational structure is the hierarchical
  arrangement through which the essential tasks of
  an enterprise are subdivided and grouped to
  create the systems, decision centers, and
  behavioural network that carries out enterprise
  strategies.

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Purposes Served by Organisational Structure
(cont.)

• An organisational structure is more than the
  boxes and lines on an organisational chart (the
  symbolic structure of boxed titles and lines that
  represent positions and reporting of
  relationships).

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The Organisational Star Offers Organisational
Targets for Change
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The Process of Organisational Design

• Organisational design is the process managers go
  through to create meaningful structures, decision
  and information networks, and governance systems.

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Organisational design provides for

• The dividing and grouping of tasks.
• Networks to convey information.
• A structure for locating decision centres or
  authority.
• Processes for coordination, control, and
  conflict resolution.
• The means to link key work units with
  appropriate external stakeholders.

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Organisational Design by Function
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Organisation Design by Geography
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Organisational Design by Product Line
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Organisation Design by Customer
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Integrated Organisational Design
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Matrix Organisation

• A matrix organisation incorporates dual
  responsibilities and reporting relationships,
  connecting selected functions with specific
  products or projects with the project manager
  typically given overall responsibility and the
  budget to draw people from functional areas.

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The Matrix Organisational Design
General Manager
Functional Departments
A
Project Managers A, B, C
B
C
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What are the Fundamental trade-offs for Balancing
Organisational Design?

• Centralisation and decentralisation.
• Autonomy and Control.
• Differentiation and integration.
• Bureaucratic versus organic structures.
• Wide versus narrow span of control.
• Flat versus tall hierarchy.
• Control with staff or line.

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Balancing Centralisation Decentralisation

• Centralisation
• An organisation structure that concentrates
  authority and decision making toward the top of
  the organisation.
• More appropriate for large organisations in
  slow-changing industries.

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Balancing Centralisation and Decentralisation
(cont.)

• Decentralisation
• A structure that disperses authority and decision
  making to operating units throughout the
  organisation.
• Appropriate for organisations in complex,
  fast-changing environments requiring flexibility.

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Balancing Autonomy and Control

• Autonomy means granting power and responsibility
  to followers to initiate innovation action that
  improves processes and performance, with results
  assessed against general goals.

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Autonomy and Control (cont.)

• Control limits the authority given managers to
  shape decisions and resource allocations by
  specifying parameters and providing for
  higher-level reviews, often with approvals prior
  to proceeding.

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Balancing Differentiation and Integration

• Differentiation is the cognitive-emotional
  orientations people hold toward a subpart of an
  organisation to ones work unit be it a
  particular department, function, or discipline.
• Differentiation promotes specialisation or
  functional expertise, with differences in goals,
  time horizons, interpersonal style.

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Balancing Differentiation and Integration (cont.)

• Integration reflects the quality and form of
  collaboration between work units to shift
  expectations to a big picture perspective of
  the larger organisation.
• Integration promotes the realisation that
  ultimately coordination across subunits is of
  greater importance than individual departments or
  functions.

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Trade-offs among Control, Autonomy, and
Coordination
COORDINATION (teamwork)
Consistency Flexibility
Synergy Accountability
Global perspective
AUTONOMY (decentralisation)
CONTROL (centralisation)
Local responsiveness
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Mechanistic versus Organic Structures 1

• A mechanistic organisation has a traditional
  look and feel, highly structured and formalised,
  typically with lots of silos between work
  units.
• Designed for conformance behaviours to handle
  routine functions appropriate to stable
  environments.

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Mechanistic versus Organic Structures 2

• An organic organisation has a looser look and
  feel that relies on the adaptive capacities and
  motivation of individuals.
• Empowerment is facilitated within a collaborative
  network to cope with dynamic internal and
  external forces. Embodies postmodern structures.

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Bureaucracy

• Bureaucracy is an efficiency-oriented system of
  organisation that emphasises formalisation of
  roles and rules to promote control.

