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MODULE 4 (10 Hours) Contextual Dimensions & Structural Options: Contextual Factors, types of structure, Influence of Environment, Strategy, Size & Technology and Power & Politics on Structure, Flat structure 1

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Page 1: Module4 Contextual Dimensions

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MODULE 4 (10 Hours)

Contextual Dimensions & Structural Options: Contextual Factors, types of structure, Influence of Environment, Strategy, Size & Technology and

Power & Politics on Structure, Flat structure

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Contextual FactorsEffectiveness of a particular design is contingent upon many issues. There are 5 basic

factors influencing the contextual factors in conjunction with structural issues, they are as under -

1. Environment• The external env. consists of suppliers, customers, financial institutions, scientific

technological base,• the industry, government and the community.• If the key elements are stable, predictable, then it is the ‘mechanistic design’ which is

appropriate; if vice versa, as in dynamic and unpredictable, then it is the organic design which will be more effective.

2. Size• The number of people, sales volume, total assets, market shares.• A small company will have - less no. of vertical layers, little / no differentiation and low

degree of division of labor – so will be flexible to changes• A large company will have – movement to monolith central hierarchy with well defined

roles ad high degree of horizontal differentiation and specialization.

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3. TechnologyThe knowledge, tools and techniques used for conversion of inputs to outputs and other

issues.Org having manufacturing set up like line assembly consist of centralized control and

coordination mechanisms; difficult in adapting to external change.Org having IT set ups will possess decentralized control, individual and group autonomy and

will respond to external change

4. StrategyStrategy determines the impact on the structural issues of the org.e.g., cost minimization / innovative strategies

5. Org CultureCulture determines the ideologies, values and norms in common by its members and their

manifestations in patterns.It also represents the unwritten code of conduct that guides the responses of org members

to the demands and expectations of internal and external stakeholders.If it employees behaviors are monitored / rigid, then it is centralized and vice versa.

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Types of Org structures –• Simple structure, • Functional organization, • Bureaucracy , • Product / Market oriented, • Project oriented and • Matrix organization, • SBU, • Adhocracy – Mintzberg Framework• Horizontal / vertical structure• Multidimensional structure• Network• Virtual organizations

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Influence of Environment – 3 major areas • Dimensions of environment• Nature of environment on structure• Relationship between structure and environment

These are explained belowI. Dimensions of EnvironmentThere are 4 dimensions – pace of change, degree of connectedness, extent of similarity &

degree of uncertainty.

1. Pace of changeChange can be – evolutionary and relatively slow, then environment is stable - transformational and abrupt, then environment is dynamic.

2. Degree of connectednessThis is extent to which factors are in connection with each other, as they will have their

influence / impact on the organization.It is considered simple level of connectedness if there is low connectivity amongst the

factors in the environment.

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3. Extent of similarity The environment of any org can be termed as homogenous, if various forces

share the similar properties and common features; Heterogeneous environment forms if the different external forces in the

environment tend to vary and are dissimilar to each other.

4. Degree of uncertainty.Org and their subunits need to adjust to such situations by effecting change in

their structures and processes, the dimensions of uncertainty are - – Strength of social, political and economic pressures on the organization– Frequency of technological breakthroughs in the industry– Reliability of resources and suppliers– Stability of demand for the organization’s products / services

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II. Nature of Environment & StructureContributions by various researchers to in understanding the nature of env and its effect on

the structure of the organization are as under – and are explained • Stable & dynamic environment• Causal texture of environment• Differentiation & Integration

1. Stable & dynamic environmentBurns & Stalker report of their research study, which analyzed the effect of external

environment on their pattern of management. They have distinguished between two

Stable Environment Dynamic Environment

Demand for firm’s product is stable & predictable

Demand for the firm’s products can change dramatically

There is no change in the nature of competition

Unexpected changes in competition can occur

Technological innovations are evolutionary in nature

There is an extremely rapid rate of technological change

Govt policies are stable Govt policies undergo frequent changes to cope with the new environments

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Burns and stalker examined the impact of stable and dynamic environment on three structural components as in complexity, formalization and centralization.

Further, the two streams of mgmt practice and structure – mechanistic system and organic system were identified.

2. Causal texture of environmentEmiry & Trist conducted case studies and identified types of interdependencies and

linkages that are present in the organization. They reported their findings in the form of factors as follows,

L – Linkages1 – Focal org2 – External Environment(refer to the diagram in the textbook)

Based on the linkages, three types of interdependencies were identified – internal, transactional and environmental.

Internal – these are linkages between various functions within the focal org’s such as those between R & D, production and marketing.

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2. Transactional interdependencies, - Two types

Input Transactional interdependencies represent direct linkages between the focal org and the suppliers of inputs such as raw material, educational institutions for man power.

