Chapter 15
Learning Outcomes
Organizational Design
and Structure
1 Define differentiation and integration as organizational design
processes.
2 Discuss the basic design dimensions managers must consider in
structuring an organization.
3 Describe five structural configurations for organizations.
4 Describe four contextual variables that influence organizational
structure.
5 Explain the forces reshaping organizations.
6 Discuss emerging organizational structures.
7 Identify two cautions about the effect of organizational structures
on people.
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1
Learning Objective
Define differentiation and
integration as organizational design
processes.
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Organizational Design-Evan
the process of constructing and adjusting an
organization’s structure to achieve its goals.
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Organizational Design-Evan
Organizational Design – the process of
constructing and adjusting an
organization’s structure to achieve its
goals.
the linking of
departments and
jobs within an
organization
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Key Organizational Design Processes
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The process of deciding
how to divide the work
in an organization-Katie
Four Dimensions
• Manager’s goal orientation
• Time orientation
• Interpersonal orientation
• Formality of structure
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Horizontal
Differentiation-Katie
• The degree of differentiation
between organizational
subunits
• Based on employee’s
specialized knowledge,
education, or training
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Vertical
Differentiation-Katie
• The difference in
authority and
responsibility in the
organizational hierarchy
• Greater in tall, narrow
organizations than in
flat, wide organizations
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Spatial
Differentiation-Katie
• Geographic dispersion of
an organization’s offices,
plants, and personnel
• Complicates organizational
design, but may simplify
goal achievement or
protection
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Differentiation Between
Marketing and Engineering
Basis for Difference
Marketing
Engineering
Goal orientation
Time orientation
Interpersonal
orientation
Structure
Sales volume
Long run
People
oriented
Less formal
Design
Medium run
Task
oriented
More formal
The process of coordinating
the different parts
of an organization-Robin
• Designed to achieve
unity among individuals
and groups
• Supports a state of
dynamic equilibrium –
elements of organization
are integrated, balanced
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Vertical
Integration
-Robin
•
•
•
•
Hierarchical referral
Rules and procedures
Plans and schedules
Positions added to the
organization structure
• Management information
systems
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Horizontal
IntegrationRobin
•
•
•
•
Liaison roles
Task forces
Integrator positions
Teams
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2
Learning Objective
Discuss the basic design
dimensions managers must
consider in structuring an
organization.
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2 Ways to Approach-Justin
Organizational Design Process
I
establish desired
level of each
structural dimension
on a high-low
continuum and
develop structure that
meets desired
configuration
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2 Ways to Approach-Justin
Organizational Design Process
II
describe what is
or is not
important to the
success of the
organization
rather than worry
about specific
characteristics
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Formalization – the degree
to which the organization
has official rules,
regulations, and procedures
Centralization – the degree
to which decisions are
made at the top of the
organization
Ben M.
Specialization –
the degree to
which jobs are
narrowly
defined and
depend on
unique
expertise
Hierarchy of
Authority –
the degree of
vertical
differentiation
across
levels of
management
Basic
Design
Dimensions
Complexity – the degree to
which many different types
of activities occur in the
organization
Standardization – the
degree to which work
activities are accomplished
in a routine fashion
3
Learning Objective
Describe five structural
configurations for organizations.
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Machine Bureaucracy –
a moderately
decentralized form of
organization that
emphasizes the
technical staff and
standardization of
Structural
work processes
Configurations
Professional
of
Bureaucracy –
Organizations
a decentralized
form of
Divisional Form – a
moderately decentralized organization that
emphasizes the
form of organization
operating level
that emphasizes the
and standardization
middle level and
of skills
standardization of outputs
Simple Structure – a
centralized form of
organization that
emphasizes the upper
echelon and direct
Kyle P
supervision
Adhocracy – a
selectively
decentralized
form of
organization that
emphasizes the
support staff and
mutual adjustment
among people
Five Structural Configurations of Organization-Kyle
P
Structural
Configuration
Prime
Coordinating
Mechanism
Key Part of
Organization
Simple
Structure
Direct
Supervision
Upper
Echelon
Type of
Decentralization
Centralization
Machine
Bureaucracy
Standardization of
Work Processes
Technical
Staff
Professional
Bureaucracy
Standardization
of Skills
Operating
Level
Divisionalized
Form
Standardization
of Outputs
Middle
Level
Limited
Horizontal
Decentralization
Vertical and
Horizontal
Decentralization
Limited Vertical
Decentralization
Adhocracy
Mutual
Adjustment
Support
Staff
Selective
Decentralization
Strategic
Apex
Mintzberg’s
Five Basic
Parts of an
Organization
Middle
Line
Operating Core
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From H. Mintzberg, The Structuring of Organizations (Upper Saddle
River, N.J.: Prentice-Hall, 1979): 20. Reprinted with permission.
4
Learning Objective
Describe four contextual variables
that influence organizational
structure.
