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Chapter 21 Organization Design

Chapter 21 Organization Design. Objectives. Distinguish between mechanistic and organic structures Describe the three traditional types of organizational structures and their advantages and disadvantages Describe horizontal and network structures and their advantages and disadvantages.

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Chapter 21 Organization Design

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  1. Chapter 21 Organization Design

  2. Objectives • Distinguish between mechanistic and organic structures • Describe the three traditional types of organizational structures and their advantages and disadvantages • Describe horizontal and network structures and their advantages and disadvantages 21 -1 Organizational Behavior: An Experiential Approach 8/E Joyce S. Osland, David A. Kolb, Irwin M. Rubin and Marlene E. Turner

  3. …Objectives • Distinguish between formal and informal organizational structure • Describe the boundaryless organization • Explain the differentiation-integration issue in organization design 21 -2 Organizational Behavior: An Experiential Approach 8/E Joyce S. Osland, David A. Kolb, Irwin M. Rubin and Marlene E. Turner

  4. Structure Systems Strategy Style Skills Shared Values/Goals Staff The 7-S Model 21 -3 Organizational Behavior: An Experiential Approach 8/E Joyce S. Osland, David A. Kolb, Irwin M. Rubin and Marlene E. Turner

  5. Mechanistic Vs. Organic Structures Mechanistic Organic Specialized Rigidly Defined Centralized Vertical Rigid Departmentalization Clean Chain of Command Narrow High Tasks Tasks Authority Communication Unit Hierarchy Span of Control Formalization Common Broadly Defined Decentralized Horizontal Cross-Functional Teams Cross-Hierarchical Teams Wide Low 21 -4 Organizational Behavior: An Experiential Approach 8/E Joyce S. Osland, David A. Kolb, Irwin M. Rubin and Marlene E. Turner

  6. Organizational Structure - Defined Organizational structure refers to the pattern of roles, authority, and communication that determines the coordination of the technology and people within an organization 21 -5 Organizational Behavior: An Experiential Approach 8/E Joyce S. Osland, David A. Kolb, Irwin M. Rubin and Marlene E. Turner

  7. Functional Structure Marketing Manufacturing Accounting 21 -6 Organizational Behavior: An Experiential Approach 8/E Joyce S. Osland, David A. Kolb, Irwin M. Rubin and Marlene E. Turner

  8. Functional Structure Advantages • Develop functional expertise • Loyalty to function and standards of performance • Can assign specialists where needed reducing duplication • Promote standardization • Facilitates centralized purchasing Disadvantages • Integration and coordination difficulties • Slow decision making • Information sharing and collaboration can be problematic 21 -7 Organizational Behavior: An Experiential Approach 8/E Joyce S. Osland, David A. Kolb, Irwin M. Rubin and Marlene E. Turner

  9. When to Use a Functional Structure? • Size: small • Product or service: single • Number of markets: small • Cycle time: long 21 -8 Organizational Behavior: An Experiential Approach 8/E Joyce S. Osland, David A. Kolb, Irwin M. Rubin and Marlene E. Turner

  10. Divisional Structure Product Division 1 Product Division 2 Marketing Manufacturing Accounting Marketing Manufacturing Accounting 21 -9 Organizational Behavior: An Experiential Approach 8/E Joyce S. Osland, David A. Kolb, Irwin M. Rubin and Marlene E. Turner

  11. Divisional Structure Disadvantages • Duplication of effort and resources • May require more equipment • Lost economies of scale • Decreased opportunity for technical specialization • Standardization is harder • Coordination and collaboration problems • Client service? Advantages • Focus leads to improvements • Customer satisfaction • Responsiveness to market and environment • Coordination across functions • Decentralized decision making 21 -10 Organizational Behavior: An Experiential Approach 8/E Joyce S. Osland, David A. Kolb, Irwin M. Rubin and Marlene E. Turner

  12. When to Use a Divisional Structure? • Products or services: several • Environment: rapidly changing and unpredictable • Technology: nonroutine and depends on several functional areas • Size: large • Strategy: adaptive, customer service 21 -11 Organizational Behavior: An Experiential Approach 8/E Joyce S. Osland, David A. Kolb, Irwin M. Rubin and Marlene E. Turner

