Challenges of Organizational Design

1. Challenges of Organizational Design Balancing Differentiation / Integration Balancing Centralization / Decentralization Mechanistic versus Organic Structures

2. Differentiation Design Challenge 1 People in this organization take on new tasks as the need arises and it’s very unclear who is responsible for what and who is supposed to report to whom. This makes it difficult to know whom to call on when the need arises and difficult to coordinate people’s activities so they work together as a team.

3. Differentiation Differentiation: assigning people and resources to tasks simple organization -> low differentiation complex organization -> high differentiation

4. Differentiation • The basic building blocks of differentiation are • organizational roles. • An organizational role is a set of task-related • behaviors required of a person by his or • her position in an organization. • For example: • Maintenance Technician • Design Engineer

5. Differentiation As the division of labor increases, managers specialize in some roles and hire people to specialize in others. Specialization allows people to develop their individual abilities and knowledge within their specific role. The identification of roles leads to authority and control issues.

6. Differentiation Authority is the power to hold people accountable for their actions and to make decisions concerning the use of resources. Control is the ability to coordinate and motivate people to work in an organization’s interests.

7. Differentiation • In most organizations, people with similar roles • are grouped into a subunit. • The main subunits that develop in • organizations are: • functions (or departments) • divisions

8. Differentiation A function is a subunit composed of a group of people who possess similar skills and knowledge to perform their jobs. marketing dept. maintenance dept. A division is a subunit that consists of a collection of functions that are related to a particular good or service. Motorola’s semiconductor division

9. Differentiation The number of functions and divisions in an organization is a measure of its complexity. Differentiation increases control and allows an organization to accomplish tasks effectively.

10. Differentiation As organizations grow in size, they differentiate into five different kinds of functions: 1) Support functions facilitate relations with the environment and stakeholders purchasing sales marketing legal affairs public relations

11. Differentiation As organizations grow in size, they differentiate into five different kinds of functions: 2) Production functions manage the efficiency of the conversion processes production operations production control quality control

12. Differentiation As organizations grow in size, they differentiate into five different kinds of functions: 3) Maintenance functions enable an organization to keep its departments in operation personnel engineering janitorial services

13. Differentiation As organizations grow in size, they differentiate into five different kinds of functions: 4) Adaptive functions allow adjustment to changes in the environment research and development market research long-range planning

14. Differentiation As organizations grow in size, they differentiate into five different kinds of functions: 5) Managerial functions facilitate the control and coordination of activities within and among departments. top management middle managers lower-level managers

15. Differentiation An organization chart is a drawing that shows the end result of organizational differentiation. The organization chart is a snapshot of the way things are “divided up” along two dimensions: vertical horizontal

16. Differentiation Vertical differentiation refers to the way an organization designs its hierarchy of authority (i.e., reporting relationships). Horizontal differentiation refers to the way an organization groups tasks into roles and roles into subunits (i.e., functions and divisions).

17. Integration Design Challenge 2 We can’t get people to communicate and coordinate in this organization. Specifying tasks and roles is supposed to help coordinate the work process, but here it builds barriers between people and functions.

18. Integration Integrating Mechanisms 1) Hierarchy of Authority: “who reports to whom” 2) Direct Contact: subunit representatives meet face to face 3) Liaison Role: a specific person coordinates with other subunits

19. Integration • 4) Task Force: temporary committee to coordinate cross-functional activities • Team: permanent committee • 6) Integrating Role: A new role is established • to coordinate the activities of two or more • functions or divisions • 7) Integrating Department: A new department • is created to coordinate the activities of • functions or divisions

20. Balance differentiation and integration.

21. Decision Making • Centralized • High managerial control • Low employee empowerment • Decentralized • Low managerial control • High employee empowerment • Crucial in fast-changing environments

22. Types of Structures Two general categories of structure types: organic and mechanistic

23. Mechanistic Structures Designed to 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

24. Organic Structures Promote flexibility, so people initiate change and can adapt quickly Decision making is decentralized Roles are loosely defined Integrating mechanisms are complex Tasks rely on mutual adjustment Information flows freely

25. Design Goal Anticipate environmental, social, and procedural constraints and opportunities Satisfy interests of primary stakeholders