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Weber

• The concept was first described by Max Weber more
  than half a century ago to emphasise
• A hierarchy of command and authority.
• Specialisation and division of labor.
• A system of governing rules and policies.
• Promotion based on competence and training.

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Geometric Effects of Span-of-Control Ratios
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Shifting Control from Staff to Line

• Staff positions are jobs that support line
  positions through carrying out advisement and
  assistance in areas such as legal counsel, human
  resources, strategic planning, and accounting.
• Historically thought of as overhead activities.
• With IT, the numbers employed as staff declines.

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Shifting Control from Staff to Line (cont.)

• Line positions are job assignments that directly
  contribute to creating customer value by either
  designing products, producing them, financing
  needed resources, marketing to create demand,
  and/or selling and servicing the product.
• Leaner-flatter organisations cut staff, limit
  their tasks.

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Reconfiguring Work through Process Reengineering

• Reengineering reconfigures work processes to
  better serve customers.
• Reengineering is the radical redesign of business
  processes to achieve dramatic improvements in
  measures such as cost, quality, service, and
  speed.

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Reconfiguring Work through Process Reengineering
(cont.)

• Reengineering at the personal level aims to shift
  the mindsets of people steeped in working in
  vertical, functionally aligned (silo)
  organisations.

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Paretos 80/20 Law

• Paretos Law of the maldistribution of work
• The 80/20 rule states 80 of an outcome or
  observed result is caused by only 20 of the
  input or contributing events.
• Examples (a) 80 of absences are caused by 20
  of the employees (b) 80 of an activitys costs
  originate from 20 of the steps involved.

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Four Options for Participative Team Management

• QUALITY CIRCLES A group process involving
  volunteers in analysing problems and recommending
  solutions.
• SELF-MANAGED TEAMS A work unit granted authority
  to take the decisions and actions necessary to
  produce a product or service.

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Four Options for Participative Team Management
(cont.)

• SOCIO-TECHNICAL SYSTEMS A systems approach to
  enhance motivation and productivity by balancing
  human and technical systems.
• CROSS-FUNCTIONAL TEAMS People from several
  functions coordinate interrelated tasks.

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Summary

• Organisational structures and systems are
  designed to support strategies by providing the
  architecture for assigning responsibilities,
  making decisions, and integrating work flows.
• However, strategies are changed with the
  objective of improving the match between
  organisational capabilities and shifting
  environmental conditions.
• One environmental factor that by itself is
  causing changes in organisational design is
  technology. Information technology in particular
  is altering the nature of jobs by speeding the
  tempo of decisions, thus compressing layers of
  management and producing flatter, more organic
  organisational structures.

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Summary continued 1

• Organisational design is the structural
  arrangement for grouping essential tasks (jobs)
  and providing a behavioural network for making
  decisions and coordinating work flow. Managers
  design the structure of organisations by using
  variations of four basic forms function,
  geography, product, and customer (and to a lesser
  degree, the matrix design).
• Organisational design supports the strategies of
  an enterprise and helps focus employee behaviour.
  Managers intend that design will help strike a
  balance among the needs to control behaviours,
  allow reasonable autonomy, and integrate actions
  across work units.

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Summary continued 2

• Because of accelerated shifts in global
  competition and technology, there is a tendency
  for organisations to become less mechanistic (or
  machinelike) and more organic (flexible).
• Bureaucracy, which for decades promoted
  efficiency and predictability through rules and
  control, is softening to practices that create
  greater employee involvement and adaptation.
• Reengineering has also promoted the creation of
  leaner, more cost-efficient organisations by
  emphasising the interconnection of process
  workflows across functional areas.

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Summary continued 3

• With the increasing complexity of operations,
  organisations are building in greater
  participation opportunities for non-managers.
• Groups ranging from quality circles to
  self-managing and cross-functional teams are
  involved in continuous-improvement projects and
  running their own operations. With high
  involvement, people are challenged to rethink
  systems and processes to eliminate tasks that
  no longer add value.