Organisation design

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Organisation design

• Week 4
• Organisation studies

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Learning outcomes

• To understand the classical and contingency
  approach to organisational design
• To understand the role which environmental
  factors play in organisational design

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The Classical Approach- Weber and Bureaucracy
(Weber 1948)

• Authority in organisations generally fell into
  one of three categories
• Traditional- based upon a line of succession
  linked to the person not their abilities
• Charismatic- Based upon the personal attributes
  of the position holder
• Rational-legal - based upon the formal position
  rather than the person
• Weber believed that rational-legal provided the
  most effective mechanism for organisations

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Why rational legal?

• Authority lies with the position- not the person-
  therefore person can be replaced
• It provided a clear line of accountability
• Clients would be treated on the basis of the
  merits of case not favouritism
• In order to achieve this Weber argued that the
  optimal organisational design was that of
  Bureaucracy.

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Characteristics of Bureaucracy

• Specialisation each office has specified tasks
  influence
• Hierarchy clear chain of command
• Rules ensuring uniformity, coordination,
  stability, continuity
• Impersonality cool professionalism
• Appointment on the basis of technical competence
• Progression offers a career for life
• Exclusivity the job is the individuals sole
  occupation
• Segregation of official activity from outside the
  organisation
• Accurate written records to guide and influence
  conduct

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CHARACTERISTICS OF BUREAUCRATIC STRUCTURES

• division of labour
• well defined hierarchies
• formalisation
• impersonality

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CHARACTERISTICS OF BUREAUCRATIC STRUCTURES

• well defined career paths
• employment based on merit
• development of rules, policies and procedures
  (recorded in writing) to cover all eventualities

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ADVANTAGES of BUREAUCRACY

• facilitates management control without day to day
  involvement
• removal of favouritism
• reduced ambiguity

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ADVANTAGES of BUREAUCRACY

• consistency
• clearly defined reporting mechanisms
• reduced employee stress

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DISADVANTAGES OF BUREAUCRACY

• procedures and policies become basic standards -
  employees do no more and no less
• employee alienation
• concentration of power at the top of the hierarchy

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DISADVANTAGES OF BUREAUCRACY

• impersonal to outsiders
• impossible to establish rules and procedures to
  cover all eventualities
• slow to establish new rules and procedures

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Dysfunctions of bureaucracy

• Goal displacement- following rules becomes a
  larger priority than fulfilling the end goal
• Dealing with position rather than person
• Duplication
• Lack of transferable skills
• Can cause people to under develop
• Overly rigid

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Summary of Bureaucracy

• Bureaucracy is a highly centralised, formalised,
  specialised organisational design
• It has advantages (ensures equality of treatment)
• It also has disadvantages (inflexible and top
  heavy)
• In reality most complex organisations need some
  degree of bureaucratic organisation

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Business environment and organisational structure

• In reflection- all organisations are open systems
  which must adapt to their environment
• There is no one best form of organisational
  design
• However, when dealing with different
  environments, the contingency approach best
  reflects the reality of organisational design

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The contingency approach (Late 1950s)

• Adopting a universal approach fails to look at
  the environmental factors
• Contingency theorists believe that the most
  appropriate structure is the one that matches the
  circumstances
• 3 variables in circumstances
• Environment
• Size
• Technology application of knowledge to perform
  work

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The environment and Organisational Structure

• When novelty and unfamiliarity in both market
  situation and technical information become the
  accepted order of things, a fundamentally
  different kind of management system becomes
  appropriate from that which applies to a
  relatively stable commercial and technical
  environment (BURNS AND STALKER 1961)

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Environmental stability (Burns and Stalker 1961)

• STABLE
• stable, predictable demand
• unchanging, well known set of competitors
• technological change evolutionary
• govt. policy stable and predictable

• UNSTABLE
• demand subject to rapid change as new products
  come on line
• competitors change rapidly
• technological change is revolutionary
• govt. policy is unpredictable and subject to
  rapid change

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Mechanistic Structure (stable environments)
(Burns and Stalker)

