Organizational Design

1. Organizational Design

2. Organizational Design • Introduction • Definition • Classical & Neoclassical Approaches : • Contingency approach • Mechanistic organization • Organic organization • Simple structure • Machine bureaucracy • Interorganizational Designs • Technology as a factor in OD

3. Introduction • ‘Organizing’ is a subject of the larger activity of ‘managing’. it is the process by which the structure of an organization is created & maintained. • The word “organization” may be used to refer to the process of organizing, the structure that evolves out of this process and the processes/activities that take place within it. • All activities involving two or more persons entails the formation of an organization.

4. Definition • Organization Design refers to the process of coordinating the structural elements of an organization in the most appropriate manner.

5. Classical & Neoclassical Theory • The Quest for the One Best Design • Classical organizational theorists (such as Weber, Taylor ) believed that a universally best way to design organizations exists, an approach based on high efficiency. • Neoclassical organizational theorists (such as McGregor,Argyris ) their approach emphasizes the need to pay attention to basic human needs to succeed and express oneself.

6. The Evolution of Organization Theory • Meaning : The current state of organization theory is the result of an evolutionary process. Theories have been introduced, evaluated and refined over time ; new insights tend to reflect the limitations of earlier theories. • Types : 1 through 4

7. Evolution of Contemporary Organization Theory Based on W. Richard Scott, “Theoretical Perspectives”, in Marshall W. Meyer, ed., Environments & organizations

8. Types • The early approaches to organization theory in this century conceived of organizations as mechanical devises to achieve goals. • Management could design formal relationships, rules, and the like but there were informal patterns of communication, status, norms, and friendships created to meet the social needs of organization members.

9. Types contd. • Argued that properly aligning structure to its contingency variables would facilitate the achievement of the organization’s goals. Conversely, implementation of the wrong structure could threaten the organization’s survival. • Political nature of the organizations. The outcome of the political struggles among coalitions within the organization for control.

10. Classical View Point Contd. • The classical theorists on the whole, with scientific management stream consider the three streams of classical theories briefly i.e. Bureaucracy : The rigid structures, fixed jurisdictions, impersonal rules and mundane routine, often results in delays, produces inertia, encourages buck-passing, leads to wastage of resources, and causes frustration.

11. The Classical View Point contd. • Administrative Theory : It views organizations as power centered & does not provide underpinning the elements of a democratic form of organization. • Scientific Management : Concerned with micro aspects such as physical activities of work through time and motion study & examination of men-machine relationships.

12. Neoclassical View Point • The neoclassical theory recognizes the primacy of psychological and social aspect of the worker as an individual and his relations within and among groups and the organization. • The Neoclassical viewpoint thus gave birth to human relations movement and provided the thrust toward democratization of organizational power structures & participative management.

13. Developing Framework • Type 1 theorists : Known as classical school, models that would apply in all situations. • Frederick Taylor & Scientific Management • Henri Fayol & Principles of Organization : He proposed 14 principles that he argued were universally applicable & could be taught in schools and universities.

14. 14 Principles • Division of Work • Authority • Discipline • Unity of command • Unity of direction • Subordination of individual interest to the general interest • Remuneration

15. 14 Principles contd. • Centralization • Scalar chain • Order • Equity • Stability of tenure of personnel • Initiatives • Esprit de corps. Promoting team spirit

16. Frame Work contd. • Type 1 theorists contd. • Max Weber & Bureaucracy : A German sociologist, proposed “ideal type’’ organizational structure. • Ralph Davis : Introduced Rational PlanningPerspective. It offered a simple & straightforward model for designing an organization.

17. Max Weber’s Theory of Bureaucracy(1929) • Theory of authority structures • Ideal type of organization • Negative Connotation • Prototype for all organizations today. • Complex organizations.

18. Max Weber’s Theory of Bureaucracy(1929) • FEATURES: • Division of Labour • Authority Hierarchy • Formal Selection • Formal Rules & Regulations • Impersonality • Career Orientation • Centralization of Authority

19. EFFECT / IMPACT ON OB • Positive Effects : • Hierarchy & Specialization, Productivity • Stability • Negative Effects / Dysfunctions • Conflicts and differences • Distorted communication • Dull, gray, conditioned “organization man”. • Group Think • System of control & authority • No informal organizations • Bureaucratic Rules • Cannot assimilate influx of new techniques “ NO REAL WORLD ORGANIZATION EXACTLY FOLLOWS THE WEBER MODEL”.

20. Frame Work contd. • Type 2 theorists • Elton Mayo : Hqwthorne Studies • Chester Bernard : Introduced the notion of Cooperative System. • Douglas McGregor :Two distinct views of human beings : one basically negative – Theory X and other positive –Theory Y. • Warren Bennis and the Death of Bureaucracy

21. Frame Work contd. • Type 3 theorists • Herbert Simon : He argued that organization theory needed to go beyond superficial& oversimplified principles to a more open, rational & contingent design. • Katz and Kahn : Have investigated the environmental structure relationship. • Joan Woodward, Charles Perrow & James Thompson have made an impressive case for the importance of technology in determining the appropriate structure for an organization. • It also include those who advocate organization size as an important factor influencing structure.

22. Frame Work contd. • Type 4 theorists • March & Simon : Cognitive Limits to Rationality. • Pfeffer’s Organizations : As Political Arenas

23. Miller’s Integrative Framework Strategic Dimension Challenge Predicted Structural Characteristics Scanning of markets to discern customer requirements; low formalization; decentr- alisation; extensive use of coordinate committees & task force To understand & manage more products, customer types, techno- logies & markets Innovation Moderate to high complexity; extensive scanning & analysis of customer reaction &competitors’ strategies; moderate to high formalization & moderate decentralization To understand & cater to consumer prefer- ences Market Differentiation To select the right range of products, services, customers & territory High complexity; low formalization ; decentralization Breadth Innovation High complexity; high formalization ; high centralization Breadth Stability To produce standardized products efficiently High formalization ;high centralization Cost Control