  13. Matrix Structure Marketing Manufacturing Accounting Product Division 1 Product Division 2 21 -12 Organizational Behavior: An Experiential Approach 8/E Joyce S. Osland, David A. Kolb, Irwin M. Rubin and Marlene E. Turner

  14. Matrix Structures - Defined Matrix structures have a dual focus, usually products and functions. It is an attempt to profit from the advantages of both functional and product structures • However, having both a product boss and a functional boss can cause confusion and conflict 21 -13 Organizational Behavior: An Experiential Approach 8/E Joyce S. Osland, David A. Kolb, Irwin M. Rubin and Marlene E. Turner

  15. When to Use a Matrix Structure? • Pressure to share scarce resources across product lines • Environmental pressure for two or more critical outputs • Environment is both complex and uncertain 21 -14 Organizational Behavior: An Experiential Approach 8/E Joyce S. Osland, David A. Kolb, Irwin M. Rubin and Marlene E. Turner

  16. Horizontal Structures - Defined Horizontal corporations are flat structures with minimal layers of management and self-managing multidisciplinary teams organized around core processes 21 -15 Organizational Behavior: An Experiential Approach 8/E Joyce S. Osland, David A. Kolb, Irwin M. Rubin and Marlene E. Turner

  17. Horizontal Hospital Structure Senior Management Nurse Coordinators Team Team Team Patient Flow Nurse Coordinators Team Team Team Patient Flow 21 -16 Organizational Behavior: An Experiential Approach 8/E Joyce S. Osland, David A. Kolb, Irwin M. Rubin and Marlene E. Turner

  18. When to Use Horizontal Structures? • Short product life and development cycles • Customer satisfaction is a goal • Environment is uncertain 21 -17 Organizational Behavior: An Experiential Approach 8/E Joyce S. Osland, David A. Kolb, Irwin M. Rubin and Marlene E. Turner

  19. Network Structure - Defined Network organizations consist of brokers who subcontract needed services to designers, suppliers, producers, and distributors linked by full-disclosure information systems and coordinated by market mechanisms 21 -18 Organizational Behavior: An Experiential Approach 8/E Joyce S. Osland, David A. Kolb, Irwin M. Rubin and Marlene E. Turner

  20. Network Organization Structure Designers Producers Brokers Suppliers Marketers & Distributors 21 -19 Organizational Behavior: An Experiential Approach 8/E Joyce S. Osland, David A. Kolb, Irwin M. Rubin and Marlene E. Turner

  21. When to Use Network Structures? • Need to concentrate on core function and can subcontract the rest • Can’t afford large start-up costs • Fast-paced changing industries • Environment is uncertain 21 -20 Organizational Behavior: An Experiential Approach 8/E Joyce S. Osland, David A. Kolb, Irwin M. Rubin and Marlene E. Turner

  22. Network Idealists - Defined Networked idealists are initially non- profit entrepreneurs who develop organic, cellular distributed network structures to accomplish their work 21 -21 Organizational Behavior: An Experiential Approach 8/E Joyce S. Osland, David A. Kolb, Irwin M. Rubin and Marlene E. Turner

  23. Characteristics of Networked Idealists • Guerilla infrastructures and radical architectures – bypass traditional entry barriers • Winning by not trying – “a different game” • Value-based motivation – do good and make $ • Attack strengths – attack strong incumbents • Knowledge from the people – partners and customers add value 21 -22 Organizational Behavior: An Experiential Approach 8/E Joyce S. Osland, David A. Kolb, Irwin M. Rubin and Marlene E. Turner

  24. Networked Idealists Inner circle Founder Active users Passive users 21 -23 Organizational Behavior: An Experiential Approach 8/E Joyce S. Osland, David A. Kolb, Irwin M. Rubin and Marlene E. Turner

  25. Characteristics of Boundaryless Organizations • Permeable internal and external boundaries • Good ideas welcomed regardless of their source • Cross-functional customer service teams • Delegated authority • Shared information 21 -24 Organizational Behavior: An Experiential Approach 8/E Joyce S. Osland, David A. Kolb, Irwin M. Rubin and Marlene E. Turner

