2. LEARNING OBJECTIVES
▪ Understand how organizational design requires
managers to select the right combination of
organizational structure, control, and culture
▪ Discuss how effective organizational design enables
a company to increase product differentiation,
reduce its cost structure, and build competitive
advantage
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3. ORGANIZATIONAL DESIGN
▪ Process of deciding how a company should
create, use, and combine organizational
structure, control systems, and culture
▪ To pursue a business model successfully
▪ Organizational structure: Means through which
a company assigns employees to specific tasks
and roles that are to be linked together to
increase:
▪ Efficiency, quality, and innovation
▪ Responsiveness to customers
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4. ORGANIZATIONAL DESIGN
▪ Control system: Provides managers with
incentives for employees as well as feedback on
how the company performs
▪ Organizational culture: Specific collection of
values, norms, beliefs, and attitudes that:
▪ Are shared by people and groups in an organization
▪ Control the way people interact with each other and
with stakeholders outside the organization
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6. GROUPING TASKS, FUNCTIONS, AND
DIVISIONS
▪ Function - Collection of people who work
together and perform the same types of tasks
▪ Amount and complexity of handoffs increase
with growth of the organization
▪ Handoffs - Transfers among people, functions, and
subunits
▪ Division - Way of grouping functions to allow an
organization to better produce and transfer its
goods and services to customers
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7. ALLOCATING AUTHORITY AND
RESPONSIBILITY
• Clear and unambiguous chain of
command that defines each
manager’s relative authority
Hierarchy of authority
• Number of subordinates reporting
directly to a particular manager
Span of control
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9. TALL ORGANIZATIONS
• Communication problems
• Long time taken in decision making and
adherence
• Distortion of commands and orders
• Increases expenses
Limitations
• Principle of the minimum chain of command:
Company should design its hierarchy with the
fewest levels of authority necessary to use
organizational resources effectively
Solution
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10. INTEGRATING MECHANISMS
▪ Ways to increase communication and
coordination among functions and divisions
▪ Direct contact
▪ Liaison roles
▪ Teams: Formation of a group that represents each
division or department:
▪ Facing a common problem
▪ With a goal of finding a solution to the problem
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11. STRATEGIC CONTROL
▪ Design a system that sets ambitious goals and
targets for all managers and employees
▪ Management by objectives: Employees are
encouraged to help set their own goals
▪ Managers manage by exception, intervening only when
they sense something is not going right
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1. Setting of organization’s goals.
2. Setting of departmental goals.
3. Discussion of departmental goals.
4. Defining expected results (setting individual goals).
5. Conducting periodic performance reviews.
6. Providing performance feedback.
12. STRATEGIC CONTROL SYSTEMS
▪ Mechanism that allows managers to monitor and
evaluate:
▪ Whether their business model is working as intended
▪ How their business model could be improved
▪ Basic structure of competitive advantage
▪ Control and efficiency
▪ Control and quality
▪ Control and innovation
▪ Control and responsiveness to customers
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14. 0
0
2
0
3
0
4
Scorecard
Balanced
A performance measurement tool
that looks at more than just the
financial perspective
It evaluates the company’s
performance from four
perspectives:
1.Financial
2.Customer
3.Internal processes
4.People/innovation/growth
Managers will focus on areas that
drive their organization’s success
and use scorecards that reflect
those strategies.
16. TYPES OF STRATEGIC CONTROL
SYSTEMS
• Way one manager shapes and influences the behavior of another in
a face-to-face interaction in the pursuit of a company’s goals
Personal control
• Establishes performance goals and then measures performance
relative to these goals
Output control
• Establishes comprehensive system of rules that specify the
appropriate behavior through:
• Operating budget
• Standardization
• Rules and procedures
Behavior control
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17. ORGANIZATIONAL CULTURE
▪ Specific collection of values and norms shared by
people and groups in an organization
▪ Organizational socialization - Describes how
people learn organizational culture
▪ Culture and strategic leadership
▪ Organization’s founder and top managers help create
its organizational culture and provide strategic
leadership
▪ Shared values and common culture increase integration
and improve coordination among members
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18. ADAPTIVE CORPORATE CULTURES
▪ Innovative culture that encourages and rewards
middle- and lower-level managers for taking the
initiative to achieve organizational goals
▪ Common value sets
▪ Values promoting a bias for action
▪ Values stem from nature of the organization’s mission
▪ Values determine how to operate the organization
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19. DEVELOPING CULTURE AT THE
FUNCTIONAL LEVEL
• Functional strategy improves efficiency and quality
Production
• Develops distinctive competencies in innovation, quality,
and excellence that result in products that fit customers’
needs
R&D
• Monitor sales behavior
• Encourage high responsiveness to customers to
develop sophisticated output and behavior controls
Sales
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21. IMPLEMENTING COST LEADERSHIP
AND DIFFERENTIATION
• Choosing a combination compatible with lowering
cost structure while preserving ability to attract
customers
Implementing cost leadership
• Company must design its structure, control, and
culture around the particular source of its
competitive advantage
• Makes it difficult to standardize activities and
increases the bureaucratic costs
Implementing differentiation
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Quazi Tafsirul Islam.
Find more at www.quazitafsir.com
