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Griffin Chap12

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  • 1. CHAPTER 12 Managing Organization Design Copyright © by Houghton Mifflin Company. All rights reserved. PowerPoint Presentation by Charlie Cook
  • 2. Learning Objectives
    • After studying this chapter, you should be able to:
      • Identify the basic nature of organization design.
      • Identify the two basic universal perspectives on organization design.
      • Identify and explain several situational influences on organization design.
      • Discuss how an organization’s strategy and its design are interrelated.
      • Describe the basic forms of organization design that characterize many organizations.
      • Describe emerging issues in organization design.
  • 3. Chapter Outline
    • The Nature of Organization Design
    • Universal Perspectives on Organization Design
      • Bureaucratic Model
      • Behavioral Model
    • Situational Influences on Organization
      • Core Technology
      • Environment
      • Organization Size
      • Organizational Life Cycle
    • Strategy and Organization Design
      • Corporate-Level Strategy
      • Business-Level Strategy
      • Organizational Functions
    • Basic Forms of Organization Design
      • Functional (U-Form) Design
      • Conglomerate (H-Form) Design
      • Divisional (M-Form) Design
    • Matrix Design
      • Hybrid Design
    • Emerging Issues in Organization Design
      • The Team Organization
      • The Virtual Organization
      • The Learning Organization
      • Issues in International Organization Design
  • 4. The Nature of Organization Design
    • Organization Design
      • The overall set of structural elements and the relationships among those elements used to manage the total organization.
      • A means to implement strategies and plans to achieve organizational goals.
    • Organization Design Concepts
      • Organizations are not designed and then left intact. Organizations are in a continuous state of change.
      • Organization design for larger organizations is extremely complex and has many nuances and variations.
  • 5. Universal Perspectives on Organization Design
    • Bureaucratic Model (Max Weber)
      • A logical, rational, and efficient organization design based on a legitimate and formal system of authority.
      • Characteristics
        • Adopt a division of labor with each position filled by an expert.
        • Create a consistent set of rules to ensure uniformity in task performance.
        • Establish a hierarchy of positions, which creates a chain of command.
        • Engage in impersonal management; with appropriate social distance between superiors and subordinates.
        • Employment and advancement to be based on technical expertise, and employees protected from arbitrary dismissal.
  • 6. Bureaucratic Model
    • Advantages
      • Efficiency in function due to well-defined practices and procedures.
      • Organizational rules prevent favoritism.
      • Recognition of and requirement for expertise stresses the value of an organization’s employees.
    • Disadvantages
      • Organizational inflexibility and rigidity due to rules and procedures.
      • Neglects the social and human processes within the organization.
      • Belief in “one best way” to design an organization does not apply to all organizations and their environments.
  • 7. Behavioral Model: Likert System
    • Renesis Likert
      • Organizations that pay attention to work groups and interpersonal processes are more effective than bureaucratic organizations.
    System 1 Exploitative Authoritative Job-centered leader behavior System 2 Benevolent Authoritative System 3 Consultative System 4 Participative Employee-centered leader behavior
  • 8. Situational Influences on Organization Design ORGANIZATION DESIGN Organizational Size Organizational Life Cycle Core Technology Environment
  • 9. Situational Influences on Organization Design (cont’d)
    • Core Technology
      • Technology is the conversion processes used to transform inputs into outputs.
      • A core technology is an organization’s most important technology.
      • Joan Woodward initially sought a correlation between organization size and design; instead, she found a potential relationship between technology and design.
      • As the complexity of technology increases, so do the number of levels of management.
  • 10. Situational Influences on Organization Design (cont’d)
    • Woodward’s Basic Forms of Technology
      • Unit or Small-Batch Technology
        • Produce custom-made products to customer specifications, or else produce in small quantities, similar to Likert’s System 4 organization.
      • Large Batch/Mass Production
        • Uses assembly-line production methods to manufacture large quantities of products; resembles Likert’s System 1.
      • Continuous Process
        • Use continuous-flow processes to convert raw materials by process or machine into finished products; resembles Likert’s System 4.
  • 11. Situational Influences on Organization Design (cont’d)
    • Burns and Stalker
      • Forms of the organizational environment
        • Stable environments that remain constant over time.
        • Unstable environments subject to uncertainty and rapid change.
      • Organization Designs
        • Mechanistic organizations that are similar to bureaucratic or System 1 models; found most frequently in stable environments.
        • Organic organizations that are flexible and informal models; usually found in unstable and unpredictable environments.
  • 12. Situational Influences on Organization Design (cont’d)
    • Lawrence and Lorsch
      • Differentiation
        • The extent to which the organization is broken down into subunits.
      • Integration
        • The degree to which the various subunits must work together in a coordinated fashion.
  • 13. Situational Influences on Organization Design (cont’d)
    • Organizational Size
      • Defined as the total number of full-time or full-time equivalent employees
      • Research findings:
        • Small firms tend to focus on their core technology.
