Organizational Design

Organizational Design 2002 South-Western

OrganizationsCommon Elements Operate with authority Have departments Use line and staff positions 2002 South-Western

Organizational Design Objectives Respond to change Integrate new elements Coordinate the components Encourage flexibility 2002 South-Western

Mechanistic Structure is Characterized By • Rigidly defined tasks • Formalization • Rules and regulations • Centralized decision making • Emphasis on control from top levels down • Vertical communication 2002 South-Western

Mechanistic versus Organic Structures 2002 South-Western

Organic Structure Free flowing. Has few rules and regulations. Decentralizes decision making. Referred to as the horizontal structure. Allows changes to be made rapidly as the needs require. Frequently redefines tasks to fit employee and environmental needs. 2002 South-Western

Contingency Factors 2002 South-Western

Influence of Strategy on Structure 2002 South-Western

Uncertain Environment Calls For • Organic structure that emphasizes: • flexibility • coordination • less formal procedures 2002 South-Western

Small Organizations Little division of labor Few rules and regulations Informal performance appraisals Informal budget development procedures 2002 South-Western

Large Organizations Mechanistic Greater division of labor More rules and regulations More elaborate internal systems 2002 South-Western

Organizational Life Cycle and Structural Characteristics 2002 South-Western

Producing Goods in Small Quantities Small batch technology Unit production technology 2002 South-Western

Large Volume of Standardized Products Technology • Large batch technology • Mass production technology 2002 South-Western

2002 South-Western

Functional Structure • Groups positions into departments based on similar skills, expertise, and resources. Advantages • Economics of scale • Minimizes duplication of personnel and equipment • Simplifies training Disadvantages • Employees may have little understanding of and concern for the specialty areas outside their own functional area • Barriers in communication, cooperation, and coordination • Functional structure response time to changes may be slow 2002 South-Western

Divisional Structure • Groups departments based on organizational outputs. • Self-contained strategic business units. • Creates a set of autonomous mini-companies. 2002 South-Western

Divisional Structure Advantages • Focuses the attention of employees and managers on results for the product, the customer, or the geographical area. • Flexible and responsive to change. • Singleness of purpose. • Responsibility and accountability for performance are easier to target. 2002 South-Western

Divisional Structure Disadvantages • Duplication of activities and resources. • Loses efficiency and economies of scale. • Lack of technical specialization, expertise, and training can result. • Coordination may suffer. 2002 South-Western

Matrix Structure Combines the advantages of functional specialization with the focus and accountability of the divisional structure. Employs dual lines of authority. 2002 South-Western

Matrix Design Used in One ofTwo Situations • First, it is used when a firm offers a diverse set of products, has a complex environment, and requires functional expertise. • Second, it is used when managers want to maximize economies of scale and shared resources. 2002 South-Western

Team Structure • Advantages • Breaks down barriers across departments. • Speeds up decision making and response time. • Employees are strongly motivated. • Improvement over the matrix structure. • Disadvantages • Depends on employees who learn and train for success. • A large amount of time may be required for team meetings. 2002 South-Western

Network Structure Known as “Dynamic Network” • A small central organization relies on other organizations to perform critical functions on a contract basis. Advantages • Provides flexibility. • Overhead remains low. Disadvantages • Lack of control. 2002 South-Western

Organizational Design