ContentsIntroduction……………………………………………………………………………..                   1Organization Design…………………………………………………………………….     ...
0. Introduction:Organizational structure is formal and informal framework of policies and rules, within which anorganizati...
For an organizational role to exist and be meaningful to people, it must incorporate (1) verifiableobjectives, which are m...
1. Organizational Design:   Organizational design is about enabling a group of people to combine, coordinate, andcontrol r...
project organizations, boundarlyess organizations, and so forth are different forms of anorganization’s structures.       ...
Figure – 3 Input-Output ModelsIn this model of designing/redesigning, we have an input-output diagram where structure andd...
It’s the basis on which individuals are grouped into departments and departments into total     organizations. Managers sh...
Functional and divisional chains of command are implemented simultaneously and overlay oneanother in the same departments....
The organization becomes a small, central hub electronically connected to other organizationsthat perform vital functions....
2.3   Major forms of Departmentalization: Functional Departmentalization - Grouping activities by functions performed. Ac...
 Process departmentalization - Grouping activities on the basis of product or service or   customer flow. Because each pr...
independence by reporting directly to the Board and General Manager, while emphasizingexecutive-level teamwork among the i...
Line units and personnel conduct major business of the organization like production andmarketing functions. Staff units an...
Staff authority is the right to advise or counsel those with line authority. For example, a qualitycontrol manager aids a ...
4.2 Line and Staff Conflict:Conflict between line and staff personnel is almost inevitable. Although minimal conflict due ...
hold both line and staff personnel accountable for the results of their own activities. In otherwords, line personnel shou...
Coordination activities is a becoming a very important factor that plays in an organization.Basically its the linking of t...
5.2 Horizontal Coordination:It’s another type of coordination which is focusing on the Linking of work units (individuals,...
goals and visions should not be conflicted with other units goals; therefore the organization topmanagement must pay an at...
Simple structure: The simple structure is a structure in which the owner-manager makes allmajor decisions and monitors all...
functional area. Knowledge sharing facilitates career paths as well as professional developmentof functional specialists.H...
The multidivisional structure consists of operating divisions, each representing a separatebusiness or profit center in wh...
1.     Team structure2.     Matrix Structure3.     Project StructureTeam structure: Team structure organizes separate func...
Advantages of a pure matrix organizational form, to project management, include:•      Because key people can be shared, t...
7. Current Issues in Organizational Design:One of the most challenging things which companies face today is the working en...
Organizations also produce goods and services that customers want at competitive prices. BillGates, who built Microsoft in...
Organizations exist to do the following:                         Bring together resources to achieve desired              ...
•   Albert, S. “Knowledge Management: Living Up To The Hype?” Midrange Systems, “ 11(13),    Sep 7, 1998, pp.52•   Daft, R...
•    Web References. Vertical Coordination. Retrieved from    http://www.webref.org/agriculture/v/vertical_coordination.ht...
•   Stanford N., (2005) Organization design: the collaborative approach, Elsevier Butterworth-    Heinemann, Linacre House...
