Basic Challenges of Organizational Design
(Lecture notes)
Mechanistic and organic structures
Mechanistic structure – high complexity (great deal of horizontal differentiation), high
formalization, limited info. Network (mostly top down), little input by low-level members in
decision making. The rigid pyramid-shaped organization.
Opposite is the organic structure –
(transparency – Robbins 204)
Why do structures differ?
Major causes:
1. Strategy
Alfred Chandler´s strategy-structure thesis – changes in corporate strategy precede
and lead to changes in org. structure. Orgs begin with single product or service. Simple,
therefore only simple structure necessary. Low complexity and formalization in org.
structure. Companies expand, need more specialized units. Product diversification leads to
independent divisions.
More contemporary research now focuses on three strategy dimensions – innovation, cost
minimization and imitation – and structural design that works best with each.
Innovation strategy – concentration on innovative products
Cost-minimization strategy – basic product, little innovation, e.g. the discount store
Imitation strategy – combination of the two above. Mass-marketed clothes following
designer styles. Companies that follow smaller innovative companies with perhaps
superior products.
(transparency p. 206)
2. Organization size
Large organizations generally contain a great deal of vertical and horizontal differentiation.
More likely to require decentralized decision making.
More theoretical approach – when an organization hires more employees it will attempt to
take advantage of the economic advantages of specialization. Result is increased
horizontal differentiation. Control by management requires more formal rules and
regulations. Even greater vertical differentiation – new units created to co-ordinate extra
activities of organization members.
3. Technology
Technology – how does an organization transfer its input into output? How does an
organization convert financial, human and physical resources into products or services?
Automobile company uses assembly line – universities use lectures, case studies etc.
Woodward’s thesis – specific structures associated with 3 technology classifications –
unit production, e.g. custom-built articles, mass production, e.g. automobiles and process
production, e.g. oil refineries.
(Transparency 208/ + Jones 273)
Per row’s thesis – Woodward’s thesis only applied to manufacturing industries. Perrow
directed his attention to knowledge technology. He proposed that technology be viewed in
two terms:
- the number of exceptions individuals encountered in their work (task variability)
- the type of search procedures followed to find successful solutions to these exceptions
(problem analyzability)
Task variability – routine jobs (worker on assembly line) vs. consultant. Basically the
number of exceptional solutions there are in a job. The difference between a cook at a
McDonald’s restaurant and a top management position.
Problem analyzability - Some problems easily defined and logical to solve. Others illdefined and cannot be solved by logic. - they require experience, intuition, and judgment.
Perrow used these two dimensions to construct a 2x2 matrix (Ex. 13-4) showing 4 types of
technology.
Routine technologies have few exceptions + easy-to-analyze problems – steel
production/oil refining.
Engineering tech. have many exceptions but can be handled in systematized manner –
construction of bridges.
Craft tech. deal with difficult problems, but few exceptions. Shoemaking and furniture
restoration.
Non-routine tech. have many exceptions + difficult-to-analyze problems, e.g. aerospace
operations.
Perrow argued that cells 1 and 2 fit with mechanistic structures – cells 3 and 4 with organic
structures.
Thompson´s thesis – Thompson argued that 3 techn. categories could be used to
classify organizations – long-linked, mediating, intensive.
Long-linked tech. is characterized by a number of sequential and repetitive steps, such as
assembly-line technology. The success of the operation depends on co-ordination – an
error at the beginning affects the whole process. Input, conversion and output must be
performed in series.
Mediating tech. – based on pooled task interdependence. Each part of the organization
(individual, dept) contributes independently to organization’s performance. .Activities can
be controlled by standardization, e.g. chain of supermarkets. Mediating because the
organization links clients on both the input and the output side of the organization –
manufacturers and customers in the case of supermarkets.
Intensive tech. – a customised response to a diverse set of contingencies. Reciprocal task
interdependence – activities of individuals and departments are fully dependant on one
another. The order etc. of the tasks depends on the feedback from the problem itself. A
good example of this is a hospital – the patient is the client. Thompson argued that
organizations need to protect themselves from uncertainty. Structure depends on this –
long-linked tech. orgs could integrate vertically to ensure availability of inputs, e.g. raw
materials, and the ability to dispose of outputs. It would seem logical to say that long-linked
+ mediating technologies tend to fit best with mechanistic structures – intensive tech. with
organic structures. .
4 Environment
The environment is the organization’s e.g. suppliers, customers, govt. agencies – basically
anything that is outside the control of the org. itself.
Recent research has shown that there are 3 key dimensions to any organization’s
environment – capacity, volatility and complexity.
Capacity refers to the extent to which an environment can support growth, e.g. are there
enough raw materials, customers.
Volatility refers to the amount of change in the environment, e.g. political change.
Complexity – are there e.g. many new competitors.
These factors combined suggest different structural arrangements. The more scarce,
dynamic and complex the environment, the more organic a structure should be. The more
abundant, stable and simple the environment, the more mechanistic it should be.