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Question Sir, Kindly answer the following questions
1. Explain the meaning and purpose of an organizational design. Describe the key factors which affects organizational design and their impact. Illustrate with reference to an organization. Briefly describe the organization you are referring to.
2. Distinguish between the functional organization and the product organization. Describe the boundaryless and virtual organization designs, and discuss how they meet the challenges of the new environment. Explain with suitable examples.
Answer ARIJIT,
HERE IS SOME USEFUL MATERIAL.
REGARDS
LEO LINGHAM
=========================
1. Explain the meaning and purpose of an organizational design. Describe the key factors which affects organizational design and their impact. Illustrate with reference to an organization. Briefly describe the organization you are referring to.
Organization
An organization is a collection of people working together under a defined structure for the purpose of achieving predetermined outcomes through the use of financial, human, and material resources. There are a number of approaches to the structure and management of organizations.
Scientific Theory
The oldest theory of management has a focus on efficiency and production. Evolved into classical organizational theory with the principals of chain of command, unity of command, span of control, specialization, and the use of a scalar chain or vertical levels of authority.The organizational design is bureaucracy.
Classical Theory
Work is divided into specialized tasks and standardized. The hierarchy of authority ( the right to direct ) and responsibility ( the obligation to perform ) is the chain of command. Line authority is linear and derived from position, staff authority is an advisory relationship.
The arrangement of the work group or organizational structure is based on departmentalization.
Span of control refers to how many employees a manager can effectively supervise.
Characteristics of Bureaucratic Structures
Authority and communication flow downward through a rigid chain of command.
The vertical growth represents many levels of supervision and indicates a one person one boss philosophy(unity of command)
The number of people supervised is small(span of control).
Bureaucratic Structure
Bureaucracy results in a line structure, so called because it is a chain of command or leader-follower relationship. It is also called a machine bureaucracy.
This type of structure facilitates large scale administration by coordinating the work of many personnel.
Complex Organizations
Highly structured, formal entities with uniform rules, policies and procedures.
People placed in functional specialty areas with standard pay structures,roles and responsibilities.
Authority clearly designated and centralized=a tall structure
Flat Structures
Less complex organizations have flat structures where authority is decentralized and the span of control is wider.
Other Classical Designs
Simple structure consists of a strategic apex ( executive- level management ) and an operating core ( the individuals responsible for the organizational work ). An example is a private physician’s office.
Classical Designs
A professional bureaucracy consists of an operating core of professionals with decentralized decision making and a well developed support staff. The technostructure ( individuals who standardize and improve the work, such as accountants ) is underdeveloped.Most hospitals are professional bureaucracies.
A divisionalized form is characterized by a number of independent divisions with one administration such as an integrated system.
Adhocracy is a fluid structure using shifting teams of management, staff, and experts.
Human Relations Era
Concern for profit and production along with the human or social elements of an organization.
Fosters cooperation between labor and management and strives for worker autonomy and growth.
Focus on the informal organization with its rewards of attention and recognition.
Neoclassical or Humanistic Theory
Less formal, less control.More participation in decision making with decision authority at the point of service.
Results in a flat structure developed along horizontal lines with fewer levels of management.
Communication is enhanced, but managers can be overburdened.
Neoclassical Theory
Seeks to validate aspects of human behavior in organizations through research; the Hawthorne study.
Views managers as coaches, not as authority figures.
Concerned with employee motivation, satisfaction, creativity.
Authority works with willing participants.
Systems Theory
A system is a set of interrelated parts arranged in a unified whole.
Productivity is viewed as a function of the interplay among people, structure, and the environment.
The organization is a complex social and technical open system that requires human, financial, and material resources.
Learning Organizations
Influenced by systems theory, learning organizations are characterized by five disciplines: systems thinking, personal mastery, mental models, shared vision, and team learning.
Participation, in these organizations, is the basis of learning.
The organizational design is a systems model based on the rapid sharing of information through computer technology. This design can be applied to both bureaucracies and organic structures.
