Organization Design

What is the managerial relevance of organization design?

What are the antecedents and consequences of organization design?

What are the critical structural elements of organization design?

What are critical design parameters? How is overall structure designed? How is coordination achieved?

Managerial Relevance of Organization design

give the organization a competitive advantage

help the organization deal with its stakeholders

increase the organization’s efficiency

give the organization more control over its environment

allow the organization to better coordinate and motivate employees

help the organization to develop and implement its strategy

The Gillette Company: A Success Story

The Gillette Company: New Structure

Exec. V.PresGlobal Business

Exec. V.PresGlobal Business

Exec. V.PresCom. Operations

Exec. V.PresCom. Operations

Com. OperationsN. America

Com. OperationsS. America

Com. OperationsEurope

Com. OperationsAsia Pacific

Com. OperationsAfrica, ME, E. Eur

Braun

Oral-B

Stationery

Blades &Razors

Toileries

Batteries

ChairmanCEO

PresidentCOO

What is organizational structure?

The formal system of rules and tasks and authority relationships that control how people cooperate and use resources to achieve the organization’s goals. (Barnard, 1948)

The sum total of the ways in which its labor is divided and then its coordination is achieved among these tasks. (Mintzberg, 1983)

The groupings of related activities performed in an organization into meaningful components to insure effective communication, coordination, and control for accomplishing the organization’s strategic objectives.

Core parts of organizational structure

Board of directorsPresident

Executive Committee

StrategicPlanning

Controller

OperationsResearch

ProductionScheduling

PersonnelTraining

LegalCounsel

Public Relations

Industrial Relations

Payroll

Mailroom

Basic Research

VPOperations

PlantManagers

VPMarketing

RegionalSales Mngs.

Foremen

DistrictSales Staff

PurchasingAgents

MachineOperators

Assemblers SalesPersonnel

Shippers

The Operating Core

Strategic Apex

TechnoStructure

SupportStaff

Middle Line

•Environment•Age and Life-cycle•Technology•Top-Mngt. Strategy

Organizational Design: Antecedents & Consequences

ContextualFactors

OrganizationDesign

Consequencesof Design

•Differentiation

•Integration

•Innovation•Ability to Adapt•Decision-making•Power & Politics•Conflict

Elements of Organization Design

DESIGN

DIFFERENTIATION

INTEGRATION

Allocation of

TASKS

RESOURCES

AUTHORITY

COORDINATION

CONTROL

Design Parameters

Design of Positions Job specializationJob formalizationJob standardization

Design of Superstructure Unit groupingsUnit size

Design of Lateral Linkages Planning & Control Systems

Liaison devices

Design of Decision-making Vertical decentralizationHorizontal

decentralization

Design of Superstructure

Reasons for grouping activities are:

• to establish common supervision• to share common resources more efficiently• to develop common performance measures• to facilitate mutual adjustment• to manage interdependencies among

activities

Criteria for grouping positions and units

Work-flow interdependencies Functional interdependencies Scale interdependencies Social interdependencies

What are the most common bases for grouping activities?

Grouping by knowledge and skill Grouping by work process and

function Grouping by time Grouping by output (product) Grouping by client (customer) Grouping by place (geographical)

Five mechanisms to achieve coordination

M

A

O O

M

A

O OM

A

O O

Mutual Adjustment Direct Supervision

Inputs Work Process Outputs

Standardizationof

Integration Mechanisms

Direct Contact Liaison Role Task Force Full-time

Integrators Permanent Teams Integrating

Department

Hierarchical Referral Rules and Plans New Hierarchical

Levels Vertical Information

Systems

Horizontal Integration Vertical IntegrationSim

ple

Com

ple

x