Module Thirteen Organization and Work Design

1. Module Thirteen Organization and Work Design

2. Levels of Analysis- Organizational Behavior Individual Team Organization Environment

4. Organization and Work Design • Design has become an exciting topic • The subject of design is now front and center in grand architectural undertakings from the Opera House in Sydney Australia to the Guggenheim Museum in Bilbao, Spain to the proposals for a new World Trade Center in New York City. • Design is the leading edge in dramatic waterfront revitalizations in a number of major cities in the world, and its popularity is evident in the large number of new television shows dedicated to house and kitchen design as well as the variety of household design challenge programs. • Design hits the pages of business magazines through the many ergonomic design awards being acknowledged for exciting new products such as Apple Computers’ iPod or the new Vespa Scooter from Italy. • In the Harvard Business Review’s list of breakthrough ideas for 2004, it is even suggested that a Masters of Fine Arts degree is the new MBA degree because the skill of design has the potential to create a significant competitive advantage in the future. • Does the same kind of design excitement exist in the world of organization?

5. What is an organization? An organization is: A social entity… …designed to accomplish tasks that individuals cannot accomplish alone… …within an economic, scientific, cultural, institutional and legal context. Organizations rely on: Division of labor / specialization Coordination of activities Grouping of tasks and people

6. Organizational design involves: Choosing an organizational structure that best fits its: Strategy Environment People Technology Making intelligent trade-offs

7. Design • Requirements Realized Design • Design • Dimensions Organization Design Framework Passive Design (Contextual Factors) “Mess” Policy Choices Active Design (Managerial Choices)

8. The Organization: A System-Based Framework ENVIRONMENT OUTPUTS INPUTS TRANSFORMATION FEEDBACK SYSTEM BOUNDARIES

9. The Organization: A System-Based Framework ENVIRONMENT * International Sector * Government Sector * Industry Sector * Socio-Cultural Sector * Market Sector * Resources Sector INPUTS Organization Obtains Inputs from Its Environment * Energy * Raw Materials * Human Resources * Financial Resources * Information TRANSFORMATION Organization Transforms Inputs and Adds Value to Them * Technical Subsystem * Human Subsystem * Managerial Subsystem OUTPUTS Organization Releases Outputs to Its Environment * Products * Services * Waste *Human Satisfaction *Societal Benefits FEEDBACK SYSTEM BOUNDARIES

10. Key Concepts of General Systems Theory Subsystems or Components A system composed of interrelated parts or elements. True for all systems - Mechanical, Biological, and Social. Every system has at least two interconnected elements. Holism, Synergism, Organicism, and Gestalt The whole is not just the sum of the parts; The system itself can be explained only as a totality. Holism is the opposite of elementarism, which views the total as the sum of its individual parts. Open Systems View Systems can be considered one of two ways: (1) closed or (2) open. Open systems exchange information, energy, or material with their environments. Biological and social systems are inherently open systems. Mechanical systems may be open or closed. The concepts of open and closed systems are difficult to defend in the absolute. Systems are considered on an open-closed dimension: i.e., systems are relatively open or relatively closed.

11. Key Concepts of General Systems Theory Input-Transformation-Output Model The open system can be viewed as a transformation model, in a dynamic relationship with its environment, it receives various inputs, transforms these inputs in some way, and then exports the outputs. System Boundaries It follows that systems have boundaries that separate them from the environments. The concept of boundaries helps us understand the distinction between open and closed systems. The relatively closed system has rigid, impenetrable boundaries, whereas the open system has permeable boundaries between itself and a broader suprasystem. Boundaries are relatively easily defined in physical and biological systems but are very difficult to delineate in social systems such as organizations.

12. Key Concepts of General Systems Theory Negative Entropy Closed physical systems are subject to the force of entropy which increases until eventually the entire system fails. The tendency toward maximum entropy is a movement to disorder, complete lack of resource transformation, and death. In a closed system, the change in entropy must always be positive; however, in open biological or social systems, entropy can be arrested and may even be transformed into negative entropy– a process of more complete organization and ability to transform resources– because the system imports resources from its environment. Steady State, Dynamic Equilibrium, and Homeostasis The concept of steady state is closely related to that of negative entropy. A closed system eventually must attain an equilibrium state with maximum entropy – death or disorganization. However, an open system may attain a state in which the system remains in dynamic equilibrium through the continuous inflow of materials, energy, and information.

