Organization Design

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Organization Design
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Organizational Design

• Organizations change
• Organizations, especially large ones, can be very
  complex

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Bureaucratic Model

• Max Weber
• Design based upon formal system of authority
• Distinct divisions of labor, staffed with experts
• Consistent set of rules for uniform performance
• Hierarchy of positions and chain of command
• Managers should be impersonal
• Employment and advancement based upon technical
  expertise
• - Protect employees against arbitrary firing
• Examples Govt, universities
• Strengths/weaknesses

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Behavioral Model

• Rensis Likert major researcher
• Created dimension and table (matrix) of processes
• System 1 design bureaucratic model
• System 4 design full behavioral model

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System 1 Design

• Leadership process includes no perceived
  confidence and trust.
• Motivational process taps only physical,
  security, and economic motives.
• Communication process is such that information
  flows downward.
• Interaction process is closed.
• Decisions occur at the top.
• Goal setting occurs at top.
• Control is centralized.
• Performance goals are low.

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System 4 Design

• Leadership process includes perceived confidence
  and trust.
• Motivational process taps a full range of motives
  through participatory methods.
• Communication flows freely.
• Interaction process is open.
• Decisions occur at all levels.
• Goal setting encourages group participation.
• Control process is dispersed.
• Performance goals are high.

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Situational View

• Influences
• Technology
• Unit or small-batch technology
• E.g. Brooks Brothers (custom suits), Kinkos
• Often System 4 Design
• Mass production or large-batch
• E.g. Ford, Whirlpool, Phillips
• Often System 1 Design
• Continuous-process
• E.g. Shell, Dow
• Often System 4 Design
• Typically highly automated

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Situational View

• Environment
• Mechanistic organizations
• Bureaucratic
• Most often stable environment
• Well-defined rules and procedures
• E.g. AF, Wendys, Aetna
• Organic organizations
• Unstable, fluid environment
• E.g. Motorola, Limited Brands
• Characterize according to
• Differentiation how many subunits
• Integration how much the units have to cooperate

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Situational View

• Organization size
• Large organizations
• Have greater specialization
• More SOP
• More regulations
• Greater centralization
• E.g. Wal-Mart

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Situational View

• Organization Life Cycle
• Birth, youth, mid-life, maturity
• Organization you need changes over time
• Becomes more mechanistic over time
• More specialized over time
• Coordination demands increase

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Strategy and Organizational Design

• Corporate strategy
• Single product vs. portfolio strategy
• Internationalization strategy
• Life cycle strategy
• Business-level strategy
• Defenders tall and centralized, functional
• Prospectors flat, decentralized
• Differentiators structure around the
  differentiator
• Cost Leadership centralized, functional

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Basic FormsFunctional (U-Form)

• Organize by basic functions
• Operations
• Marketing
• Finance
• HR
• RD
• U form (unitary)
• Example Abercrombie Fitch, WD-40

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Basic FormConglomerate (H-Form)

• Organization is a set of unrelated businesses
• (H stands for holding)
• Often along product lines
• Examples
• GE
• Aircraft engines, appliances, broadcasting,
  lighting,
• Mitsubishi

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Basic FormDivisional (M-Form)

• Organize along related product lines
• (M stands for multidivisional)
• Examples
• Walt Disney
• Theme parks, movies, merchandise
• HP
• PCs, printers, medical equipment
• Allows for autonomy yet take advantage of shared
  resources

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Basic FormMatrix Design

• Organization is a combination of two more basic
  forms
• Examples
• Martha Stewart
• Product groups and lifestyle (wedding, cooking,
  etc.)
• GM
• Major disadvantages
• Uncertain reporting relationships
• Potential conflicting goals
• Coordination required, longer decision making

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New Developments

• Team organization
• Use small project teams
• E.g. Apple, Xerox
• Virtual organization
• Little or no formal structure
• Small corporate staff
• Bring on temporary people, as needed
• Learning organization
• Focus on continual learning, development