Organizational Design
Fundamentals
Contemplative Questions
• In what type of company would
I like to work?
• How do organizations process
information?
• Are all organizations the same?
• How are they different?
• What career paths can I
pursue?
Management Functions
Designing organizational structures is part of
organizing, one of the four basic management
functions.
Planning
Defining
goals, establishing
strategy, and
developing
subplans to
coordinate
activities
Organizing
Determining
what needs
to be done,
how it will
be done,
and who is
to do it
Leading Controlling
Lead to
Directing
and motivating all
involved
parties and
resolving
conflicts
Achieving the
Monitoring
organization’s
activities
stated
to ensure
purpose
that they are
accomplished
as planned
Org chart example
Chief Executive
Officer
Executive
Vice-President
VicePresident
VicePresident
Region
1
District
A
District
B
Region
2
District
C
President
VicePresident
Region
3
District
D
Executive
Vice-President
VicePresident
Region
4
District
E
VicePresident
Region
5
District
F
District
G
Alternate Org. Form:
A Matrix Organization
Design
ManuEngineering facturing
Contract
Admin.
Purchasing
Accounting
Human
Resources
Alpha
Project
Design
Group 1
Mftg.
Group 1
Contract
Group 1
Purch.
Group 1
Acctg.
Group 1
HR
Group 1
Beta
Project
Design
Group 2
Mftg.
Group 2
Contract
Group 2
Purch.
Group 2
Acctg.
Group 2
HR
Group 2
Gamma
Project
Design
Group 3
Mftg.
Group 3
Contract
Group 3
Purch.
Group 3
Acctg.
Group 3
HR
Group 3
Omega
Project
Design
Group 4
Mftg.
Group 4
Contract
Group 4
Purch.
Group 4
Acctg.
Group 4
HR
Group 4
An IS Department Org Chart
Fig. 1-3.
IS professionals frequently work in project-based teams.
Only 1 team works on a project, usually.
People work on many projects, however (e.g. a matrix organization).
Teams are comprised of diverse group of members from several areas, and
may include users, managers, analysts, programmers, etc.
Organizations

Whether you are a programmer, analyst, user
or manager, it will help your career if you
can understand how organizations work.


Analysts, especially, need to understand how
organizations process information.
There are literally millions of organizations
in the world.


When is a group of people considered an
organization?
An organization is a ________ with some form of
___________ who collectively possess some
___________ .
Organizations




In what type of organization would you like to
work?
All organizations vary in terms of their strategy,
their structure, their processes, their culture.
Organizational structure is almost always
predetermined. It is there on your first day on
the job.
What works at one company may not work in
another, therefore it would be helpful to
classify organizations into certain types.

Then we can make general statements about the
types.
Organizations


In what type of organization would you like to
work?
Think of organizations in terms of 3 dimensions:




Degree of complexity
Formalization
Centralization
These dimensions will help you assess
prospective employers


They generate great questions for job interviews.
They also help to determine how information is
processed within the organization.
Degree of Complexity
 Two dimensions of organizational design
 Vertical (the number of layers of management)
 Span of control = avg. # employees / manager
 Horizontal (how jobs are differentiated)
Unity of Command says everyone should report to one and
only one superior (this is often not the case in IS).
 IS positions commonly require team work
 You may have a superior who advises you and team
leaders or project managers who give you specific
direction
Vertical complexity
Contrasting Spans of Control
Organization Level
(Highest)
Assuming Span of 4
Assuming Span of 8
1
1
1
2
3
4
8
16
64
64
512
256
4,096
4
5
1,024
6
7
4,096
Span of 4:
(Lowest)
4,096 Operatives. 1,365 Managers
Span of 8:
4,096 Operatives. Only 585 Managers!
Which organization looks more appealing to you?
Horizontal complexity
Functional Departmentalization
Plant Manager
Manager,
Engineering
Castings
Dept. Mgr.
Manager,
Manager,
Accounting Manufacturing
Manager,
Human
Resources
Manager,
Purchasing
Press
Dept. Mgr.
Finishing
Dept. Mgr.
Inspection
Dept. Mgr.
Tube
Dept. Mgr.
Horizontal complexity
Product Departmentalization
Bombardier, Inc.
Mass Transit
Sector
Mass Transit
Division
Recreational
Products
Division
Recreational and Utility
Vehicles Sector
Bombardier-Rotax
(Vienna)
Logistic
Equipment
Division
Rail Products
Sector
Rail and Diesel Products
Division
Industrial
Equipment
Division
BombardierRotax
(Gunskirchen)
Horizontal complexity
Customer Departmentalization
Figure 10-7
Director
of Sales
Manager,
Retail Accounts
Manager,
Wholesale Accounts
Manager,
Government Accounts
Horizontal complexity
Geographic Departmentalization
Vice President
for Sales
Sales Director,
Western Region
Sales Director
Southern Region
Sales Director,
Midwest Region
Sales Director
Eastern Region
Centralization and Decentralization
DEGREE OF CENTRALIZATION
DEGREE OF DECENTRALIZATION
Judging by the size of the desk, where do decisions get made?
Which organization looks more appealing to you?
Two Extremes for Organizational Types
Mechanistic
Rigid hierarchical
relationships
Fixed duties
High formalization
Organic
Vertical and horizontal
collaboration
Adaptable duties
Low formalization
Formalized
communication
channels
Informal
communication
Centralized
decision authority
Decentralized
decision authority
Types of Organizations
Mechanistic
Rigid hierarchical
relationships
Fixed duties
High formalization
Organic
Vertical and horizontal
collaboration
Adaptable duties
Low formalization
Formalized
communication
channels
Informal
communication
Centralized
decision authority
Decentralized
decision authority
In which type of organization would you like to work?
Do you like to take orders?
Are you risk-averse, i.e. do you avoid risk?
Do you prefer to be aware of the ‘big picture’?
Woodward’s Findings on Technology,
Structure, and Effectiveness
Unit
Production
Mass
Production
Process
Production
Structural
characteristics
Low vertical
differentiation
Low horizontal
differentiation
Low
formalization
Moderate vertical
differentiation
High horizontal
differentiation
High
formalization
High vertical
differentiation
Low horizontal
differentiation
Low
formalization
Most effective
structure
Organic
Mechanistic
Organic