13. Key Concepts of General Systems Theory Feedback The concept of feedback is important in understanding how a system maintains a steady state. Information concerning the outputs or the process of the system is fed back as an input into the system, perhaps leading to changes in the transformation process and/or future outputs. Feedback can be both positive and negative, although the field of Cybernetics is based on negative feedback. Negative feedback is informational input which indicates that the system is deviating from a prescribed course and should readjust to a new steady state. Hierarchy A basic concept in systems thinking is that of hierarchical relationships between systems. A system is composed of subsystems of a lower order and is also part of a suprasystem. Thus, there is a hierarchy of the components of the system.

14. Key Concepts of General Systems Theory Internal Elaboration Closed systems move toward entropy and disorganization. In contrast, open systems appear to move in the direction of greater differentiation, elaboration, and a higher level of organization. Multiple Goal Seeking Biological and social systems appear to have multiple goals or purposes. Social organizations seek multiple goals, if for no other reason than that they are composed of individuals and submits with different values and objectives. Equifinality of Open Systems In mechanistic systems there is a direct cause-and-effect relationship between the initial conditions and the final state. Biological and social systems operate differently. Equifinality suggests that certain results may be achieved with different initial conditions and in different ways. This view suggests that social organizations can accomplish their objectives with diverse inputs and with varying internal activities (Conversion processes).

15. WORK & ORGANIZATION DESIGN • At the most basic level, the structural arrangements are usually the products of rational decisions about: • How to divide the labor (how should tasks and responsibilities be allocated among individuals) • Which departmentalization to use (e.g., simple, functional, divisional, matrix,…) – meaning how employees and activities are grouped together • How authority is to be distributed within and among organizational units (centralized, decentralized) • What systems of coordination (e.g. cross-functional teams), control (e.g., rules) and rewards (e.g., pay structures) are appropriate for achieving collective ends

16. ELEMENTS OF ORGANIZATIONAL STRUCTURE Four basic structural elements (YOU NEED TO KNOW THESE TERMS): • Span of control (# of people directly reporting to next level in the hierarchy) • Centralization/decentralization (degree to which formal decision authority is held by a small group of people) • Formalization (degree to which organizations standardize behavior through rules, procedures, training – cooking and bagging fries at McDonalds) • Departmentalization – e.g., functional, divisional, matrix (specifies how employees and their activities are grouped together—alternatively considered organizational chart)

17. Organization Design: The Star Model • <<<<Insert figure 13-1 from textbook>>>

18. Organization Performance Model <<<Insert figure 13-2 from textbook>>>

19. Forms of Structure • Simple • Functional • Product or Self-Contained • Mixed or Hybrid • Process Organization • Network Organization

20. SIMPLE STRUCTURE • Ownership = control • Main strategy/goal • Existing • Extending the personal skills of the entrepreneur • Pros: People specialize in areas of expertise, relative ease of coordination given size of business • Main drawback: cannot deal with complexity

21. Functional Form of Structure President Manufacturing Accounting Marketing R&D

22. FUNCTIONAL STRUCTURE Key: Typically utilized when an organization “outgrows” a simple structure Example: OCOB • Group personnel on the basis of function performed, or work process, or functional knowledge, training or academic knowledge • Pros: Efficiency. Work well when business and environment are stable. Foster professional identity and clarify career paths. Direct supervision is easier because managers have background in function. Create pools of talent that serve the organization. • Key downsides: Barriers between functions, employee lack of understanding of business, dysfunctional conflict

23. Product (Self-Contained) Form President Product Group 2 Product Group 3 Product Group 1 R&D Mfg. Acct. Mkt. R&D Mfg. Acct. Mkt. R&D Mfg. Acct. Mkt.

