The document discusses factors that affect organizational design and different types of organizational structures. It describes how the organizational environment, strategy, technology, and human resources can influence design. It then explains functional, divisional, product-based, multinational, network, virtual, and matrix designs. Tall and flat structures are also compared, with tall having many levels and narrow spans of control, while flat has fewer levels and wide spans.

1. Managing Organizational Design and Change
Designing Organizations
Contemporary Management

2. Factors Affecting Organizational Structure
© Copyright 2004 McGraw-Hill. All rights reserved. 7–2
Figure 7.1

3. Organizational Environment
• The quicker the environment changes, the more problems
face managers, org. design must be more flexible (i.e., flat
and decentralized authority) when environmental change is
rapid.
Strategy
• A differentiation strategy needs a more flat and
flexible structure, low cost may need a more formal
structure.
• Increased vertical integration or diversification also
requires a more flexible structure.
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Factors Affecting Organization Design

4. Technology
Technology refers to the combination of skills, knowledge,
tools, equipment, computers and machines used in the
organization.
• Organizations utilizing complex technology require a
flexible structure to be managed efficiently.
• Organizations utilizing routine technology can be more
readily managed using a formal structure.
Human Resources
• Highly skilled workers whose jobs require working in
teams usually need a more flexible structure.
• Higher skilled workers (e.g., professors and doctors)
often have internalized professional norms.
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Factors Affecting Organization Design

5. Organization Design Options
5

6. Functional Design
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Figure 7.3
Works best when..
 Business environment is stable and predictable.
 Organization is small to medium in size.
 Quality is maintained through routine tasks.
An organizational structure composed of all the departments that
an organization requires to produce its goods or services.

7. Functional Design
Advantages:
• Reinforce specialized skills and resources.
• Reduces duplication of scarce resources.
• Encourages learning from others doing similar jobs.
• Easy for managers to monitor and evaluate workers.
Disadvantages:
• Short-term focus on routine tasks.
• Difficult for departments to communicate with others.
• Preoccupation with own department and losing sight of
organizational goals.
© Copyright 2004 McGraw-Hill. All rights reserved. 7–7

8. Organizational Uses of Place Design
8

9. Organizational Uses of Place Design
Advantages:
• Each department or division is in direct contact with customers in
its locale and can adapt more readily to their demands.
• Lower costs for materials, freight, and perhaps labor may result.
• Marketing strategies and tactics can be tailored to geographic
regions.
Disadvantages:
• Control and coordination problems increase.
• Employees may begin to emphasize their own unit’s goals and
needs rather than those of the entire organization.
9

10. Organizational Uses of Product Design
10

11. Organizational Uses of Product Design
Advantages:
• Reduces the information overload that managers face in a purely
functional design.
• More effective handling of the business is possible.
Disadvantages:
• Duplicating functions and resources, e.g a different sales team
for each division.
• Dispersing technical expertise across smaller units.
• Creating negative rivalries between divisions.
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12. Organizational Uses of Multidivisional Design
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13. Organizational Uses of Multidivisional Design
• Eases problems of coordination by focusing functional expertise and
knowledge on specific goods or services
• A firm must have a large number of managerial personnel to oversee
all the product lines
• Higher costs result from the duplication of various functions
• Often reduces the environmental complexity facing any one team,
department, or division.
13

14. Basic Options in Multinational Design
14

15. Organizational Uses of Multinational Design
A worldwide product-line division may not be as effective at
opening new territories as a geographically organized division,
since the division operating under a place design often:
• Can establish relations with host governments.
• Invest in distribution channels.
• Develop brand recognition.
• Build competencies that no single product-line division could
afford.
15

16. Organizational Uses of Network Design

17. Advantages:
• Versatile, scalable, and adaptable.
• Allows companies to outsource business activities to free staff to focus
on higher-value strategic work.
• Allows companies with multiple satellite locations or far divisions to
work with external partners flexibly.
• Allows for a more effective resolution of complex tasks.
Disadvantages:
• Since teams are independent and small, network-centric organizations
may find it difficult to achieve large-scale tasks.
• The success of the teams depends on the knowledge, skills and
motivation of individuals on each team, so an unmotivated team may
impact the overall goal achievement.
17
Organizational Uses of Network Design

18. Organizational Uses of Virtual Design
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19. Organizational Uses of Virtual Design (cont.)
 Virtual networks are flexible and promote learning by integrating
information and knowledge between the different organizations that
make them up.
 Managers delegate authority and responsibility to employees while
providing a clear vision of the organization’s purpose and goals
 Structure can be changed quickly to meet changing conditions and
situations.
 Employees can respond fastly to changing customer demands with
customized products and services available at any time and place.
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20. Organizational Uses of Virtual Design (cont.)
Advantages:
• Increased Productivity
• No Unnecessary Meetings
• Healthy Work-Life Balance
• Improved Employee Retention Rates.
Disadvantages:
• Reduced Team Collaboration
• Social Isolation
• Hidden Technological Costs
• Potential Security Risks
20

21. Matrix Design
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22. Tall and Flat Organizations
Tall structures have many levels of authority and narrow spans of
control.
• As hierarchy levels increase, communication gets difficult,
creating delays in the time being taken to implement decisions.
• Communications can also become garbled as it is repeated
through the firm.
Flat structures have fewer levels and wide spans of control.
• Structure results in quick communications but can lead to
overworked managers.
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23. Flat Organizations
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24. Tall Organizations
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25. Thank You
Contemporary Management