Organizational Structure & Design

Organizational Structure & Design

An organization is a formal group of people with one or more shared goals. The word itself is derived from the Greek word ὄργανον (organon) meaning tool.

The Issues • Definitions: Design & structure • Differentiation • The integration challenge • Centralization • Formalization • Rules & norms • Multi-organization design & structure

Organizational Design • Definition: The process of defining and coordinating organizational structure elements. This is an architectural task. • Purpose: To create a design that will coordinate organizational tasks & motivate people to achieve objectives. • Challenge: To choose appropriate levels and types of vertical and horizontal differentiation and integration.

Horizontal differentiation Integration Centralization Formalization Organizational Structure • The definition, distribution, and arrangement of interlocking roles (i.e., who does what). This is created by “building” what the architects designed. Challenges • Authority • Control • Sub-units • Vertical differentiation

Impact of Design& Structure • Physical appearance of organization • Nature of jobs • Efficiency of organization • Effectiveness of organization • Relationships with other organizations • Nature and quality of work experience for organizational members • Organizational culture

Differentiation(Division of Labor) • Definition: Allocation of people and resources to tasks & establishment of task & authority relationships • Identifies total set of organizational tasks • Divides tasks into jobs, departments, divisions • Assigns authority & authority relationships

Sub-Unit ChoicesDepartments, Divisions, etc. • Functional: Based on functions performed (e.g., production, sales, research) • Product: Based on products and services produced (e.g., food, cleaning supplies, pharmaceuticals) • Customer: Based on customers served (e.g., convenience stores, supermarkets) • Geography: Based on physical location • Matrix: Based on a combination of function, product, customer and/or geography. Creates dual authority and dual responsibility

Vertical Differentiation • Vertical differentiation: Design of hierarchy with reporting relationships to link roles and sub-units • Defines who reports to whom • Defines areas of responsibility • Hierarchy: Classification of people according to authority and rank

Hierarchy of Authority • Tall organizations have many levels • Flat organizations have few levels

Span of Control • The number of organizational members who report to a manager • Wide span of control means one manager supervises many members • Narrow span of control means one manager supervises a small number of members

Horizontal Differentiation Horizontal differentiation: The way an organization groups tasks into jobs/roles and jobs/roles into sub-units • Establishes the division of labor and level of specialization • Defines personal tasks & responsibilities • Highly specialized jobs have narrow range of tasks • Less specialized jobs have broad range of tasks

The Integration Challenge • Integration: The process of coordinating tasks, functions, sub-units so they work effectively together & not at cross-purposes • Challenge: Now that we have differentiated both vertically and horizontally, how do we integrate?

Integrating Mechanisms • Hierarchy of authority: Ranking of employees specifies who reports to whom • Direct Contact: Face-to-face meetings to coordinate activities • Liaison Role: Person assigned responsibility for coordinating his/her unit with persons from other units (part of job) • Task Force: Temporary committees with members from multiple units coordinate activities Cont.

Integrating Mechanisms (cont.) • Team: Permanent committees with members from multiple units coordinate activities • Integrating role: Person assigned responsibility for coordinating activities of multiple units (person’s entire job)

Highly Centralized Authority • Authority given to a few top managers, allowing decisions to be made by those with the “big picture” • Facilitates development of a few “masters of knowledge” • Provides non-decision makers the freedom to perform technical tasks with fewer distractions

Decentralized Authority • Authority distributed throughout the organization • Allows leaner organizations and fewer levels • Allows those closest to problems and opportunities to make decisions • Is received favorably by many organizational members

Formalization • High formalization: Formal rules and procedures used to standardize operations (Do it “by the book”) • Usually associated with centralized authority • Low formalization: Coordination by mutual adjustment rather than formal rules & procedures • Usually associated with decentralized authority

Rules and Norms • Rules: Formal, written statements that specify appropriate behavior & means for reaching desired goals • Norms: Unwritten but generally agreed upon standards of behavior that are considered acceptable and appropriate & means for reaching desired goals

Multi-Organization Design& Structure Issues • Conglomerate: Separate companies without close product or service relationship that are overseen by a single parent company • Strategic alliance: Two or more firms combine competitive capabilities to operate a business without sharing ownership or general management • Network design: Very small central organizational structure contracts with other organizations to develop and deliver the network organization's products and services

Matrix Structure Note the duplication of core functional skills across each product line.

