Organizational Design III

1
Organizational Design III

• Internal and External Context

2
Contextual Factors

• Contextual factors represent the contingencies
  upon which the appropriate design is chosen
  
• How do we know when a design is appropriate?
• The four contextual factors are
• Size
• Technology
• Environment
• Strategy

3
Contingency Theory Revisited

• Contingency theory suggests that the best
  organizational design is the one that is
  internally consistent, and congruent with its
  environment
• Internal consistency is achieved when the various
  design parameters fit together
  
• relates to size, technology, and strategy
• Environmental congruence refers to fit with the
  environment

4
Organization Size

• In terms of organizational design, size refers to
  the number of employees
  
• Size may be one of the most important correlates
  of structure

5
Org. Size and Design Dimensions
6
Technology

• The technological imperative structure must fit
  technology
  
• Technology in general refers to the tools,
  techniques and actions used by the organization
  to transform inputs into outputs
  
• The relationship with structure is complex due to
  the variety of technologies across different
  units
  
• e.g. in biotech compare RD versus production

7
Woodwards classification

• There are three basic types of technology
• unit technology - small batch and customized
  products
  
• mass technology - large batch, mass production,
  assembly line technology
  
• continuous process technology- e.g. oil refining,
  chemical production
  
• These increase in complexity
• With increasing tech. complexity comes increasing
  adminsitrative structure

8
Technological Interdependence

• the degree of interrelatedness of the
  technological elements of the organization
  
• pooled - elements share a common pool of
  resources (e.g. typing pool)
  
• sequential - the output of one are the inputs for
  another element (e.g. production line)
  
• reciprocal - outputs and inputs are shared amongs
  the units (e.g. surgical team)

9
Technology and structure

• these are increasing in complexity
• as technological complexity increases, so does
  the necessary organizational complexity
  
• need to communicate and coordinate resource
  demands
  
• requires budgeting, planning, scheduling, and
  ultimately, mutual adjustment
  
• organizational complexity may be offset by
  decentralization

10
Strategy and Structure

• The strategic imperative structure follows
  strategy
  
• failure to choose the right structure will
  prevent strategy from succeeding
  
• A simple framework of generic strategies is
• innovation - purpose is to understand and manage
  new processes and technologies (e.g. 3M)
  
• market differentiation - specializing in customer
  preferences (e.g. PG, JJ)
  
• cost control - to produce standardized products
  efficiently (e.g. Kia, Airtran)

11
Generic strategies-generic structures
12
Environment

• Defined as anything outside the boundaries of the
  organization
  
• there are a number of elements in the
  environment
  
• economic, political, legal/regulatory,
  sociocultural, ecological
  
• when these are of relevance or interest to the
  organization they become part of its task
  environment
  
• the task environment includes all organizational
  stakeholders

13
Environmental Dimensions

• simplicity-complexity
• the number of discrete factors or elements in an
  organizations task environment (e.g. diversity
  of markets, legal structures, technological
  knowledge)
• static-dynamic
• the rate of change in the various factors (e.g.
  legal changes, demographic changes, advancement
  of knowledge)
  
• hostility - the amount of competition for
  resources
  
• uncertainty - the ability to predict the future

14
Environments and structure

• the environmental imperative structure should
  reflect the degree of complexity in the
  environment
  
• as complexity grows, so should differentiation
  (the number of specialized functions within an
  organization)
  
• as dynamism increases, so should integration
  (horizontal mechanisms to link specialized
  functions)

15
Mechanistic vs Organic structures
16
How context relates to performance
Size Technology Strategy
Environment
Structure
Performance, survival
17
Review

• We have covered the basic theoretical views of
  why organization structures are the way they are
  
• We have discussed the major design parameters
  (position design, grouping, integrating
  mechanisms)
  
• We have reviewed the major contextual factors
  that influence structure