2. 2
Planning Ahead —
What are the essentials of organizational design?
How do contingency factors influence
organization design?
What are the major issues in subsystems design?
How can work processes be reengineered?
3. 3
Study Question 1: What are the essentials of
organizational design?
Organizational design
– Choosing and implementing structures that best
arrange resources to serve the organization’s
mission and objectives.
– A problem-solving activity that should be
approached from a contingency perspective.
4. 4
Figure 11.1 A framework for
organizational design—aligning structures
with situational contingencies.
5. 5
Study Question 1: What are the essentials of
organizational design?
Organizational effectiveness
– Sustainable high performance in using resources to
accomplish mission and objectives.
– Approaches:
• Systems resource approach focuses on inputs.
• Internal process approach focuses on transformation
process.
• Internal process approach focuses on outputs.
• Internal process approach focuses on environment.
6. 6
Study Question 1: What are the essentials of
organizational design?
Short-run, medium-run and long-run criteria for
evaluating organizational effectiveness:
– Short-run focus.
• Goal accomplishment.
• Performance efficiency in resource utilization.
• Stakeholder satisfaction.
– Medium-run focus.
• Adaptability in the face of changing environments.
• Development of people and systems to meet new challenges.
– Long-run focus.
• Survival under conditions of uncertainty.
7. 7
Study Question 1: What are the essentials of
organizational design?
Bureaucracy
– A form of organization based on logic, order, and the
legitimate use of formal authority.
– Bureaucratic designs feature …
• Clear-cut division of labor.
• Strict hierarchy of authority.
• Formal rules and procedures.
• Promotion based on competency.
8. 8
Study Question 1: What are the essentials of
organizational design?
Contingency perspective on bureaucracy asks the
questions:
– When is a bureaucratic form a good choice for an
organization?
– What alternatives exist when it is not a good choice?
Environment determines the answers to these
questions.
– A mechanistic design works in a stable environment
– An organic design works in a rapidly changing and
uncertain environment.
9. 9
Figure 11.2 A continuum of organizational design
alternatives: from bureaucratic to adaptive organizations.
10. 10
Study Question 1: What are the essentials of
organizational design?
Structural characteristics associated with design
alternatives:
– Goal predictability versus adaptability.
– Authority centralized versus decentralized.
– Rules and procedures many versus few.
– Spans of control narrow versus wide.
– Tasks specialized versus shared.
– Teams and task forces few versus many.
– Coordination formal and impersonal versus informal
and personal.
11. 11
Study Question 1: What are the essentials of
organizational design?
Mechanistic Designs
– Predictable goals
– Centralized authority
– Many rules and
procedures
– Narrow spans of
control
– Specialized tasks
– Few teams and task
forces
– Formal and impersonal
means of coordination
Organic Designs
– Adaptable goals
– Decentralized authority
– Few rules and
procedures
– Wide spans of control
– Shared tasks
– Many teams and task
forces
– Informal and personal
means of coordination
12. 12
Study Question 2: How do contingency
factors influence organization design?
Checklist for identifying contingency factors in
organizational design:
– Does the design fit well with the major problems and opportunities
of the external environment?
– Does the design support implementation of strategies and the
accomplishment of key operating objectives?
– Does the design support core technologies and allow them to be
used to best advantage?
– Can the design handle changes in organizational size and different
stages in the organizational life cycle?
– Does the design support and empower workers and allow their
talents to be used to best advantage?
13. 13
Study Question 2: How do contingency
factors influence organization design?
Environment and organizational design —
– Certain environment …
• Relatively stable and predictable elements.
• Bureaucratic organizations and mechanistic designs
are appropriate.
– Uncertain environment …
• More dynamic and less predictable elements.
• Adaptive organizations and organic designs are
appropriate.
14. 14
Study Question 2: How do contingency
factors influence organization design?
Strategy and organizational design —
– Structure follows strategy.
– Stability strategy is supported by:
– Bureaucratic organizations using mechanistic
designs.
– Growth strategies are is supported by:
– Adaptive organizations using organic designs.
16. 16
Study Question 2: How do contingency
factors influence organization design?
Technology
– The combination of knowledge, skills,
equipment, computers, and work methods
used to transform resource inputs into
organization outputs.
17. 17
Study Question 2: How do contingency
factors influence organization design?
Core manufacturing technologies:
– Small-batch production.