Upcoming SlideShare
Loading in...5
×

Organization Design

17,401

Published on

Published in: Education
3 Comments
12 Likes
Statistics
Notes
No Downloads
Views
Total Views
17,401
On Slideshare
0
From Embeds
0
Number of Embeds
1
Actions
Shares
0
Downloads
0
Comments
3
Likes
12
Embeds 0
No embeds

No notes for slide

Organization Design

  1. 1. ContentsIntroduction…………………………………………………………………………….. 1Organization Design……………………………………………………………………. 3Departmentalization…………………………………………………………….……… 6Establishing Relationship Report………………………………………………….…… 10Allocating Authority…….……………………………………………………………... 11Coordinating Activities………………………………………………………………… 16Basic Forms of Organizational Design………………………………..………………… 18Current Issues in Organizational Design………………………………………………... 24References………..……………………………………………………………………… 27 1
  2. 2. 0. Introduction:Organizational structure is formal and informal framework of policies and rules, within which anorganization arranges its lines of authority and communications, and allocates rights and duties.Organizational structure determines the manner and extent to which roles, power, andresponsibilities are delegated, controlled, and coordinated, and how information flows betweenlevels of management. “Organization” is a word many people use loosely. Some would say itincludes all the behavior of all participants. Other would equate with the total system of socialand cultural relationships. Still others refer to it as an enterprise, such as the United States SteelCorporation or the Department of Defense. But for most participating managers, the termorganization implies a formalized intentional structure of roles or positions.In the first place, people working together must fill certain roles. In the second place, the rolespeople asked to fill should be intentionally designed to ensure that required activities are doneand that activities are fit together so that people can work smoothly, effectively, and efficientlyin groups. Certainly, most managers believe they are organizing when they establish such anintentional structure. It is often said that good people can make any organization pattern work.Some even assert that vagueness in an organization is a good thing in that it forces teamwork,since people know that they must corporate to get anything done. However, there can be nodoubt that good people and those who want to corporate will work together most effectively ifthey know their parts they are to play in any team operation and the way their roles relate to oneanother. This is as true in business or government as it is in football or in a symphony orchestra.Designing and maintaining these systems of roles is basically the managerial function oforganizing. 2
  3. 3. For an organizational role to exist and be meaningful to people, it must incorporate (1) verifiableobjectives, which are major part of planning; (2) a clear idea of the major duties or activitiesinvolved; and (3) an understood area of discretion or authority so that the person filling the roleknows what he or she can do to accomplish goals. In addition to make a role work outeffectively, provision should be made for supplying needed information and other toolsnecessary for performance in that role.It is in this sense that we think of organizing as 1. The identification and classification of required activities, 2. The grouping of activities necessary to attain objectives, 3. The assignment of each grouping to a manager with the authority (delegation) necessary to supervise it, and 4. The provision for coordination horizontally (on the same or a similar organizational level) and vertically (for example, corporate headquarters, division, and department) in the organization structure.An organization structure should be designed to clarify who is to do what tasks and who isresponsible for what results, to remove obstacles to performance caused by confusion anduncertainty of assignment, and to furnish decision-making and communications networksreflecting and supporting enterprise objectives. 3
  4. 4. 1. Organizational Design: Organizational design is about enabling a group of people to combine, coordinate, andcontrol resources and activities in order to produce value, all in a way appropriate to theenvironment in which the business competes. So, designing is not just an one-step action butrather it is a process. This means that, you cannot have a pre-dominant form which is fixedforever. It must be constantly change and evolve with its changing environment. Appropriateorganizational design enables an organization to execute better, learn faster, and change moreeasily. Organization Design is one of –or maybe the most important– determinant things whicheach manager must know to be successful in implementing strategy in an organization. To do so,they must be masters in strategy, accounting, psychology, information technology, and manyother fields. To be successful in organizational design, it is not important to be good in just oneor two fields and the areas are interdependent to each others.In every job, worker’s actions are influenced by the situation in which the person works in. As aresult, to achieve an effective performance, companies must align various organizationalfeatures. Organization design interventions deal with modifying elements of an organization’sstructure, including the division of labor, allocation of decision rights, choice of coordinatingmechanisms, delineation of organizational boundaries, and networks of informal relationships.Organizational performance is the result of the interaction of strategy, organizational context,and individual behavior. This means managers need to choose the right approach to the rightmarkets, create processes to deliver quality goods and/or services to those markets, and motivatepeople to act in line with the company’s objectives. Organizational design takes into account allthree critical performance factors: strategy, organization, and motivation.If you want to know about organization design, you have to know the basic forms of structure.Consider an architecture analogy – if you know different types of structures commonly used forbuilding a house for example, town-house, studio flat, blocks of flats, open plan, detached, semi-detached, terraced – you can then accept or reject structures that do not fit your purpose.Functional structures, process structures, product, geographical, market structures, matrix or 4
