Challenges of Organizational Design
Balancing Differentiation / Integration
Balancing Centralization / Decentralization
Mechanistic versus Organic Structures
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Differentiation
Design Challenge 1
People in this organization take on new tasks
as the need arises and it’s very unclear who
is responsible for what and who is supposed
to report to whom. This makes it difficult
to know whom to call on when the need
arises and difficult to coordinate people’s
activities so they work together as a team.
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Differentiation
Differentiation: assigning people and resources
to tasks
simple organization -> low differentiation
complex organization -> high differentiation
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Differentiation
The basic building blocks of differentiation are
organizational roles.
An organizational role is a set of task-related
behaviors required of a person by his or
her position in an organization.
For example:
• Maintenance Technician
• Design Engineer
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Differentiation
As the division of labor increases, managers
specialize in some roles and hire people
to specialize in others.
Specialization allows people to develop their
individual abilities and knowledge within
their specific role.
The identification of roles leads to authority
and control issues.
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Differentiation
Authority is the power to hold people
accountable for their actions and to make
decisions concerning the use of resources.
Control is the ability to coordinate and
motivate people to work in an organization’s
interests.
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Differentiation
In most organizations, people with similar roles
are grouped into a subunit.
The main subunits that develop in
organizations are:
• functions (or departments)
• divisions
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Differentiation
A function is a subunit composed of a group of
people who possess similar skills and
knowledge to perform their jobs.
marketing dept.
maintenance dept.
A division is a subunit that consists of a
collection of functions that are related to a
particular good or service.
Motorola’s semiconductor division
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Differentiation
The number of functions and divisions in
an organization is a measure of its
complexity.
Differentiation increases control and allows
an organization to accomplish tasks
effectively.
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Differentiation
As organizations grow in size, they differentiate
into five different kinds of functions:
1) Support functions facilitate relations with
the environment and stakeholders
purchasing
marketing
public relations
sales
legal affairs
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Differentiation
As organizations grow in size, they differentiate
into five different kinds of functions:
2) Production functions manage the efficiency
of the conversion processes
production operations
production control
quality control
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Differentiation
As organizations grow in size, they differentiate
into five different kinds of functions:
3) Maintenance functions enable an
organization to keep its departments
in operation
personnel
engineering
janitorial services
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Differentiation
As organizations grow in size, they differentiate
into five different kinds of functions:
4) Adaptive functions allow adjustment to
changes in the environment
research and development
market research
long-range planning
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Differentiation
As organizations grow in size, they differentiate
into five different kinds of functions:
5) Managerial functions facilitate the
control and coordination of activities within
and among departments.
top management
middle managers
lower-level managers
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Differentiation
An organization chart is a drawing that
shows the end result of organizational
differentiation.
The organization chart is a snapshot of the
way things are “divided up” along
two dimensions:
vertical
horizontal
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Differentiation
Vertical differentiation refers to the way an
organization designs its hierarchy of
authority (i.e., reporting relationships).
Horizontal differentiation refers to the way an
organization groups tasks into roles and
roles into subunits (i.e., functions and
divisions).
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Integration
Design Challenge 2
We can’t get people to communicate and
coordinate in this organization. Specifying
tasks and roles is supposed to help
coordinate the work process, but here it
builds barriers between people and
functions.
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Integration
Integrating Mechanisms
1) Hierarchy of Authority: “who reports to whom”
2) Direct Contact: subunit representatives meet face
to face
3) Liaison Role: a specific person coordinates with
other subunits
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Integration
4) Task Force: temporary committee to coordinate
cross-functional activities
5)
Team: permanent committee
6) Integrating Role: A new role is established
to coordinate the activities of two or more
functions or divisions
7) Integrating Department: A new department
is created to coordinate the activities of
functions or divisions
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Balance differentiation and integration.
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Decision Making
Centralized
•High managerial control
•Low employee empowerment
Decentralized
•Low managerial control
•High employee empowerment
•Crucial in fast-changing environments
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Types of Structures
Two general categories of structure types:
organic and mechanistic
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Mechanistic Structures
Designed to induce people to behave in
predictable ways.
Decision making is centralized
Subordinates are closely supervised
Information flows downward in the hierarchy
Tasks are clearly defined
Integrating mechanisms are simple
Work is very standardized
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Organic Structures
Promote flexibility, so people initiate change and
can adapt quickly
Decision making is decentralized
Roles are loosely defined
Integrating mechanisms are complex
Tasks rely on mutual adjustment
Information flows freely
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Design Goal
Anticipate environmental, social, and
procedural constraints and opportunities
Satisfy interests of primary stakeholders
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