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Managing Organizations
ORGANIZATIONAL DESIGN FOR STRATEGIC COMPETENCY
(OD = THE CONSTRUCTION OR CHANGING OF AN ORGANIZATION’S
STRUCTURE)
Objectives:
1. DESCRIBE AND EXPLAIN THE ORGANIZATION DESIGN
OPTIONS
2. IDENTIFY THE PRINCIPLES OF ORGANIZATION
DESIGN (THE CLASSICAL OR THE „OLD MODEL“ OF
ORGANIZATION)
3. CONTRAST MECHANISTIC VERSUS ORGANIC
ORGANIZATIONS
4. EXERCISE – ORGANIZING (XYZ paper company)
© J. Rudy, Organizational Behavior, FMCU, Fall 2007
Organization Design Options


ORGANIZING AS A MANAGERIAL FUNCTION
(P, O, L, C) DEALS WITH ORGANIZATION STRUCTURES
Organization structure definitions


OS IS A FORMAL SYSTEM OF WORKING RELATIONSHIP THAT
BOTH SEPARATES AND INTEGRATES TASKS
OS ENABLES EMP-ees TO WORK TOGETHER EFFECTIVELY BY:
1. ALLOCATING PEOPLE AND RESOURCES TO TASKS
2. CLARIFYING RESPONSIBILITIES THROUGH JOB
DESCRIPTIONS, ORGANIZATIONS CHARTS & LINES OF
AUTHORITY
3. LETTING EMPLOYEES KNOW WHAT IS EXPECTED OF
THEM BY ESTABLISHING RULES, REGULATIONS,
OPERATING PROCEDURES & PERFORMANCE STANDARDS
4. CREATING CONDITIONS FOR COLLECTING AND
EVALUATING INFORMATION TO HELP MANAGERS MAKE
DECISIONS AND SOLVE PROBLEMS
© J. Rudy, Organizational Behavior, FMCU, Fall 2007
Basic Elements of OS

SPECIALIZATION:
The process of identifying specialized tasks and assigning them to individuals or
work groups who have been trained specifically to do them

STANDARDIZATION:
Developing the procedures an organization uses to ensure that employees
perform their jobs in a uniform and consistent manner. Standardization
promotes predictable behaviors

COORDINATION:
The formal and informal procedures that integrate both managerial and
employee activities

AUTHORITY:
The right to make decisions and take actions

COMPLEXITY:
Considers how much differentiation (division of labor, number of vertical levels,
etc.) there is in the organization

FORMALIZATION:
The degree to which an organization relies on rules and procedures to direct the
behavior of employees

CENTRALIZATION:
The concentration of decision-making authority in upper management.
© J. Rudy, Organizational Behavior, FMCU, Fall 2007
Organization Chart
 DESCRIBES FIVE (5) MAJOR POINTS ABOUT AN
ORGANIZATION STRUCTURE:





