organization theory & design
DESCRIPTION
General introduction to Organizational theories and designTRANSCRIPT
Learning organization
Flow of presentation• Devika Shinde P-34
• Pradnya Bhalerao C-03
• Sukhada Kulkarni P-17
• Puja Govekar P-09
• Dhanraj Koli P-16
• Anandita Singh C-34
• Jayashree Prabhu C-43
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DEVIKA SHINDERoll No. – p-34
General introduction to Organizational theories and
design
What is Organizational Design
What is Organizational Design
• Developments in or changes to the structure of an organization
• Organization Design refers to the process of coordinating the structural elements of an organization in the most appropriate manner
Key elements of organizational designs:
DepartmentalizationSpan of Control
WorkSpecialization
Chainof Command
Authority and Responsibility
Centralization vs. Decentralization
Organizational Theories
The current state of organization theory is the result of an evolutionary process. Theories have been introduced, evaluated and refined over time ; new insights tend to reflect the limitations of earlier theories.
Classical & Neoclassical Theory
• Classical organizational theorists (such as Weber, Taylor ) believed that a universally best way to design organizations exists, an approach based on high efficiency.
• Neoclassical organizational theorists (such as McGregor,Argyris ) their approach emphasizes the need to pay attention to basic human needs to succeed and express oneself.
Differentiation
Differentiation
• The process by which an organization allocates people and resources to organizational tasks and establishes the task & authority relationships that allows organization to achieve its goal.
• Process of establishing division of labour.
Example
• Differentiation at B.A.R. and Grille restaurant.
Organizational Role
• The basic building block of differentiation.
• It is the set of task – related behaviors required of a person by his or her position in an organization.
• Example of B.A.R. and Grille restaurant.
Contd…..
• Authority
• Control
Sub units
• Function: is a sub-unit composed of group of people, working together, who possess similar skills or use same kind of knowledge, tools or techniques to perform their jobs– Support functions
– Production function
– Maintenance
– Adaptive
– Managerial
Sub-units
• Division: A sub unit that consists of a collection of functions or departments that share responsibility for producing a particular good or service.
Vertical and horizontal differentiation
• Hierarchy
• Vertical differentiation
• Horizontal differentiation
PRADNYA BHALERAO
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Balancing differentiation &
integration
What is differentiation?
The process by which an organization allocates people & resources to organizational tasks & establishes the tasks & authority relationships that allow the organization to achieve its goal.
Challenges of horizontal differentiation
• Development of subunit orientation• Communication gap Production team VS Research team
E.g. Xerox computer system, Wal-mart television linkups
What is integration?
• The process of coordinating various tasks, functions and divisions so that they work together and not at cross-purpose.
7-integrating mechanism1) Hierarchy of authority
2) Direct contact
3) Liaison role
4) Task force
5) Team
6) Integrating role
7) Integrating department
Hierarchy of authority
• Simplest device
• Allocation of authority
• E.g. Becton Dickinson
Liaison team
MarketingProductio
n
Team Force or Team
Engineering
Engineering
Marketing
Marketing
R & DR & D
SalesSales
Production
Production
Integrating Role or Department
Computer Hardwar
eDivision
IntegrationRole or
Department
ApplicationDivision
ComputerSoftwareDivision
Differentiation & Integration-key aspects
Differentiation Integration
A highly complex, highly differentiated organization needs high level of integration
An organization that has a relatively simple, clearly defined role structure needs to use only simple integrating mechanism
Expensive –in terms of the number of managers employed & the amount of managerial time spent on coordinating organizational activities.
Unnecessary investment
Summary • Carefully guide the process of differentiation so that
it develops the core competencies that give the organization a competitive advantage
• Carefully integrate the organization by choosing
appropriate integration mechanism that allow subunits to cooperate & that build up the organization’ core competencies
Balancing Centralization & Decentralization
What is Centralization?• Organizational setup whereby the authority to
make important decision is retained by managers at the top of the hierarchy
What is Decentralization?• An organizational setup whereby the authority
to make important decision about organizational resources and to initiate new projects is delegated to managers at all levels in the hierarchy…
Centralization Advantages Disadvantages
Top managers coordinate organizational activities effectively & keep the organization focused on its goal.
