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Organization Structure

Dr. S. Jeyavelu

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Defining Organizational Structure

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Defining Organizational Structure

Formal reporting relationships

Number of levels in the hierarchy

Span of control of managers

Departmentalizationgrouping of individuals

Grouping of departments into the total organization

Design of systems to ensure effective communication,coordination, control and integration of effort acrossdepartments

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A Typical Organization Chart

CEO

Production Finance Marketing

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Choosing a Structure

Required Work Activities

Departmentalization

Reporting Relationships Departments must fit into overall hierarchy

Departmental groupings

Needed to allow efficient and effectiveoutcomes

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Functional Structure

CEO

Production Finance Marketing

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MD

PlantManager

Production

Purchase

Quality

R&D

Finance HR Marketing

North

Sales

Service

Dealer Dev

Accounts

South East West

Logistics IT, NPD

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GM (Operations)

4 locations

VP (Operations)

Director (Operations)

GM (Finance)

4 locations

VP (Finance)

Director (Finance)

GM ( Marketing)

4 locations

VP (Marketing)

Director (Marketing)

Deputy MD

Anand Mahindra

Managing DirectorR K Pitamber

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Strengths Best in stable environment Allows economies of scale

within functional departments Enables in-depth knowledge

and skill development

Specialist freed fromadmin/coordinating work Simple decision/

communication networkbest for single/few productorganization

Weaknesses

Slow response time toenvironmental changes

Bottlenecks caused bysequential tasks

May cause decisions to pile ontop, hierarchy overload

Leads to poor horizontalcoordination amongdepartments

Results in less innovation

If multi product priorityconflict Involves restricted view of the

whole

Source: Adapted from Robert Duncan, What Is the Right Organization Structure? Decision Tree Analysis Provides the

Answer,Organizational Dynamics (Winter 1979): 429.

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Divisional Structure

Divisionsubunit consisting of collection offunctions or departments sharing

responsibility for producing particular product

of service

Large complex company model

Strengths and weaknesses?

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CEO

Prod Div 1 Prod Div 2 Prod Div 3

Divisional Structure (Product)

CEO

India Europe USA/Canada

Divisional Structure (Geographical)

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Divisional Structure

Strengths

Suited to fast change inunstable environment

Leads to client satisfactionbecause product responsibility

and contact points are clear Involves high coordination

across functions

Allows units to adapt todifferences in products,

regions, clients Best in large organizationswith several products

Decentralize decision making

Weaknesses

Eliminates economies of scaleto functional departments

Leads to poor coordinationacross product lines

Eliminates in-depthcompetence and technicalspecialization

Makes integration andstandardization across product

line difficult



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F a r m E q u i p m e n t D i v i s i o nT r a c t o r s

G MC e n t r a l S u p p l i e s

M a t l . H a n d l i n g + Q A+ P l a n n i n g +

P r o c u r e m e n t ++ A c c t s + E x c i s e

S u p p . M o d u l e M g r

M a n u f a c t u r i n g +I n s p e c t i o n +E n g i n e e r i n g

M f g M o d u l e M g r

M a i n t e n a n c e +P & I R +

H R D + T r a i n i n g +A d m i n i s t r a t i o n

S e r v ic e s M g r

P U 1 M g r P U 2 M g r . . . P U 6

G MO p e a r t i o n s

H e a d o f M a n u f a c t u r i n g

A u t o m o t i v e D i v i s i o nJ e e p s

C o r p o r a t e f u n c t i o n s( P u r c h a s e , M a r k e t i n g , O p e r a t i o n s )

D e p u t y M DA n a n d M a h i n d r a

M a n a g i n g D i r e c t o r

R K P i t a m b e r

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Matrix Structure

Multi-focused approach

Economies of scale importantsharing internalresources

Used when co-operation needed between functionsand products

Relies on key roles

Top leader

Matrix bosses Two-boss employee

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Production Marketing Operations

