Organizational Structure

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ORGANIZATIONAL STRUCTURE and DESIGN

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Organizational Structure

  1. 1. ORGANIZATIONAL STRUCTURE and DESIGN
  2. 2. ORGANIZATION : SYSTEM <ul><li>Organization should be viewed as a system. </li></ul><ul><li>A System is a Set of Interacting Elements that Acquire INPUTS from the Envnt. TRANSFORM them and DISCHARGES OUTPUTS to the External Environment. </li></ul>
  3. 3. ORGANIZATION : SYSTEM <ul><li>INPUTS: Employees, Raw Materials & other Physical Resources Information and Financial Resources </li></ul><ul><li>TRANSFORMATION PROCESS : It CHANGES these Inputs into sthg. of VALUE that can be EXPORTED back to the ENVIRONMENT </li></ul>
  4. 4. ORGANIZATION : SYSTEM <ul><li>OUTPUT: Specific Products or Services Employee Satisfaction Pollution and Other By-products </li></ul>
  5. 5. ORGANIZATION: CLOSED SYSTEM <ul><li>It would not Depend on its Environment, Autonomous, Enclosed , and Sealed off from OUTSIDE world . </li></ul><ul><li>More Focused on Internal System </li></ul><ul><li>Early Management Concepts including Scientific Management approach.... </li></ul><ul><li>The Environment would be STABLE and Predictable </li></ul><ul><li>Primary Management ISSUE: Efficiency </li></ul>
  6. 6. ORGANIZATION: OPEN SYSTEM <ul><li>It must Interact with Environment to Survive </li></ul><ul><li>-It both Consumes Resources and Exports Resources to the Environment. </li></ul><ul><li>It must continuously Change and Adapt to the Environment </li></ul><ul><li>Internal Efficiency is just One Issue sometimes the Minor one </li></ul>
  7. 7. ORGANIZATION: SUBSYSTEM <ul><li>They perform the Specific Functions required for Organizational Survival, such as; PRODUCTION MAITENANCE BOUNDARY SPANNING ADAPTATION MANAGEMENT </li></ul>
  8. 8. ORGANIZATION: SUBSYSTEMS <ul><li>PRODUCTION SUBSYSTEM: Produces the Products or Services outputs of the organization </li></ul><ul><li>BOUNDARY SUBSYTEM: Responsible for Exchanges with the External Environment e.g., Purchasing or Marketing Products </li></ul><ul><li>MAINTENANCE: Maintains Smooth Operations and Upkeep of the organization’s Physical and Human Elements </li></ul>
  9. 9. ORGANIZATION: SUBSYSTEMS <ul><li>ADAPTIVE SUBSYSTEM: It is Responsible for Organizational Change and Adaptation </li></ul><ul><li>MANAGEMENT SUBSYSTEM: It is Responsible for Coordinating and Directing the Other Subsystems of the organization. </li></ul>
  10. 10. ORGANIZATIONAL CONFIGURATION <ul><li>Various PARTS of the organization are Designed to Perform the Key Subsystem Functions . </li></ul><ul><li>Every Organization has FIVE PARTS (according to Henry Mintzberg) 1. TECHNICAL CORE 2. TECHNICAL SUPPORT 3. ADMINISTRATIVE SUPPORT 4. TOP MANAGEMENT 5. MIDDLE MANAGEMENT </li></ul>
  11. 11. ORGANIZATIONAL CONFIGURATION <ul><li>1. TECHNICAL CORE: Produces the products and services outputs of the organization </li></ul><ul><li>2. TECHNICAL SUPPORT: - Helps the organization to adapt to Environment. - Scanning of the Environment for Problems, Opportunities, Technological Development </li></ul>
  12. 12. ORGANIZATIONAL CONFIGURATION <ul><li>3.ADMINISTRATIVE SUPPORT -Smooth Operations and Upkeep of the Organization including its Physical and Human Elements that is, HR Activities- Recruiting and Hiring, Compensation, T & D, Maintenance Activities- Cleaning, Repair of Machines </li></ul>
  13. 13. ORGANIZATIONAL CONFIGURATION <ul><li>MANAGEMENT 4. TOP MANAGEMENT: It provides Direction, Strategy, Goals, and Policies for the Entire organization. 5. MIDDLE MANAGEMENT It is Responsible for Implementation and Coordination at the Departmental Level -Mediating bt. Top Management and the Technical Core </li></ul>