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Size
Technology
Contextual Variables –
a set of characteristics that
influences the organization’s
design processes
Strategy
and Goals
Environment
Implications of Size
Basic Design
Dimensions
Formalization
Centralization
Specialization
Standardization
Complexity
Hierarchy of authority
Small
Organizations
Less
High
Low
Low
Low
Flat
Large
Organizations
More
Low
High
High
High
Tall
Technological
Interdependence
the degree of interrelatedness of the organization’s
various technological elements
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Relationship Between
Technology and Basic
Design Dimensions
Task Variability
Few Exceptions
Problem Analyzability
Craft
1. Moderate
2. Moderate
3. Moderate
4. Low moderate
5. High
6. Low
Well-defined and Routine
1. High
Analyzable
Key
2. High
1 Formalization 4 Standardization
2 Centralization 5 Complexity
3. Moderate
3 Specialization 6 Hierarchy of Authority
4. High
5. Low
6. High
Ill-defined and
Unanalyzable
Many Exceptions
Nonroutine
1. Low
2. Low
3. Low
4. Low
5. High
6. Low
Engineering
1. Moderate
2. Moderate
3. High
4. Moderate
5. Moderate
6. Moderate
Built from C. Perrow, “A Framework for the Comparative Analysis of Organization,” American Sociological Review, April 1967, 194-208
Environment
anything outside the boundaries of an organization
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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
?
Environment
Environment
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Extremes of Environmental
Uncertainty-Tyson
Mechanistic Structure – an organizational
design that emphasizes structured
activities, specialized tasks, and centralized
decision making
Organic Structure – an organizational design
that emphasizes teamwork, open
communication, and decentralized decision
making
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Key Organizational Design ElementsTyson
Context of the organization
Correct size
Current technology
Perceived environment
Current strategy and goals
Influences how manager perceive structural needs
Structural dimensions
Level of formalization
Level of centralization
Level of specialization
Level of standardization
Level of complexity
Hierarchy of authority
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Strategic Dimension
Innovation—to understand
and manage new processes
and technologies
Market differentiation—to
specialize in customer
Cost control—to produce
standardized products
efficiently
Dillin
Predicted Structural
Characteristics
Low formalization
Decentralization
Flat hierarchy
Moderate to high complexity
Moderate to high preferences
formalization
Moderate centralization
High formalization
High centralization
High standardization
Low complexity
Miller’s Integrative
Framework of
Structural & Strategic Dimensions
© 2009 Cengage Learning. All rights reserved.
D. Miller, “The Structural and Environmental Correlates of Business Strategy,” Strategic Management Journal 8 (1987): 55-76.
Copyright @ John Wiley & Sons Limited. Reproduced with permission.
Which characterize the organizational
processes-Dillin
Differentiation and Integration
Which influence how well the structure meets its
Purposes
Designate formal
lines of authority
Designate formal
informationprocessing patterns
Which influence how well the structure fits the
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Context
of the organization
5
Learning Objective
Explain the forces reshaping
organizations.
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Organization Life Cycle
the differing stages of an
organization’s life from birth to death
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Forces Reshaping
Organizations
• Globalization
• Changes in InformationProcessing Technologies
• Demands on Organizational
Processes
• Emerging Organizational
Structures
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Structural Roles of Managers
Roles of Managers Today
Roles of Future Managers
1. Strictly adhering to boss–
employee relationships
2. Getting things done by
giving orders
3. Carrying messages up
and down the hierarchy
4. Performing a set of tasks
according to a job description
5. Having a narrow functional
focus
6. Going through channels,
one by one by one
7. Controlling subordinates
1. Having hierarchical
relationships subordinated
2. Getting things done by
negotiating
3. Solving problems and
making decisions
4. Creating the job through
entrepreneurial projects
5. Having a broad crossfunctional collaboration
6. Emphasizing speed and
flexibility
7. Coaching one’s workers
Management Review, January 1991, Thomas R. Horton.
6
Learning Objective
Discuss emerging organizational
structures.
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Emerging structures
• Network organizations
• Virtual organizations
• Circle organizations
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HD’s Circle Organization
Create
Demand
Produce
Product
Provide
Support
Leadership and
Strategy Council
(LSC)
From R. Teerlink and L. Ozley, More than a Motorcycle: The Leadership Journey at Harley-Davidson. Boston, MA, 2000. P. 139.
Copyright © 2000 by the Harvard Business School Publishing Corporation; all rights reserved.
© 2009 Cengage Learning. All rights reserved.
7
Learning Objective
Identify two cautions about the effect of
organizational structures on people.
© 2009 Cengage Learning. All rights reserved.
Four Symptoms of Structural
Weakness-Zach
Overloaded hierarchy; information
• Delay in
funneling limited to too few channels
decision making
• Poor quality
Right information not reaching
right people in right format
decision making
• Lack of innovative
No coordinating
response to changing
effort
environment
• High level of
Departments work against each other,
conflict
not for organizational goals
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Paranoid
Depressive
Dysfunctional
Personality/Organization
Combinations-Zach
Schizoid
Dramatic
Compulsive