CEO

Product 1

Product 2

Product 3

Matrix Structure

Matrix Structure

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Matrix Structure

Strengths Achieves coordination

necessary to meet dualdemands from customers

Flexible sharing of humanresources across products

Suited to complex decisionsand frequent changes inunstable environment

Provides opportunity for bothfunctional and product skilldevelopment

Best in medium-sizedorganizations with multipleproducts

Weaknesses Causes participants to

experience dual authority,which can be frustrating andconfusing

Means participants need goodinterpersonal skills andextensive training

Is time consuming; involvesfrequent meetings and conflictresolution sessions

Will not work unless

participants understand it andadopt collegial rather thanvertical-type relationships

Requires great effort tomaintain power balance



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Horizontal / Flat Structure

Flatter / short structure

Communication, teamwork vital for

coordination of processes

Decisions made at team level

Culture implications

Increasing Importance Strengths and weaknesses?

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A Horizontal Structure

Team

3

Team

2

Team

1

Top

ManagementTeam

Team

3

Team

2

Team

1

Customer

Customer

Process

Owner

Process

Owner

Testing

Product

PlanningResearch

Market

Analysis

New Product Development Process

Distrib.MaterialFlow

PurchasingAnalysis

Procurement and Logistics Process

Sources: Based on Frank Ostroff, The Horizontal Organization, (New York: Oxford University Press, 1999); John A. Byrne, The Horizontal Corporation, Business Week,

December 20, 1993, 76-81; and Thomas A. Stewart, The Search for the Organization of Tomorrow, Fortune, May 19, 1992, 92-98.

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A Horizontal Project Structure

Process Team

3

Process Team

2

Process Team

1

Top

ManagementTeam

Process Team

3

Process Team

2

Process Team

1

Customer

Customer

Project

Owner

Project

Owner

Testing

Product

PlanningResearch

Market

Analysis

Distrib.MaterialFlow

PurchasingAnalysis

Sources: Based on Frank Ostroff, The Horizontal Organization, (New York: Oxford University Press, 1999); John A. Byrne, The Horizontal Corporation, Business Week,

December 20, 1993, 76-81; and Thomas A. Stewart, The Search for the Organization of Tomorrow, Fortune, May 19, 1992, 92-98.

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Network Structure and the

Boundaryless Organization

A cluster of different organizations whose actions arecoordinated by contracts and agreements ratherthan through a formal hierarchy of authority

Very complex as companies form agreements withmany suppliers, manufacturers, and distributors

Such agreements are necessary as the organizationoutsources many of the value creation activitiesinvolved in production and marketing goods andservices

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Advantages of Network Structures

To the degree that a network partner can perform aspecific functional activity reliably, and at a lowercost, production costs are reduced.

Avoids the high bureaucratic costs of operating acomplex organizational structure

Allows an organization to act in an organic way

Access to low-cost foreign sources of inputs and

functional expertise

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Disadvantages of Network Structures

A considerable level of mutual adjustment is

needed to allow the groups to interact so that

they can learn from one another.

Difficult to obtain the ongoing learning that

builds competences as companies have no

incentive to do so

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The Boundaryless Organization

Composed of people who are linked bycomputers, faxes, CAD systems and videoconferencing

The use of outsourcing and the developmentof network organization are increasing rapidlyas organizations recognize the manyopportunities they offer to reduce costs andincrease flexibility.

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External Environment

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Figure 3-1: The Organizational

Environment

28

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Figure 3-2: Three Factors Causing

Uncertainty

29

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Relationship Between Environmental

Characteristics and Organizational Actions

Environmental

domain

(ten sectors)