• well defined chains of command
• specialisation and division of labour
• detailed job descriptions, including precise
  definitions of rights, obligations and methods

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Mechanistic Structure (stable environments)
(Burns and Stalker)

• reliance on vertical communication
• reliance on rules and procedures to cover all
  eventualities (as far as possible)

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Characteristics of Organic Structures (unstable
environments) (Burns and Stalker)

• no preoccupation with adhering to chain of
  command
• less emphasis on division of labour
• divisional rather than functional structure

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Characteristics of Organic Structures (unstable
environments) (Burns and Stalker)

• jobs are not rigidly defined
• emphasis on lateral communication
• power and influence of junior and middle managers
  is relatively high

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Lawrence and Lorsch (1969)

• Argued that three main factors demonstrated the
  link between the environment and structure
• 1 Differentiation
• 2 Integration
• 3 Environment

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1. Degree of Differentiation(Lawrence and
Lorsch,1969)

• The extent to which functions focuses on
• The organisations units and goals or their own
  specialist objectives
• Had different time perspectives time taken for
  results of their decisions to become apparent
  with respect to the part of the environment with
  which they dealt
• Were managed according to task or person
  orientation
• Tended to be more bureaucratically managed than
  other functions

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2. Integration (Lawrence and Lorsch1969)

• Two types of co-ordination - vertical and
  horizontal
• Vertical co-ordination - using rules and
  procedures through the hierarchy to control
  functional behaviour
• Horizontal co-ordination using lateral
  processes designed to encourage functions to make
  mutual adjustment to each other

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3. Environment (Lawrence and Lorsch1969)

• Conceptualised in three specialist functions in
  firms
• Technical economic sub environment - production
  function operating within a stable internal
  environment, short term horizons rely mostly on
  rules and procedures mechanistic structure
• Scientific sub-environment research and
  development long term horizons, unstable
  environment - organic structure
• Market sub-environment lies between the two
  extremes

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Organisational size

• As organisations expand and become more elaborate
  the more of a tendency towards bureaucracy is
  exhibited
• This can lead to economic efficiency
• However also all the problems of bureaucracy

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Technology and Structure (JOAN WOODWARD 1965)

• Unit small batch production organisations
  which manufacture and assemble small orders or
  single units to direct customer specification
• Large batch mass production characterised by
  long production runs of a standardised product

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Technology and Structure (JOAN WOODWARD 1965)

• Process (continuous flow) production
  represents the highest level of
  technology occurs where the process involves the
  continual processing of the same raw material eg
  oil refining

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Technology and Structure (JOAN WOODWARD 1965)

• Unit successful organisations characterised by a
  loose formal structure and flat hierarchy of
  management explained by reliance on skilled
  labour and need for flexibility to be able to
  meet individual customer needs - craft technology
  predictable outcome
• Mass successful organisations characterised by
  wide spans of control (facilitated by large
  numbers of employees performing the same, simple,
  automated process) taller structures due to
  planning and control undertaken by specialists or
  managers more complex technology less
  predictable

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Technology and Structure (JOAN WOODWARD 1965)

• Process due to the high level of technological
  sophistication and the interdependence of the
  process, successful organisations relied on
  narrow spans of control, resulting in tall
  structures and well defined hierarchies of
  authority, high ratio of administration and
  management - highly complex technological
  processes unpredictable outcome

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Conclusions

• Bureaucracy does have advantages
• However this classical approach of one method
  fits all is problematic in modern rapidly
  changing sectors
• Organisations must taker into account their
  environment when their design is being decided.

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Tutorial Four Questions

•  1 Outline the characteristics which define Max
  Webers view of an ideal bureaucracy
• (a)    what are the advantages of bureaucracy
• (b)   What are the disadvantages of bureaucracy
•  
• 2. Describe the features of mechanistic and
  organic structures identified by Burns and
  Stalker (1961).
• (a) How do these relate to the
  organisations environment?.

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Tutorial Four Questions

• 3. Give examples of ways in which the
  organisations environment influences management
  structure?
•  
• 4. Outline the relationship between technology
  and organisational structure