  26. Informal Structures - Defined The informal structure refers to natural formations, informal leadership, and communication patterns that evolve in an organization and run parallel to the formal structure 21 -25 Organizational Behavior: An Experiential Approach 8/E Joyce S. Osland, David A. Kolb, Irwin M. Rubin and Marlene E. Turner

  27. Differentiation: The differences in cognitive and emotional orientations among managers in different functional departments, and the difference in formal structure among these departments Integration: The behaviors and structures used by differentiated organizational subunits to coordinate their work activities Differentiation Vs. Integration -Defined 21 -26 Organizational Behavior: An Experiential Approach 8/E Joyce S. Osland, David A. Kolb, Irwin M. Rubin and Marlene E. Turner

  28. Characteristic R&D Department Manufacturing Department Sales Department Goals New developments, quality Efficient production Customer satisfaction Time horizon Long Short Short Interpersonal orientation Mostly task Task Social Formality of structure Low High High Differentiation 21 -27 Organizational Behavior: An Experiential Approach 8/E Joyce S. Osland, David A. Kolb, Irwin M. Rubin and Marlene E. Turner

  29. Contingencies That Influence Design • Strategy • Environment • Technology • Size • National culture • People and their shared values 21 -28 Organizational Behavior: An Experiential Approach 8/E Joyce S. Osland, David A. Kolb, Irwin M. Rubin and Marlene E. Turner

  30. Stable Low Uncertainty Formal, centralized mechanistic structure with few departments Moderate Uncertainty Formal, centralized mechanistic structure with many depts. and integration roles Unstable Moderate Uncertainty Decentralized, organic structure with participation and teamwork; few departments; boundary spanning roles High Uncertainty Decentralized, organic structure; participation and teamwork; numerous departments and boundary spanners Simple Complex Environmental Characteristics and Recommended Organizational Designs Environmental Rate of Change Environmental Complexity 21 -29 Organizational Behavior: An Experiential Approach 8/E Joyce S. Osland, David A. Kolb, Irwin M. Rubin and Marlene E. Turner

  31. International Structures – Strategic Alliances • Licensing – allow products to be sold for a fee by foreign firms with access to global markets and distribution channels 21 -30 Organizational Behavior: An Experiential Approach 8/E Joyce S. Osland, David A. Kolb, Irwin M. Rubin and Marlene E. Turner

  32. …International Structures – Strategic Alliances • Joint ventures – separate business entities designed to enter new markets, formed by two or more firms that share development and production costs • Consortia – groups of independent companies that join together to share skills, resources, costs, and access to one another’s markets 21 -31 Organizational Behavior: An Experiential Approach 8/E Joyce S. Osland, David A. Kolb, Irwin M. Rubin and Marlene E. Turner

  33. International Structures - Integrated Network Models • Distributed, specialized resources and capabilities • Large flows of components, products, resources, people, and information among interdependent units • Complex processes of coordination and cooperation in an environment of shared decision making 21 -32 Organizational Behavior: An Experiential Approach 8/E Joyce S. Osland, David A. Kolb, Irwin M. Rubin and Marlene E. Turner

  34. International Structures – The Family Business • Most common structure worldwide is the family business • Dominant values in Chinese family businesses are: patrimonialism, paternalism, hierarchy, mutual obligations, responsibility, familialism, personalism, and connections 21 -33 Organizational Behavior: An Experiential Approach 8/E Joyce S. Osland, David A. Kolb, Irwin M. Rubin and Marlene E. Turner

  35. Keiretsu and Chaebols - Defined • Japanese keiretsu – complex inter-firm networks that combine market exchange and non-economic social relations • Korean chaebols – business group consisting of large companies owned and managed by family members or relatives in many diversified business areas 21 -34 Organizational Behavior: An Experiential Approach 8/E Joyce S. Osland, David A. Kolb, Irwin M. Rubin and Marlene E. Turner

  36. When Does Culture Matter in Design? • High power distance cultures tend toward structures with centralized decision making. Low PD cultures prefer decentralization • High uncertainty avoidance generally correlates with greater formalization and more formal structures • Matrix structures did not fit the French respect for hierarchy and unity of command 21 -35 Organizational Behavior: An Experiential Approach 8/E Joyce S. Osland, David A. Kolb, Irwin M. Rubin and Marlene E. Turner

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