Organizational Design

1. MANAGEMENT Meeting and Exceeding Customer Expectations EIGHTH EDITION OrganizationalDesign Prepared by Deborah Baker Texas Christian University

2. learning objectives • Explain the meaning of organizational design • Describe the four objectives of organizational design • Distinguish between mechanistic and organic organizational structures • Discuss the influence that contingency factors—organizational strategy, environment, size, age, and technology—have on organizational design • Describe the characteristics, advantages, and disadvantages of functional, divisional, matrix, team, and network structural designs

3. Organizational Design 1 Organizational Design The creation of or change to an organization’s structure • Develop the overall layout of positions and departments • Develop the interrelationships of the departments • Create the means to implement plans, achieve goals, and ultimately satisfy the customer

4. Common Elements of Organizations 2 • They operate with authority • They have departments • They use line and staff positions

5. Objectives of Organizational Design Respond to Change Integrate New Elements CoordinateComponents EncourageFlexibility 2

6. Organizational Structures A tight organizational structure characterized by rigidly defined tasks, formalization, many rules and regulations, and centralized decision making MechanisticStructure A flexible, free-flowing organizational structure that has few rules and regulations and decentralizes decision making right down to the employees performing the job OrganicStructure 3

7. Organizational Structures 3

8. Contingency Factors Affecting Organizational Design Strategy Environment Size Age Technology 4

9. Influence of Strategy on Structure 4

10. Environment 4 Requirements for an Unstable Environment • The organization must be able to adapt to change • The organization needs greater coordination between departments

11. Environment and Structure 4

12. Environment 4 Stable Environment Unstable Environment • Mechanistic structure • Centralized decision making • Wide spans of control • Specialization • Organic structure • Flexibility • Coordination • Less formal procedures

13. Size of the Organization 4 Small Organizations Large Organizations • Organic structure • Little division of labor • Few rules and regulations • Informal procedures • Mechanistic structure • Greater division of labor • More rules and regulations • More elaborate internal systems to control

14. Age of the Organization Birth Youth Midlife Maturity 4 Organizational Life Cycle

15. Organizational Life Cycle 4

16. Technology Small Batch Mass Production Continuous Process Flexible Manufacturing Systems 4

17. Technology 4

18. Structural Options Functional Matrix Divisional Network Team 5

19. Structural Options 5

20. Functional Structure 5 Advantages Disadvantages • Economies of scale • Minimizes duplication • Comfortable environment for employees • Simplifies training • Employees have little understanding of or concern for areas outside their own area • Barriers in communication, cooperation, and coordination • Slow response time to changes in the environment

21. Functional Structure 5

22. Divisional Structure 5 Advantages Disadvantages • Focuses the attention on results • Flexible and responsive to change • Responsibility and accountability are easier to target • Excellent vehicle for developing senior executives • Duplication of activities and resources • Loss of efficiency and economies of scale • Lack of technical specialization, expertise, and training • Different divisions may feel they are competing with one another

23. Divisional Structure 5

24. Matrix Structure 5 Advantages Disadvantages • Flexible • Increase in communication and coordination • Increase in employee motivation • Sense of commitment and satisfaction • Training in functional and management skills • General perspective • Dual chain of command • Pits divisional objectives against functional objectives • Time loss to meetings • Balance of power between functional and divisional sides

25. Matrix Structure 5

26. Team Structure 5 Advantages Disadvantages • Breaks down departmental barriers • Speeds up decision making • Motivates employees • Lower administrative costs • Does not involve the problem of double reporting • Team membership • Performance suffers if training is not provided • Time required for team meetings

27. Team Structure 5

28. Network Structure 5 Advantages Disadvantages • Flexibility • Low administrative overhead • Communication by e-mail • Lack of control • Reliance on contractors • Supply unreliability • Lack of technical expertise

29. Network Structure 5