        • Large firms have more job specialization, standard operating procedures, more rules and regulations, and are more decentralized.
    • Organizational Life Cycle
      • A progression through which organizations evolve as they grow and mature —birth, youth, midlife, and maturity.
  • 14. Strategy and Organization Design
    • Corporate-Level Strategy
      • Single-product strategy
      • Related or unrelated diversification
      • Portfolio approach to managing strategic business units
  • 15. Strategy and Organization Design (cont’d)
    • Business-Level Strategy
      • Defender
      • Prospecting
      • Analyzer
    • Generic Competitive Strategies
      • Differentiation
      • Cost leadership
      • Focus
  • 16. Strategy and Organization Design (cont’d)
    • Organizational Functions
      • Major functions of the organization (e.g., marketing, finance, research and development, and manufacturing) influence an organization’s design.
  • 17. Basic Forms of Organization Design
    • Functional or U-form (Unitary) Design
      • Organizational members and units are grouped into functional departments such as marketing and production.
      • Coordination is required across all departments.
      • Design approach resembles functional departmentalization in its advantages and disadvantages.
  • 18. Functional or U-Form Design for a Small Manufacturing Company Figure 12.1 CEO Vice president, operations Vice president, marketing Vice president, finance Vice president, human resources Vice president, R&D Scientific director Labor relations director Plant human resource manager Controller Accounting supervisor Regional sales managers District sales managers Plant managers Shift supervisors Lab manager
  • 19. Basic Forms of Organization Design (cont’d)
    • Conglomerate or H-form (Holding) Design
      • Organization consists of a set of unrelated businesses with a general manager for each business.
      • Holding-company design is similar to product departmentalization.
      • Coordination is based on the allocation of resources across companies in the portfolio.
      • Design has produced only average to weak financial performance; has been abandoned for other approaches.
  • 20. Conglomerate (H-Form) Design at Pearson PLC Figure 12.2 CEO Publishing operations Entertainment operations Oil services operations Fine china operations Periodicals operations Investment banking operations
  • 21. Basic Forms of Organization Design (cont’d)
    • Divisional or M-form (Multidivisional) Design
      • An organizational arrangement based on multiple businesses in related areas operating within a larger organizational framework.
      • The design results from a strategy of related diversification.
      • Some activities are extremely decentralized down to the divisional level; others are centralized at the corporate level.
      • The largest advantages of the M-form design are the opportunities for coordination and sharing of resources.
      • Successful M-form organizations can out perform U-form and H-form organizations.
  • 22. Multidivisional (M-form) Design at The Limited, Inc. Figure 12.3 CEO Bath & Body Works Structure The Limited Express Lerner New York Victoria ’ s Secret Other chains
  • 23. Basic Forms of Organization Design (cont’d)
    • Matrix Design
      • An organizational arrangement based on two overlapping bases of departmentalization (e.g., functional departments and product categories).
      • A set of product groups or temporary departments are superimposed across the functional departments.
      • Employees in the resulting matrix are members of both their departments and a project team under a project manager.
      • The matrix creates a multiple command structure in which an employee reports to both departmental and project managers.
      • A matrix design is useful when:
        • There is strong environmental pressure.
        • There are large amounts of information to be processed.
        • There is pressure for shared resources.
  • 24. Basic Forms of Organization Design (cont’d)
    • Matrix Design Advantages
      • Enhances organizational flexibility.
      • Involvement creates high motivation and increased organizational commitment.
      • Team members have the opportunity to learn new skills.
      • Provides an efficient way for the organization to use its human resources.
      • Team members serve as bridges to their departments for the team.
      • Useful as a vehicle for decentralization.
  • 25. Basic Forms of Organization Design (cont’d)
    • Matrix Design Disadvantages
      • Employees are uncertain about reporting relationships.
      • Managers may view design as an anarchy in which they have unlimited freedom.
      • The dynamics of group behavior may lead to slower decision making, one-person domination, compromise decisions, or a loss of focus.
      • More time may be required for coordinating task-related activities.
  • 26. A Matrix Organization Figure 12.4 Employees CEO Project manager B Project manager C Vice president, engineering Vice president, production Vice president, finance Vice president, marketing Project manager A
  • 27. Basic Forms of Organization Design (cont’d)
    • Hybrid Designs
      • An organizational arrangement based on two or more common forms of organization design.
      • An organization may have a mixture of related divisions and a single unrelated division.
      • Most organizations use a modified form of organization design that permits it to have sufficient flexibility to make adjustments for strategic purposes.
  • 28. Emerging Issues in Organization Design
    • The Team Organization
      • An approach to organizational design that relies almost exclusively on project-type teams, with little or no underlying functional hierarchy.
    • The Virtual Organization
      • An organizational design that has little or no format structure with few permanent employees, leased facilities, and outsourced basic support services.
      • It may conduct its business entirely on-line and exists only to meet for a specific and present need.
    • The Learning Organization
      • An organization that works to facilitate the lifelong learning and development of its employees while transforming itself to respond to changing demands and needs.
