BA105-1:
Organizational Behavior
Professor Jim Lincoln
Week 2: Lecture
Organization design I:
Session objectives
• Introduce organization design as the clearest case
of the “manager as engineer” perspective
• Understand the legacy of classical (“one best
way”) design theory
• Understand principles of grouping and linking
• Get a feel for strategic organization design from
the congruence or “fit” perspective
– There is no “one best way”
– Every design must be aligned with the organization’s
environment, strategy, & internal architecture.
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Organizational Design
Informal
Organization
Input
(culture, leadership,
networks, politics)
Environment
(Competition,
change)
Resources
(munificence)
History (age,
conditions at
founding)
Strategy
(diversification;
innovation)
Formal
Organization
Output
(job titles,
departments,
reporting hierarchy,
IT & HR systems
Systems
Tasks
(technologies,
work flows)
Unit
Individual
People
(ability, skills,
motivation,
biases)
3
What is formal organization?
Bureaucracy! Meaning what exactly…?
• Formal structure
–
Grouping (or division of labor or differentiation)
•
–
Linking (or coordination or integration)
•
•
Divide work and group people doing similar tasks into
distinct jobs and work units
Devise mechanisms of control and coordination to
direct activity and create an integrated whole
Formal rules & measurement systems
–
–
–
Accounting & finance
Inventory and process control
Human resource
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What should structure do?
• Provide efficiency in the
accomplishment of tasks
• Coordinate and integrate
activities across the
organization
• Economize on information
processing
• Empower people to undertake
and accomplish challenging
tasks
• Allow for flexibility
– adjust quickly and smoothly to • Fit the organization’s strategy
new conditions
and environment
– Support creativity & innovation
• Align with & support the
• Channel individual behavior
organization’s culture,
in cooperative & productive
networks, incentive systems,
ways
etc.
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What shouldn’t structure do?
• Cause overspecialization
leading to unmanageable
coordination problems
• Balkanize the organization
into warring fiefdoms
• Disempower and
demotivate people
• Breed “bureaucratic
personalities”
• Be a residue or holdover from
the past
• Mire the organization in “red
tape”
• Become a weapon in
organizational politics
• Divert or smother alternative
means of channeling &
coordinating action
• Become sacred and
ceremonial
• Provide a safe haven for the
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incompetent or unmotivated
• This week:
– Classical and mainstream design
perspectives
• Next week:
– Modern “new economy” design
perspectives
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SCIENTIFIC MANAGEMENT :
“Systems so perfect that no one will need to be good”
Frederick W. Taylor: The Principles of Scientific Management, 1911.
Frank B. Gilbreth: Motion Study, a Method for Increasing the Efficiency of the Workman.
New York, D. Van Nostrand Company, 1911.
Which always brings to mind….
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The Scientific Management Program:
The Origin of Industrial Engineering
• Time and motion study
• Reduce physical tasks to elemental units (“therbligs”).
Recombine in maximally efficient way
• Fixed rules & standards for physical task performance
• Pay geared to performance (piece rates)
• Production scheduling, equipment design, shop layout
• Scientific method (measure, experiment)
• Functional foremanship
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Taylor’s Functional Foremanship
Maintenance
Foreman
Worker A
Operations
Foreman
Worker B
Quality
Assurance
Foreman
Worker C
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The Line and Staff Alternative
Maintenance
Worker A
Line
Foreman
Worker B
Quality
Assurance
Worker C
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CLASSICAL ADMINISTRATIVE THEORY
Henry Fayol: General and Industrial Management, 1949
L. Gulick and L. Urwick: Papers on the Science of Administration, 1937
J. Mooney: The Principles of Organization, 1947
• Principles of horizontal structuring
– Specialization (divide tasks)
– Unity of direction (group tasks into departments)
• Principles of vertical structuring
– Unity of command
– Scalar chain
• “Go through channels”
– Span of control
• Principles of authority and decision-making
– Centralization:
• Fit authority to responsibility
• Delegate routine decisions; manage exceptions
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Specialization
(Division of Labor)
13
Unity of Direction
(Grouping)
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Principles of Hierarchy:
Unity of Command, Scalar Chain, Span of Control
15
Logical flaws in CM: The trade-off between hierarchy & span of control
CEO
Case 2
Case 1
CEO
“A”
“A”
Herbert Simon: “The proverbs of administration.”