Top management become overloaded & need to take care of day-to-day activities & cannot focus on long term decision making
Lower hierarchy-afraid to make news or express their ideas
Hierarchy of authority exists , people are constantly looking to their superiors for help.
DecentralizationAdvantages Disadvantages
Promotes flexible & responsiveness by allowing subordinate to make on the spot decisions
Planning & coordination becomes more difficult
Motivates to perform the best Personal goals & objectives can be pursed at the expense of organization
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Standardization
Which is defined by sets of rules and norms, that are considered proper in a given situation
Mutual adjustment.
It is a process in which people use their judgment rather than standardized rules to
address problems
Balancing standardization & Mutual adjustment
• Both are very important.
• But only one can be adopted at a time.
• Eg: IBM policies tranformation.
• The real challenge faced, is to design a structure that achieves right balance between the two.
A right balance between the two is very important.
• Formalization: Use of written rules and procedures to standardize operations.
• Formalization and Mutual adjustment: High level of formalization implies centralization of authority, and lower one implies mutual adjustment and dynamic decision making.
• Rules: Formal and written statements
• Norms: standards and styles of behaviour
Socialization• Process by which organizational members
learn the norms of organization and internalize these unwritten rules of conduct in them.
• Why is behavior rigid when rules change?
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Standardization Vs Mutual adjustment
Manager facing the challenge of balancing the need for standardization
against need for mutual adjustments
PUJA a. govikarRoll no. p-9
Mechanistic and Organic Organizational Structure
`
Mechanistic structure
• It is designed to induce people to behave in predictable, accountable ways.
• Decision-making authority centralized.
• Task associated with role and are coordinated through standardization.
• Each person knows his responsibility.
Mechanistic structure cont.
• At the functional level, each function is separate, and communication and cooperation among functions are the responsibility of someone at the top management.
• Formal written rules and procedures are main means of organizational control.
• Vertical command structure.• Promotion ties to performance• Best suited to organization that face stable,
unchanging environment.
Organic Structure
• It promotes flexibility, so people initiate change and can adapt quickly to changing conditions.
• Decision-making authority decentralized.
• Roles are loosely defined.
• High level of integration needed.
Organic Structure cont.• Co-ordination is achieved through mutual adjustment
as people and functions workout role and responsibility.
• Informal norms and values.• Status conferred by ability not by any formal position
in hierarchy.• Best suited to organization that face unstable, changing
environment.• Eg: Sony (Sony’s Magic Touch)
Mechanistic v/s Organic Structure
Mechanistic Organic
Individual Specialization Joint Specialization
Simple Integration Complex integration
Centralization Decentralization
Standardization Mutual Adjustment
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Mechanistic v/s Organic Structure
• Individual Specialization
• Simple Integration
• Centralization
• Standardization
• Joint Specialization
• Complex integration
• Decentralization
• Mutual Adjustment
Contingency Approach to Organizational Design
• A management approach in which design of an organization's structure is tailored to the sources of uncertainty facing an organization.
• Organization must design internal structure to control the external environment.
• Tom burns and G.M. Stalker theory
Tom burns and G.M. Stalker theory
• They found that organizations need different kinds of structure to control activities when they need to adapt and respond to change in the environment.
• Eg: Mcdonald (Mcdonald’s Changing Environment)
McDonald Changing Environment
• Problems faced by McDonald due changing Environment in early 2000s.
• Consumer taste shifting as health conscious.
• Environmentalist attacking the packaging.
• Increase in competition.
Organizational Structure
• It had Mechanistic structure having standardized operations and formalization.
• The burger and fries served in London tasted & looked same as in New York.
Solution McDonalds came up with..
• McDonalds new approach to production was based on flexibility.
• Designed menu that would appeal to local customer.
• This led to shift McDonald from mechanistic to organic structure
Identify the organization structure
Rayon mill
• Used standard well-understood technology
• Had bureaucratic structure • Factory bible explained all
procedures • A system of hierarchically linked job
positions with clear responsibilities • Treat problem situations as temporary
deviations from the norm • Sometimes ask sales dept to slow
down so as to not overwhelm the production dept.
