MBA 635 chapter 15

©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
15
©2013 Cengage Learning. All Rights Reserved.
May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in
part.
Organizational
Design and
Structure

Learning Objectives
1 Define differentiation and integration as
organizational design processes.
2 Discuss six basic design dimensions of an
organization.
3 Briefly describe five structural
configurations for organizations.
4 Describe four contextual variables for an
organization.
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Learning Objectives continued
5 Explain the four forces reshaping
organizations.
6 Discuss emerging organizational structures.
7 Identify two cautions about the effect of
organizational structures on people.
3

©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
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Organizational Design Terms
Organizational design: the process of
constructing and adjusting an organization’s
structure to achieve its strategy and goals
Organizational structure: the linking of
departments and jobs within an organization
Contextual variables: a set of characteristics
that influence the organization’s design
process
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Differentiation and Integration
Differentiation Integration
Successful
organizational
design
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Differentiation: the process of deciding how to divide
the work in an organization
Integration: the process of coordinating the different
parts of an organization

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Four Dimensions of Differentiation
Manager’s goal
orientation
Time orientation
Interpersonal orientation Formality of structure
Differentiation
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Forms of Differentiation
Horizontal
• Degree of
differentiation
between
subunits
• Based on
specialization
Vertical
• Difference in
authority and
responsibility
in the
organizational
hierarchy
Spatial
• Geographic
dispersion of
an
organization’s
offices, plants,
and personnel
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Horizontal, vertical, and spatial differentiations
indicate the amount of width, height, and breadth an
organizational structure needs

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Complexity
• Complexity refers to the number of
activities, subunits, or subsystems within the
organization
• The more structurally differentiated an
organization is, the more complex it is
• An organization’s complexity should mirror
the complexity of its environment
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Integration
Vertical linkages integrate
activities up and down the chain
of command
Hierarchical referral
Rules and procedures
Plans and schedules
Added positions
Management information systems
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Integration
Horizontal linkages
integrate activities across
the organization
Liaison roles
Task forces
Integrator positions
Teams
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Hierarchy of
Authority – the
degree of vertical
differentiation
across levels of
management
Specialization –
the degree to
which jobs are
narrowly defined
and depend on
unique expertise
Basic
Design
Dimensions
Formalization – the degree to
which the organization has
official rules, regulations, and
procedures
Standardization – the
degree to which work activities
are accomplished in a
routine fashion
Complexity – the degree
to which many different types
of activities occur in the
organization
Centralization – the degree
to which decisions are
made at the top of the
organization

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Designing Formal Structures
1. How many tasks should a given position in the organization contain, and how
specialized should each task be?
2. How standardized should the work content of each position be?
3. What skills, abilities, knowledge, and training should be required for each
position?
4. What should be the basis for the grouping of positions within the organization
into units, departments, divisions, and so on?
5. How large should each unit be, and what should the span of control be?
6. How much standardization should be required in the output of each position?
7. What mechanisms should be established to help individuals in different
positions and units adjust to the needs of other individuals?
8. How centralized or decentralized should decision-making power be in the
chain of authority?
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Contextual Variables
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Contextual
Variables – a set
of characteristics
that influences the
organization’s
design processes
Technology
Strategy &
Goals
Environment
Size

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Woodward’s Classification of Technology
• Technology: the tools, techniques, and
actions used by an organization to transform
inputs into outputs
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Unit
• Small-
batch and
made-to-
order
Mass
• Large-
batch
Process
• Continuous
production

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^
Perrow’s Variables for Technology and Design
• Task variability considers the number of
exceptions encountered in doing the tasks
within a job
• Problem analyzability examines the types of
search procedures followed to find ways to
respond to task exception
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Perrow’s Key Aspects of Structure
• The amount of discretion that an individual
can exercise to complete a task
• The power of groups to control the unit’s
goals and strategies
• The level of interdependence among groups
• The extent to which organizational units
coordinate work using feedback or planning
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^
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Thompson’s View of Technology and Design
• Technological interdependence: the degree
of interrelatedness of the organization’s
various technological elements
• Greater technological interdependence
leads to greater organizational complexity
• The problems of this greater complexity may
be offset by decentralized decision making
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^
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Forces of Change in a New Economy
• Customers can get their goods and
services 24/7Any time
• Customers can order from anywhere
if they have Internet accessAny place
• Intangibles are adding value to
productsNo matter
• Technology and information allow for
rapid, responsive customization
Mass
customization
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^
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Environment
• Environment : anything outside the boundaries
of an organization
• Task environment: the elements of an
organization’s environment that are related to
its goal attainment
• Environmental uncertainty: the amount and
rate of change in the organization’s
environment
• Mechanistic structure
• Organic structure
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Three Dimensions of Environment
Volatility
Complexity
Capacity
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If the environment is
uncertain, dynamic,
and complex and
resources
are scarce, the
manager needs an
organic structure that
is better able to
adapt to its
environment

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Organizational Life Cycles
31
Shorter life cycles put more pressure on
organizations to be both flexible
and efficient Birth
Growth
MaturityDecline
Revival ??

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^
Globalization
• Globalization makes spatial differentiation
even more of a reality for organizations
• The structure for an international business is
generally based on
• Level of vertical differentiation
• Level of horizontal differentiation
• Degree of formalization, specialization,
standardization, and centralization
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^
^
Changes in Information Processing Technologies
• The hierarchy of authority has been
flattened
• The basis of centralization has been changed
• Less specialization and standardization are
needed
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^
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Emerging Organizational Structures
• Network organization—weblike structures that
contract operating functions to other
organizations and coordinate these activities at
their headquarters
• Virtual organization—temporary network
organizations consisting of independent
enterprises
• Circle organization—systemic parts that create
demand, produce product, and provide support
and are linked by leadership and strategy
council
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^
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Cautionary Notes about Structure
• An organizational structure may be weak or deficient
• Delayed decision making
• Decision making lacks quality
• Lacks ability to respond innovatively
• Conflict
• The personality of the chief executive may adversely
affect the structure
• The paranoid
• The depressive
• The dramatic
• The compulsive
• The schizoid
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^
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Chapter 15: Reflect & Discuss
Rendition Video Clip
 Review the earlier section, “Basic Design
Dimensions.” Which dimensions does this scene show
or imply?
 Can you sense the division of labor represented by
Senator Hawkins and Alan Smith? Corrine Whitman
does not appear in this scene but is also part of a
division of labor.
 Review the five structural configurations described
earlier in this chapter. Which of those configurations
best describes the likely structure of Senator Hawkins’
office? Which configurations do not apply? Why?
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MBA 635 chapter 15

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MBA 635 chapter 15