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BASIC CHALLENGES OFORGANIZATIONAL

DESIGNInstructor

Group Members 

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Agend

• Diferentiation

• Balancing Diferentiation and integration

• Balancing centralization and

decentralization

• Coordinating the Formal and InormalOrganization

• Balancing Standardization and MutualAdjustment

• Mechanistic and Organic OrganizationalStructures

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O!er!"e#

• Designing structure with clear idea o  – What is to achiee

 – !fect o the choices made on the sta"eholders

• Organizational design is an eoling#rocess

• It inoles – $ow to control coordinate and motiate

 – %he tas"s in organization and #eo#le who#erorm them

 – Ma&imization o organization's a(ilit) to createalue

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O!er!"e#

• In short* the cha#ter is a(out*

 +Ho# n Orgn"$t"on de!e%ops!%ue cret"on s&"%%s nd

b"%"t"es "n order to sur!"!e ndgro#'

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Diferentiation

•  %he #rocess () which an organization allocates#eo#le and resources to organizational tas"s

• !sta(lishes the tas" and authorit) relationshi#sthat allow the organization to achiee its goals

,who is res#onsi(le or what and who re#ort towhom-

• D"!"s"on o( %bor)  the degree o s#ecialization inthe organization

• In a sim#le organization* diferentiation is low

(ecause the diision o la(or is low (ecauseIndiiduals t)#icall) #erorm all organizationaltas"s

• In a com#le& organization* diferentiation is high(ecause the diision o la(or is high

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.

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Organizational Roles

• +Set o tas"/related (ehaiorsre0uired o a #erson () his or her#osition in an organization1 –

As the diision o la(or increases*managers s#ecialize in some roles andhire #eo#le to s#ecialize in others

 – S#ecialization allows #eo#le to deelo#their indiidual a(ilities and "nowledgewithin their s#eci2c role

• Organizational structure is (ased on as)stem o interloc"ing roles

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Organizational Roles

Aut*or"t+)

  the #ower to hold #eo#le accounta(leor their actions and to ma"e

decisions concerning the use oorganizational resources

Contro%)

the a(ilit) to coordinate and motiate#eo#le to wor" in the organization'sinterests

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Subun"ts) Funct"ons ndD"!"s"ons

• Funct"on) a su(unit com#osed o a grou#o #eo#le* wor"ing together* who #ossesssimilar s"ills or use the same "ind o"nowledge* tools* or techni0ues to

#erorm their jo(s• D"!"s"on) a su(unit that consists o a

collection o unctions or de#artmentsthat share res#onsi(ilit) or #roducing a#articular good or serice

• Orgn"$t"on% comp%e,"t+) thenum(er o diferent unctions anddiisions #ossessed () an organization

 – Degree o diferentiation

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Funct"on T+pes

•

Support (unct"ons – 3urchasing* sales and mar"eting* 34

and legal afairs• -roduct"on (unct"ons

 – 3roduction o#erations* 3roduction

controls and 0ualit) control• M"ntennce (unct"ons

 – 3ersonnel* engineering* and janitorialserices

• Adpt"!e (unct"ons

 – 45D* Mar"et 4esearch* long range#lanning

•

Mnger"% (unct"ons–

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.ert"c% nd Hor"$ont%D"/erent"t"on

• 6ertical Diferentiation

+%he wa) an organization designs itshierarch) o authorit) and creates

re#orting relationshi#s to lin"organizational roles and su(units1

• $orizontal Diferentiation

+%he wa) an organization grou#sorganizational tas"s into roles and rolesinto su(units ,unctions and diisions-1

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.ert"c% nd Hor"$ont%D"/erent"t"on

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Orgn"$t"on% Des"gnC*%%enges

• Coordination o organizational actiities

• Who will ma"e decision

• $ow strictl) organization control

em#lo)ees actiities• In7uencing the inormal #ersonal

relationshi#

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B%nc"ng D"/erent"t"on ndIntegrt"on

• Hor"$ont% d"/erent"t"on is su##osed toena(le #eo#le to s#ecialize and (ecome more#roductie

 – S#ecialization oten limits communication(etween su(units

 – 3eo#le deelo# su(unit orientation

• Subun"t or"entt"on) a tendenc) to iewone's role in the organization strictl) rom the

#ers#ectie o the time rame* goals* andinter#ersonal orientations o one's su(unit

• When su(unit orientation occurs*communication ails and coordination (ecomes

di8cult

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B%nc"ng D"/erent"t"onnd Integrt"on

Integrt"on

 the #rocess o coordinating arioustas"s* unctions* and diisions so thatthe) wor" together and not at cross/#ur#oses

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 %)#es o Integration

Mechanisms

• H"errc*+ o( ut*or"t+

• D"rect contct) L""son ro%es

• L""son ro%es

• Ts& (orce

• Tems

• Integrt"ng ro%e

• Integrt"ng deprtment

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B%nc"ng D"/erent"t"on ndIntegrt"on