High-Tech Electronics Firm • Creating new industries, such as
computers, space technologies, equipment, etc.,
• There was an even more fluid organizational style
• Jobs allowed to shape themselves • People hired for general expertise and
brains and then allowed/encouraged to find their own place in the organization to make their contribution
• As situations changed, people would take on different activities but without changing jobs
• People continually inquiring into what they should be doing and then acting
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Functional structure
A design that group people on the basis of their common expertise and experience or because they uses the same resources.
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Functional structure
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Functional structure Advantages
• Specialization – each department focuses on its own work
• Accountability – someone is responsible for the section
• Clarity – know your and others’ roles
• Learning- from one another
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Functional structure
Disadvantages
• Closed communication could lead to lack of focus.
• Departments can become resistant to change.
• Coordination .
• Customer problem.
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Control problems
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continue
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Divisional structure
• Divisional structure is one in which set of relatively autonomous units or divisions are governed by central corporate office, but each operation division has its own functional specialist who provides product and services different from those of other divisions
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Types of Divisional structure
• Product structure– Divisions by the product group or category
• Market structure– Divisions by type of customer
• Geographic structure– Global or regional divisions
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ANANDITAC 34
Divisional Structures
Functions according to the specific demands of products, markets, or customers.
Divisional Structures
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Divisional Structure I• A structure in which functions are
grouped together according to the specific demands of products,
markets, or customers.
• The type of divisional structure selected is driven by the specific type of control problem experienced.
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I) Product structures
A divisional structure in which products are grouped into separate divisions, according to their similarities or differences.
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Types of product structures
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a) Product Division Structure
• Characterized by splitting of the manufacturing function into different product lines or divisions.
• Centralized support functions.• Service needs of a number of different
product lines.• Typically used by organizations whose
products are broadly similar and aimed at the same market.
• E.g. Food processors, furniture makers, personal care products, paper products, etc.
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Product Division Structure
4-19
Large Food Processor – E.g. Heinz
Vice PresidentSales and Marketing
Vice President
Research and Development
Vice President Materials
Management
CEO
Vice President Finance
PDM PDM PDM PDM
Centralized support functions
Divisions04/08/23 73
Product Division Structure – Contd.
• Design decision increases horizontal differentiation within the organization.
• For each division, there is a separate manufacturing unit that has it’s own hierarchy .
• Each division is headed by a product division manager (PDM).
• Each PDM is responsible for the division’s product activities and coordinating with the central support functions.
• Increases vertical hierarchy in an organization. 04/08/23 74
b) Multidivisional Structure• To manage complex and diverse value
creation activities.
• Support functions are placed in self-contained divisions.
• Typically used by an organization whose products are very different and that operates in several different industries.
• E.g. Cars and fast food industries.
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Multidivisional Structure.
Consumer Products Company.
CorporateManagers
CEO
Divisional Managers
Senior VP
Marketing
Senior VP
Finance
Senior VP
Materials
Management
Senior VP
Research and
Development
Functional Managers
Corporate Headquarters Staff
Division B
Support functions
Division D
Support functions
Division A
Support functions Support functions
Division C
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COMPARISON
MULTIDIVISIONAL STRUCTURE
PRODUCT DIVISION STRUCTURE
Independence of each division – self contained.
Divisions shares the services of a set of centralized functions.
New level of management – a corporate head quarters staff – adds more control.
No such level – control is lesser.
Structure is designed to allow a Company to operate in many different businesses.
Structure can only be used to control the activities of a Company that is operating in one business or Industry.
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ADVANTAGES
• Increased Organizational Effectiveness.
• Increased control.
• Profitable growth.
• Internal Labour Market.
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DISADVANTAGES• Managing the Corporate- Divisional
relationship.
• Coordination problems between divisions.
• Transfer pricing.
• Bureaucratic costs.
• Communication Problems.
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Product Team Structure• Specialists from the support functions are combined
into product development teams.
• Typically used by an organization whose products are
very technologically complex.
• Or whose characteristics change rapidly to suit
customer needs.
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Product Team Structure.