• A variety of custom products are tailor-made to order.
– Mass production.
• A large number of uniform products are made in an assembly-
line system.
– Continuous-process production.
• A few products are made by continuously feeding raw
materials through a highly automated production system with
largely computerized controls.
18. 18
Study Question 2: How do contingency
factors influence organization design?
Technology and organization design —
– The technological imperative
• Technology is a major influence on organizational
structure.
• The best small-batch and continuous process plants
have more flexible organic structures.
• The best mass-production plants have more rigid
mechanistic structures.
19. 19
Study Question 2: How do contingency
factors influence organization design?
Core service technologies:
– Intensive technology
• Focuses the efforts of many people with special expertise on
the needs of patients or clients.
– Mediating technology
• Links together parties seeking a mutually beneficial exchange
of values.
– Long-linked technology
• Functions like mass production, where a client is passed from
point to point for various aspects of service delivery.
20. 20
Study Question 2: How do contingency
factors influence organization design?
Organization size, life cycle, and design —
– Larger organizations tend to have more mechanistic
designs, but it is not always best.
– Organizational life cycle:
• Birth stage — small size, simple structure.
• Youth stage — rapid growth in size, simple structure experiences
stress.
• Midlife stage — growing to large size, more complex and formal
structure.
• Maturity stage — stabilizes at large size, mechanistic structure.
22. 22
Study Question 2: How do contingency
factors influence organization design?
Coping with the disadvantages of large size:
– Downsizing.
• Reducing the scope of operations and number of employees.
– Intrapreneurship.
• The pursuit of entrepreneurial behavior by individuals and
subunits within large organizations.
– Simultaneous structures.
• Organizations that combine mechanistic and organic designs.
23. 23
Study Question 2: How do contingency
factors influence organization design?
Human resources and good organization
design —
– Provides people with supporting structures
needed for both high performance and work
satisfaction.
– Produces a good “fit” between organization
structures and human resources.
– Allows the expertise and talents of organization
members to be unlocked and utilized.
24. 24
Study Question 3: What are the major issues
in subsystems design?
Basics of subsystem design …
– Subsystem —
• A department or work unit headed by a manager.
• Operates as a smaller part of the larger
organization.
– Ideally, each subsystem supports other
subsystems, working toward interests of entire
organization.
25. 25
Figure 11. 5 Subsystems differentiation among research and
development (R&D), manufacturing, and sales divisions.
26. 26
Study Question 3: What are the major issues
in subsystems design?
Lawrence and Lorsch’s findings on
subsystems design …
– The total system structures of successful firms
match the challenges of their environments.
– The subsystems structures of successful firms
match the challenges of their respective
subenvironments.
– Subsystems in successful firms worked well
with each other.
27. 27
Study Question 3: What are the major issues
in subsystems design?
Managing subsystem differentiation:
– Differentiation is the degree of difference that
exists among the internal components of an
organization.
– Common sources of subsystems differentiation:
• Time orientation
• Objectives
• Interpersonal orientation
• Formal structure
28. 28
Study Question 3: What are the major issues
in subsystems design?
Managing subsystem integration:
– Integration is the level of coordination achieved
among an organization’s internal components.
– Organization design paradox —
• Increased differentiation creates the need for greater
integration.
• Integration is more difficult to achieve as
differentiation increases.
29. 29
Study Question 3: What are the major issues
in subsystems design?
Mechanisms for achieving subsystem integration:
– Rules and procedures
– Hierarchical referral
– Planning
– Direct contact
– Liaison role
– Task forces
– Teams
– Matrix organizations
30. 30
Study Question 4: How can work processes be
reengineered?
Process reengineering
– Systematic and complete analysis of work processes.
– Design of new and better work processes.
Work process
– “A related group of tasks that create a result of value
for the customer.” (Michael Hammer)
Workflow
– Movement of work from one point to another in the
manufacturing or service delivery process.
31. 31
Study Question 4: How can work processes be
reengineered?
Steps in reengineering core processes:
– Identify core processes.
– Map core processes in respect to workflows.
– Evaluate all tasks for core processes.
– Search for ways to eliminate unnecessary tasks or work.
– Search for ways to eliminate delays, errors, and
misunderstandings.
– Search for efficiencies in how work is shared and
transferred among people and departments.
32. 32
Figure 11.6 How reengineering can
streamline core business processes.