  14. 14. ORGANIZATIONAL STRUCTURE <ul><li>ORGANIZING The Process of Creating an Organization’s Structure </li></ul><ul><li>ORGANIZATIONAL STRUCTURE How Job Tasks are Formally Divided, Grouped, and Coordinated </li></ul><ul><li>ORGANIZATIONAL DESIGN It is concerned with the Developing or Changing the Organizational Structure- A process that involves decisions about Six Key Elements; </li></ul>
  15. 15. Key Design Questions for Designing the proper Organizational Structure <ul><li>1. To what degree are Activities are Subdivided into Separate Jobs? </li></ul><ul><li>2. On what basis will Jobs be Grouped Together? </li></ul><ul><li>3. To Whom do Individuals and Groups Report? </li></ul><ul><li>. 4. How many Individuals can a Manager Efficiently and Effectively Direct? 5. Where does Decision Making Authority Lie? 6. To What Degree there will be Rules and Regulations to Direct Employees and Managers? </li></ul>
  16. 16. ORGANIZATIONAL STRUCTURE <ul><li>Organizational Design Six key Elements 1. Work Specialization -Division of Labor -The Degree to which Tasks/ Activities in an organization are divided into Separate Jobs. -A Job is broken down in Steps and each Step is done by a different person </li></ul>
  17. 17. 1. Work Specialization <ul><li>Human Diseconomies from Specialization came to be known as BOREDOM, FATIGUE, STRESS, LOW PRODUCTIVITY, POOR QUALITY, INCREASED ABSENTEEISM and HIGH TURNOVER </li></ul>
  18. 18. 2. DEPARTMENTALIZATION <ul><li>It is the basis of grouping the Jobs </li></ul><ul><li>Ways of Classifying and Grouping Work Activities </li></ul><ul><li>a. FUNCTIONAL: </li></ul><ul><li>Groups Jobs by Functions Performed. </li></ul><ul><li>It is the most popular way to GROUP ACTIVITIES </li></ul>
  19. 19. 2. DEPARTMENTALIZATION- <ul><li>FUNCTIONAL: </li></ul><ul><li>… Can be Used in ALL types of Organizations, Only the Functions Change to Reflect the Organization’s Activities </li></ul><ul><li>It puts together Efficiencies due to similar </li></ul>
  20. 20. ORGANIZATIONAL STRUCTURE Organizational Design <ul><li>b. PRUDUCT Departmentalization: </li></ul><ul><li>Groups Jobs by the Type of Product or Product Line. </li></ul><ul><li>The major Advantage is the Increased ACOUNTABILITY for product PERFORMANCE </li></ul><ul><li>Each Major Product Area is Placed under the Authority of a Manager for Everything regarding that Product </li></ul>
  21. 21. ORGANIZATIONAL STRUCTURE Organizational Design <ul><li>c. PROCESS </li></ul><ul><li>Groups jobs on the basis of Product Flow </li></ul><ul><li>Each Dept. is Specializes in ONE SPECIFIC PHASE of PRODUCTION </li></ul><ul><li>It can also be Used for processing CUSTOMERS as well as products </li></ul>
  22. 22. ORGANIZATIONAL STRUCTURE Organizational Design <ul><li>d. GEOGRAPHICAL … </li></ul><ul><li>Groups jobs on the basis of Territory or Geography </li></ul><ul><li>e. CUSTOMER </li></ul><ul><li>Groups jobs on the basis of Common Customers </li></ul><ul><li>Microsoft- organized around Four Customer Markets; Consumers, Businesses, Large Corporations, Software Developers </li></ul>
  23. 23. ORGANIZATIONAL STRUCTURE Organizational Design <ul><li>3. CHAIN OF COMMAND It is the Continuous Line of Authority that extends from upper organizational level to lower levels and CLARIFIES Who Reports to Whom . </li></ul><ul><li>Authority and Unity of Command </li></ul><ul><li>These concept do not have Substantial Relevance today because of Advancements in Information Technology and Trend toward Empowering Employees </li></ul>
  24. 24. ORGANIZATIONAL STRUCTURE Organizational Design <ul><li>4. SPAN OF CONTROL Number of employees a manager can Efficiently an Effectively Manage </li></ul><ul><li>The Wider or Larger the Span, The more Efficient the Organization </li></ul>