Contingency Theory
The organization’s structure must be matched to its environment to enhance performance.
The optimal form of an organization is contingent on the circumstances faced by that organization including patients, third-party payers, regulators, and personnel.
Chaos Theory
Based upon the belief in the uncertainty and unpredictability of the environment, chaos theory asserts that organizations are living, self-organizing systems that are complex and self-adaptive.
The system moves between order and chaos and is only stable temporarily.
=====================================================
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The key findings of the classical contingency studies are summarized .
Contingency variables
Organizational design variables
-------------------------------------1
Contingency variables ---1
Size (number of employees)
Complexity of operations
technology (automaticity,
workflow rigidity, specificity of
evaluation and continuity of
throughput)
Organizational design variables ----1
Structure:
Role specialization
Standardization of procedures
Formalization
======================================1
Contingency variables ---------------------2
Change in size (number of
employees)
Organizational design variables ----------------------2
Number of divisions
Division of labour
Extent of regulations
Delegation personnel
Delegation budget
Decentralization
Number of hierarchical levels
================================2
Contingency variables ----------------------------3
Size (number of employees)
Organizational design variables ---------------------3
Functional specialization
Role specialization
Standardization
Documentation
Centralization
Vertical span
===================================3
Contingency variables ----------------------------4
Complexity of production
Organizational design variables ----------------------4
technology
Number of hierarchical levels
Relationship wage costs to other costs
Management system
================================4
Contingency variables -----------------------5
Complexity of operations
technology (automaticity,
workflow rigidity, specificity of
evaluation and continuity of
throughput)
Organizational design variables --------------------5
Size
Structure:
Role specialization
Standardization of procedures
Formalization
==================================5
Contingency variables--------------------------6
Task uncertainty (largest impact),
task interdependence and units
Organizational design variables ---------------6
size
Co-ordination mechanisms
(impersonal, personal or impersonal)
===============================6
Contingency variables--------------------------7
Dynamism of environment
Organizational design variables ----------------------7
Stability of organization structure
Elaborateness of organizational design
Ratio of vertical communication to
horizontal/diagonal
Prestige attached to possession of networks,
knowledge and experience
==============================7
Contingency variables --------------------------------8
Uncertainty of the environment
(Measured as clarity of
information, uncertainty of
causal relationships and the time
span of definitive feedback)
Organizational design variables ---------------------------------8
Differentiation:
Goal orientation
Time orientation
Interpersonal orientation
Formality of structure
Integration:
Influence of integrators
Reward system for integrators
Modes of conflict resolution
=====================================8
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PRINCIPLES OF ORGANIZATIONAL DESIGN
Division of Labour
Departmentalization
Specialization
Authority and Responsibility
Line and staff authority
Authority and power
Contingency Factors
Environment and technology
Knowledge technology: task variability & problem analyzability
Spans of Control
Levels of contro
Centralization and decentralization
Contingency Factors
Knowledge technology:
task variability & problem analyzability
=======================================
EFFECTIVE ORGANIZATIONAL DESIGNS
Use functional structures , when the organization is small, geographically centralized, and provides few goods and services.
---------------------------------------------------------------------
When the organization experiences bottlenecks in decision making and difficulties in coordination, it has outgrown its functional structure.
Use a divisional structure when the organization is relatively large, geographically dispersed, and/or produces wide range of goods/services.
Use lateral relations to offset coordination problems in functional and divisional structures.
------------------------------------------------------------------------------------------------------
When the organization needs constant coordination of its functional activities, then lateral relations do not provide sufficient integration. Consider the matrix structure.
To adopt the matrix structure effectively, the organization should modify many traditional management practices.
