This is the first week presentation in the subject of Organizational Behavior

1. Organizational Theory: Organizational design, structures and
processes as a basis for organizational effectiveness.
• Dr. Tamer Koburtay
• Department of Strategy, Leadership
and Management
• College of Business
• Abu Dhabi University
• Tamer.Koburtay@adu.ac.ae

2. Organization
Theory in Action
Current challenges
 Globalization
 Ethics and social
responsibility
 Speed of responsiveness
 The digital workplace
 Diversity

3. What is an
Organization?
 Organizations are (1) social entities that (2) are
goal-directed, (3) are designed as deliberately
structured and coordinated activity systems, and
(4) linked to the external environment.

4. What is an
Organization?
 Types of organizations
- Large, multinational corporations vs family-owned businesses.
- For-profit business vs non-profit organizations.
• Sole proprietorship
• Family business
• Partnership
• Joint stock companies
• Multinational companies
• Cooperatives-businesses that are owned and democratically
controlled by their members.
• Organizations can be for profit or non profit like charity, government
schools, government hospitals etc.

5. Perspectives on
Organizations
 Open systems
- Open system thinking pays attention to the
(open) boundary between the organization and its
context.
- Closed system design focuses exclusively upon the
organization without consideration of its
dependence upon or capacity to influence
elements comprising its context.

6. Dimensions of
Organizational
Design
Structural dimensions:
Deals with internal
characteristics of an
organization.
Contextual dimensions:
Characterizes whole
organization, including its size,
technology, environment, and
goals.
To evaluate organization
both structural and
contextual dimensions must
be examined.

7. Dimensions of Organizational Design
Structural dimensions
 Formalization
 Specialization
 Hierarchy of authority
 Centralization
 Professionalism
 Personnel ratios
Contextual dimensions
 Size
 Organizational technology
 Environment
 Goals and strategy
 Culture

8. Structural dimensions
• Formalization: written documents like procedures,
job descriptions, regulations, and policy manuals.
The size of documents determine the level of
formalization.
• Specialization: is referred as division of labor.
Greater the specialization higher is the division of
work, hence specific works performed by workers.
• Hierarchy of authority: reporting and span of
control in number of employees under each
manager.

9. Structural dimensions
• Centralization: refers to hierarchical level that has
authority to make decision. Top level concentration
of decision making.
• Decentralization: when authority and
responsibility is delegated to lower levels.
• Professionalism: is the level of formal education
and training of employees. It is measured by
average number of years of education of
employees.

10. Structural dimensions
• Personnel ratios: The deployment of people to
various functions and departments.
• Personnel ratios include the administrative ratio,
the clerical ratio, the professional staff ratio and
the ratio of indirect to direct labour employees.
• A personnel ratio is measured by dividing the
number of employees in a classification by the total
number of organizational employees.

11. Contextual
dimensions
• Size of the organization is measured by number of
employees, total sales, total assets, total output, also
reflect size.
• Organizational technology: refers to tools, techniques,
equipment and processes used to transform inputs into
outputs. It includes manufacture, information systems and
the internet.
• Environment: includes all the elements outside the
boundary of the organization. Key elements include the
industry, government, customers, suppliers and the
financial com-munity. The environmental elements that
affect an organization the most are often other
organizations.

12. Contextual
dimensions
• Goals and strategies: defines purpose and competitive
techniques that is distinct to each company.
• - Goals are enduring (stable) written statements
reflecting company’s intent.
• Strategy is a plan of action that describes resource
allocation and activities used to reach goals under given
circumstances.

13. Contextual dimensions
• Organization culture: is the underlying key values,
beliefs, understanding pertain to ethical behavior,
commitment to employees, efficiency or customer
service that enables to retain with organization.

14. Interacting different dimensions of
Organization Design

15. Major stakeholder groups and what
they expect

16. Organizational
Structure
 Three key components
 Vertical aspect of organizing
1- Formal reporting relationships including the number of levels
and the span of control.
2- Grouping of individuals into departments and of departments
into the total organization.
 Horizontal aspect of organizing
3- Design of systems to ensure effective communication,
coordination and integration of efforts.

17. A Sample Organization Chart

18. Information-
Processing
Perspective
on
Structure
 Traditional organization versus learning
organization
- Traditional organization design emphasizes
vertical communication and control.
- Learning organization which emphasizes
communication and collaboration.
 Centralized versus decentralized decision making
- Centralized authority focused on top level
decision making.
- Decentralized authority focused on shared
tasks and decisions.

