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Challenges of Organizational Design

Balancing Differentiation / Integration

Balancing Centralization / Decentralization

Mechanistic versus Organic Structures
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Differentiation
Design Challenge 1

People in this organization take on new tasks
as the need arises and its very unclear who
is responsible for what and who is supposed
to report to whom. This makes it difficult
to know whom to call on when the need
arises and difficult to coordinate peoples
activities so they work together as a team.
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Differentiation: assigning people and resources
to tasks

simple organization -> low differentiation

complex organization -> high differentiation
Differentiation
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The basic building blocks of differentiation are
organizational roles.

An organizational role is a set of task-related
behaviors required of a person by his or
her position in an organization.

For example:
Maintenance Technician
Design Engineer
Differentiation
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As the division of labor increases, managers
specialize in some roles and hire people
to specialize in others.

Specialization allows people to develop their
individual abilities and knowledge within
their specific role.

The identification of roles leads to authority
and control issues.
Differentiation
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Authority is the power to hold people
accountable for their actions and to make
decisions concerning the use of resources.


Control is the ability to coordinate and
motivate people to work in an organizations
interests.

Differentiation
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In most organizations, people with similar roles
are grouped into a subunit.


The main subunits that develop in
organizations are:
functions (or departments)
divisions


Differentiation
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A function is a subunit composed of a group of
people who possess similar skills and
knowledge to perform their jobs.

marketing dept. maintenance dept.

A division is a subunit that consists of a
collection of functions that are related to a
particular good or service.

Motorolas semiconductor division
Differentiation
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The number of functions and divisions in
an organization is a measure of its
complexity.


Differentiation increases control and allows
an organization to accomplish tasks
effectively.
Differentiation
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As organizations grow in size, they differentiate
into five different kinds of functions:

1) Support functions facilitate relations with
the environment and stakeholders

purchasing sales
marketing legal affairs
public relations
Differentiation
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As organizations grow in size, they differentiate
into five different kinds of functions:

2) Production functions manage the efficiency
of the conversion processes

production operations
production control
quality control
Differentiation
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As organizations grow in size, they differentiate
into five different kinds of functions:

3) Maintenance functions enable an
organization to keep its departments
in operation

personnel
engineering
janitorial services
Differentiation
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As organizations grow in size, they differentiate
into five different kinds of functions:

4) Adaptive functions allow adjustment to
changes in the environment

research and development
market research
long-range planning

Differentiation
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As organizations grow in size, they differentiate
into five different kinds of functions:

5) Managerial functions facilitate the
control and coordination of activities within
and among departments.

top management
middle managers
lower-level managers

Differentiation
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An organization chart is a drawing that
shows the end result of organizational
differentiation.

The organization chart is a snapshot of the
way things are divided up along
two dimensions:

vertical horizontal
Differentiation
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Vertical differentiation refers to the way an
organization designs its hierarchy of
authority (i.e., reporting relationships).



Horizontal differentiation refers to the way an
organization groups tasks into roles and
roles into subunits (i.e., functions and
divisions).
Differentiation
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Design Challenge 2

We cant get people to communicate and
coordinate in this organization. Specifying
tasks and roles is supposed to help
coordinate the work process, but here it
builds barriers between people and
functions.
Integration
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Integrating Mechanisms

1) Hierarchy of Authority: who reports to whom

2) Direct Contact: subunit representatives meet face
to face

3) Liaison Role: a specific person coordinates with
other subunits
Integration
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4) Task Force: temporary committee to coordinate
cross-functional activities

5) Team: permanent committee

6) Integrating Role: A new role is established
to coordinate the activities of two or more
functions or divisions

7) Integrating Department: A new department
is created to coordinate the activities of
functions or divisions
Integration
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Balance differentiation and integration.
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Decision Making
Centralized
High managerial control
Low employee empowerment

Decentralized
Low managerial control
High employee empowerment
Crucial in fast-changing environments
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Types of Structures
Two general categories of structure types:

organic and mechanistic
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Mechanistic Structures
Designed to induce people to behave in
predictable ways.

Decision making is centralized
Subordinates are closely supervised
Information flows downward in the hierarchy
Tasks are clearly defined
Integrating mechanisms are simple
Work is very standardized

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Organic Structures
Promote flexibility, so people initiate change and
can adapt quickly

Decision making is decentralized
Roles are loosely defined
Integrating mechanisms are complex
Tasks rely on mutual adjustment
Information flows freely
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Design Goal
Anticipate environmental, social, and
procedural constraints and opportunities

Satisfy interests of primary stakeholders