====================================================================================
ORGANIZATION STRUCTURES
Functional Organizations
Reduces duplication of activities
Encourages technical expertise
-------------------------------------------------
DIVISIONAL ORGANZATIONS
Improves decision making
Fixes accountability for performance
Increases coordination of functions
---------------------------------------------------------
MATRIX STRUCTURES
Reinforces & broadens technical excellence
Facilitates efficient use of resources
Balances conflicting objectives of the organization
--------------------------------------------------------
LATERIAL RELATIONS
Dotted-line supervision
Liaison roles
Temporary task forces
Permanent teams
Integrating managers
=======================================
Organization Design
Organization design is central to an enterprise’s ability to be market driven, adaptive, innovative, and more – in short, to be able to compete effectively.
The design approach is guided by the following core principles:
Organization design is more than just structure – it is the integration of structure, processes, people, culture, systems and technology
Strategy is the starting point – organization design must be driven by, and supportive of, overall strategy
Clarity and accountability underpin sound organization design –when good people know what to do and are held accountable, they achieve results
Transitioning to a new organization end-state requires an integrated approach to change management
=======================================================
Strategic Organization Design
The Need:
Senior organizational leaders are constantly facing the need to restructure their organizations. Changes in leadership, a shift in strategy, or changing factors within an organization often create the need for reorganizing. Organization design is one of the most potent tools available to senior managers for shaping the direction of their organizations. It can be a key leverage point for directing attention and energy to certain critical activities in an organization.
Organizational leaders, however, often lack the tools necessary to help them in making decisions about how to structure their organizations. Efforts at restructuring are often uneven and unsystematic. Decisions to reorganize are often made with insufficient information and without a clear process to guide the effort. The result is that reorganizations often fail to produce the desired effects, leading instead to further confusion or problems within the organization.
The Process:
Strategic Organization Design is a four-phase participative process intended to provide senior leaders with a systematic, step-by-step method for examining the structure of their organizations. The four-phases are as follows:
p Preliminary Analysis
p Strategic Design
p Operational Design
p Implementation
The preliminary analysis involves the collection of information necessary for making design decisions. Structured interviews are conducted focusing on the strategy of the organization, the key tasks being performed and current strengths and weaknesses of the organization. Operational design involves the structuring of supervisory roles, information flows, and jobs within the context of the strategic design decisions. Implementation involves managing the transition from the current design to a new design.
===========================================
Strategic Organization Design
The key restructuring decisions are made during the strategic design phase. This phase involves six steps:
Step 1. Identify design criteria.
Step 2. Generate grouping alternatives.
Step 3. Evaluate grouping alternatives against the criteria.
Step 4. Generate linking mechanisms.
Step 5. Conduct an impact analysis.
Step 6. Select a new design.
The goal of the strategic design phase is to develop grouping and linking combinations that best support the strategy and basic work of the organization. Before any design decisions are made, the management group identifies design criteria - statements about what the new design will need to be able to do. These statements are reflections of the organization's strategy, its basic tasks, and the current strengths and weaknesses identified during the preliminary analysis.
Next, several different grouping alternatives are developed by the group and assessed against the design criteria. Linking or coordinating mechanisms such as liaison roles, integrator departments, etc. are then generated for each of the possible grouping alternatives. This step depends on the need for information exchange between groups in a particular design. Finally, an impact analysis is conducted to determine the effect that the new design will have on the organization. At this point a final design can be selected using the information and ideas generated during each step. Often the final design is a hybrid of several alternatives considered during the process.
Who Should Be Involved?
This process is highly participative, involving each member of senior leadership staff of an organization, i.e. a Vice President and each of his or her direct reports. The process draws heavily on the knowledge of the organization that each senior staff member has, and its success depends on the sharing of their ideas, concerns, and work-related needs. To complete the process usually requires one to two days time for each member of the senior staff.
The process is not only for those groups who have an immediate need to restructure. Leadership groups who only want to modify their organization slightly, or who simply want to reexamine their current structure may also benefit from using this process. The process can help managers to solidify their strategy and ensure that their structure is consistent with it.
Strategic Organization Design Process Outline
Objective: To provide a systematic participative process to help leaders structure their organizations in a way which helps accomplish the overall business strategy as well as the day-to-day work.