19. Efficiency versus Learning Outcomes

20. Vertical
Informatio
n Linkages
 Vertical linkages coordinate activities between the
top and the bottom of the organization.
Hierarchical referral are the vertical lines which
identify the chain of command. The lines of the
organization chart act as communication channels.
Rules and plans
- Rules enabling employees to be coordinated.
- Plans provide standing information for
employees.
Vertical information systems is a strategy for
increasing vertical information capacity. It includes
reports,
computer-based communication and written
information.

21. Horizontal
Informatio
n Linkages
 Horizontal linkage refers to the amount of
communication and coordinates activities across
organizational departments.
Information systems enable information exchange
throughout the organization.
Direct contact is a higher level of horizontal linkage (i.e.
liaison role). A liaison person is located in one
department but has the responsibility for
communicating and achieving coordination with
another department.
Task force is a temporary committee composed of
representatives from each department affected by a
problem.
Full-time integrator is responsible for coordination.
Teams are the strongest horizontal linkage.

22. Organizational
Design
Alternatives
Three key indicators of organization
design:
 Required work activities
 Reporting relationships
 Departmental grouping options
- Functional grouping
- Divisional grouping
- Multifocused grouping
- Horizontal grouping
- Virtual network grouping

23. Functional Structure
Activities grouped by common
function
All specific skills and knowledge are
consolidated
e.g., all marketing people are located
in the marketing department. All
people associated with the assembly
process for generators are grouped
together in one department.

24. Functional
Structure

25. Divisional Structure
 Product structure or strategic business units
 With this structure, divisions can be organized
according to individual products, services,
product groups, major projects or programs,
divisions, businesses or profit centers.
 The distinctive feature of a divisional structure is
that grouping is based on organizational
outputs.
e.g., Nestlé

26. Divisional
Structure

27. Functional vs Divisional Structure – Example

28. Geographical Structure
 Organizing to meet needs of users/customers by geography.
 It is particular common in large nonprofit organizations.
 Many multinational corporations are organized by country.
 Focuses managers and employees on specific geographic regions.
 Strengths and weaknesses similar to divisional organization.

29. Geographical Structure for Apple Computer, Inc.

30. Matrix
Structure
 Conditions for matrix:
- Condition 1: Share resources across the
organization.
- Condition 2: Two or more critical outputs
required – products and technical knowledge.
- Condition 3: Environment is complex and
uncertain.
 Two variations of matrix structure
- Functional matrix
- Product matrix
 A dual-authority structure can help to ensure a
balance between vertical and horizontal aspects
of organizations.

31. Matrix
Structure

32. Dual-
Authority
Structure in a
Matrix
Organization

33. Horizontal
Structure
 Organization around core processes.
 Key characteristics:
- Structure is created around cross-functional
processes.
- Self-directed teams are the basis of organization
design and performance.
- Process owners are responsible for entire
process.
- People on the team are given authority for
decisions.
- Can increase organization’s flexibility.
- Customers drive the horizontal corporation.
- The culture promotes openness, trust and
collaboration.

34. Horizontal
Structure

35. A Horizontal Structure

36. Virtual Networks
and Outsourcing
 It extends the concept of horizontal coordination and
collaboration beyond the boundaries of the
organization.
 Most common strategy is outsourcing
- Contract out certain tasks/functions.
 Virtual or modular structures subcontract most of their
major functions to separate companies.
 The virtual network organization serves as a central hub
with contracted experts.

37. Virtual
Network
Structure

38. Hybrid Structure
 Organizations often use a hybrid
structure that combines characteristics of
various structure approaches tailored to
specific needs.
 One common type is the combination of
the functional and divisional structures.
 Often used in rapidly changing
environments.
 Greater flexibility.

39. Application of Structural
Design
 Each type of structure is applied in different
situations and is intended to meet different needs.
 Structural alignment aligns structure with
organizational goals.
 Symptoms of structural deficiency:
• Decision making is delayed or lacking quality.
• Organization does not respond innovatively to
a changing environment.
• Employee performance declines, goals are not
being met.
• Too much conflict.

40. Mechanistic
and Organic
Forms

41. Framework for
Organizational
Responses to
Uncertainty

42. Resources
Dependence
• Resource-dependence means
organizations depend on the
environment but strive to acquire control
over resources to minimize their
dependence.
• Minimize vulnerabilities.
• Dependence on shared resources
give power to other organizations.
• Will team up with others when
resources are scarce and be more
competitive.
• Also need to maximize their own
autonomy and independence.