  5. 5. project organizations, boundarlyess organizations, and so forth are different forms of anorganization’s structures. Figure – 1However, structure is not the only consideration. For organizational design, there are a series ofpolicies that are controllable by management and can influence employee behavior. They can bedescribed in five categories and depicted as a star model (Figure – 1&2).This model clearly demonstrates that changing the structure impacts on each of the other aspectsof the organization. For things to work well you need to design not simply re-structure. Figure – 2 Star model 5
  6. 6. Figure – 3 Input-Output ModelsIn this model of designing/redesigning, we have an input-output diagram where structure anddesign decisions take place in the processing elements (people, work, formal organization,informal organization, see Figure – 3) where you are working to get balance and harmony amongthese elements in order to produce the required outputs. The challenge in trying to achieve adesign that results in this balance is in being able to look beyond the ‘structure’ of yourorganization, whether it is hierarchy, matrix, network or something else, to the design that liesbehind it. You need to be able to make sound judgments on what to change and what to leave –remembering that as soon as you change one element, it will affect all the other elements. Tocompound the challenge, you are trying to make this judgment in a context where customerrequirements and environmental demands are constantly shifting.There are some principles in organizational design. First one is principle of “Division of Labour”which the manager decides about departmentalization and specialization. In designing, themanager must think about how to divide labors between different parts of the organization andalso there must be some specialization for each job. Second is principle of “Unity of command”which includes defining the line of command and also having one superior in the company. Thethird principle is “Authority and Responsibility” which itself consists of line and staff authorityand authority and power. The last two principles are “Spans of Control” and “ContingencyFactors”. Spans of control is deciding about the levels of control in the organization and alsodeciding about centralization and decentralization of the departments of the company.Contingency factors in designing an organization is thinking about Environment and technologyand having the Knowledge technology which is about task variability & problem analyzability. 2. Departmentalization: 6
  7. 7. It’s the basis on which individuals are grouped into departments and departments into total organizations. Managers should make choices about how to use the series of command to group people together to perform their work. There are five approaches to structural design that reflect different uses of the chain of command in departmentalization.Ι. Vertical functional approach People are grouped together in departments by common skills and work activities, such as an engineering department and an accounting department.ΙΙ. Divisional Approach Departments are grouped together into separate, self-contained divisions based in a common product, program, or geographical region. Diverse skills rather than similar skills are the basis of departmentalization. ΙΙΙ. Horizontal matrix approach 7
  8. 8. Functional and divisional chains of command are implemented simultaneously and overlay oneanother in the same departments. Two chains of command exist, and some employees report totwo bosses. Ις. Team-based approachThe organization creates a series of teams to accomplish specific tasks and to coordinate majordepartments. Teams can exist from the office of the president all the way down to the shop floor.ς. Network Approach 8
  9. 9. The organization becomes a small, central hub electronically connected to other organizationsthat perform vital functions. Departments are independent, contracting services to the central hubfor a profit. Departments can be located anywhere in the world.Each approach to structure serves a distinct purpose for the organization, and each hasadvantages and disadvantages. The basic difference among structures is the way in whichemployees are departmentalized and to whom they report. 2.1 Advantages of Departmentalization: Department can be staffed by experts with specialized training. Consistency among departments for repetitive activities. Shared management responsibility. Supervision is facilitated. Coordination within the department is easier. 2.2 Disadvantages of Departmentalization: Personnel unfamiliar with procedures performed in their department by others. Inter-department documentation of activities is often not accessible. Delays when there are problems. Decision making becomes slow. Accountability and performance are difficult to monitor. 9