Output Transactional interdependencies i.e., linkages between the focal org and its output in the environment such as sales and major customer.

3. Environmental Interdependencies

These are linkages between various aspects of external environment of the focal org. E.g., two or more suppliers can form a coalition and together formulate norms for supplies to the focal org.

The Env. Interdependencies are also called ‘causal texture’ of the org and are critical to survival of the organizaiton.

Based on their ‘causal textures’, Emery & Trist have introduced four types of causal textures / environments, they are - Placid randomized, placid clustered, disturbed reactive and turbulent field.

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Causal textures of the environmentEnv Type

movement Connectedness Characteristics of env. Appropriate coping technologies

1 Placid Randomized Unchanging, evolutionary change, low uncertainty

Tactics

2 Placid Clustered Cluster of threats, suppliers or customers may join hands to form powerful coalition

Strategies

3 Disturbed Reactive More complex, many competitors seeking similar ends; 1 or 2 large org’s can dominate and have influence over environment

Operations

4 Turbulent Field Most dynamic, high uncertainty, discontinuous / disconnected changes in the environment

Multilateral agreements

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4. Differentiation & IntegrationLawrence and Lorsch carried out research projects with an aim to establish relationships

between environmental differences and their effect on org structure. Just as org as a whole has its own environment, various tasks within the org’s also have

their environments which differ in terms of the degree of uncertainty.

This degree of uncertainty can be measured by the following dimensions, they are –

1. Information availability – if info is available, then uncertainty will be low.

2. Cause – effect relationship – this relationship can be established easily, then uncertainty is low, if this relationship cannot be established / difficult to establish, then uncertainty is high.

3. Time orientation – this can be short, moderate or long; if time is short, then uncertainty is low and vice versa for the rest of the two.

4. Interpersonal orientation – task driven interpersonal relationship will be appropriate for low and high uncertainty; whereas social relationships will be required in situations of moderate uncertainty.

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Differentiation & Integration

Differentiation – is the tendency among specialists to think and act in restricted ways (tends to fragment the org)

Integration – in direct opposition to differentiation, it involves the colloboration among specialists needed to achieve a common purpose (tends to co-ordinate the org).

Greater the environment uncertainity, greater the differentiation (horizontal complexity).

Greater the differentiation greater the need for integration

Integration through personnel policies, financial control, interdepartment transfers, inter departmental coordintion.

Integration gives rise to vertical complexity.

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For org’s to succeed, org’s must find a balance between – • Differentiation – occurs through a division of labour and technical specialization (too

much differentiation leads to conflicts and politics)

• Integration – occurs when specialists cooperate to achieve a common goal.

III. Relationship between environment & structure• As organizations depend on their environment for resources, output

consumption and legitimacy, it is imperative that they develop designs that would enable them to proactively respond to the issues relating to resources availability, consumption pattern and legitimacy.

• As competition increases, org’s concern for quality / minimizing cost gets reflected in the appropriate structure.

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• As the environment is dynamic, greater is the need for restructuring the organization, e.g., so if the env is uncertain / changing env, the org will move to a organic form to react to the external changes.

• Consumption patterns, expectations, aspirations and priority of values/goals of the society, stakeholders issues are subject to changes, which adds to dynamic force of the env.

• Strategic decisions like mergers, acquisitions, joint ventures, strategic alliances and partnerships are attempts on the part of the org’s to gain control over the uncertainties in the env and to ensure their survival.

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Strategy & StructureOrganizations need to develop mechanisms and intimate actions to deal

effectively with the opportunities and threats in their respective environments.A set of broad decisions as to how an organization will direct its energy and

efforts to gain a competitive advantage in its environment.Strategies are needed to enable org’s respond to demands in terms of meeting

competition, coping with the dynamics of change and utilizing resources for realizing its vision / mission.

Strategies represents a coherent set of actions aimed at gaining a sustainable advantage over competition, improve position vis-à-vis customers or allocating resources.

In a nutshellA strategy thus can be defined as a series of goal oriented decisions and actions

that match an org’s skills and resources with the opportunities and threats in its environment.

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The core competencies include Skills and abilities in value creationable activities, such as - Manufacturing; R & D; Org design

To achieve superior efficiency, quality, innovation and customer responsiveness.

Alfred chandler during 1960’s studied the relationship between the strategic choice and the structure of the organization.

• Simpler the structure, process and output, so will the strategy; and vice versa. • As org’s deal with multiple products/services the high degree of

interdependence in the internal functions was required.

Based on his study, chandler has proposed two issues• Changes in corporate strategy preceded and led to changes in org’s structure• Org structures followed the growth strategies of firms. Growth strategies

tended to follow certain patterns.• Growth patterns are as under – growth strategies I, II, III, IV & V.

