Structural design for organization

1. Structural Design for Organizations
Organizational Theory & Design : Session 2 & 3
Dr. Mamta Tripathi
09-10-2023 1

2. Why Restructuring?
 The article’s headline reads, “IBM Unveils a Sweeping Restructuring
in Bid to Decentralize Decision Making”
 The organizations are restructuring to cut costs, become more
responsive to customers & competitors or to achieve some similar
purpose
 But what is it that these organizations are restructuring?
 Answer to this question is complexity, formalization, &
centralization
 Acceptance of these three components are the core dimensions of
organization structure, while generally widespread today, is not
universal
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3. Components of Organizational Structure
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Formal
Reporting
Relationship
s
• Number of levels in hierarchy
• Span of control
Grouping of
Individuals
• Creation of departments
organizations
Design of
Systems
• Communication, coordination, and
integration of efforts

4. Information Sharing Perspective on
Structure
Vertical
linkages Horizontal
linkages
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5. Vertical Linkages
 Managers create information linkages to facilitate
communication & coordination among organizational
elements
 Vertical linkages are used to coordinate activities between
the top and bottom of an organization & are designed
primarily for control of the organization
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6. Vertical Information Sharing Devices
The vertical lines of the organization chart
act both up & down the chain as the
communication channel
Hierarchical
Referral
A rule or procedure is established so
employees know how to respond without
communicating on each separate issue;
budget
Rules & plans
Periodic reports, written information and
computer-based communications distributed
to managers
Vertical
Information
Systems
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7. Horizontal Information Sharing
 Horizontal communication overcomes barriers between
departments & provides opportunities for coordination among
employees to achieve unity of effort & organizational objectives
 Horizontal linkage refers to communication and coordination
horizontally across organizational departments
 “People in engineering & manufacturing almost have to be
sleeping together. These guys weren’t even flirting!” – Lee
Iacocca, 1980 (Chrysler)
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8. Horizontal Linkage Devices
• Cross-functional information systems enable
employees to routinely exchange information;
e.g. Siemens
Information
systems
• A person located in one department having
the responsibility for communicating &
achieving coordination with another
department
Liaison
Roles
• A temporary committee composed of
representatives from each department
affected by a problem & linking several
departments to solve common problems; e.g.
DaimlerChrysler
Task Forces
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9. Horizontal Linkage Devices Cont.
 Full-time Integrator
• Usually with a title such as product manager, project manager, or
brand manager, this full-time position outside the affected departments
is created to achieve coordination between two or more departments
• The integrator does not have formal authority over team members
(because that rests with managers of the functional departments), but
nevertheless the integrator has responsibility for the entire product (or
project or brand); need excellent people skills
 Teams
• Permanent task forces, often used in conjunction with a full-time
integrator
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10. What
type of
linkage
is this?
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11. What type
of linkage
is this?
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12. Relational Coordination: High Task
Interdependence
Frequent, timely, problem-solving
communication carried out through
relationships of shared goals, shared
knowledge, & mutual respect; improves
performance of a work process by improving
the work relationships between people
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13. Which Device Should Be Used & When?
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14. Organization Design Alternatives
Required Work Activities
Reporting Relationships
Departmental Grouping Options
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15. Departmental Grouping Options
Functional
grouping
Divisional
grouping
Multi-
focused
grouping
Horizontal
grouping
Virtual
network
grouping
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16. Functional Grouping
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Functional structure consolidates human
knowledge and skills (inputs) with
respect to specific activities in order to
provide depth of expertise

17. Divisional Structure
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Divisional structure, sometimes called
product structure or strategic business
units, means that departments are grouped
based on organizational outputs

18. Functional
&
Divisional
Structure
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19. Functional : Strengths & Weaknesses
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20. Divisional: Strengths & Weaknesses
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21. Geographical Structure
 Organizing to meet needs of users/customers by geography
 Many multinational corporations are organized by country
 Focuses managers and employees on specific geographic regions
 Horizontal coordination within a region is emphasized rather than
linkages across regions
 Strengths and weaknesses similar to divisional organization
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22. Sample Geographic Structure
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23. Matrix Structure
 The matrix can be used when both technical expertise-
product innovation and change are important
 When the structure needs to be multi-focused for
simultaneous emphasis on both product and function or
product and geography, the matrix structure can be
considered
 It gives dual lines of authority to both the functional &
product chains simultaneously
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24. Conditions for the Matrix
Need of sharing scarce resources across the
organization/product lines
Two or more critical outputs required: new
products & in-depth technical knowledge
1.Environment is both complex & uncertain;
high interdependence between departments
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25. Sample
Matrix
Organizatio
n
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26. Variations of Matrix Structure
 Functional Matrix
• The functional bosses have primary authority & product
managers simply coordinate the product activities
 Product Matrix
• The product managers have primary authority &
functional managers assign technical personnel to
provide advisory expertise as needed
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27. Matrix: Strengths & Weaknesses
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28. Horizontal Structure
 A horizontal structure organizes employees around core processes
 Organizations typically shift to a horizontal structure during
reengineering, or business process reengineering – the redesign of a
vertical organization along its horizontal workflows and processes
 A process refers to a group of related tasks that transform inputs
into outputs
 The horizontal structure organizes employees around core processes
by bringing together people who work on a common process so they
can easily communicate & coordinate their efforts
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29. Characteristics of Horizontal
Structure
 Structure is created around cross-functional processes which
increases flexibility e.g. Ford Motor Company’s Customer Service
 Self-directed teams, not individuals, are dominant players e.g. Schwa
 Process owners are responsible for entire process
 People on the team are given authority for decisions; cross-trained;
creative
 Customers drive the organization, effectiveness is measured by
customer satisfaction, employee satisfaction, & financial
contribution
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30. Sample
Horizontal
Structure
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31. Horizontal: Strengths & Weaknesses
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32. Virtual Networks and Outsourcing
 With a virtual network structure, also called a modular
structure, the firm subcontracts most of its major functions
or processes to separate companies & coordinates their
activities from a small headquarters organization
 In outsourcing, a firm contracts out certain tasks or
functions, such as manufacturing, human resources etc. to
other companies; Eli Lilly & Company-Chem-Explorer,
Wipro
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33. How Virtual Network Structure Works?
 The virtual network organization is central hub surrounded
by a network of outside specialists connected
electronically
 Organizational partners located in different parts of the
world use networked computers or the Internet to
exchange data & information rapidly
 The idea is that a firm can concentrate on what it does
best
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34. Virtual Network: Strengths & Weaknesses
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35. Hybrid Structure
 Companies combine characteristics of functional, divisional,
geographical, or horizontal structures to take advantage of
the strengths of a particular structure while avoiding some
of the weaknesses
 Companies may combine characteristics of the functional
and divisional structures
 Some companies combine characteristics of functional and
horizontal structures
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36. Structural Alignment
 Finding the right balance between vertical control &
horizontal coordination is an important design
decision
 Vertical control is best associated with goals of
efficiency & stability
 Horizontal coordination is associated with learning,
innovation, & flexibility
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37. Efficiency Vs. Learning
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38. Symptoms of Structural Deficiency
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Decision making is delayed or lacking in quality
Organization cannot meet changing needs
Employee performance declines, goals are not met
Too much conflict

39. 09-10-2023 39
ACTIVITY TIME!
OT&D Session 2 & 3 (Section C)

40. Thank You!
Dr. Mamta Tripathi
09-10-2023 40