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Organizational Structure


The word itself is derived from the Greek word ???a??? (organon) meaning tool. The Issues ... This is an architectural task. Purpose: To create a design that ... – PowerPoint PPT presentation

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Title: Organizational Structure

Organizational Structure Design
  • An organization is a formal group of people with
    one or more shared goals. The word itself is
    derived from the Greek word ???a??? (organon)
    meaning tool.

The Issues
  • Definitions Design structure
  • Differentiation
  • The integration challenge
  • Centralization
  • Formalization
  • Rules norms
  • Multi-organization design structure

Organizational Design
  • Definition The process of defining and
    coordinating organizational structure elements.
    This is an architectural task.
  • Purpose To create a design that will coordinate
    organizational tasks motivate people to achieve
  • Challenge To choose appropriate levels and
    types of vertical and horizontal differentiation
    and integration.

Organizational Structure
  • The definition, distribution, and arrangement of
    interlocking roles (i.e., who does what). This is
    created by building what the architects

  • Horizontal differentiation
  • Integration
  • Centralization
  • Formalization
  • Authority
  • Control
  • Sub-units
  • Vertical differentiation

Impact of Design Structure
  • Physical appearance of organization
  • Nature of jobs
  • Efficiency of organization
  • Effectiveness of organization
  • Relationships with other organizations
  • Nature and quality of work experience for
    organizational members
  • Organizational culture

Differentiation(Division of Labor)
  • Definition Allocation of people and resources
    to tasks establishment of task authority
  • Identifies total set of organizational tasks
  • Divides tasks into jobs, departments, divisions
  • Assigns authority authority relationships

Sub-Unit ChoicesDepartments, Divisions, etc.
  • Functional Based on functions performed (e.g.,
    production, sales, research)
  • Product Based on products and services produced
    (e.g., food, cleaning supplies, pharmaceuticals)
  • Customer Based on customers served (e.g.,
    convenience stores, supermarkets)
  • Geography Based on physical location
  • Matrix Based on a combination of function,
    product, customer and/or geography. Creates dual
    authority and dual responsibility

Vertical Differentiation
  • Vertical differentiation Design of hierarchy
    with reporting relationships to link roles and
  • Defines who reports to whom
  • Defines areas of responsibility
  • Hierarchy Classification of people according to
    authority and rank

Hierarchy of Authority
  • Tall organizations have many levels
  • Flat organizations have few levels

Span of Control
  • The number of organizational members who report
    to a manager
  • Wide span of control means one manager supervises
    many members
  • Narrow span of control means one manager
    supervises a small number of members

Horizontal Differentiation
  • Horizontal differentiation The way an
    organization groups tasks into jobs/roles and
    jobs/roles into sub-units
  • Establishes the division of labor and level of
  • Defines personal tasks responsibilities
  • Highly specialized jobs have narrow range of
  • Less specialized jobs have broad range of tasks

The Integration Challenge
  • Integration The process of coordinating tasks,
    functions, sub-units so they work effectively
    together not at cross-purposes
  • Challenge Now that we have differentiated both
    vertically and horizontally, how do we integrate?

Integrating Mechanisms
  • Hierarchy of authority Ranking of employees
    specifies who reports to whom
  • Direct Contact Face-to-face meetings to
    coordinate activities
  • Liaison Role Person assigned responsibility for
    coordinating his/her unit with persons from other
    units (part of job)
  • Task Force Temporary committees with members
    from multiple units coordinate activities

Integrating Mechanisms (cont.)
  • Team Permanent committees with members from
    multiple units coordinate activities
  • Integrating role Person assigned responsibility
    for coordinating activities of multiple units
    (persons entire job)

Highly Centralized Authority
  • Authority given to a few top managers, allowing
    decisions to be made by those with the big
  • Facilitates development of a few masters of
  • Provides non-decision makers the freedom to
    perform technical tasks with fewer distractions

Decentralized Authority
  • Authority distributed throughout the organization
  • Allows leaner organizations and fewer levels
  • Allows those closest to problems and
    opportunities to make decisions
  • Is received favorably by many organizational

  • High formalization Formal rules and procedures
    used to standardize operations (Do it by the
  • Usually associated with centralized authority
  • Low formalization Coordination by mutual
    adjustment rather than formal rules procedures
  • Usually associated with decentralized authority

Rules and Norms
  • Rules Formal, written statements that specify
    appropriate behavior means for reaching desired
  • Norms Unwritten but generally agreed upon
    standards of behavior that are considered
    acceptable and appropriate means for reaching
    desired goals