Phase I: Preliminary Analysis
Conduct structured interviews to:
v Identify strengths and weaknesses of the existing organization
v Clarify issues related to business strategy and organizational design
Phase II: Strategic Organization Design
v Design Criteria: Review information from the preliminary analysis and
generate criteria for a new design
v Grouping: Generate several design options and evaluate against criteria
- Grouping By Output – Product, Service, or Project
- Grouping By Activity – Function, Work Process, Knowledge or Skill
- Grouping By Customer – Market Segment, Customer Need, Or Geography
v Linking: Identify information flow requirements, select ways to
facilitate the flow of information to meet the requirements, and
evaluate against the criteria
v Impact Analysis: Analyze each option to determine feasibility given the
existing leadership skills, power relationships, and work environment.
Phase III: Operational Design
v Carry out the operational homework necessary to put organization design
decisions in place
v Design work charters, reporting relationships, information flows, etc.
Phase IV: Implementation
v Develop a strategy for implementing the new design
v Assess the potential resistance to the new organization
v Determine the best way to manage the transition from the old
organization to the new one.
==============================================
EXAMPLE OF ORGANIZATION DESIGN / STRUCTURE
APPLE COMPUTERS
THE EMPHASIS IS ON
(1) How to divide work among the organization's subunits?
(2) How to coordinate and control the efforts of the units created?
A WORLDWIDE PRODUCT STRUCTURE
Implements strategies that emphasize global products
Each product division assumes responsibility to produce and sell its products or services though out the world
A WORLDWIDE GEOGRAPHIC STRUCTURE
Implements a multinational or regional strategy
Country-level divisions
Separate divisions for large market countries
APPLE’S GEOGRAPHIC STRUCTURE
HYBRIDS AND WORLDWIDE MATRIX STRUCTURE
Support strategies that include local adaptation and concern for globalization.
Mix geographic units with product or function units
Managers report to multiple supervisors
Conflict, confusion, loss of accountability
Amplified by distance, time, culture, language
THE TRANSNATIONAL NETWORK STRUCTURE
Implements the transnational strategy
Combines functional, product, and geographic subunits in networks
Has no symmetry or balance in its structural form
Resources, people, and ideas flow in
all directions
Nodes or centers in the network coordinate product, functional, and geographic information
NETWORK STRUCTURES HAVE
Dispersed subunits
Specialized operations
Interdependent relationships
Multidimensional perspectives
National subsidiary management senses needs of local customers and host governments
Global business management tracks competitors and coordinates response
Functional management concentrates knowledge and facilitates transfer among organizational units
Distributed, interdependent capabilities
Centralize activities for which global scale or centralized knowledge is important
Involve relevant national units in developing technology, products, marketing strategy
Interdependence of worldwide units is high – the integrated network
EXAMPLE PRODUCT LINKS
CONTROL AND COORDINATION SYSTEMS
Top managers must design organizational systems to control and coordinate the activities of their subunits.
BASIC FUNCTIONS OF CONTROL
Measure or monitor the performances
of subunits
Provide feedback to subunit
managers regarding the effectiveness
of their units
COORDINATION SYSTEMS
Provide information flows among subsidiaries
Link the organization horizontally
CONTROL SYSTEMS
Output
Bureaucratic
Decision making
Cultural
========================
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2. Distinguish between the functional organization and the product organization. Describe the boundaryless and virtual organization designs, and discuss how they meet the challenges of the new environment. Explain with suitable examples.
1.FUNCTIONAL ORGANIZATION.
This organization is structured by major functions.
-manufacturing function.
-production function.
-marketing function.
-sales management function.
-distribution functions.
-supply chain function.
-finance/accounting function
-legal function
-human resource function
etc
2.PRODUCT ORGANIZATION.
This organization is structured by product groups.
EXAMPLE LEVER BROS UK
-personal care products.
-food products.