  25. 25. ORGANIZATIONAL STRUCTURE Organizational Design <ul><li>7. FORMALIZATON In organizations with high Formalizations there are Explicit Job Descriptions, Numerous Rules, Clearly Defined Procedures Covering Work Processes -In short it is t he extent to which employee behavior is Guided by Rules and Procedures -Employees have little Discretion as to what is to be Done? When and How? </li></ul>
  26. 26. ORGANIZATIONAL STRUCTURE Organizational Design
  27. 27. ORGANIZATIONAL STRUCTURE Organizational Design <ul><li>5.CENTERLIZATION </li></ul><ul><li>6.DECENTERLIZATION The degree to which Lower level employees provide input or actually make decision </li></ul>
  28. 28. Two models of Organizational Design 1. MECHANISTIC <ul><li>This organization has Rigid, and Tightly Controlled Structure and Characterized by: High Specialization Rigid Departmentalization Narrow Span of Control High Formalization and Little Participation in decision making by the lower-level employees </li></ul>
  29. 29. ORGANIZATIONAL STRUCTURE Organizational Design <ul><li>2. ORGANIC ORGANIZATION Highly Adaptive and Flexible </li></ul><ul><li>Cross-Functional Teams </li></ul><ul><li>Cross Hierarchical Teams </li></ul><ul><li>Free flow of Information </li></ul><ul><li>Wide span of control </li></ul><ul><li>Decentralization . Low Formalization </li></ul>
  30. 30. ORGANIZATIONAL STRUCTURE Organizational Design <ul><li>Employees are highly Trained and Empowered to handle Diverse Job Activities and Problems . </li></ul><ul><li>The High Levels of Skills, Training and the Support provided by other Team Members make Formalization and Tight Managerial Controls Unnecessary. </li></ul>
  31. 31. ORGANIZATIONAL STRUCTURE Organizational Design <ul><li>CONTIGENCY FACTORS What an appropriate structure of an organization should be depends on Four Contingency factors: 1. Organization’s Strategy 2. Size 3. Technology 4. Degree of Environmental Uncertainty </li></ul>
  32. 32. ORGANIZATIONAL STRUCTURE Organizational Design <ul><li>1. STRATEGY and STRUCTURE: </li></ul><ul><li>-Structure should Follow Strategy </li></ul><ul><li>-It must facilitates the Achievement of Organizational Goals </li></ul><ul><li>-Current Strategy Framework ; Focus on three Dimensions: A.INNOVATORS Organization’s Pursuit of Meaningful and Unique Innovations. </li></ul><ul><li>-they Need Flexibility – Organic Stcr. </li></ul>
  33. 33. ORGANIZATIONAL STRUCTURE Organizational Design <ul><li>2. COST MINIMIZATION: Pursuit of tightly Controlled Costs - they Seek the Efficiency, Stability and Tight Control: MECHANISTIC </li></ul><ul><li>3. IMMITATION: Minimizing the Risk and Maximizing the Profit by Copying the Market Leader -They use the characteristics of both the Structures Mechanistic; Tight Control, Low Costs Organic ; to Mimic the Industry’s Innovative Directions </li></ul>
  34. 34. ORGANIZATIONAL STRUCTURE Organizational Design <ul><li>2. SIZE AND STRUCTURE -Large Organizations….Mechanistic --the Relationship is not Linear </li></ul><ul><li>3. TECHNOLOGY and STRUCTURE a. Unit Production </li></ul><ul><li>b. Mass Production c. Process Production -More Routine the Technology… -More Non-routine the Technology… </li></ul>
  35. 35. ORGANIZATIONAL STRUCTURE Organizational Design <ul><li>4. ENVIRONMENTAL UNCERTAINTY and STRUCTURE </li></ul><ul><li>The greater the uncertainty, the more an organization needs FLEXIBILITY which is offered by the Organic organization </li></ul>
  36. 36. ORGANIZATIONAL STRUCTURE Organizational Design <ul><li>TRADITIONAL ORGANIZATIONAL DESIGNS </li></ul><ul><li>SIMPLE STRUCTURE: A. Low Departmentalization b. Wide Span of Control c. Authority Centralized in a Single person d. Little Formalization </li></ul>
  37. 37. ORGANIZATIONAL STRUCTURE TRADITIONAL ORGANIZATIONAL DESIGNS <ul><li>2. BUREAUCRACY </li></ul><ul><li>Highly Routine Operating Tasks Achieved through -Specialization -Very Formal Rules & Reg.. -Tasks Grouped into Functional Depts. -Centralized Authority -Narrow Span of Control -Decision making follows Chain of Command </li></ul>