1.
2.
3.
4.
5.
TASKS
SUBDIVISIONS
TYPE OF WORK
LEVEL OF MANAGEMENT
LINES OF AUTHORITY
© J. Rudy, Organizational Behavior, FMCU, Fall 2007
Basic Principles of Organization
Design
1.
2.
3.
4.
5.
DIVISION OF LABOR
UNITY OF COMMAND
AUTHORITY AND RESPONSIBILITY
SPAN OF CONTROL
DEPARTMENTALIZATION
© J. Rudy, Organizational Behavior, FMCU, Fall 2007
Basic Principles of Organization
Design
 Division of Labor:
 INDIVIDUALS SPECIALIZE IN DOING PART OF AN
ACTIVITY RATHER THAN THE ENTIRE ACTIVITY
© J. Rudy, Organizational Behavior, FMCU, Fall 2007
Basic Principles of Organization
Design
 Unity of Command:
 NO PERSON SHOULD REPORT TO TWO OR MORE
BOSSES
 This is the classical view – when organizations were
comparatively simple. Strict adherence to this
principle creates a degree of inflexibility, and then
lower efficiency
© J. Rudy, Organizational Behavior, FMCU, Fall 2007
Basic Principles of Organization
Design
 Authority & Responsibility:
 AUTHORITY IS A RIGHT, THE LEGITIMACY WHICH IS
BASED ON THE PERSON’S POSITION IN THE
ORGANIZATION (Legitimate power)
 POWER – AN INDIVIDUAL’S
CAPACITY
INFLUENCE DECISIONS (Other people)
TO
 RESPONSIBILITY - AN OBLIGATION TO PERFORM
© J. Rudy, Organizational Behavior, FMCU, Fall 2007
Basic Principles of Organization
Design
 Span of Control:
 A NUMBER OF SUBORDINATES A MANAGER CAN
DIRECT EFFECTIVELY AND EFFICIENTLY
© J. Rudy, Organizational Behavior, FMCU, Fall 2007
Basic Principles of Organization
Design
 Departmentalization:
 THE WAY HOW ACTIVITIES SHOULD BE GROUPED
INTO DEPARTMENTS
 THERE ARE FIVE WAYS:
·
FUNCTIONAL
·
PRODUCT
·
CUSTOMER
·
GEOGRAPHIC
·
PROCESS
© J. Rudy, Organizational Behavior, FMCU, Fall 2007
Organization Design Concepts
 THERE ARE TWO BASIC
DESIGN CONCEPTS TODAY:
 1.
 2.
ORGANIZATION
MECHANISTIC ORGANIZATION
ORGANIC ORGANIZATION
© J. Rudy, Organizational Behavior, FMCU, Fall 2007
Mechanistic Organization
(Bureaucracy)
 STRUCTURE CREATED BY APPLICATION OF THE
CLASSICAL PRINCIPLES.
 THIS STRUCTURE SCORES HIGH ON:
 Complexity
 Formalization
 Centralization
© J. Rudy, Organizational Behavior, FMCU, Fall 2007
Organic Organization
(Adhocracy)
 IS A DIRECT CONTRAST TO THE MECHANISTIC
FORM
 THIS STRUCTURE SCORES LOW ON:
 Complexity
 Formalization
 Centralization (DECENTRALIZED)
© J. Rudy, Organizational Behavior, FMCU, Fall 2007
Mechanistic vs. Organic Concept
 KEY CONTINGENCIES
(factors that influence the decision what form
of the structure is best suitable in certain
conditions):
·
·
·
·
ORGANIZATION’S STRATEGY
SIZE OF AN ORGANIZATION
USED TECHNOLOGY
ENVIRONMENT
© J. Rudy, Organizational Behavior, FMCU, Fall 2007
Mechanistic Design Options
 FUNCTIONAL
structure
 DIVISIONAL
structure
 IS A DESIGN THAT
GROUPS SIMILAR OR
RELATED
OCCUPATIONAL
SPECIALITIES
TOGETHER
 CREATES SELFCONTAINED,
AUTONOMOUS UNITS
THAT ARE USUALLY
ORGANIZED ALONG
MECHANIC LINES

Each unit / division is generally
autonomous, with a division
manager responsible for
performance and holding
complete strategic and
operating decision-making
authority
© J. Rudy, Organizational Behavior, FMCU, Fall 2007
Divisional Structure:
Major Advantage / Disadvantage
 Focus on results
 Frees HQ staff from
operating details
 Duplication of
activities &
resources
© J. Rudy, Organizational Behavior, FMCU, Fall 2007
Divisional Structure:
Example
Divisional Organization Structure
Company Ex
Executive Vice-President
Buick
Oldsmobile
Cadillac
Chevrolet
Pontiac
Trucks
Busses
Buick Division
Chevrolet Motor Division
Truck & Bus Operation
Oldsmobile Division
Pontiac Motor Division
Truck & Bus Engineering
Cadillac Division
© J. Rudy, Organizational Behavior, FMCU, Fall 2007
Organic Design Options





·
·
·
·
·
SIMPLE STRUCTURE
MATRIX STRUCTURE
NETWORK STRUCTURE
TASK FORCE STRUCTURE
COMMITTEE STRUCTURE
© J. Rudy, Organizational Behavior, FMCU, Fall 2007
Organization Design Options
(Summary)
Design
Strengths
Functional
Economies through specialization
Divisional
High accountability for results
Simple
Speed, economy, flexibility
Matrix
Economies through specialization &
accountability for product results
Network
Speed, economy, flexibility
Task Force
Flexibility
Committee
Flexibility
© J. Rudy, Organizational Behavior, FMCU, Fall 2007