8/12/2019 Org Design & Structure
1/33
Ms. Neha Goel
8/12/2019 Org Design & Structure
2/33
Designing Organizational Structure Organizational Structure: The formal system of task and job
reporting relationships that determines how employees use resourcesto achieve org goals.
Organizational Design: The process by which managers create aspecific type of org structure and culture so that the org can work inmost effective and efficient way.
The challenge: coordinatingthe activities of employees, groups,functions, and divisions.
8/12/2019 Org Design & Structure
3/33
Skilled workforce-Flexible structure
Non specialized
employees: FormalStructure
Flexible structure-Differentiation strategy
Formal structure- low cost
strategy
Complicatedtechnology- flexiblestructure
Routine Technology-Formal Structure
Mechanistic Structure Stable environment
Organic Structure-Rapidly changingenviron
OrganizationalEnvironment Technology
HumanResources
Strategy
8/12/2019 Org Design & Structure
4/33
The Organizational Environment
Rapidly changing external environment
Greater uncertainty
More problems Scarce resources
Stable external environment
Uncertainty is low
Less coordination and communication is required
Easily available resources
8/12/2019 Org Design & Structure
5/33
Strategy Different strategies call for different org structures
Differentiation strategy- develop new and innovative
products Low-cost strategy: driving down costs in all functions
International Strategy
8/12/2019 Org Design & Structure
6/33
TechnologyWhat makes technology routine or complicated
Task Variety: no. of new/unexpected problems/situationa person/function encounters in performing a job/task.
Task Analyzability: degree to which programmedsolutions are available
Routine technology: low task variety, high task
analyzability Complicated technology: high task variety, low task
analyzability
8/12/2019 Org Design & Structure
7/33
Human Resources Factors that determine org structure:
Needs of the workforce regarding authority and freedom Skill level of employees: Complexity and kind of work
employees perform
8/12/2019 Org Design & Structure
8/33
Organizational Design Decisions1. Managers decide how to divide the overall task into
successively smaller jobs
2. Managers decide the bases by which to group the jobs
3. Managers decide the appropriate size of the group reporting
to each superior
4. Managers distribute authority among the jobs
8/12/2019 Org Design & Structure
9/33
Division of Labor:
Departmentalization:
Span of Control:
High Low
Homogeneous Heterogeneous
ManyFew
Authority:LowHigh
Specialization
Basis
Number
Delegation
The Four Key Design Decisions
8/12/2019 Org Design & Structure
10/33
Division of Work Division of Workconcerns the extent to which jobs are
specialized
It is the process of breakdown of a complex task intocomponents.
It is the process of dividing work into relatively specialized jobsto achieve advantages of specialization
3 ways of dividing work:
- Personal specialties: e.g. accountants, software engineers, graphic
designers, scientists, etc.
- Natural sequence of work: e.g. dividing work in a manufacturing plantinto fabricating and assembly (horizontal specialization)
- Vertical plane: e.g. hierarchy of authority from lowest-level manager tohighest-level manager
8/12/2019 Org Design & Structure
11/33
Delegation of Authority Managers decide how much authority should be
delegated to each job and to each jobholder
Delegation of authorityprocess of distributing
authority downward in the hierarchy of an organization
Authority
- Decentralized: Distribution of authority a large extent
- Centralized: less distribution of authority at lower levels
8/12/2019 Org Design & Structure
12/33
Reasons to Decentralize Authority1. Relatively high delegation of authority encourages the
development of professional managers
2. High delegation of authority can lead to a competitive
climate within the organization
3. Managers who have relatively high authority can exercise
more autonomy, and thus satisfy their desires to
participate in problem solving
8/12/2019 Org Design & Structure
13/33
Reasons to Centralize Authority
1. Managers must be trained to make the decisions thatgo with delegated authority
2. Many managers are accustomed to making decisionsand resist delegating authority to their subordinates
3. Administrative costs are incurred because new controlsystems must be developed to provide top
management with information about the effects ofsubordinates decisions
4. Decentralization means duplication of functions
8/12/2019 Org Design & Structure
14/33
Departmentalization process in
which an organization is structurally
divided by combining jobs in
departments according to some
shared characteristic or basis.
8/12/2019 Org Design & Structure
15/33
Functional Geographic
Product Market
Departmentalization Bases
8/12/2019 Org Design & Structure
16/33
Departmental Bases:
Functional Departmentalization Jobs are combined according to the functions of the
organization
The principal advantage is efficiency
- By having departments of specialists, management
creates efficient units
A major disadvantage is that organizational goals may be
sacrificed in favor of departmental goals
8/12/2019 Org Design & Structure
17/33
Engineering Reliability Finance
Manufacturing DistributionHuman
Resources
Public
Relations
Purchasing
OBM Company
Functional Departmentalization Structure
8/12/2019 Org Design & Structure
18/33
Departmental Bases:
Geographic Departmentalization Establish groups according to geographic area
Advantageous in large organizations because physical
separation of activities makes centralized coordination
difficult
Provides a training ground for managerial personnel
ABCCompany
Delhi Chennai Mumbai Kolkata
8/12/2019 Org Design & Structure
19/33
Departmental Bases:
Product Departmentalization Product becomes the preferred basis as a firm grows by
increasing the number of products it markets
Concentrating authority, responsibility, and accountability in a
specific product department allows top management tocoordinate actions
ABC Industry
RetailOil and
PetroleumTelecom
Financial
services
8/12/2019 Org Design & Structure
20/33
Departmental Bases:
Customer Departmentalization The importance of customer satisfaction has stimulated firms
to search for creative ways to serve people better
Each kind of customer is served by a self-contained unit.