High

complexity

Establishment of favorable linkages:

ownership, strategic alliances, cooptations,

interlocking directorates, executive recruitment,

advertising, and public relations

Organic structure and systems with low

formalization, decentralization,

and low standardization to enable

a high-speed response

Many departments and boundary roles

Greater differentiation and more

integrators for internal coordinationHigh

uncertainty

High rate

of change

Scarcity of

valued

resources

Resource

dependence Control of the environmental domain:

change of domain, political activity,

regulation, trade associations, and

illegitimate activities

Environment Organization

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Simple + Stable =

Low Uncertainty

1. Small number of external elements

and elements are similar

2. Elements remain the same of change

slowly

Examples: soft drink bottlers, beerdistributors, container

manufacturers, food processors

Simple + Stable =

High-Moderate Uncertainty

1. Small number of external elementsand elements are similar

2. Elements change frequently and

unpredictably

Examples: E-commerce, fashion clothing,

music industry, toy manufacturers

Complex + Stable =

High Uncertainty

1. Large number of external elementsand elements are dissimilar

2. Elements change frequently and

unpredictably

Examples: Computer firms, aerospace

firms, telecommunications, airlines

Complex + Stable =

Low-Moderate Uncertainty

1. Large number of external elements

and elements are dissimilar

2. Elements remain the same or change

slowly

Examples: Universities, appliancemanufacturers, chemical cos,

insurance cos

Framework for Assessing Environmental

Uncertainty

ENVIRONMENTAL

CHANGE

STABLE

ENVIRONMENTAL COMPLEXITY

UNSTABLE

SIMPLE COMPLEX

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Figure 4-8: Fit Between the Organization and Its

Environment

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Lawrence & Lorsch: Differentiation, Integration,

and the Environment

Investigated how companies in different

industries differentiate and integrate their

structures to fit the environment

Three industries that experienced different

levels of uncertainty:

The plastics industry

The food-processing industry The container or can-manufacturing industry

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Findings: Lawrence and Lorsch

When environment is perceived as moreunstable and uncertain:

Effective organizations are less formalized, more

decentralized and rely more on mutualadjustment

When environment is perceived as stable andcertain:

Effective organizations have a more centralized,standardized, and formalized structure

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Figure 4.9: Functional Differentiation and

Environmental Demands

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Burns and Stalker

Also 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

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Table 4-2: The Effect of Uncertainty,

Differentiation and Integration

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Copyright 2007 Prentice Hall 38

Figure 4-10: Relationship Between

Environmental Uncertainty and Structure

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Environmental Uncertainty, Structure

& Effectiveness

Environmental

UncertaintyDifferentiation Integration

Uncertainty

Reduction

Mechanisms

Low Low Low Low

ModerateModerate Moderate Moderate

High High High High

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Technology and Structure

S. Jeyavelu

h l l d

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Figure 9-2: Technical Complexity and

Three Types of Technology

i h i l l i d

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Figure 9-3: Technical Complexity and

Organizational Structure

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Figure 9-4: Charles Perrow

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Table 9-1: Routine and Nonroutine Tasks

and Organizational Design

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Figure 9-5: Task Interdependence and

Three Types of Technology

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Figure 9-6: Work Flows

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NEW CHOICES

Mass

Production

Small batchFlexible

ManufacturingMass

Customization

Continuous

Process

Relationship of Flexible Manufacturing Technology

to Traditional Technologies

BATCH SIZESmall Unlimited

Customized

Standardized

P

RODUCTFLEXIBILITY

Source: Based on Jack Meredith, The Strategic Advantages of New

Manufacturing Technologies For Small Firms. Strategic Management

Journal 8 (1987): 249-58; Paul Adler, Managing Flexible Automation,

California Management Review(Spring 1988): 34-56; and

Otis Port, Custom-made Direct from the Plant.Business Week/21stCentury Capitalism,18 November 1994, 158-59.

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Comparison of Organizational Characteristics Associated with

Mass Production and

Flexible Manufacturing Systems

Characteristic Mass Production FMS

Structure:

Span of Control Wide Narrow

Hierarchical levels Many Few

Tasks Routine, repetitive Adaptive, craft-like

Specialization High Low

Decision making Centralized DecentralizedOverall Bureaucratic,

mechanisticSelf-regulating,organic

Source: Based on Patricia L. Nemetz and Louis W. Fry, Flexible

Manufacturing Organizations: Implications for Strategy Formulation

and Organization Design.Academy of Management Review13

(1988); 627-38; Paul S. Adler, Managing Flexible Automation,

California Management Review (Spring 1988); 34-56; Jeremy Main,Manufacturing the Right Way,Fortune, 21 May 1990, 54-64.

