Download Organizational design

MGT 563
OPERATIONS STRATEGIES
Dr. Aneel SALMAN
Department of Management Sciences
COMSATS Institute of Information Technology,
Islamabad
Recap Lecture 20
• Technology Def and Concept
• Technology Components
• Technology Levels
• Invention and Innovation
• Impact of technology on Operations
Strategy, Technology, and
Organizational Design
Topics to be discussed
• Why are strategy and organizational learning
important and linked?
• What is organizational design and how is it linked
to strategy?
• How does technology influence organizational
design?
• How does the environment influence
organizational design?
Why are strategy and organizational
learning important and linked?
• Strategy
• The process of positioning the organization in the
competitive environment and implementing actions to
compete successfully.
Why are strategy and organizational
learning important and linked?
Organizational learning
• Process of knowledge acquisition and adaptation to
changing circumstances through:
• Information distribution
• Information interpretation
• Information retention
Why are strategy and organizational
learning important and linked?
Mimicry
Copying successful practices of others
Provides
Workable
Solutions
to
Problems
Reduces
the
Number of
Decisions
Establishes
Legitimacy
and
Acceptance
Why are strategy and organizational
learning important and linked?
• Experience
• A primary way to acquire knowledge.
• Besides learning by doing, managers can also establish
structured programs to learn from successes as well as
failures.
Why are strategy and organizational
learning important and linked?
Scanning
• Involves looking outside the
firm and bringing back useful
solutions.
Grafting
The process of acquiring individuals, units, or firms to
bring in useful knowledge.
Why are strategy and organizational
learning important and linked?
• Avenues for knowledge retention:
•
•
•
•
•
•
Individuals
Transformation mechanisms
Formal structures
Physical structures (ecology)
External archives
IT systems
What is organizational design and how is
it linked to strategy?
• Organizational design
• The process of choosing and implementing a structural
configuration.
What is organizational design and how
is it linked to strategy?
Operations
And I.T.
Environment
Size
Strategy
Organizational
Design
What is organizational design and how is
it linked to strategy?
The structural configuration:
• Allows the management to focus on skills and abilities that
their firms need to compete, be flexible, and adaptive.
• Allows the individual members the ability to experiment,
grow, and develop competencies that contribute to
success.
What is organizational design and how is
it linked to strategy?
• Co-evolution of strategy and structure
• The firm can adjust to external changes even as it shapes
some of the challenges facing it.
• Shaping capabilities via the organization’s design is a
dynamic aspect of co-evolution.
What is organizational design and how is
it linked to strategy?
Organizational size
• As the number of
employees increase, the
possible interconnections
among them increase even
more.
• The design of small firms is
directly influenced by core
operations technology.
What is organizational design and how is
it linked to strategy?
• Simple design
• A configuration involving one or two ways of specializing
individuals and units.
• Vertical specialization and control emphasize levels of
supervision without elaborate formal mechanisms.
What is organizational design and how is
it linked to strategy?
• Managerial scripts
• A series of well-known routines for
problem identification and
alternative generation and analysis
that are common to managers in a
firm.
What is organizational design and how
is it linked to strategy?
Overemphasis on vertical
relations
Overemphasis on
functions or product lines
Barriers to
Desired Action
Isolating of firm from its
partners
Cultural, national,
geographic limits
What is organizational design and how is
it linked to strategy?
Co-evolution of strategy and structure can
be hampered by:
• Organizational inertia
• Hubris
• Issue of detachment
How does technology influence
organizational design?
Operations technology
• The combination of resources, knowledge, and techniques
that creates a product or service.
Information technology
• The combination of machines, artifacts, procedures, and
systems used to gather, store, analyze, and disseminate
information for translating it into knowledge
How does technology influence
organizational design?
• Thompson’s view of technology
• Classification according to the degree of specification and
degree of interdependence of work units.
How does technology influence
organizational design?
• Intensive technology
• Uncertainty as to how to produce desired outcomes.
• Requires assistance of specialists.
• Mediating technology
• Links parties that want to become interdependent.
• Long-linked technology
• Production method is known and broken down into a number of
sequential steps.
How does technology influence
organizational design?
Woodward’s view of technology
• Small-batch production.
• Mass production.
• Continuous-process technology.
How does technology influence
organizational design?
• An adhocracy is characterized by:
•
•
•
•
•
•
Few rules, policies, and procedures.
Substantial decentralization.
Shared decision making among members.
Extreme horizontal specialization.
Few levels of management.
Virtually no formal controls.
How does technology influence
organizational design?
• An adhocracy is useful when:
• The tasks facing the firm vary considerably and provide
many exceptions.
• Problems are difficult to define and solve.
How does technology influence
organizational design?
Why IT makes a difference
• IT provides a partial substitute for:
• Operations
• Process controls
• Methods of coordination
• IT provides a strategic capability
How does technology influence
organizational design?
• IT as a substitute
• Initial implementation of IT often displaced routine, highly
specified, and repetitious jobs.
• A second wave of substitution replaced process controls
and informal coordination mechanisms with IT.
How does technology influence
organizational design?
IT as a strategic capability
• Improves the efficiency, speed of responsiveness, and
effectiveness of operations.
• Provides all levels of the organization with the knowledge
required for immediate decision-making.
• Enhances motivation through individual empowerment.
How does technology influence
organizational design?
Operations
Strategy
Information
Systems
Structure
Management
How does technology influence
organizational design?
• IT and e-business
• Many dot-com firms adopted some variation of adhocracy.
• As the dot-coms grew, the adhocracy design became
problematic.
How does technology influence
organizational design?
• Virtual organization
• An ever-shifting constellation of firms, with a lead
corporation, that pool skills, resources, and experiences to
thrive jointly.
• Partner firms are bound by mutual trust and need for
collective survival.
How does the environment influence
organizational design?
General environment
• The set of cultural, economic, legal-political, and
educational conditions found in the areas in which the
organization operates
Specific environment
• The owners, suppliers, distributors, government agencies,
and competitors with which an organization must interact
to grow and survive.
How does the environment influence
organizational design?
Inter-dependence
Uncertainty
Richness
Environmental Complexity
How does the environment influence
organizational design?
• Environmental richness
• A condition where the economic climate is improving,
customers are buying more products, and suppliers are
willing to invest in the organization’s future.
• Provides the best climate for opportunity and dynamic
growth.
How does the environment influence
organizational design?
Environmental interdependence
• Linkage between environmental independence and
organization design may be subtle and indirect.
• Organization may co-opt powerful outsiders by including them on
governing board.
• Develop centralized staff teams to service an important client
group.
How does the environment influence
organizational design?
• Environmental uncertainty
• A more organic structure is the appropriate organizational
design response to uncertainty and volatility.
How does the environment influence
organizational design?
• In a complex global economy, firms must learn to coevolve by adjusting their environment.
• Two important ways of co-evolution:
• Management of networks
• Development of alliances
How does the environment influence
organizational design?
Inter firm alliances
• Cooperative agreements or joint ventures between two
independent firms.
• Often, firms are geographically and geopolitically
separate, but have common interests.
• A structure that is often used in complex technology
industries.