Multi-Organization Design Structure Issues
  • Conglomerate Separate companies without close
    product or service relationship that are overseen
    by a single parent company
  • Strategic alliance Two or more firms combine
    competitive capabilities to operate a business
    without sharing ownership or general management
  • Network design Very small central organizational
    structure contracts with other organizations to
    develop and deliver the network organization's
    products and services

Matrix Structure
Note the duplication of core functional skills
across each product line.
Matrix organizations provide clear accountability
within a specific business function and allow
more efficient allocation of specialized skills
across the entire business. By taking advantage
of the shared services and skills and not having
to develop and manage those skills themselves,
the divisional or product line organizations can
better focus on their core business objectives
  • Weak/Functional Matrix A project with only
    limited authority is assigned to oversee the
    cross-functional aspects of the project. The
    functional managers maintain control over their
    resources and project areas.
  • Balanced Functional Matrix A project manager is
    assigned to oversee the project. Power is shared
    equally between the project manager and the
    functional managers.
  • Proponents of this structure believe it strikes
    the correct balance, bringing forth the best
    aspects of functional and projectized
    organizations. However, this is the most
    difficult system to maintain as the sharing of
    power is a very delicate proposition.

  • Strong/Project Matrix A project manager is
    primarily responsible for the project. Functional
    managers provide technical expertise and assign
    resources on an as-needed basis.
  • Because project resources are assigned as
    necessary there can be conflicts between the
    project manager and the functional manager over
    resource assignment. The functional manager has
    to staff multiple projects with the same experts.

  • Growing complexity in the business environment
    makes "business as usual" ineffective.
    Globalization extends the need for communication
    and coordination across different time zones and
    locations. Change has become the norm, an
    unpredictable basic reality. Corporations are
    evolving into virtual enterprises using
    integrated computer and communications
    technologies. These collaborative networks are
    not defined by concrete walls or physical space,
    but make it possible to draw upon vital resources
    as needed, regardless of where they are
    physically located and regardless of who owns

Learning Organization
  • A boundary less environment is required by
    learning organizations to facilitate team
    collaboration and the sharing of information.
    When an organization develops the continuous
    capacity to adapt and survive in an increasingly
    competitive environment because all members take
    an active role in identifying and resolving
    work-related issues, it has developed a learning
  • A learning organization is one that is able to
    adapt and respond to change. This design empowers
    employees because they acquire and share
    knowledge and apply this learning to
    decision-making. They are pooling collective
    intelligence and stimulating creative thought to
    improve performance. Supervisors facilitate
    learning by sharing and aligning the
    organization's vision for the future and
    sustaining a sense of community and strong

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  • Customer Focused
  • Organizational Redesign is structuring an
    organization, division or department to optimize
    how it supplies products and services to its
    clients and customers.

Steps in Reorganization
  • Determining How the Company Goes to Market
  • Sketch how the current organizational structure
    (e.g., departments, roles, responsibilities,
    information flow, decision-making, etc.) supports
    how the company goes to market. Include
  • What the current structure does well.
  • What the current structure does not do well.
  • If possible, "numbers" that put a value to what
    is done well and what not.

  • Draw an ideal organizational structure.
  • Focus on
  • How it can improve upon the current situation (in
  • What it can improve upon.
  • How it will affect the organization and its
    parts, processes and people.

  • Determine who should be involved in the planning
    process, in particular "RACI", i.e. who is
    Responsible, Accountable, Consulting and who
    should be kept Informed.
  • List the major players who perform or are
    involved in the key processes that support the
    current structure.
  • What would the ideal organization (processes,
    roles, people) look like (first draft)? Who would
    fill what position? How can the current players
    be utilized in this new schema?
  • What new equipment, technology, resources,
    people, skills or systems would be needed in the
    new structure?

  • Develop a schedule (dates and RACI) for the
    change from the current situation to the ideal
    state. Create flowcharts that capture the
    changeover. Be specific about
  • When and how the change from the old to the new
    will occur.
  • Impediment that might appear during the
    transition .Create scenarios of what might occur
    and how they can be handled.
  • Create a program that would prepare employees for
    the change.

Administrative Issues
  • Regular communication to staff regarding the
    progress, decisions, plans, etc., of the project.
  • A written plan that is shared with key personnel,
    that is referred to periodically, updated when
    necessary and referred to continually.
  • Scheduled "monitoring" meetings between the
    Project Team, Sponsor, Oversight Committee.

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