Organizational Design Fundamentals

1. Organizational Design Fundamentals

2. Contemplative Questions • In what type of company would I like to work? • How do organizations process information? • Are all organizations the same? • How are they different? • What career paths can I pursue?

3. Management Functions Designing organizational structures is part of organizing, one of the four basic management functions. Planning Organizing Leading Controlling Lead to Achieving the organization’s stated purpose Defining goals, estab- lishing strategy, and developing subplans to coordinate activities Determining what needs to be done, how it will be done, and who is to do it Directing and moti- vating all involved parties and resolving conflicts Monitoring activities to ensure that they are accomplished as planned

4. Org chart example Chief Executive Officer Executive Vice-President Executive Vice-President President Vice- President Vice- President Vice- President Vice- President Vice- President Region 1 Region 2 Region 3 Region 4 Region 5 District A District B District C District D District E District F District G

5. Alternate Org. Form:A Matrix Organization Design Engineering Manu- facturing Contract Admin. Human Resources Purchasing Accounting Alpha Project Design Group 1 Mftg. Group 1 Contract Group 1 Purch. Group 1 Acctg. Group 1 HR Group 1 Beta Project Design Group 2 Mftg. Group 2 Contract Group 2 Purch. Group 2 Acctg. Group 2 HR Group 2 Gamma Project Design Group 3 Mftg. Group 3 Contract Group 3 Purch. Group 3 Acctg. Group 3 HR Group 3 Omega Project Design Group 4 Contract Group 4 Purch. Group 4 Acctg. Group 4 HR Group 4 Mftg. Group 4

6. An ISDepartment Org Chart Fig. 1-3. IS professionals frequently work in project-based teams. Only 1 team works on a project, usually. People work on many projects, however (e.g. a matrix organization). Teams are comprised of diverse group of members from several areas, and may include users, managers, analysts, programmers, etc.

7. Organizations • Whether you are a programmer, analyst, user or manager, it will help your career if you can understand how organizations work. • Analysts, especially, need to understand how organizations process information. • There are literally millions of organizations in the world. • When is a group of people considered an organization? • An organization is a ________ with some form of ___________ who collectively possess some ___________ .

8. Organizations • In what type of organization would you like to work? • All organizations vary in terms of their strategy, their structure, their processes, their culture. • Organizational structure is almost always predetermined. It is there on your first day on the job. • What works at one company may not work in another, therefore it would be helpful to classify organizations into certain types. • Then we can make general statements about the types.

9. Organizations • In what type of organization would you like to work? • We can classify organizations in terms of 3 dimensions: • Degree of complexity • Formalization • Centralization • These dimensions will help you assess prospective employers and your career path • They generate great questions for job interviews. • They also help to determine how information is processed within the organization.

10. Degree of Complexity • Two dimensions of organizational design • Vertical (the number of layers of management) • Span of control = avg. # employees / manager • Horizontal (how jobs are differentiated) Unity of Command says everyone should report to one and only one superior (this is often not the case in IS). • IS positions commonly require team work • You may have a superior who advises you and team leaders or project managers who give you specific direction

11. Assuming Span of 4 Vertical complexityContrasting Spans of Control (Highest) Assuming Span of 8 1 1 1 4 8 2 16 64 3 Organization Level 64 512 4 256 4,096 5 1,024 6 7 4,096 (Lowest) Span of 4: 4,096 Operatives. 1,365 Managers Span of 8: 4,096 Operatives. Only 585 Managers! Which organization looks more appealing to you?

12. Horizontal complexityFunctional Departmentalization Plant Manager Manager, Human Resources Manager, Engineering Manager, Accounting Manager, Manufacturing Manager, Purchasing Castings Dept. Mgr. Press Dept. Mgr. Tube Dept. Mgr. Finishing Dept. Mgr. Inspection Dept. Mgr.

13. Horizontal complexityProduct Departmentalization Bombardier, Inc. Mass Transit Sector Recreational and Utility Vehicles Sector Rail Products Sector Mass Transit Division Bombardier-Rotax (Vienna) Rail and Diesel Products Division Recreational Products Division Logistic Equipment Division Industrial Equipment Division Bombardier- Rotax (Gunskirchen)

14. Horizontal complexityCustomer Departmentalization Figure 10-7 Director of Sales Manager, Retail Accounts Manager, Wholesale Accounts Manager, Government Accounts

15. Horizontal complexityGeographic Departmentalization Vice President for Sales Sales Director, Western Region Sales Director Southern Region Sales Director, Midwest Region Sales Director Eastern Region

16. Centralization and Decentralization DEGREE OF CENTRALIZATION DEGREE OF DECENTRALIZATION Judging by the size of the desk, where do decisions get made? Which organization looks more appealing to you?

17. Two Extremes for Organizational Types Organic Mechanistic Rigid hierarchical relationships Fixed duties High formalization Formalized communication channels Centralized decision authority Vertical and horizontal collaboration Adaptable duties Low formalization Informal communication Decentralized decision authority

18. Types of Organizations Mechanistic Organic Rigid hierarchical relationships Fixed duties High formalization Formalized communication channels Centralized decision authority Vertical and horizontal collaboration Adaptable duties Low formalization Informal communication Decentralized decision authority In which type of organization would you like to work? Do you like to take orders? Are you risk-averse, i.e. do you avoid risk? Do you prefer to be aware of the ‘big picture’?