-cosmetics
-peters ice cream
etc etc
===============================
Different types of organizational structure and their relevance
TYPES OF ORGANIZATION
HORIZONTAL ORGANIZATION
Horizontal organizations consist of teams which are organized around business processes and which are responsible for the results they generate. By flattening portions of the organization and holding the team members accountable for results, it asserts that decisions will be made more quickly and more consistently with business objectives. This tool seeks to reduce problems with cross-functional coordination by ensuring that the team members have the necessary skills to have end-to-end accountability for the process.
Approach
The following steps are critical to creating a horizontal organization:
Organize teams around the most critical business processes.
Give team members ownership of the process and assign a clear process leader.
Cross-train team members for the range of skills needed for their process.
Tie performance measures directly to customer requirements for the process, and reward individuals for individual and team contributions.
Create career development paths consistent with developing team consistent with developing team skills.
Redefine managers' roles to focus on enabling teams to perform through training, coaching, sharing, information, and setting strategic direction.
Benefits
Horizontal organizations are often used to structure processes which requires extensive cross-functional coordination. This tool increases the responsiveness and productivity of an organization. Additionally, horizontal organizations can be used to balance local and global needs within a multinational corporation by creating a network linking the disparate operations.
[these types of organization structure are still very popular with the
''brick and mortar '' type of manufacturing / marketing cos.
these organization are visible and can be seen in types like
-product divisions
-business divisions
-geographical divisions
-functional divisions
etc etc
==========================================###
virtual organization
A virtual organization or company is one whose members are geographically apart, usually working by computer EMAIL and GROUPWARE while appearing to others to be a single, unified organization with a real physical location.
But there is more to virtual organizations then simply replacing the location where people work.
What makes a virtual organization different?
It removes many barriers - especially that of time and location.
It emphasizes concentrating on new services and products, especially those with intensive information and knowledge characteristics, rather than concentrating on cost savings made possible by removing the barriers.
It goes beyond outsourcing and strategic alliances and is more flexible in:
that it has continuously changing partners,
the arrangements are loose and goal oriented,
emphasizes the use of knowledge to create new products and services,
its processes can change quickly by agreement of the partners.
What are the steps to a virtual organization?
Often the steps here go through:
outsourcing mainly to reduce costs where there is some experience in working at a distance, but three is one dominant party and high certainty of what everyone must do.
forming strategic alliances to share the work and gain experience in developing and sharing common goals. Here there is no dominant party although the parties are fixed. and
then becoming virtual organizations to achieve flexibility. Now the partners themselves can quickly change, with greater emphasis on the use of knowledge to create new and innovative products.
Why virtual?
What are the reasons for organizations becoming virtual. These include:
Globalization, with growing trends to include global customers,
Ability to quickly pool expert resources,
Creation of communities of excellence,
Rapidly changing needs,
Increasingly specialized products and services,
Increasing required to use specialized knowledge
[these types of organization structure are becoming very popular with the
''SERVICE '' type of cos.
these organization are visible and can be seen in types like
-insurance
-financial
-consulting
-professional services
etc etc
=========================================================###
INVERTED PYRAMID
Many of today's leaders view their organization as a pyramid, with senior leadership atop the apex, disseminating orders and snapping the proverbial finger expecting immediate responses. Below him or her reside lower echelon leaders and workers organized in subordinate tiers.
This construct is irrespective of your organization's size. If you want to succeed you need to get to the top. Your organization then succeeds because you pulled them to victory.
This perception of leadership has been the norm in nearly every military, governmental and civilian organization.
We grew up in it, we're comfortable with it and we expect to lead in the same structure. Control often rests with one individual. Leaders view workers as personnel to be positively or negatively persuaded to achieve the desired goals of the unit or organization.
THIS ABOVE IS A PYRAMID STRCUTURE.
Consider for an instant, a notion that subordinate tiers are not meant to be supporting of those above them, but instead supported by those placed in leadership positions below them. Envision the organizational pyramid inverted.
The leader stands at the bottom of the organization, supporting those who actually make the mission happen. In this organization the leader doesn't ask, "What are you doing for me?" but instead correctly queries the subordinate, "What can I do to help you?" or "What do you need to be successful?"