  10. 10. 2.3 Major forms of Departmentalization: Functional Departmentalization - Grouping activities by functions performed. Activities can be grouped according to function (work being done) to pursue economies of scale by placing employees with shared skills and knowledge into departments for example human resources, IT, accounting, manufacturing, logistics, marketing, and engineering. Functional departmentalization can be used in all types of organizations. Product Departmentalization - Grouping activities by product line. Tasks can also be grouped according to a specific product or service, thus placing all activities related to the product or the service under one manager. Each major product area in the corporation is under the authority of a senior manager who is specialist in, and is responsible for, everything related to the product line. LA Gear is an example of company that uses product departmentalization. Its structure is based on its varied product lines which include women’s footwear, children’s footwear and men’s footwear. Customer Departmentalization - Grouping activities on the basis of common customers or types of customers. Jobs may be grouped according to the type of customer served by the organization. The assumption is that customers in each department have a common set of problems and needs that can best be met by specialists. The sales activities in an office supply firm can be broken down into three departments that serve retail, wholesale and government accounts. Geographic Departmentalization - Grouping activities on the basis of territory. If an organizations customers are geographically dispersed, it can group jobs based on geography. For example, the organization structure of Coca-Cola has reflected the company’s operation in two broad geographic areas – the North American sector and the international sector, which includes the Pacific Rim, the European Community, Northeast Europe, Africa and Latin America groups. 10
  11. 11.  Process departmentalization - Grouping activities on the basis of product or service or customer flow. Because each process requires different skills, process departmentalization allows homogenous activities to be categorized. For example, the applicants might need to go through several departments namely validation, licensing and treasury, before receiving the driver’s license. 3. Establishing Reporting Relationship: It’s one of the most important factors on the organizational because every position mustreport to another position. HRIS keeps track of this departmental organizational informationthrough the Reporting Relationship fields. This data can be updated through theEstablish/Maintain Position workflow to initially enter or maintain any changes in theorganizational structure. These changes must be approved by the ECC Team Assistants; it willbe reflected in HRIS. The data maintained in HRIS for the reporting relationship will also exportto another part, so it is most important that this data be kept up to date and exact. This action isprocessed in the Establish/Maintain Position workflow.The third basic element of organizing is the establishment of reporting relationship amongpositions. The purpose of this activity is to clarify the chain of command and the span ofmanagement. Chain of command is an old concept, first popularized in the early years of the 20thcentury. The chain of command actually has two components; the first, called unity commended,suggests that each person within an organizational must have a clear reporting relationship to oneand only one boss. The second, called the scalar principle, suggests that must be a clear unbrokenline of authority that extends from the lowest to the highest position in the organizational.On the other hand, the internal audit manager shall report directly to the Board of Directorsthrough an established Audit Committee designated by the Board—and report administrativelyto the General Manager. The intent of this reporting relationship is to establish auditor 11
  12. 12. independence by reporting directly to the Board and General Manager, while emphasizingexecutive-level teamwork among the internal auditor, the General Manager, and the Board.For daily operational matters, the internal audit manager shall report directly to the GeneralManager. The internal audit manager shall also report to the Board of Directors, or its designatedaudit committee, at least once every three months.The internal audit manager shall file all internal audit reports, audit plans, and all other writtenaudit documents, directly to the Board of Directors, or its designated audit committee, and theGeneral Manager. The internal audit manager also shall prepare quarterly summary report ofaudit activities to the Board of Directors and the General Manager. Each summary report willinclude comments about major audit findings and recommendations. 4. Allocating Authority:Most businesses will have various aims and objectives and it is important that employees in theorganization know these objectives and work towards them. For example, for a business wants totry to improve the quality of the service that they provide, a customer service employees shouldbe nice to customers or give them the best quality service when dealing with them. In anyorganization, it is highly likely that a person will have responsibility for managing a number ofother people in the organization. In some cases it might just be the responsibility for looking afterone other person and in other cases it might be very many. The number of people that one personhas responsibility for is termed the span of control. The more people an individual hasresponsibility for the wider the span of control is said to be. Chief executives are responsible forthe overall activities of an organization, but each manager or supervisor is responsible for theorganization of his/her own department. 4.1 Line and Staff Authority: 12