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Growth stages of organizations• GS – I : Initial stage – single function, single location, single product, single

industry,; follows a predictable path. • GS – II: Volume expansion – in terms of producing, selling, distributing more

products / services• GS - III: Geographic expansion• GS IV: Vertical Integration• GS V: Product diversification

Time line and progression of organizations• Time – t ; progression I (GS 1)• Time – t +1 ; progression II (GS 3)• Time – t + 2; progression III (GS 5)

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Types of Strategy’s Miles & Snow’s classification of org into four strategies – Defenders, Prospectors,

Analyzers & Reactors.

Competitive StrategiesMicheal Porter has classified strategies into 3 types – Cost leadership Strategy,

Differentiation Strategy & Focus.

Components of Strategy ImplementationThere are 5 major components in developing mechanisms for implementation of

strategies, they are • Task focus (Value)• Structure• Decision processes & Control• Reward Systems• PeopleAnd either side of the org – we have Firm Strategy & Firm Performance.

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Relationship between Environment, Strategy & Structure

Perceived threats &Opportunities in the Environment Strategy Structure

SWOT in terms ofCompetency &Resources

Org’s continuously seek to align themselves with changes in their environment by rearrangement of various roles and functions in their systems. Some of the ways are

• Enlargement of scope of functions• Creation of new function• Partnering and networking

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Size & Technology Technology is the process by which knowledge, skills, tools and techniques are

used by transform inputs into outputs.

Org levels & technologyThis exists at 3 levels – individual, functional / departmental & Organizational

Input – conversion – Output process• Input – consists of skills, procedures and techniques, allows each org function

to handle relationships and management with external vendors.

• Conversion – a combination of machines, techniques and work procedures, transforms intput into outputs. Other methods such as work redesign, allowing employees to devise better ways.

• Output – effectively dispose of finished goods/ services to customers. Product testing of the goods/services, after sales etc.

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Technology & StructureJoan Woodward made an attempt to seek a relationship between technology and

structure. She studied and identified levels of technical complexity that are associated with three types of production technology, they are

• Unit & Small batch technology• Large batch & mass production technology• Continuous process technology

Nature of input and transformation processCharles perrow, proposed a generic typology of technology which are applicable to all

kinds of org’s, and identified two factors as its determinants, they are - Input task variability & Problem analyzability

Input task variability • Refers to the numbers of exceptions (new or unexpected situations) that a person

encounters while performing a task.• Uniformity refers to few or no exceptions or unpredictable cases.• Input variability is considered to be high when there are exceptions and

unpredictable instances.

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Problem analyzability• Refers to the degree to which search activity is needed to solve a problem.• The problem is analyzable when the problems encountered in the process of

transformation of inputs to outputs can be easily analyzed, specified and solved by using routine procedures.

• Thus the decisions can be programmed as the problem can be anticipated and solution can be arrived at routinely.

Perrow’s Technology Classificationhe has used dimensions of the above two issues, to differentiate among four types of

technology, they are – Routine technology / manufacturing; Engineering Technology / production; Craft work / Technology; Non routine technology.

Routine technology / manufacturing; • The features are – single product, highly mechanized process of production, mass

production, formal and centralized structure.• Decisions are easily made, defined ; manuals and instructions can be developed to

respond to any problems.• Centralized structure with high degree of formalization is likely to be appropriate design

for routine technology / manufacturing.

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Engineering Technology / production; • The features are – customized, customerized, flexible centralized structure.• In heavy manufacturing setups, the raw materials are highly variable with lots

of exceptions, but the problems encountered in the transformation process can be anticipated, analyzed & specified.

• Decisions can be programmed.

Craft work / Technology; • Here the raw materials has few exceptions, but the problems encountered in

process of transformation cannot be analyzed / anticipated.• People need to develop unique methods to respond to unique problems/

issues.• People’s experience, intuition and judgment, play a important role than pre-

specified solutions• e.g., potter • The above mentioned nuances cannot be captured in a rational, logical and

analytical framework , so cannot be predicted and programmed.

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Non routine technology.• The features here are – great variation in input and the problem in the

conversion process cannot be analyzed.• The problems are input specific.• Thus the structure has to be flexible enough to allow for continuous

innovation, experimentation and fundamental transformation in approach to a task.

Task interdependence & type of technologyJD Thompson, devised a typology of technology based on the nature of

relationship between various tasks carried out in the input-conversion-output process.

Three types of task interdepedencies were identified, they are – • Serial interdependence – mass production assembly line• Pooled interdependence - also called mediating technology; banking & public

utility org’s• Reciprocal Interdependence – R&D, Hospitals.

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