Organizational Structure

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Organizational Structure Design
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• 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.

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The Issues

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

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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
  objectives.
• Challenge To choose appropriate levels and
  types of vertical and horizontal differentiation
  and integration.

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Organizational Structure

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

Challenges

• Horizontal differentiation
• Integration
• Centralization
• Formalization

• Authority
• Control
• Sub-units
• Vertical differentiation

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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

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Differentiation(Division of Labor)

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

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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

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Vertical Differentiation

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

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Hierarchy of Authority

• Tall organizations have many levels
• Flat organizations have few levels

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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

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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
  specialization
• Defines personal tasks responsibilities
• Highly specialized jobs have narrow range of
  tasks
• Less specialized jobs have broad range of tasks

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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?

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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

Cont.
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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)

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Highly Centralized Authority

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

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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
  members

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Formalization

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

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Rules and Norms

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

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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

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Matrix Structure
Note the duplication of core functional skills
across each product line.
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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
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• 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.

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• 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.

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VIRTUAL ORGANISATION

• 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
  them.

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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
  culture.
• 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
  culture.

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REORGANIZATION

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

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Traditional
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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.

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

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Planning

• 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?

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Implementation

• 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.

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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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MUL
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Infosys