Group Divisions according to type of customer they serve
Retail
StoresMail Order
On-Line
Sales
Government
Contracts
ABC
Company
Institutional
Sales
8/12/2019 Org Design & Structure
21/33
Span of Control
Number of individuals who report to a specific manager
The frequency and intensity of actual relationships is the
critical consideration in determining the managers spanof control
Span of control is important for 2 reasons:
o Span affects work relations in the organizationo Span affects decision making-
- Tall hierarchies: narrow span
- Flat hierarchies: wide span
8/12/2019 Org Design & Structure
22/33
Dimensions of Structure
Formalizationthe extent to which expectations
regarding the means and ends of work are specified,
written, and enforced
Centralizationthe location of decision-making
authority in the hierarchy
Complexitythe direct outgrowth of dividing work
and creating departments
8/12/2019 Org Design & Structure
23/33
Types of Organization
Patterns for organizing the personnel:
- Line System: Activities at one level are the same, eachperforming same type of work, divisions exist solely for
control and direction
- Functional System: separate departments look after difffunctions,
- Line & Staff System: Staff positions are advisory and linepositions are specialized. Staff managers canrecommend and line managers have the authority.
8/12/2019 Org Design & Structure
24/33
Line organization:
- simple,- disciplined,
- flexible,
- prompt decision,
- fixedresponsibility
- overloading,
- Scope forfavourism
GM
Manager:South India
Manager:District 1
Manager:District 2
Manager:north India
Manager:District 3
Manager:District 4
8/12/2019 Org Design & Structure
25/33
Line and staff organizations
- Planned specialization, quality decisions, trainedpersonnel, lack of well defined authority, line and staffconflicts.
President
VP finance
Manager:
accounting
Manager cashcontrol
Director R&D VP production
Manager:
Factory
Chief:Assembly
Chief:Maintenance
Manager:
personnel
Director: PR VP Sales
Manager:
Domestic sales
Manager:Foreign Sales
8/12/2019 Org Design & Structure
26/33
Organization Design Models
The Mechanistic Model
Emphasizes importance ofachieving high levels of
production and efficiency
through:
- Extensive use of rules andprocedures
- Centralized authority
- High specialization of labor
The Organic Model
Emphasizes importance ofachieving high levels ofproduction and efficiencythrough:
- Limited use of rules and
procedures- Decentralized authority
- Relatively low degrees of
specialization
8/12/2019 Org Design & Structure
27/33
Comparison of Mechanistic and OrganicStructures
Process Mechanistic Structure Organic Structure
1. Leadership Includes no perceived
confidence and trust
between superiors and
subordinates.
Includes perceived confidence
and trust between superiors
and subordinates.
2. Motivation Taps only physical, security,
and economic motives,
through use of fear and
sanctions.
Taps a full range of motives
through participatory
methods.
3. Communication Information flows downward
and tends to be distorted,
inaccurate, and viewed with
suspicion by subordinates.
Information flows freely:
upward, downward, and
laterally. The information is
accurate and undistorted.
8/12/2019 Org Design & Structure
28/33
Comparison of Mechanistic and Organic
StructuresProcess Mechanistic Structure Organic Structure
4. Interaction Closed and restricted.
Subordinates have little
effect on departmentalgoals, methods, and
activities.
Open and extensive. Both
superiors and subordinates
are able to affectdepartmental goals,
methods, and activities.
5. Decision Relatively centralized.
Occurs only at the top of
the organization.
Relatively decentralized.
Occurs at all levels through
group processes.
6. Goal setting Located at the top of the
organization, discouraging
group participation.
Encourages group
participation in setting high,
realistic objectives.
8/12/2019 Org Design & Structure
29/33
Comparison of Mechanistic and Organic
StructuresProcess Mechanistic Structure Organic Structure
7. Control Centralized. Emphasizes
fixing blame for mistakes.
Dispersed throughout the
organization. Emphasizes self-control and problem solving.
8. Performance goals Low and passively sought by
managers, who make no
commitment to developing
the organizations human
resources.
High and actively sought by
superiors, who recognize the
need for full commitment to
developing, through training,
the organizations human
resources.
8/12/2019 Org Design & Structure
30/33
Organization Design Models:
The Matrix Model
Matrix organization attempts to maximize the strengths
and minimize the weaknesses of both the functional and
product bases
Simultaneously group people and resources by functions and
by products
Superimpose a horizontal structure of authority, influence,
and communication on the vertical structure
Facilitates the utilization of highly specialized staff and
equipment
8/12/2019 Org Design & Structure
31/33
Project or product A
Project or product B
Project or product C
Project or product D
Project or product E
Manufacturing Marketing Engineering FinanceFunctions
Projects, products
Example of the Matrix Organization Model
8/12/2019 Org Design & Structure
32/33
Advantages of Matrix Organization
Efficient use of resources
Flexibility in conditions of change and uncertainty
Technical excellence Freeing top management for long-range planning
Improving motivation and commitment
Providing opportunities for personal development
8/12/2019 Org Design & Structure
33/33
Thank You!!!!