24. DIVISIONAL STRUCTURE Example: McDonalds (Geography) • Main strategy/goal • Diversification • Typically used by mid- to large-size companies (although can be used by smaller companies) • Key specialization • Semi-autonomous divisions (could be products - see above chart; clients - advertising firm organizes on automotive and hotel clients; or geography – North and South American regions) • Key pros: Greater responsiveness to a changing environment, improved coordination around product, decision making closer to customer, improved customer satisfaction • Key downsides: • Reinventing the wheel (each division has its own functions), barriers between divisions, transfer prices, destructive within firm competition

25. Matrix Form General Manager Manufacturing Marketing Engineering Program Project Manager Program

26. R&D Prod.n Mktg MATRIX STRUCTURE (HYBRID) • Main strategy/goal • Typically used by large companies (although can be smaller) pursuing technological advantage, speed, and multiple markets at the same time • Multiple chain of command (Some employees have two supervisors) • Key pros: Ideal for project based organizations, project flexibility, innovation • Key downsides • Coordination costs associated with having more than one boss; time associated with communication with two bosses • Stress Examples: NASA, Boeing

27. Dynamic Network Form Product design Product distribution Fashion Company Headquarters (Broker) Product manufacturing Advertising Accounts receivable

28. Horizontal and Flexible Structures • People get things done by working across organizational units rather than relying on a managerial hierarchy • Organization is decentralized with a free flow of information • Informal, voluntary cooperation required • Types: • Process organization • Designs for global competition • Network organizations • Matrix, transnational, keiretsu, and global consortia formats

29. Comprehensive Approaches to Organization Design Three Orientations That Can Be Used To Guide Redesign Programs • Information Processing • Self-Design • Sustainable Work Systems

30. Macro Organization Design Cultural Values and Assumptions Grouping Task and work processes Goals and strategies Business situation Business results Emergent behavior Linking Managerial processes Information Technology Design Choices

31. Self Design Process Model Conceptual and empirical knowledge Identifying Design Criteria Defining organizational issues Agreeing on design criteria Group values Diagnostic data Receiving feedback and testing against criteria Testing for consistency among components; testing against criteria Generating alternative designs Choosing the design Finalizing the design

32. Sustainable Work Systems

33. Types of Teams • Self-Directed Work Teams • Lean Production Teams • Off-Line Teams

34. Criteria of Work-Group Autonomy 1. The group has influence on its qualitative goals 2. The group has influence on its qualitative goals 3. The group decides on questions of external leadership 4. The group decides what additional tasks to take on 5. The group decides when it will work 6. The group decides on questions of production method 7. The group determines the internal distribution of tasks 8. The group decides on questions of recruitment 9. The group decides on questions of internal leadership 10. The group members determine their individual production methods Source: Jon Gulowsen, “A Measure of Work-Group Autonomy,” In Davis, L.E., and Taylor, J.C., (eds.), Design of Jobs, (Santa Monica, CA: Goodyear, 1979), pp.207-209

35. Newer, Job-Focused Redesign Options • Job Enlargement • Job Sharing • Flexible Work Schedules • Job Enrichment • Job Characteristics Approach to JE

36. The Job Characteristics Model Critical psychological states Personal and work outcomes Core job dimensions Experienced meaningfulness of the work High internal work motivation Skill variety Task identity Task significance High-quality work performance Experienced responsibility for outcomes of the work Autonomy High satisfaction with the work Knowledge of the actual results of the work activities Low absenteeism and turnover Feedback Employee growth Need strength

37. WORK AND ORGANIZATION DESIGN (1) • Structure = patterns of formalized interactions • Structure evolves through and with time • Link between structure, environment, and strategic goal is crucial • One size does not fit all: there are multiple designs available • Essence of design = choosing one’s preferred trade-off

38. WORK AND ORGANIZATION DESIGN (2) • Work design and organization design can be viewed as ways to create experiences, not only produce a product or a service. • Depending on the strategic choice, the organization could be designed to match or align with the environment, it could be designed to deliberately misalign with the environment by finding niches of opportunity between the dominant environmental forces, or it could lead the environment • Work & Organization design are not restricted to a structural perspective. People and the roles they play are manifested through organizational processes. For example, poor organization design can block the free flow of communications, creativity and innovation. • We have viewed work & organization design as a holistic process that comprises several sequential variables: strategic or policy choices, design requirements that can make these choices operational , and design dimensions that bound and specify the requirements and lead to a realized design.