Organizational Design

Structuring An Organization Effectively

Design & Differentiation

Process by which an organization

Allocates people to tasks Allocates resources to tasks Establish authority relationships To help organizations to achieve their goals

Dividing things up

Organizational Design Basics

Differentiation Balancing Differentiation & Integration Balancing Centralization & Decentralization Balancing Standardization & Mutual Adjustment Coordinating Formal & Informal Organizations Mechanistic & Organic Structures

Organizations

Simple organization

Differentiation is low Division of labor is low Individuals typically perform all organizational tasks Differentiation is high Division of labor is high Individuals perform separate tasks

Complex organization

Organizational Role

A set of task related behaviors required of a person by his or her position in an organization
Maintenance technician Design engineer

Division of Labor Increases

Managers specialize in some roles Hire people to specialize in others People develop their individual abilities
Knowledge related to their organizational role

Authority & Control Issues

People with similar roles are grouped into a subunit

Functions (or departments) Divisions

Function (or Department)

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

Marketing dept Maintenance dept

Division

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

Motorolas semiconductor division

Differentiation

Vertical differentiation

The way an organization designs its hierarchy of authority & reporting relationships The way an organization groups tasks into roles & roles into subunits
Functions & Divisions

Horizontal differentiation

Differentiation

Enables specialization Increases productivity

But, leads to subunit orientation

The tendency to view ones role in the organization strictly from the orientations of ones subunit Individuals to see world through a subunit lens

Integration

Process of coordinating

Tasks Functions Divisions

Differentiation divides things up Integration pulls things back together

Integration Mechanisms

Hierarchy of authority
Who reports to who

Direct contact
Meet face to face

Liaison role
A specific manager coordinating with managers from other subunits

Task force
Temporary committees coordinate cross functional activities

Integration Mechanisms

Team
Permanent committees coordinate

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

Integrating department
A new department is created to coordinate the activities of functions or divisions

Doing the Balancing Act

Finding the level of differentiation that reaps the benefits of functional specialization for the company
While also utilizing the right level of integration that keeps the subdivisions communicating with each other

Striking a balance between Differentiation & Integration

Centralization & Decentralization

Managers at the top of the hierarchy retain the authority to make important decisions

Managers at all levels are allowed to make decisions regarding resources and new projects

Striking a balance between Centralization & Decentralization

Formalization

Standardization is conformity to specific models or examples (rules and norms)

Mutual adjustment is the process of allowing people to use their judgment rather than standardized rules to address a problem

Striking a balance between Standardization & Mutual Adjustment

Formalization

Extent to which rules and procedures govern the actions of individuals and groups within the organization Balancing act

Too low
Uncertainty about authority and responsibility

Too high
Limit innovation and creativity

Organizations must find a fit between the formal and informal organizations

Mechanistic Structures

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
Creating an Effective Structure

Organic Structures

Promote flexibility People initiate change and can adapt quickly to changing conditions Decision making is decentralized Roles are loosely defined Integrating mechanisms are complex Reliance on mutual adjustment Information flows freely
Creating an Effective Structure

Questions