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Chapter 14 Nelson & Quick Organizational Design & Structure

Copyright 2005 by South-Western, a division of Thomson Learning. All rights reserved.

Organizational Design
Organizational Design - the process of constructing and adjusting an organizations structure to achieve its organizations structure goals. the linking of departments and jobs within an organization
H. Mintzberg, The Structuring of Organizations, Prentice Hall, 1979, 301. Reprinted by permission of Prentice-Hall, Inc, Upper Saddle River, NJ.

Key Organizational Design Processes

The process of deciding how to divide the work in an organization

Four Dimensions Managers goal orientation Time orientation Interpersonal orientation Formality of structure

Horizontal Differentiation

The degree of differentiation between organizational subunits Based on employees specialized knowledge, education, or training

Vertical Differentiation

The difference in authority and responsibility in the organizational hierarchy Greater in tall, narrow organizations than in flat, wide organizations

Spatial Differentiation
Geographic dispersion of an organizations offices, plants, and personnel Complicates organizational design, but may simplify goal achievement or protection

Differentiation Between Marketing and Engineering

Basis for Difference Goal orientation Time orientation Interpersonal orientation Structure Marketing Sales volume Long run People oriented Less formal Engineering Design Medium run Task oriented More formal

The process of coordinating the different parts of an organization

Designed to achieve unity among individuals and groups Supports a state of dynamic equilibrium - elements of organization are integrated, balanced

Vertical Integration
Hierarchical referral Rules and procedures Plans and schedules Positions added to the organization structure Management information systems

Horizontal Integration
Liaison roles Task forces Integrator positions Teams

Formalization - the degree to which the organization has official rules, regulations, and procedures

Centralization - the degree to which decisions are made at the top of the organization

Hierarchy of Authority the degree of vertical differentiation across levels of management

Basic Design Dimension s

Specialization the degree to which jobs are narrowly defined and depend on unique expertise

Complexity - the degree to which many different types of activities occur in the organization

Standardization - the degree to which work activities are accomplished in a routine fashion

Simple Structure - a centralized form of organization that emphasizes the upper echelon & direct supervision Structural Configurations of Organizations

Machine Bureaucracy a moderately decentralized form of organization that emphasizes the technical staff & standardization of work processes

Adhocracy - a selectively decentralized form of organization that emphasizes the support staff & mutual adjustment among people

Divisional Form - a moderately decentralized form of organization that emphasizes the middle level & standardization of outputs

Professional Bureaucracy a decentralized form of organization that emphasizes the operating level & standardization of skills

Five Structural Configurations of Organization Prime Structural Type of Key Part of Coordinating Configuration Organization Decentralization Mechanism Simple Structure Machine Bureaucracy Direct Supervision Standardization of Work Processes Upper Echelon Technical Staff Operating Level Middle Level Support Staff

Limited Horizontal Decentralization Vertical & Horizontal Decentralization Limited Vertical Decentralization Selective Decentralization

Professional Standardization Bureaucracy of Skills Divisionalized Standardization Form of Outputs Adhocracy Mutual Adjustment

Mintzbergs Five Basic Parts of an Organization

Strategic Apex

Middle Line Operating Core

From H. Mintzberg, The Structuring of Organizations (Upper Saddle River, N.J.: Prentice-Hall, 1979): 20. Reprinted with permission.


Contextual Variables a set of characteristics that influences the organizations design processes

Strategy & Goals



Basic Design Dimensions

Formalization Centralization Specialization Standardization Complexity Hierarchy of authority

Small Organizations
Less High Low Low Low Flat

Large Organizations
More Low High High High Tall


Technological Interdependence the degree of interrelatedness of the organizations various technological elements

Relationship Between Technology and Basic Design Dimensions

Problem Analyzability

Task Variability
Few Exceptions Many Exceptions

Key 1 Formalization 2 Centralization 3 Specialization

Craft Ill-defined & Unanalyzable 1. Moderate 2. Moderate 3. Moderate 4. Low-moderate 5. High 6. Low Well-defined & Routine 1. High Analyzable 2. High 3. Moderate 4. High 4 Standardization 5 Complexity 5. Low 6 Hierarchy of Authority 6. High

Nonroutine 1. Low 2. Low 3. Low 4. Low 5. High 6. Low Engineering 1. Moderate 2. Moderate 3. High 4. Moderate 5. Moderate 6. Moderate

Built from C. Perrow, A Framework for the Comparative Analysis of Organization, American Sociological Review, April 1967, 194-208

Environment - anything outside the boundaries of an organization Task Environment - the elements of an organizations environment that are related to its goal attainment Environmental Uncertainty - the amount and rate of change in the organizations environment


Extremes of Environmental Uncertainty

Mechanistic Structure - an organizational design that emphasizes structured activities, specialized tasks, and centralized decision making

Organic Structure - an organizational design that emphasizes teamwork, open communication, and decentralized decision making

Strategic Dimension

Predicted Structural Characteristics Innovationto understand Low formalization and manage new processes Decentralization and technologies Flat hierarchy Market differentiationto Moderate to high complexity specialize in customer Moderate to high preferences formalization Moderate centralization Cost controlto produce High formalization standardized products High centralization efficiently High standardization Low complexity

Strategy & Goals

Millers Integrative Framework of Structural & Strategic Dimensions

D. Miller, The Structural and Environmental Correlates of Business Strategy, Strategic Management Journal 8 (1987): 55-76. Copyright @ John Wiley & Sons Limited. Reproduced with permission.

The Relationship among Key Organizational Design Elements

Context of the organization Correct size Current technology Perceived environment Current strategy & goals

Influences how manager perceive structural needs Structural dimensions Level of formalization Level of centralization Level of specialization Level of standardization Level of complexity Hierarchy of authority

Which characterize the organizational processes Differentiation & Integration Which influence how well the structure meets its Purposes Designate formal lines of authority Designate formal informationprocessing patterns Which influence how well the structure fits the Context of the organization

Forces Reshaping Organizations

Organizational Life Cycle - the differing stages of an organizations life from birth to death Globalization Changes in Information-Processing Technologies Demands on Organizational Processes Emerging Organizational Structures

Structural Roles of Managers Today versus Managers of the Future

Roles of Managers Today 1. Strictly adhering to boss employee relationships 2. Getting things done by giving orders 3. Carrying messages up and down the hierarchy 4. Performing a set of tasks according to a job description 5. Having a narrow functional focus 6. Going through channels, one by one by one 7. Controlling subordinates Roles of Future Managers 1. Having hierarchical relationships subordinated 2. Getting things done by negotiating 3. Solving problems and making decisions 4. Creating the job through entrepreneurial projects 5. Having a broad crossfunctional collaboration 6. Emphasizing speed & flexibility 7. Coaching ones workers
Management Review, January 1991, Thomas R. Horton.

HDs Circle Organization

Create Demand

Produce Product

Provide Support

From R. Teerlink and L. Ozley, More than a Motorcycle: The Leadership Journey at Harley-Davidson. Boston, MA, 2000. P. 139. Copyright 2000 by the Harvard Business School Publishing Corporation; all rights reserved.

Four Symptoms of Structural Weakness

Delay in decision Overloaded hierarchy; information funneling limited to too few channels making Poor quality Right information not reaching decision making right people in right format Lack of innovative No coordinating effort response to changing environment Departments work against each High level of other, not for organizational goals conflict



Dysfunctional Personality/Organization Combinations

Schizoid Dramatic Compulsive