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Organizational Design

Fundamentals
Contemplative Questions

• In what type of company would


I like to work?
• How do organizations process
information?
• Are all organizations the same?
• How are they different?
• What career paths can I pursue?
Management Functions
Designing organizational structures is part of
organizing, one of the four basic management functions.

Planning Organizing Leading Controlling


Lead to
Defining Determining Directing Monitoring Achieving the
goals, estab- what needs and moti- activities organization’s
lishing to be done, vating all to ensure stated
strategy, and how it will involved that they are purpose
developing be done, parties and accomplished
subplans to and who is resolving as planned
coordinate to do it conflicts
activities
Org chart example
Chief Executive
Officer

Executive President Executive


Vice-President Vice-President

Vice- Vice- Vice- Vice- Vice-


President President President President President

Region Region Region Region Region


1 2 3 4 5

District District District District District District District


A B C D E F G
Alternate Org. Form:
A Matrix Organization
Design Manu- Contract Human
Purchasing Accounting
Engineering facturing Admin. Resources

Alpha Design Mftg. Contract Purch. Acctg. HR


Project Group 1 Group 1 Group 1 Group 1 Group 1 Group 1

Beta Design Mftg. Contract Purch. Acctg. HR


Project Group 2 Group 2 Group 2 Group 2 Group 2 Group 2

Gamma Design Mftg. Contract Purch. Acctg. HR


Project Group 3 Group 3 Group 3 Group 3 Group 3 Group 3

Omega Design Mftg. Contract Purch. Acctg. HR


Project Group 4 Group 4 Group 4 Group 4 Group 4 Group 4
An IS Department Org Chart
Fig. 1-3.

IS professionals frequently work in project-based teams.


Only 1 team works on a project, usually.
People work on many projects, however (e.g. a matrix organization).
Teams are comprised of diverse group of members from several areas, and
may include users, managers, analysts, programmers, etc.
Organizations
 Whether you are a programmer, analyst, user
or manager, it will help your career if you
can understand how organizations work.
 Analysts, especially, need to understand how
organizations process information.
 There are literally millions of organizations in
the world.
 When is a group of people considered an
organization?
 An organization is a ________ with some form of
___________ who collectively possess some
___________ .
Organizations
 In what type of organization would you like to work?
 All organizations vary in terms of their strategy,
their structure, their processes, their culture.
 Organizational structure is almost always
predetermined. It is there on your first day on the
job.
 What works at one company may not work in
another, therefore it would be helpful to classify
organizations into certain types.
 Then we can make general statements about the types.
Organizations
 In what type of organization would you like to work?
 Think of organizations in terms of 3 dimensions:
 Degree of complexity
 Formalization
 Centralization
 These dimensions will help you assess prospective
employers
 They generate great questions for job interviews.
 They also help to determine how information is processed
within the organization.
Degree of Complexity
 Two dimensions of organizational design
 Vertical (the number of layers of management)
 Span of control = avg. # employees / manager
 Horizontal (how jobs are differentiated)

Unity of Command says everyone should report to one and


only one superior (this is often not the case in IS).

 IS positions commonly require team work


 You may have a superior who advises you and team
leaders or project managers who give you specific
direction
Vertical complexity

Contrasting Spans of Control


(Highest) Assuming Span of 4 Assuming Span of 8
1 1 1
Organization Level

2 4 8

3 16 64

4 64 512

5 256 4,096

6 1,024

7 4,096

(Lowest)
Span of 4: Span of 8:
4,096 Operatives. 1,365 Managers 4,096 Operatives. Only 585 Managers!

Which organization looks more appealing to you?


Horizontal complexity

Functional Departmentalization

Plant Manager

Manager,
Manager, Manager, Manager, Manager,
Human
Engineering Accounting Manufacturing Purchasing
Resources

Castings Press Tube Finishing Inspection


Dept. Mgr. Dept. Mgr. Dept. Mgr. Dept. Mgr. Dept. Mgr.
Horizontal complexity

Product Departmentalization
Bombardier, Inc.

Mass Transit Recreational and Utility Rail Products


Sector Vehicles Sector Sector

Mass Transit Bombardier-Rotax Rail and Diesel Products


Division (Vienna) Division

Recreational Logistic Industrial Bombardier-


Products Equipment Equipment Rotax
Division Division Division (Gunskirchen)
Horizontal complexity

Customer Departmentalization
Figure 10-7

Director
of Sales

Manager,
Manager Manager,
Manager Manager,
Manager
Retail Accounts Wholesale Accounts Government Accounts
Horizontal complexity

Geographic Departmentalization

Vice President
for Sales

Sales Director, Sales Director Sales Director, Sales Director


Western Region Southern Region Midwest Region Eastern Region
Centralization and Decentralization

DEGREE OF CENTRALIZATION

DEGREE OF DECENTRALIZATION

Judging by the size of the desk, where do decisions get made?


Which organization looks more appealing to you?
Two Extremes for Organizational Types

Mechanistic Organic

Rigid hierarchical
relationships Vertical and horizontal
collaboration
Fixed duties
Adaptable duties
High formalization
Low formalization
Formalized
communication Informal
channels communication

Centralized Decentralized
decision authority decision authority
Types of Organizations
Mechanistic Organic

Rigid hierarchical
relationships Vertical and horizontal
collaboration
Fixed duties
Adaptable duties
High formalization
Low formalization
Formalized
communication Informal
channels communication

Centralized Decentralized
decision authority decision authority

In which type of organization would you like to work?

Do you like to take orders?


Are you risk-averse, i.e. do you avoid risk?
Do you prefer to be aware of the ‘big picture’?
Woodward’s Findings on Technology,
Structure, and Effectiveness

Unit Mass Process


Production Production Production

Structural Low vertical Moderate vertical High vertical


characteristics differentiation differentiation differentiation
Low horizontal High horizontal Low horizontal
differentiation differentiation differentiation
Low High Low
formalization formalization formalization

Most effective Organic Mechanistic Organic


structure