ProductDivision
Product Division
CEO
Functions
Product Development Teams
Product Division
V ice PresidentResearch and Development
V ice PresidentSales and Marketing
V ice President Manufacturing
Vice PresidentFinance
Functional specialist
V ice PresidentMaterials Management
PTM Product Team Manager
PTM PTM PTM
4-2904/08/23 81
Product Team Structure…Contd.
• Each team is a self contained division and is headed by a Product Team Manager (PTM).
• PTM supervises the operational activities associated with developing and manufacturing the product.
• Product teams focus on the needs of one product or few related products.
• Overall functional control – V.P. of the functions.• Decision-making and responsibility for each product
is decentralized to the team.
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Divisional Structure II
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Geographic Structure:
• Used when an organization experiences control problems that are a function of geography.• Such a structure organizes divisions
according to the requirements of different locations.
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Geographic Structure
Regional Operations
Regional Operations
Regional Operations
Regional Operations
CEO
Central Support Functions
Individualstores
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Divisional Structure IIIMarket Structure :
• When an organization experiences control problems that are a function of the differences in the various customer groups being served.
• Such a structure aligns functional skills and activities with different customer needs.
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Market Structure
CommercialDivision
CommercialDivision
ConsumerDivision
ConsumerDivision
GovernmentDivision
GovernmentDivision
CorporateDivision
CorporateDivision
CEOCEO
Central Support FunctionsCentral Support Functions
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MATRIX STRUCTURE
Matrix Structure
•The search for better and faster ways todevelop products and meet customer needsled to the matrix structure.
•A matrix structure groups people and resources in two ways simultaneously:-by function and -by product
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Matrix StructureCEO
V ice PresidentEngineering
V ice PresidentFinance
V ice PresidentPurchasing
V ice PresidentSales and Marketing
V ice President Research and Development
Product AManager
Product BManager
Product CManager
Product DManager
Product Team
Two-boss employee
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Advantages of a Matrix Structure
1. Uses cross-functional teams.2. Better communication between functional
specialists, opportunity for learning, progress, innovation.
3. Enables organization to maximize its use of skilled professionals, who move from product to product as needed.
4. The dual functional and product focus promotes concern for both cost and quality.
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Disadvantages of a Matrix Structure
1. Lacks the advantages of bureaucratic structure – role ambiguity, role conflict
2. Conflict between function and product teams over the use of resources, power.
3. Lack of coordination, stress, uncertainty.
4. Over a time, people experience a vacuum of authority and responsibility.
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Multidivisional Matrix Structure•A multidivisional matrix structure provides for
more integration between corporate and divisional managers, and between divisional managers.
•This structure makes it easier for top executives from the divisions and fromcorporate headquarters to coordinateorganizational activities.
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Multidivisional Matrix Structure
CEO
Senior Vice PresidentMarketing
Senior Vice PresidentFinance
Senior Vice President Research and Development
Senior VicePresidentMaterials Management
AutomobileProductsDivision
PersonalComputerDivision
ConsumerElectronicsDivision
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Network Structure
•A recent innovation in organizational architecture is the use of network structures.
•A network structure is a cluster of different organizations whose actions are coordinated by contracts and agreementsrather than through a formal hierarchy.
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Network Structure
Network structures often result from outsourcing.
Outsourcing is the process of moving activities that were previously performed inside the organization to the outside (where they are done by other companies).
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Advantages of Network Structure
1. Organization can find a network partner – reduction in production cost.
2. Avoids the high bureaucratic costs of operating a complex organizational structure.
3. Organization acts in organic way.
4. Organization can gain access to low cost foreign sources of inputs and functional expertise.
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Disadvantages of Network Structure
1. Outsourcing ??
2. Coordination problem- different companies perform different parts of the work.
3. Trust among groups, Trust that outsourcing will not leak confidential information of company to it’s competitors.
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Boundaryless Organization
• The boundaryless organization is composed of people who are linked by computers, faxes, computer-aided design systems, and video teleconferencing, and who may rarely or ever see one another face to face.
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CONCLUSION
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Bibliography
• Organizational Theory, design, and Change – Fourth Edition, Gareth R. Jones.
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