This simple variation of a leader's perspective creates an enormous difference in a leader's efficacy. The subordinate, doing the work, is empowered with the resources and the freedom to make the best decision for the particular process or task assigned to them. The individual now thrives in the environment where they are entrusted to make their process, system or task more effective. The organization's leader is successful because his or her personnel push, pushed the unit and its mission to achieve its goals.
To dispose of this misconception, visualize a leader pivoting the inverted pyramid around its point. The leader's actions project a new direction for the top or base of the pyramid. This shift in orientation is the leader's vision. He or she projects the desired course for the unit but the organization itself finds the most effective means and completes the journey.
THIS IS THE INVERTED PYRAMID STRUCTURE.
[these types of organization structure are popular with the
''DIRECT MARKETING '' type of cos.
these organization are visible and can be seen in types like
-COSMETIC DOOR TO DOOR SELLING.
-DOMESTIC APPLIANCES DOOR TO DOOR SELLING
etc etc
========================================================###
Boundaryless Organization:
What are the boundaries?
Vertical - Boundaries between layers within an organization
Classic Example: Military organization
Problem: Someone in a lower layer has a useful idea; "Chain of command" mentality
Horizontal - Boundaries which exist between organization functional units.
Each unit has a singular function.
Problem: Each unit maximize their own goals but not the overall goal of the organization
External - Barriers between the organization and the outside world (customers, suppliers, other government entities, special interest groups, communities).
Customers are the most capable of identifying major problems in the organization and are interested in solutions.
Problem: Lose sight of the customer needs and supplier requirements
Geographic - Barriers among organization units located in different countries
Problem: Isolation of innovative practices and ideas
What is a boundaryless organization?
One that makes all of these barriers much more permeable than they are now; loosen boundaries
Let information/ideas/resources/energy flow throughout the organization and into others.
Can an organization be completely boundaryless? No -- there will always have some hierarchy, functional divisions, geographic boundaries, limits between organization
[these types of organization structure are with the
'' IT COS '' type of SOFTWARE/ SOLUTIONS cos.
these organization are visible and can be seen in types like
-IT
-ITES
-BPO SERVICES
etc etc
===================================================
Matrix structure
Different structures can be combined together. When one has two parallel
organizational structures this is called a matrix structure. The idea is to combine the
advantages of two structures, but this has the obvious disadvantage of being harder to
coordinate and introducing more potential conflict.
In the past most large companies were centralized – that is, involved structures in
which decisions were taken at the centre or upper levels of organization. Just as there
has been a move to flatter organizations, so there has been a move to decentralized
ones.
**MATRIX STRUCTURE
Reinforces & broadens technical excellence
Facilitates efficient use of resources
Balances conflicting objectives of the organization
Increases power conflicts
Increases confusion & stress for 2-boss employees
Impedes decision making
###############################################################
MECHANISTIC ORGANIZATION
mechanistic organizations are often appropriate in stable environments and for routine tasks and technologies. In some ways similar to bureaucratic structures, mechanistic organizations have clear, well-defined, centralized, vertical hierarchies of command, authority, and control. Efficiency and predictability are emphasized through specialization, standardization, and formalization. This results in rigidly defined jobs, technologies, and processes. The term mechanistic suggests that organizational structures, processes, and roles are like a machine in which each part of the organization does what it is designed to do, but little else.
The term "organic" suggests that, like living things, organizations change their structures, roles, and processes to respond and adapt to their environments. Organic structures are appropriate in unstable, turbulent, unpredictable environments and for non-routine tasks and technologies. For organizations coping with such uncertainty, finding appropriate, effective, and timely responses to environmental challenges is of critical importance. Organic organizations are characterized by:
decentralization
flexible, broadly defined jobs
interdependence among employees and units
multi-directional communication
employee initiative
relatively few and broadly defined rules, regulations, procedures, and processes
employee participation in problem solving and decision making, often interactively and in groups
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