Knowledge Objectives
1. Explain the concept of contingency organization
design.
2. Distinguish between mechanistic and organic
organizations.
3. Discuss the roles that differentiation and
integration play in organization structure.
1
Contingency Design
• Organizing
– The structuring of a coordinated system of
authority relationships and task responsibilities.
• Contingency Design
– The process of determining the degree of
environmental uncertainty and adapting the
organization and its sub units to the situation.
• How much environmental uncertainty is there?
• What combination of structural characteristics is
most appropriate?
– There is no single best organization design.
2
Contingency Design (cont’d)
• The Burns and Stalker Model
– Mechanistic organizations are rigid in design,
rely on formal communications, and have
strong bureaucratic qualities best suited to
operating in relatively stable and certain
environments.
– Organic organizations have flexible structures,
participative communication patterns and are
successful in adapting to change in unstable and
uncertain environments.
3
Contingency Design (cont’d)
• Joan Woodward’s Study
– When task complexity is either high or low,
organizations with organic structures are more
effective.
– When task complexity is moderate,
organizations with mechanistic structures are
more effective.
4
Contingency Design (cont’d)
• Differentiation & Integration (Lawrence &
Lorsch)
– The relationship of two opposing structural
forces and environmental complexity.
• Differentiation: the tendency of specialists to think
and act in restricted ways, i.e., building deep
functional expertise (e.g., in customer segments,
R&D, manufacturing, finance, etc.)
• Integration: the linkages among specialists
necessary to coordinate behavior to achieve the goal.
– Both differentiation and integration increase as
environmental complexity increases.
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Basic Structural Formats
• Departmentalization
– The grouping of related jobs or processes into
major organizational units.
• Overcomes some of the effect of fragmentation
caused by differentiation (job specialization).
• Permits coordination (integration) to be handled in
the least costly manner.
– Sometimes refers to division, group, or unit in
large organizations.
6
Basic Structural Formats (cont’d)
• Functional
– Categorizing jobs according to the activity
performed (e.g., Marketing, Finance, R&D, etc.)
• Product-Service
– Grouping around a specific product or service.
• Geographic
– Mapping structure to the location of resources &
and customers (e.g., NAFTA, EU, APEC).
• Customer
– Mapping structure to customer segments, e.g. for
a B2B this could be small business customers, 7
Fortune 500 Customers, State & Local Gov’t, etc.
Basic Structural Formats (cont’d)
• Work Flow Process Departments in
Reengineered Organizations
– Creating horizontal organizations that
emphasize speedy work flow between two
points:
• Identifying customer needs
• Satisfying customer needs
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Contingency Design
Alternatives
• The Contingency Approach to Spans of
Control
– Both overly narrow and overly wide spans of
control are counterproductive.
– Situational factors dictate the width of spans of
control.
• Wide spans of control for departments where many
workers work close together and do the same job.
• Narrow spans of control for departments where
work is complex and/or workers are widely
dispersed.
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Contingency Design
Alternatives (cont’d)
• Centralization
– The consolidation of decision-making authority
by top management.
• Decentralization
– The distribution of decision-making authority
to lower-level employees.
• The Need for Balance
– The challenge is to balance the need for
responsiveness to changing conditions
(decentralization) with the need to create low10
cost shared resources (centralization).
The Changing Shape of
Organizations
• New Organizations
– Fewer organizational layers
– More teams
– Smallness within bigness
• New Organizational Configurations
– Hourglass organization: a three-layer structure
with constricted middle (management) layer.
– Cluster organization: collaborative structure in
which teams are the primary unit.
– Virtual organizations: internet-linked networks
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of value-adding subcontractors.