  13. 13. Line units and personnel conduct major business of the organization like production andmarketing functions. Staff units and personnel assist the line units by providing specializedexpertise and services like accounting and public relations. Line authority flows down the chainof command. For example, line authority gives a production supervisor the right to direct anemployee to operate a particular machine, and it gives the vice president of finance the right torequest a certain report from a department head. Therefore, line authority gives an individual acertain degree of power relating to the performance of an organizational task.Two important clarifications should be considered, however, when discussing line authority: (1)line authority does not ensure effective performance, and (2) line authority is not restricted toline personnel. The head of a staff department has line authority over his or her employees byvirtue of authority relationships between the department head and his or her directly-reportingemployees. 13
  14. 14. Staff authority is the right to advise or counsel those with line authority. For example, a qualitycontrol manager aids a production manager by determining the acceptable quality level ofproducts or services at a manufacturing company, initiating quality programs, and carrying outstatistical analysis to ensure compliance with quality standards. Therefore, staff authority givesstaff personnel the right to offer advice in an effort to improve line operations.Functional authority is referred to as limited line authority. It gives a staff person power over aparticular function, such as safety or accounting. Usually, functional authority is given to specificstaff personnel with expertise in a certain area. For example, members of an accountingdepartment might have authority to request documents they need to prepare financial reports.Functional authority is a special type of authority for staff personnel, which must be designatedby top management. 14
  15. 15. 4.2 Line and Staff Conflict:Conflict between line and staff personnel is almost inevitable. Although minimal conflict due todifferences in viewpoints is natural, conflict on the part of line and staff personnel can disrupt anentire organization. There are many reasons for conflict. Poor human relations, overlappingauthority and responsibility, and misuse of staff personnel by top management are all primaryreasons for feelings of resentment between line and staff personnel. But there are several ways tominimize conflict. One way is to integrate line and staff personnel into a work team. The successof the work team depends on how well each group can work together in efforts to increaseproductivity and performance.Another solution is to ensure that the areas of responsibility and authority of both line and staffpersonnel are clearly defined. With clearly defined lines of authority and responsibility, eachgroup may better understand their role in the organization. A third way to minimize conflict is to 15
  16. 16. hold both line and staff personnel accountable for the results of their own activities. In otherwords, line personnel should not be entirely responsible for poor performance resulting fromstaff personnel advice. 4.3 Delegation:Tasks have to be given to other people to do. When this happens there is a transfer of some levelof authority. You might, for example, have been in a shop and the cashier has had to ask theirmanager or supervisor if s/he will come and sign something or do something with the till. Thismight relate to a refund or the exchange of a product, for example. If a worker is given theauthority to be able to carry out these types of task it is referred to as delegation. A person candelegate the authority for another person to be able to carry out a certain task. What they cannotdo is delegate responsibility. Ultimately, the responsibility for the way the business operates lieswith those who own the business or who have been given the responsibility to carry out such atask. Exactly what those responsibilities are might be specified in a persons job description. 4.4 Traditional Allocation:− By seniority and experiences: the more experiences the more important role.− By gender: Characteristically different jobs, varies in different cultures.− By Qualification: the higher level the more responsibility.− By Individual Contribution: suitability, eligibility and personal skills. 5. Coordinating Activities: 16