Public Administration Review 6 (1946):53-67. 16
Do organizations have to be
hierarchical?
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Coordination by hierarchy economizes on
communication and centralizes control
Marketing
Manufacturing
Accounting
Management
Engineer
ing
Human
Resources
18
Coordination by mutual adjustment maximizes
communication and diffuses control
Marketing
Manufacturing
Accounting
Engineering
Human
Resources
19
Coordination by rules & standards
economizes on hierarchy and communication
Marketing
Accounting
Manufacturing
Engineer
ing
Human
Resources
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Choose the coordination solution that fits the
degree of interdependence
Need for
Integration
Coordinating
Mechanism
1. Pooled Interdependence
Regional HQ
Low
Hotel A
Hotel B
Rules/standards
Hotel C
2. Sequential Interdependence
Medium
Product
Development
Manufacturing
Hierarchy
Sales
3. Reciprocal Interdependence
High
Aircraft
Scheduling
Operations
Maintenance
Mutual
Adjustment
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Strategic grouping:
Functional and Divisional
Organization
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Strategic grouping dimensions
• Inputs
– Functions, disciplines, or skills: engineering, finance,
manufacturing, marketing, accounting, HR, PR,
maintenance, quality, legal, logistics, etc.
• Outputs
– Product: attributes, benefits to customers, underlying
technology (what does it do? or how does it work?)
– Customer: attributes or preferences; ways of buying or
using products
– Region: (Northeast, midwest; Europe; East Asia)
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Functional organization
General
Manager
Human
Resources
Engineering
Manufacturing
Market
ing
Accounting
24
Functional organization
General
Manager
Human
Resources
Engineering
Product
A
Manufacturing
Product
B
Marketing
Accounting
Product
C
25
Product division organization
CEO
Product B
(Prefab
Houses)
Product A
(Cars)
HR
Mfg
Mkt
HR
Mfg
Product C
(Electronics)
Mkt
HR
Mfg
Mkt
26
Regional division organization
CEO
North
America
HR
Mfg
Europe
Mkt
HR
Mfg
Asia Pacific
Mkt
HR
Mfg
Mkt
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Customer-type divisions
CEO
Home
market
HR
Mfg
Education
market
Mkt
HR
Mfg
Corporate
market
Mkt
HR
Mfg
Mkt
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Is the Haas teaching mission organized
functionally or divisionally?
Undergrad
Undergrad
Program
Profs.
Ding &
Lincoln
OBIR faculty
MBA
Program
(Chatman, Ding,
Freeman,
Lincoln, Staw,
Tetlock)
MBA
Profs.
Chatman
& Staw
PhD
PhD
Program
Profs.
Freeman
& Tetlock
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Functional Organization
Pluses
• Lean and simple
– Good fit to small, young, focused
organizations
• Functions are efficiently deployed
• Breeds strong, highly-developed
functions
• Good fit to strategy based on
functional capabilities
• Good fit to a stable, homogenous
environment
• Good coordination of functions
across products & markets
Minuses
• High interdependence
– Problem of hand-offs
• & functions becoming “silos”
– Puts a heavy coordination burden
on top management
• Poor development of GM skills
• Hard to monitor performance
• Poor fit to these strategies:
– Diversification
– Product, customer, or region
focus
• Poor fit to turbulent,
heterogeneous environment
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Functional organization
General
Manager
Human
Resources
Engineering
Product
A
Manufacturing
Product
B
Marketing
Accounting
Product
C
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Next time: Allentown Materials Case
Steps in preparation:
1. Assess Allentown’s problems in relation to its strategy and
environment
2. Consider all the issues in the case but focus on the strategic
design issues of grouping (differentiation) and linking
(integration).
3. Analyze cause and effect relationships behind problems
» Work back from immediate to root causes
» Assess importance of cause-and-effect chains
4. Devise solutions that:
» Impact causes
» Are consistent and realistic
5. Think about an implementation plan that:
» Has few negative spillovers (unintended consequences)
» That minimizes alignment problems
» That minimizes resistance
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