Matrix organizations provide clear accountability within a specific business function and allow more efficient allocation of specialized skills across the entire business. By taking advantage of the shared services and skills and not having to develop and manage those skills themselves, the divisional or product line organizations can better focus on their core business objectives

Weak/Functional Matrix – A project with only limited authority is assigned to oversee the cross-functional aspects of the project. The functional managers maintain control over their resources and project areas. • Balanced Functional Matrix – A project manager is assigned to oversee the project. Power is shared equally between the project manager and the functional managers. • Proponents of this structure believe it strikes the correct balance, bringing forth the best aspects of functional and projectized organizations. However, this is the most difficult system to maintain as the sharing of power is a very delicate proposition.

Strong/Project Matrix – A project manager is primarily responsible for the project. Functional managers provide technical expertise and assign resources on an as-needed basis. • Because project resources are assigned as necessary there can be conflicts between the project manager and the functional manager over resource assignment. The functional manager has to staff multiple projects with the same experts.

VIRTUAL ORGANISATION Growing complexity in the business environment makes "business as usual" ineffective. Globalization extends the need for communication and coordination across different time zones and locations. Change has become the norm, an unpredictable basic reality. Corporations are evolving into virtual enterprises using integrated computer and communications technologies. These collaborative networks are not defined by concrete walls or physical space, but make it possible to draw upon vital resources as needed, regardless of where they are physically located and regardless of who owns them.

Learning Organization • A boundary less environment is required by learning organizations to facilitate team collaboration and the sharing of information. When an organization develops the continuous capacity to adapt and survive in an increasingly competitive environment because all members take an active role in identifying and resolving work-related issues, it has developed a learning culture. • A learning organization is one that is able to adapt and respond to change. This design empowers employees because they acquire and share knowledge and apply this learning to decision-making. They are pooling collective intelligence and stimulating creative thought to improve performance. Supervisors facilitate learning by sharing and aligning the organization's vision for the future and sustaining a sense of community and strong culture.

REORGANIZATION Customer Focused Organizational Redesign is structuring an organization, division or department to optimize how it supplies products and services to its clients and customers.

Traditional

Steps in Reorganization • Determining How the Company Goes to Market • Sketch how the current organizational structure (e.g., departments, roles, responsibilities, information flow, decision-making, etc.) supports how the company goes to market. Include: • What the current structure does well. • What the current structure does not do well. • If possible, "numbers" that put a value to what is done well and what not.

Draw an ideal organizational structure. Focus on: • How it can improve upon the current situation (in "numbers") • What it can improve upon. • How it will affect the organization and its parts, processes and people.

Planning • Determine who should be involved in the planning process, in particular "RACI", i.e. who is Responsible, Accountable, Consulting and who should be kept Informed. • List the major players who perform or are involved in the key processes that support the current structure. • What would the ideal organization (processes, roles, people) look like (first draft)? Who would fill what position? How can the current players be utilized in this new schema? • What new equipment, technology, resources, people, skills or systems would be needed in the new structure?

Implementation • Develop a schedule (dates and RACI) for the change from the current situation to the ideal state. Create flowcharts that capture the changeover. Be specific about: • When and how the change from the old to the new will occur. • Impediment that might appear during the transition .Create scenarios of what might occur and how they can be handled. • Create a program that would prepare employees for the change.

Administrative Issues Regular communication to staff regarding the progress, decisions, plans, etc., of the project. • A written plan that is shared with key personnel, that is referred to periodically, updated when necessary and referred to continually. • Scheduled "monitoring" meetings between the Project Team, Sponsor, Oversight Committee.

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Organizational Structure & Design