  17. 17. Coordination activities is a becoming a very important factor that plays in an organization.Basically its the linking of the two or more organizational members and/or units so they canperform the required functions together well. Coordinating can be achieved by many severalways such as programming, feedback and culture.Programming is recommended for most of the companies to get the suitable plans and to guideour organization. Policies and rules are also considered from the programming section which canmanage the organization behaviors. Communication skills and interaction will help theorganization to identify itself as a learning organization. Through feedbacks of thesecommunications and conversations, you will get the best coordination of the organization. Alsosharing ideas, beliefs and values are assisting the coordinating part of the organization hence itreflects the staff points of view. 5.1 Vertical Coordination:Its a process of ensuring that each successive stage in the production, processing, and marketingof a product is appropriately managed and interrelated to the next, so that decisions about what toproduce, and how much, are communicated as efficiently as possible from the consumer to theproducer. Vertical integration is a type of vertical coordination, but the latter does not necessarilyrequire that a single organization own or control all of the stages. For example, the use ofcontracts and marketing agreements between buyers and sellers plus the availability of timely.Basically its the linking of work units separated by hierarchal level. Direct supervision is a wayto gain the vertical coordinating hence the supervisors have the communication skills and abilityto coordinate other staffs. Implementing the rules and procedures will be governing the routineevents which will be leading to a successful coordination. Working together in a team with avisional goal is a cooperative idea to enhance the idea of vertical coordination since all of themembers are working and performing from the same purpose. 17
  18. 18. 5.2 Horizontal Coordination:It’s another type of coordination which is focusing on the Linking of work units (individuals,teams, departments) at the same hierarchal level. Its like dealing with members or units for thesame operational or functional level. Direct contact between members in the same level will beserving as the way considered horizontal coordination. Establishment of integrating rolesbetween the units and members will be useful since it will work as a coordination point betweenthe different units. Applying multiple command systems will also perform the actions in such afaster way by combining two or more units or groups together. The below example shows animage of command systems:5.3 Coordination Factors:There are many factors that may affect the coordinating process. Formality of the organizationsstructure will play a very important role to decide the coordination possibility. Also theinterpersonal orientation may cause a difficulty to handle the coordinating process, thats why itsvery important to know the focus purpose, whether it is task or relationship focus. An originationshould find the proper procedure to handle the time management in gaining knowledge of resultsor consequences of actions, in a result will be leading to a time oriented organization. Also the 18
  19. 19. goals and visions should not be conflicted with other units goals; therefore the organization topmanagement must pay an attention to similar issues which may affect the coordination scale. 6. Basic Forms of Organization Design:Typically, design is approached as an internal change under the guidance of an external facilitator.Managers and members work together to define the needs of the organization then create systems to meetthose needs most effectively. The facilitator assures that a systematic process is followed and encouragescreative thinking.The basic forms of organization design:1. Simple structure2. Functional structure3. Multidivisional structure4. Strategic Business Units (SBUs)5. Conglomerate structure 19
  20. 20. Simple structure: The simple structure is a structure in which the owner-manager makes allmajor decisions and monitors all activities while the staff serves as an extension of the manager’ssupervisory authority. Typically, the owner-manager actively works in the business on a dailybasis. Informal relationships, few rules, limited task specialization, and unsophisticatedinformation systems characterize this structure. Frequent and informal communications betweenthe owner-manager and employees make coordinating the work to be done relatively easy. Thesimple structure is matched with focus strategies and business level strategies, as firmsimplementing these strategies commonly compete by offering a single product line in a singlegeographic market. Local restaurants, repair businesses, and other specialized enterprises areexamples of firms using the simple structure. Simple structure modelFunctional structure: The functional structure consists of a chief executive officer and a limitedcorporate staff, with functional line managers in dominant organizational areas such asproduction, accounting, marketing, R&D, engineering, and human resources. This structureallows for functional specialization, thereby facilitating active sharing of knowledge within each 20
  21. 21. functional area. Knowledge sharing facilitates career paths as well as professional developmentof functional specialists.However, a functional orientation can negatively affect communication and coordination amongthose representing different organizational functions. For this reason, the CEO must work hard toverify that the decisions and actions of individual business functions promote the entire firmrather than a single function. The functional structure supports implementing business-levelstrategies and versification. When changing simple to a functional structure, firms want to avoidintroducing value-destroying bureaucratic procedures such as failing to promote innovation andcreativity. Functional structure modelMultidivisional Structure: With continuing growth and success, firms often consider greaterlevels of diversification. Successfully using a diversification strategy requires analyzingsubstantially greater amounts of data and information when the firm offers the same products indifferent markets(market or geographic diversification) or offers different products in severalmarkets(product diversification). In addition, trying to manage high levels of diversificationthrough functional diversifications creates serious coordination and control problems, a fact thatcommonly leads to a new structural form. 21