  38. 38. ORGANIZATIONAL STRUCTURE: Bureaucracy <ul><li>The primary Strength lies in its Ability to Perform Standardized Activities in a highly Efficient Manner </li></ul><ul><li>Putting Like Specialists together in Functional Depts. Results in economies of scale </li></ul><ul><li>Minimum duplication of Personnel and Equipment </li></ul>
  39. 39. ORGANIZATIONAL STRUCTURE: Bureaucracy <ul><li>Works best with Less Talented- Low/Middle Level Managers </li></ul><ul><li>Greater prevalence of Rules and Regulations Substitutes Managerial Discretion </li></ul><ul><li>Little need for Innovative and Experienced Decision makers below the Senior Executives </li></ul><ul><li>Specialization creates Subunits Conflicts- Functional Unit goals Override the overall goals of the org. </li></ul>
  40. 40. ORGANIZATIONAL STRUCTURE <ul><li>MATRIX STRUCTURE </li></ul><ul><li>Combines two forms of departmentalization: Functional and Product </li></ul><ul><li>It attempts to gain the Strengths of Each , while Avoiding their Weaknesses </li></ul><ul><li>It Breaks the Unity of command concept- Dual Chain of command </li></ul>
  41. 41. MATRIX STRUCTURE <ul><li>It has Ability to Facilitate coordination When the organization has a multiplicity of complex and Interdependent activities </li></ul><ul><li>The dual line of Authority reduce the Tendencies of departmental members to become so busy protecting their interests over the organization’s overall goals. </li></ul>
  42. 42. NEW DESIGN OPTIONS <ul><li>TEAM STRUCTURE </li></ul><ul><li>Management uses Teams as Coordination Device </li></ul><ul><li>It breaks down departmental barriers and decentralizes Decision making to the level of the Work Team </li></ul>
  43. 43. NEW DESIGN OPTIONS <ul><li>VIRTUAL ORGANIZATION </li></ul><ul><li>They are small organizations that OUTSOURCE major business functions </li></ul><ul><li>It is highly Centralized , with little or no Departmentalization </li></ul><ul><li>Movie Making orgs. </li></ul><ul><li>- Reduces long-term risks, because there is no long term- a team Assembled for a Finite period and then Disbanded </li></ul>
  44. 44. NEW DESIGN OPTIONS <ul><li>BOUNDARYLESS ORGANIZATION </li></ul><ul><li>Breaking down the External Barriers bt. The company and its Customers and Suppliers </li></ul><ul><li>It seeks to Eliminate the Chain of Command Have Limitless Span of Control Replace departments with Empowered Teams </li></ul>
  45. 45. ORGANIZATION DESIGN AND EMPLOYEE BEHAVIOR <ul><li>Work Specialization contributes to higher employee Productivity but at the price of Reduced Job Satisfaction </li></ul><ul><li>- But Individual differences prevail </li></ul><ul><li>The negative behavioral outcomes from high specialization are most likely to surface in Professional jobs occupied by individuals with High Needs for Personal Growth and Diversity </li></ul>
  46. 46. ORGANIZATION DESIGN AND EMPLOYEE BEHAVIOR <ul><li>Relationship bt.Span of Control and Employee Performance - Individual Differences Prevail </li></ul><ul><li>However there is some evidence that A Manager’s Job Satisfaction increases as the Number of Employees Supervised Increases </li></ul>
  47. 47. ORGANIZATION DESIGN AND EMPLOYEE BEHAVIOR <ul><li>There is strong evidence linking Centralization and Job Satisfaction </li></ul><ul><li>Less Centralized orgs . Have a Greater amount of Participative Decision Making which is positively Related with Job Satisfaction </li></ul>
  48. 48. ORGANIZATION DESIGN AND EMPLOYEE BEHAVIOR <ul><li>The Decentralization- Satisfaction relationship is Strongest with employees who have LOW SELF-ESTEEM </li></ul><ul><li>They have less confidence in their abilities </li></ul><ul><li>They place higher value on shared decision making- thus to share Responsibilities </li></ul>

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