Chapter 15
Organizational Design
& Structure
Nelson & Quick
Organizational Design
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
H. Mintzberg, The Structuring of Organizations, Prentice Hall, © 1979, 301.
Reprinted by permission of Prentice-Hall, Inc, Upper Saddle River, NJ.
Key Organizational Design
Processes
The process of deciding
how to divide the work
in an organization
Four Dimensions
• Goal orientation
• Time orientation
• Interpersonal orientation
• Formality of structure
Horizontal
Differentiation
• The degree of differentiation
between organizational subunits
• Based on employee’s specialized
knowledge, education, or training
Vertical
Differentiation
• The difference in authority and
responsibility in the organizational
hierarchy
• Greater in tall, narrow organizations
than in flat, wide organizations
Spatial
Differentiation
• Geographic dispersion of an
organization’s offices, plants and
personnel
• Complicates organizational design,
may simplify goal achievement or
protection
The process of coordinating
the different parts
of an organization
• Designed to achieve unity among
individuals and groups
• Supports a state of dynamic
equilibrium - elements of organization
are integrated, balanced
Vertical
Integration
•
•
•
•
Hierarchical referral
Rules and procedures
Plans and schedules
Positions add to the organization
structure
• Management information system
Horizontal
Integration
•
•
•
•
Liaison roles
Task forces
Integrator positions
Teams
Formalization - the degree
to which the organization
has official rules,
regulations and procedures
Hierarchy of
Authority the degree of
vertical
differentiation
across
levels of
management
Centralization - the degree
to which decisions are
made at the top of the
organization
Basic
Design
Dimensions
Complexity - the degree to
which many different types
of activities occur in the
organization
Specialization the degree to
which jobs are
narrowly
defined and
depend on
unique
expertise
Standardization - the
degree to which work
activities are accomplished
in a routine fashion
Simple Structure - a
centralized form of
organization that
emphasizes the upper
echelon & direct
supervision
Adhocracy - a
selectively
decentralized
form of
organization that
emphasizes the
support staff &
mutual adjustment
among people
Structural
Configurations
of
Organizations
Machine Bureaucracy a moderately
decentralized form of
organization that
emphasizes the
technical staff &
standardization of
work processes
Divisional Form - a
moderately decentralized
form of organization
that emphasizes the
middle level &
standardization of outputs
Professional
Bureaucracy a decentralized
form of
organization that
emphasizes the
operating level
& standardization
of skills
Five Structural Configurations of Organization
Structural
Configuration
Simple
Structure
Machine
Bureaucracy
Professional
Bureaucracy
Prime
Coordinating
Mechanism
Direct
Supervision
Standardization
of Work
Processes
Standardization
of Skills
Divisionalized Standardization
Form
of Outputs
Adhocracy
Mutual
Adjustment
Key Part of
Type of
Organization Decentralization
Upper
Echelon
Centralization
Technical
Staff
Middle
Level
Limited
Horizontal
Decentralization
Vertical &
Horizontal
Decentralization
Limited Vertical
Decentralization
Support
Staff
Selective
Decentralization
Operating
Level
Size
Technology
Contextual Variables a set of characteristics that
influences the organization’s
design processes
Strategy
& Goals
Environment
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
Technology
Technological
Interdependence the degree of interrelatedness
of the organization’s various
technological elements
Problem Analyzability
Relationship Between
Technology and Basic
Design Dimensions
Key
1 Formalization
2 Centralization
3 Specialization
Task Variability
Few Exceptions
Craft
Ill-defined &
Unanalyzable 1. Moderate
2. Moderate
3. Moderate
4. Low moderate
5. High
6. Low
Well-defined & Routine
1. High
Analyzable
2. High
3. Moderate
4. High
4 Standardization
5 Complexity
5. Low
6 Hierarchy-Authority
6. High
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
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
Strategic Dimension
Predicted Structural
Characteristics
Innovation--to understand
Low formalization
and manage new processes
Decentralization
and technologies
Flat hierarchy
Market differentiation--to
Moderate to high complexity
specialize in customer
Moderate to high
formalization
Moderate centralization
preferences
Cost control--to produce
High formalization
standardized products
High centralization
efficiently
High standardization
Low complexity
Strategy
& Goals
Integrative Framework of
Structural & Strategic Dimensions
The Relationship
among Key
Organizational
Design
Elements
Context of the organization
Correct size
Current technology
Perceived environment
Current strategy & 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
Which characterize the organizational processes
Differentiation & 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
Context of the organization
Forces Reshaping Organizations
• Life cycles in organizations - the
differing stages of an organization’s life
from birth to death
• Globalization
• Changes in Information Processing
Technologies
• Demands on Organizational Processes
• Emerging Organizational Structures
Structural Roles of Managers Today
versus Managers of the Future
Roles of Managers Today
1. Strictly adhering to boss
-employer 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
Roles of Future Managers
1. Having hierarchical
relationships subordinate
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 &
flexibility
7. Coaching one’s workers
Management Review, January 1991, Thomas R. Horton.
Four Symptoms of Structural
Weakness
• Delay in decision Overloaded hierarchy; information
funneling limited to too few channels
making
• Poor quality
Right information not reaching
decision making
right people in right format
• Lack of innovative
No coordinating effort
response to changing
environment
• High level of conflict Departments work against each
other, not for organizational goals
Paranoid
Depressive
Dysfunctional
Personality/Organization
Combinations
Schizoid
Dramatic
Compulsive