  22. 22. The multidivisional structure consists of operating divisions, each representing a separatebusiness or profit center in which the top corporate officer delegates responsibilities for day-to-day operations and business-unit strategy to division managers. Each division represents adistinct, self-contained business with its own functional hierarchy. It has three major benefits: (1)it enables corporate officers to more accurately monitor the performance of each business, whichsimplifies the problem of control; (2) it facilitates comparisons between divisions, whichimproves the resource allocation process; and (3)it stimulates managers of poorly performingdivisions to look for ways of improving performance. Partly because of its value to diversifiedcorporations, some consider the multidivisional structure to be one of the twentieth century’smost significant organizational innovations.Strategic Business Units (SBUs): During the past ten years, large companies have restructuredinto strategic business units (SBUs). An SBU is a grouping of functional units that have theresponsibility for profit (or loss) of part of the organization’s core business. SBUs are divisions(or groups) composed of independent prod-market segments that are given primary responsibilityand authority for the management of their own functional areas. It may be in any size or level,but it has its own unique mission, identifiable competitors, external market focus and control ofits business functions. Idea is to decentralize the strategic elements. Each strategic business islarge enough to maintain its own project and program managers. The executive in charge of thestrategic business unit may act as the sponsor for all of the program and project managers withinthe SBU. The major benefit of this type of structuring is that it allows the SBU to work moreclosely with the customer. It is a customer-focused organizational structure.Conglomerate structure: Appropriate for large corps with many prod lines in several unrelatedindustries. A holding company is formed with several subsidiaries in it. So as companies’growth in size and increase in complexity, they need more sophisticated work-flows. They needa more advanced structure based on their needs.Today there are some new forms of structuring in organizations. Here are three of them: 22
  23. 23. 1. Team structure2. Matrix Structure3. Project StructureTeam structure: Team structure organizes separate functions into a group based on one overallobjective. Teams are given the power to be as innovative as they want. Some teams may have agroup leader who is in charge of the group. Since the organization is made up of groups toperform the functions of the company, teams must perform well because they are heldaccountable for their performance.Matrix structure: The matrix organization is an attempt to combine the advantages of the purefunctional structure and the product organizational structure. This form is identically suited forcompanies, such as construction, that are “project-driven”. The figure below shows a typicalMatrix organization.In a matrix organization, each project manager reports directly to the vice president and thegeneral manager. Since each project represents a potential profit centre, the power and authorityused by the project manager come directly from the general manager. 23
  24. 24. Advantages of a pure matrix organizational form, to project management, include:• Because key people can be shared, the project cost is minimized• Conflicts are minimal, and those requiring hierarchical referrals are more easily resolved• There is a better balance between time, cost and performance• Authority and responsibility are shared• Stress is distributed among the teamProject Structure: A project structure is an organizational structure in which employeescontinuously work on projects. This is like the matrix structure; however when the project endsthe employees don’t go back their departments. They continuously work on projects in a teamlike structure. Each team has the necessary employees to successfully complete the project. Eachemployee brings his or her specialized skill to the team. 24
  25. 25. 7. Current Issues in Organizational Design:One of the most challenging things which companies face today is the working environmentwhich is rapidly changing. The only way they can survive in this situation is adapting themselveswith this changing environment. They need to continuously adapt themselves with pace which isfaster or equal to the speed of the changes in the world. They need to restructure and restructureagain and again to be in a place which is more advanced than the environment or at least be onthe same level.Organizations are all around us and shape our lives in many ways. But what contributions doorganizations make? Why are they important? The table below lists seven reasons organizationsare important to you and so society. First, organizations bring together resources to accomplishspecific goals. Consider Northup Grumman Newport News (formerly Newport NewsShipbuilding), which builds nuclear-powered, Nimitz-class aircraft carriers. Putting together anaircraft carrier is an incredibly complex job involving 47,000 tons of precision-welded steel,more than 1 million distinct parts, 900 miles of wire and cable, and more than seven years ofhard work by 17,800 employees. How could such a job be accomplished without an organizationto acquire and coordinate these varied resources? 25