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Mass Production and

Flexible Manufacturing Systems (cont.)


Human Resources:

Interactions Standalone Teamwork

Training Narrow, one time Broad, frequent

Expertise Manual, technical Cognitive, social

Solve problems






C i f O i ti l Ch t i ti A i t d ith

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Mass Production and

Flexible Manufacturing Systems (cont.)


Interorganizational:

Customer Demand Stable Changing

Suppliers Many,

arms length

Few, closerelations






Differences Between Manufacturing and

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Differences Between Manufacturing and

Service Technologies

Manufacturing Technology1. Tangible product

2. Products can be inventoried for later

consumption

3. Capital asset intensive

4. Little direct customer interaction

5. Human element may be less

important

6. Quality is directly measured

7. Longer response time is acceptable

8. Site of facility is moderately

important

Service Technology1. Intangible product

2. Production and consumption takeplace simultaneously

3. Labor and knowledge intensive

4. Customer interaction generally high

5. Human element very important

6. Quality is perceived and difficult to

measure

7. Rapid response time is usually

necessary

8. Site of facility is extremely important

Service:Airlines, Hotels,Consultants,

Healthcare, Law firms

Product and Service:Fast-food outlets, Cosmetics,

Real estate, Stockbrokers,

Retail stores

Product:Soft drink companies,

Steel companies,

Auto manufacturers,

Food processing plantsSources:Based on F. F. Reichheld and W. E. Sasser, Jr.,Zero Defections: Quality Comes to Services,Harvard Business

Review 68 (September-October 1990): 105-11; and David E.

Bowen, Caren Siehl, and Benjamin Schneider, A Frameworkfor Analyzing Customer Service Orientations in Manufacturing,

Academy of Management Review 14 (1989): 75-95.

C fi ti d St t l Ch t i ti f S i

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Configuration and Structural Characteristics of Service

Organizations vs. Product Organizations

Service Product

Structure:

Separate boundary roles Few Many

Geographical dispersion Much Little

Decision making Decentralized Centralized

Formalization Lower Higher

Human Resources:

Employee skill level Higher Lower

Skill emphasis Interpersonal Technical

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Organizational Culture

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Do Organizations Have Uniform

Cultures?

Core

Values

SubculturesDominantCulture

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Strong & Weak Cultures

An organizations culture can be strong or

weak.

The strength with which it binds

organizational members can influence many

other organizational factors.

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Elements of Organizational Culture

59

Unconscious, taken-for-grantedperceptions or beliefs

Mental models of ideals

Shared assumptions

Conscious beliefs

Evaluate what is good or bad, right orwrong

Shared values

Artifacts

Stories/legends

Rituals/ceremonies

Organizational language

Physical structures/dcor

Visible

Invisible

(below the surface)

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Artifacts: Stories and Legends

Social prescriptions of desired (undesired)behavior

Provides a realistic human side to

expectations Most effective stories and legends:

Describe real people

Assumed to be true

Known throughout the organization Are prescriptive

60

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Artifacts: Rituals and Ceremonies

Rituals

programmed routines

(eg., how visitors are greeted)

Ceremonies

planned activities for an audience

(eg., award ceremonies)

61

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Artifacts: Organizational Language

Words used to address people, describe

customers, etc.

Leaders use phrases and special vocabulary as

cultural symbols

eg. Referring to clients rather than customers

Language also found in subcultures

eg. Whirlpools PowerPoint culture

62

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Artifacts: Physical Structures/Symbols

Building structure -- may shape and reflect

culture

Office design conveys cultural meaning

Furniture, office size, wall hangings

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Underlying Dimensions of Organizational

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Underlying Dimensions of Organizational

