Basic Challenges of Organizational Design: Rand Nasaa DIMA HAJAIA 5190002
Basic Challenges of Organizational Design: Rand Nasaa DIMA HAJAIA 5190002
Basic Challenges of Organizational Design: Rand Nasaa DIMA HAJAIA 5190002
Basic Challenges
of Organizational
Design
RAND NASAA
D IM A H A J A I A 5 1 9 0 0 0 2
Learning Objectives
Describe the four basic organizational design challenges confronting managers and
consultants
Discuss the way in which these challenges must be addressed simultaneously if a high-
performing organizational structure is to be created
Distinguish among the design choices that underlie the creation of either a mechanistic or an
organic structure
Recognize how to use contingency theory to design a structure that fits an organization’s
environment
4.1 Differentiation
Differentiation: The process by which an organization allocates people and resources to
organizational tasks and Establishes the task and authority relationships that allow the
organization to achieve its goals.
Division of labor: The process of establishing and controlling the degree of specialization in
the organization
4.1 Differentiation
To examine why differentiation occurs and why it poses a design challenge is to examine an
organization and chart the problems it faces as it attempts to achieve its Goals.
In a simple organization, differentiation is low because the division of labor is low.
◦ One person or a few people perform all organizational tasks.
Figure 4.1
Design Challenge
Figure 4.1
Design Challenge
Figure 4.1
Design Challenge
Figure 4.1
Design Challenge
Figure 4.1
Organizational Roles
Figure 4.2
Organizational Roles
The basic building blocks of differentiation are organizational roles.
Organizational Roles: Set of task-related behaviors required of a person by his or her position in an
organization.
◦ 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
Managerial • Facilitate the control and coordination of activities within and among departments
functions
Vertical and Horizontal Differentiation
Organizational
Chart of the B.A.R.
and Grille
Figure 4.3
Vertical and Horizontal Differentiation
Hierarchy: A classification of people according to their relative authority and rank.
Vertical differentiation: The way an organization designs its hierarchy of authority and
creates reporting relationships to link organizational roles and subunits.
Horizontal differentiation: The way an organization groups organizational tasks into roles
and roles into subunits (functions and divisions).
Organizational Design Challenges
Figure 4.4
4.2 Balancing Differentiation and Integration
Horizontal differentiation is supposed to enable people to specialize and become more
productive.
◦ Specialization limits communication between subunits and prevents them from learning
from one another.
subunit orientation : a tendency to view one’s role in the organization strictly from the
perspective of the time frame, goals, and interpersonal orientations of one’s subunit.
4.2 Balancing Differentiation and Integration
To avoid the communication problems that can arise from horizontal differentiation,
organizations try to find new or better ways to integrate functions—that is, to promote
cooperation, coordination, and communication among separate subunits.
Integration and Integrating Mechanisms
Integration: The process of coordinating various tasks, functions, and divisions so that they
work together and not at cross-purposes.
Integration and Integrating
Mechanisms
Types of Integration Mechanisms:
Hierarchy of authority
o Dictates “who reports to whom”
o Direct contact : Managers meet face to face to coordinate activities
o Problematic that a manager in one function has no authority over a manager in another
Liaison roles: A specific manager is given responsibility for coordinating with managers from
other subunits on behalf of their subunits.
Integration and Integrating
Mechanisms
Types of Integration Mechanisms
Task force: A temporary committee set up to handle a specific problem.
◦ Task force members responsible for taking coordinating solutions back to their respective
functions for further input and approval.
Teams : A permanent task force used to deal with ongoing strategic or administrative issues.
Types of Integration Mechanisms
INTEGRATING ROLES OR DEPARTMENTS :
Integrating role: A full-time position established specifically to improve communication between
divisions.
◦ Focused on company-wide integration.
Integrating department: A new department intended to coordinate the activities of functions or
divisions.
◦ Created when many employees enact integrating roles.
Table 4.1
Types and Examples of
Integrating Mechanisms
Indicates managers with responsibility
for integration between subunits
Figure 4.5
Indicates managers with responsibility
for integration between subunits
Figure 4.5
Indicates managers with responsibility
for integration between subunits
Figure 4.5
Differentiation versus Integration
Managers facing the challenge of deciding how and how much to differentiate and integrate
must:
1. Carefully guide the process of differentiation.
2. Carefully integrate the organization by choosing appropriate integrating mechanisms.
4.3 Balancing Centralization and
Decentralization
Disadvantages: Top managers have little time to spend on long-term strategic decision making,
vand planning crucial future organizational activities (such as deciding on the best strategy to
vcompete globally, is neglected) when they become overloaded in operational decision making
vabout day to day resource issues (such as hiring people and obtaining inputs).
Centralization versus Decentralization of
Authority
Advantages Vs Disadvantages of Decentralization:
Advantages:
1. Promotes flexibility and responsiveness by allowing lower-level managers to make on-the-spot decisions.
2. Managers remain accountable for their actions but have the opportunity to assume greater
responsibilities and take potentially successful risks.
3. Managers can make important decisions that allow them to demonstrate their personal skills and
competences.
4. Managers are more motivated to perform well for the organization.
Disadvantages:
1. So much authority is delegated that managers at all levels can make their own decisions, planning and
coordination become very difficult.
2. may lead an organization to lose control of its decision-making process!
Centralization versus Decentralization of
Authority
Figure 4.6
4.5 Mechanistic and Organic Organizational
Structures
Figure 4.7
Contingency Approach to Organizational
Design
Contingency Approach: A management approach in which the design of an organization’s
structure is tailored to the sources of uncertainty facing an organization.
o Organization should design its structure to fit its environment(must design its internal
structure to control the external environment).
Figure 4.8
Lawrence & Lorsch on Differentiation,
Integration, and the Environment
The strength and complexity of the forces in the general and specific
environments have a direct effect on the extent of differentiation inside an
organization.
The number and size of an organization’s functions mirror the organization’s
needs to manage exchanges with forces in its environment.
Lawrence & Lorsch on Differentiation, Integration,
and the Environment
Functional Differentiation
and Environmental
Demands
Figure 4.9
Lawrence & Lorsch on Differentiation,
Integration, and the Environment
Investigated how companies in different industries differentiate and integrate their
structures to fit the environment.
Table 4.2
Lawrence & Lorsch on Differentiation,
Integration, and the Environment
Findings: Lawrence and Lorsch
When environment is perceived as very complex and unstable:
o The attitudes and orientation of each department diverged significantly
4-44
Burns and Stalker on Organic versus Mechanistic
Structures and the Environment
They found that Organizations need different kinds of structure to control their activities
based on the environment
◦ Organic structures are more effective when the environment is unstable and changing.
◦ Mechanistic structures are more effective in stable environments.
Burns and Stalker on Organic versus Mechanistic
Structures and the Environment
Rapidly changing and on-the-spot environment:
o Rapid communication and information sharing are often necessary to respond to customer needs
and develop new products.
Stable environment:
o Managing resource transactions is easy.
o better performance can be obtained by keeping authority centralized in the top-management team
and using top-down decision making.
Burns and Stalker on Organic versus Mechanistic
Structures and the Environment
Figure 4.10
It is important to realize :
mechanistic and organic structures are ideals: They are useful for examining how
organizational structure affects behavior, but they probably do not exist in a pure form in any
real-life organization.
Most organizations are a mixture of the two types, The most successful organizations are
those that have achieved a balance between the two.
An organization may tend more in one direction than in the other, but it needs to be able to
act in both ways to be effective.
Companies with a mechanistic structure tend to fare best in a stable environment. Those with
an organic structure tend to fare best in an unstable, changing environment.
End Of Chapter