  • 29. Issues in International Organization Design
    • The trend toward internationalization of business
    • How to design a firm to deal most effectively with international forces and to compete in global markets:
      • Create an international division?
      • Establish an international operating group?
      • Make international operations an autonomous subunit?
  • 30. Common Organization Designs for International Organizations Figure 12.5a CEO A. Separate International Division Production Marketing Finance International division B. Location Departmentalization North American operations European operations Asian operations CEO
  • 31. Common Organization Designs for International Organizations (cont’d) Figure 12.5b D. Multidivisional Structure CEO Subsidiary A (in Germany) Subsidiary C (in France) Subsidiary E (in Taiwan) Subsidiary D (in Japan) Subsidiary B (in United States) C. Product Departmentalization Product manager A CEO Product manager B Product manager C Asia North America Europe
  • 32. Mintzberg’s Structures
    •  
    • According to Henry Mintzberg the structural configuration of an organization can be differentiated by:
      • Prime Coordinating Mechanism
      • Key Part of Organization
      • Type of Decentralization  
  • 33. Mintzberg’s Structures
    • Prime Coordinating Mechanism
      • Direct Supervision
        • One individual is responsible for the work of others
      • Standardization of work processes
        • The content of the work is specified or programmed
      • Standardization of skills
        • Explicitly specifies the kind of training necessary to do the work
      • Standardization of outputs
        • Specifies the results, or output, of the work
      •   Mutual adjustment
        • Coordinates activities through informal communications
  • 34. Mintzberg’s Structures
    • Key Part of Organization
      • Strategic apex
        • Top management and its support staff
      • Technostructure
        • Analysts such as industrial engineers, accountants, planners, and human resource managers
      • Operating core
        • Workers who actually carry out the organization’s tasks
      • Middle line
        • Middle and lower-level management
      • Support staff
        • Units that provide support to the organization outside of the operating workflow (for example, legal counsel, executive dining room staff, and consultants.)
  • 35. Mintzberg’s Structures
    • Types of Decentralization  
      • Vertical and horizontal centralization
      • Limited horizontal decentralization
      • Vertical and horizontal decentralization
      • Limited vertical decentralization
      • Selective decentralization
  • 36. Structural Configuration
    • The Simple Structure
    •  
    • The simple structure uses direct supervision as its primary coordinating mechanism, has as its most important part its strategic apex, and employs vertical and horizontal centralization. Relatively small corporations controlled by aggressive entrepreneurs, new government departments, and medium-sized retail stores are all likely to exhibit a simple structure. These organizations tend to be relatively young. The CEO (often the owner) retains much of the decision-making power. The organization is relatively flat and does not emphasize specialization. Many smaller U-form organizations are structured in this fashion. Trilogy Software would be an example of a firm using this approach.
  • 37. Structural Configuration
    • The Machine Bureaucracy
    •  
    • The machine bureaucracy uses standardization of work processes as its prime coordinating mechanism; the technostructure is its most important part; and limited horizontal decentralization is established. The machine bureaucracy is quite similar to Burns and Stalker’s mechanistic design discussed in Chapter 12 of Griffin’s Management , Seventh Edition. Examples include McDonald’s and most large branches of the U.S. government. This kind of organization is generally mature in age, and its environment is usually stable and predictable. A high level of task specialization and a rigid pattern of authority are also typical. Spans of management are likely to be narrow, and the organization is usually tall. Large U-form organizations are also likely to fall into this category.
  • 38. Structural Configuration
    • The Professional Bureaucracy
    •  
    • The third form of organization design suggested by Mintzberg is the professional bureaucracy . Examples of this form of organization include universities, general hospitals, and public accounting firms. The professional bureaucracy uses standardization of skills as its prime coordinating mechanism, has the operating core as its most important part, and practices both vertical and horizontal decentralization. It has relatively few middle managers. Further, like some staff managers, its members tend to identify more with their professions than with the organization. Coordination problems are common.
  • 39. Structural Configuration
    • The Divisionalized Form
    •  
    • The divisionalized form , Mintzberg’s fourth design, exhibits standardization of output as its prime coordinating mechanism, the middle line as its most important part, and limited vertical decentralization. This design is the same as both the H-form and the M-form described earlier. Limited and Disney are illustrative of this approach. Power is generally decentralized down to middle management—but no further. Hence each division itself is relatively centralized and tends to structure itself as a machine bureaucracy. As might be expected, the primary reason for an organization to adopt this kind of design is market diversity.
    •  
  • 40. Structural Configuration
    • The Adhocracy
    •  
    • The adhocracy uses mutual adjustment as a means of coordination, has at its most important part the support staff, and maintains selective patterns of decentralization. Most organizations that use a fully-developed matrix design are adhocracies. An adhocracy avoids specialization, formality, and unit of command. Even the term itself, derived from “ad hoc,” suggests a lack of formality. Sun Microsystems is an excellent example of an adhocracy.
  • 41. Mintzberg’s Five Designs