Culture

The nature of human beings

The nature of human relationships

The organizations relationship to environment

The nature of humanwork relationship

The nature of reality & truth

The nature of time

Homogeneity vs. Diversity

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Embedding Mechanisms

Primary What leaders pay attention

to, measure & control

Leaders reaction to criticalincidents & crises

Deliberate role modeling &coaching

Operational criteria forrewards & punishments

Operational criteria forselection, promotion,retirement, etc

Secondary Organization structure

Systems & procedures

Physical space, facades,buildings

Stories, legends, myths &symbols

Formal statement oforganizational philosophy,creed & charter

65

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A Typology of Organizational Rites and Their Social

Consequences

Type of Rite Example Social Consequences

Passage Induction and basic training; Army Facilitate transition of person into

new social roles and statuses

Enhancement Annual awards night Enhance social identities and

increase status of members

Renewal Organizational development

activities

Refurbish social structures and

improve organization functioning

Integration Office holiday party Encourage and revive common

feelings that bind members

together and commit them to the

organization

Source: Adapted from Harrison M. Trice and Janice M. Beyer,

Studying Organizational Cultures through Rites and Ceremonials,

Academy of Management Review9 (1984), 653-659. Used with permission.

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Competing Values Framework for

Organizational Culture

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Internal External

Control

Flexible

Group / Clan

Culture

Hierarchical /

Bureaucratic

Culture

Rational / Market

Culture

Developmental /

Entrepreneurial

Culture

Four Types of Culture

Value Dimensions

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Value Dimensions

Group /

Clan

Culture

Developmental /

Entrepreneurial

Culture

Hierarchical /

Bureaucratic

Culture

Rational /

Market

Culture

Flexibility /

Control

Flexible Flexible Control Control

Internal /External

Focus

Internal External Internal External

Means Cohesion,

Morale

Adaptability,

readiness

Information

management,

communication

Planning,

goal setting

Ends Development

of human

resources

Growth,

resource

acquisition

Stability, control Production,

efficiency

O i ti l Ch t i ti

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Organizational Characteristics

Group /Clan

Culture

Developmental /Entrepreneurial

Culture

Hierarchical/Bureaucratic

Culture

Rational /Market

Culture

Compliance Affiliation Ideology Rules Contract

Motivation Attachment Growth Security Competence

Leadership Concerned,

supportive

Inventive,

risk taking

Conservative,

cautious

Directive,

goal oriented

Technology Craft Non routine Routine Engineering

Org. Form Clan Adhocracy Hierarchy Market

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Main Features of Organizational Culture

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Main Features of Organizational Culture

Components Soft Culture

Work-centric

Nurturant

Culture

Technocratic

Culture

Values Needs, interests &relationships

Work-oriented

relationships

Quality, costs &

customer satisfaction

Behavior Inefficient andindifferent to work

Productive, paternalistic

& participative

Efficient, demanding &

competitive

Relationships Need-based andsocially determined

Socio-technicallydetermined

Technologicallydetermined

Technology Neglected State of art & suited tothe employer

State of art & R&D

driven

Structure Heavy and usually

bureaucratic

Socio-technically

integrated

Lean, flexible & team

based

Procedure Nonwork oriented Work & people oriented Outcome oriented &dynamic

Goals &

Objectives

Welfare & profit (if

possible)

Interests of all

stakeholders

Market leadership,

expansion & profit

Source: Jai B P Sinha (2000). Patterns of Work Culture. Page 47.

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Dimensions of National Culture

Power DistanceStrong vs. Weak

Uncertainty AvoidanceStrong vs. Weak

Individualism vs, Collectivism

Masculinity vs. Femininity

Temporal FocusLong Term Orientation vs.

Short Term Orientation

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Managing Culture Change

Unfreeze systemhighlight threats & give hope Articulate a new direction, new set of assumptions and role

model Fill key positions with hybrids /mutants /outsiders with

different assumptions

Reward adoption of new direction & punish adherence to olddirection Seduce or coerce members to adopt new behaviors in

coherence with new direction Visible scandals to discredit sacred cows, myths and

dysfunctional traditions to symbolically destroy artifacts

associated with them Create new emotionally charged rituals, new symbols and

artifacts

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Thank You

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