  26. 26. Organizations also produce goods and services that customers want at competitive prices. BillGates, who built Microsoft into a global powerhouse, asserts that the modern organization “isone of the most effective means to allocate resources we’ve ever seen. It transforms great ideasinto customer benefits on an unimaginably large sale.” Companies look for innovative ways toproduce and distribute desirable goods and services more efficiently. Two ways are through e-business and through the use of computer-based manufacturing technologies. Redesigningorganizational structures and management practices can also contribute to increased efficiency.Organizations create a drive for innovation rather than a reliance on standard products andoutmoded approaches to management and organization design.Today, organizations adapt to and influence a rapidly changing environment. Consider Google,provider of the Internet’s most popular search engine, which continues to adapt and evolve alongwith the evolving Internet. Rather than being a rigid service, Google is continually addingtechnological features that create a better service by accretion. At any time, Google’s sitefeatures several technologies in development in development so that engineers get ideas andfeedback from users. Some large businesses have entire departments charged with monitoringthe external environment and finding ways to adapt to or influence that environment.Through all of these activities, organizations create value for their owners, customers, andemployees. Managers analyze which parts of the operation create value and which parts do not; acompany can be profitable only when the value it creates is greater than the cost of resources.Vizio Inc., a growing force in the flat-panel television industry, for example, creates value byusing existing LCD technology and developing an equity partnership with a contractmanufacture rather than producing television in-house. By keeping its costs low, the California-based company has been able to sell flat-panel TVs as about half cost of those sold by majorelectronics manufactures. 26
  27. 27. Organizations exist to do the following: Bring together resources to achieve desired goals and outcomes Produce goods and services efficiently Facilitate innovation Use modern manufacturing and information technologiesFinally, organizations have to cope with and accommodate today’s challenges of workforcediversity and growing concerns over ethics and social responsibility, as well as find effectiveways to motivate employees to work together to accomplish organizational goals. Reference 27
  28. 28. • Albert, S. “Knowledge Management: Living Up To The Hype?” Midrange Systems, “ 11(13), Sep 7, 1998, pp.52• Daft, R. L. (2008) Organization Theory and Design, South-Western Cengage Learning, 5191 Natorp Boulevard, Mason, OH 45040 USA• Flamholtz, E.G., Das, T.K. & Tsui, A.S. "Toward an Integrative Framework of OrganizationalControl," Accounting, Organizations and Society, 10(1), 1985, pp. 35-50.• Hitt M. A., Ireland D., Hoskisson R. E., (2009) Strategic management: competitiveness and globalization: concepts & cases (pp. 314-315) South-Western Cengage Learning, Mason, OH 45040• Kerzner H., (2009) Project Management: A Systems Approach to Planning, Scheduling, and Controlling (pp. 128-129) John Wiley & Sons, Inc., Hoboken, New Jersey• Organization Design,: Retrieved from http://www.emaytrix.com/mgmt307/section3.php• User Webs. Allocating Wok Roles. Retrieved from http://userwebs.cth.com.au/~gcutts/Management/4workroles.html• Bized Educators. Control of people in Organization. Retrieved from http://www.bized.co.uk/educators/level2/people/activity/people13.htm• Scribd Community. Authority Relationship. Retrieved from http://www.scribd.com/doc/24970602/Authority-Relationship. 28
  29. 29. • Web References. Vertical Coordination. Retrieved from http://www.webref.org/agriculture/v/vertical_coordination.htm• Organizational Transformation, Departmentalization, Retrieved from: http://asifjmir.wordpress.com/2010/06/26/departmentalization/• Departmentalization Coordination, Retrieved from: http://www.biotechnicalservices.com/downloads/Departmentalization%20Coordination%20SQA %20Poster%20April%202008%20Poster%20Content.pdf• Blacksacademy.net, Departmentalization and business organizations , Retrieved from: http://www.blacksacademy.net/content/3657.html• Reporting Relationship, Retrieved from: http://hrisguide.unc.edu/lessons/Reporting_Relationship.html• BusinessDictionary, Organizational Structure, Retrieved July 25, 2010, from http://www.businessdictionary.com/definition/organizational-structure.html• Koontz H., Weihrich H., (2008) Essentials Of Management (pp. 141-144), Tata McGraw- Hill, New Delhi 110 008• Myers P. S. (1996) Knowledge Management and Organizational Design, Butterworth-Heinemann 313 Washington Street Newton, MA 02158-1626• Simons R. (2005) Levers of organization design: how managers use accountability systems for greater performance and commitment, Harvard Business School Publishing, 60 Harvard Way, Boston, Massachusetts 02163 29
  30. 30. • Stanford N., (2005) Organization design: the collaborative approach, Elsevier Butterworth- Heinemann, Linacre House, Jordan Hill, Oxford OX2 8DP• Ricky Griffin. (2007). Fundamentals of Management, Fifth Edition, establishing reporting relationship. 30

×