• Managers acing the challenge odeciding how and how much todiferentiate and integrate must9

 – Careull) guide the #rocess odiferentiation so that it deelo#s thecore com#etences that gie theorganization a com#etitie adantage

 – Careull) integrate the organization ()choosing a##ro#riate integratingmechanisms that allow su(units tocoo#erate and that (uild u# the

organization's core com#etences

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D"/erent"t"on !s Integrt"on

• A BC

D ID

ID

I

nc ng

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nc ngCentr%"$t"on nd

Decentr%"$t"on• Centr%"$ed orgn"$t"on) the authorit) toma"e im#ortant decisions is retained () to#leel managers

 – %o# managers a(le to coordinate actiities

to "ee# the organization ocused on its goals• Decentr%"$ed orgn"$t"on) the authorit)

to ma"e im#ortant decisions is delegated tomanagers at all leels in the hierarch)

 –

3romotes 7e&i(ilit) –  res#onsieness

• -ros nd cons

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B%nc"ng Centr%"$t"on nd

Decentr%"$t"on 0cont12

• Ideal (alance entails9 – !na(ling middle and lower managers

who are at the scene o the action to

ma"e im#ortant decisions – Allowing to# managers to ocus on

long/term strateg) ma"ing

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 Centr%"$t"on .SDecentr%"$t"on

A BC

  BALANCING  HIGHL3 CENTRALIZEHIGHL3 DECENTRALIZEC D

C

DC

D

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Coordinating the ormal andinormal organizations

• Manager must achiee a 2t (etweenthe ormal and inormal organization

FO4MA:Org

Beliesassum#tion

I;FO4MA: org

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Status and power 

  Organization is a network of informalsocial and status relations as well as ahierarchy of formal task and authority

,relations manager must harness the powerof the informal organization in order toachieve organizational goals.

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B%nc"ng Stndrd"$t"on ndMutu% Ad4ustment

• Stndrd"$t"on) conormit) tos#eci2c models or e&am#les that areconsidered #ro#er in a gien situation –

De2ned () rules and norms• Mutu% d4ustment) the #rocess

through which #eo#le use their judgment rather than standardized

rules to address #ro(lems* guidedecision ma"ing* and #romotecoordination

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B%nc"ng Stndrd"$t"on ndMutu% Ad4ustment

Form%"$t"on) the use owritten rules and #rocedures tostandardize o#erations

  IBM !&am#le

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B%nc"ng Stndrd"$t"on ndMutu% Ad4ustment

Socialization9 =nderstood ;orms – Ru%es) ormal* written statement that s#eci)

the a##ro#riate means or reaching desiredgoals

 – Norms) standards or st)les o (ehaior thatare considered t)#ical or a grou# o #eo#le

• Ma) arise inormall)

• !&ternal rules ma) (ecome internalized norms

 –Soc"%"$t"on) the #rocess () whichorganizational mem(ers learn the norms o anorganization and internalize these unwrittenrules o conduct

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Stndrd"$t"on !ersusMutu% Ad4ustment

• Challenge acing managers is9 – %o 2nd a wa) o using rules and norms

to standardize (ehaior* and

 – to allow or mutual adjustment to giemanagers o##ortunit) to discoernew and (etter wa)s to achiee goals

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Stndrd"$t"on !ersusMutu% Ad4ustment

• A BC

SMA

SMA

SMA

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Mec*n"st"c nd Orgn"cOrgn"$t"on% Structures

• Mec*n"st"c structures) designedto induce #eo#le to (ehae in#redicta(le* accounta(le wa)s –

Decision/ma"ing authorit) is centralized – Su(ordinates are closel) su#erised

 – Inormation 7ows mainl) in a ertical directionalong a clearl) de2ned #ath

 – $ierarch) #rinci#al integrating mechanism

 –  %as"s and roles coordinated #rimaril) throughstandardization and ormal written rules

 – Best suited to organizations that ace sta(le*unchanging enironments

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Mec*n"st"c nd Orgn"cOrgn"$t"on% Structures

• Orgn"c structures) structures that#romote 7e&i(ilit)* so #eo#le initiatechange and can ada#t 0uic"l) to

changing conditions – Decision ma"ing distri(uted throughout the

hierarch)

 – Coordination is achieed through mutual

adjustments – Status conerred () a(ilit) to #roide

creatie leadershi#

 – !ncourages innoatie (ehaior

 – Suited to d)namic enironments

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 Ho# t*e Des"gn C*%%enges Resu%t "nMec*n"st"c nd Orgn"c Structures

>>

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 Ts& nd Ro%e Re%t"ons*"ps

>?

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Cont"ngenc+ Approc*

• A management a##roach in whichthe design o an organization'sstructure is tailored to the sources o

uncertaint) acing an organization• Organization should design its

structure to 2t its enironment

>@

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