DESIGN DEFINITION • Organizing – The function of management that creates the organization’s structure. • Organization Design – When managers develop or change the organization’s structure. ELEMENTS IN ORGANIZATIONAL DESIGN • Work specialization • Departmentalization • Authority and Responsibility • Span of control • Centralization versus Decentralization • Formalization WORK SPECIALIZATION • Dividing work activities into separate job tasks. • Also known as division of labor. • Allows organizations to efficiently use the diversity of skills that workers have. DEPARTMENTALIZATION AUTHORITY AND RESPONSIBILITY • Chain of command – The line of authority extending from upper organizational levels to lower levels, which clarifies who reports to whom. • Authority – The rights to inherent in a managerial position to give orders and expect the orders to be obeyed. • Responsibility – An obligation to perform assigned duties. AUTHORITY AND RESPONSIBILITY (cont…) • Types of authority – Line authority: entitles manager to direct the work of an employee. – Staff authority: functions to support, assist, advise, and generally reduce some of their informational burdens. • Unity of command – Structure in which each employee reports to only one manager. AUTHORITY AND RESPONSIBILITY (cont…) • Authority versus Power – Authority: it is a right. Its legitimacy is based on an authority figure’s position in the organization. It goes with the job. – Power: an individual’s capacity to influence decisions. SPAN OF CONTROL • The number of employees a manager can efficiently and effectively supervise. • The more training and experience employees have, the less direct supervision they need. SPAN OF CONTROL (cont…) • Contingency variables: – Similarity of employee tasks. – The complexity of those tasks. – The physical proximity of employees. – The degree to which standardized procedures are in place. – The sophistication of the organization’s management information system. – The strength of the organization’s value system. – Preferred managing style of the manager. CENTRALIZATION AND DECENTRALIZATION • Centralization – The degree to which decision making takes place at upper levels of the organization. • Decentralization – The degree to which lower level managers provide input or actually make decisions. FORMALIZATION • How standardized an organization’s jobs are and the extent to which employee behavior is guided by rules and procedures. • Highly formalized organizations: – Explicit job descriptions – Numerous organizational rules – Clearly defined procedures covering work processes – Little discretion FORMALIZATION (cont…) • Low formalization: – Employees have more discretion in how they do their work. 2 GENERIC ORGANIZATION STRUCTURE MODELS • Mechanistic Organization/Bureaucracy – A bureaucratic organization; a structure that’s high in specialization, formalization, and centralization. • Organic Organization – Highly adaptive form that is as loose and flexible as the mechanistic organization is rigid and stable. – Low in specialization, formalization, and centralization. CONTINGENCY FACTORS FOR ORGANIZATIONAL DESIGN • Strategy • Size • Technology • Environment STRATEGY • Certain structural designs work best with different organizational strategies. • Eg: Flexibility and free flowing information of the organic structure works well when an organization is pursuing a meaningful and unique innovations. • Eg: mechanistic organization with its efficiency, stability, and tight controls work best for companies wanting to tightly control costs. SIZE • Large organizations considered to be those more than 2000 employees tend to have more specialization, departmentalization, centralization, and rules and regulations than small organizations. • Basically, the bigger the organization, the more mechanistic the organization structure will be. TECHNOLOGY • Organization uses some form of technology to covert its inputs into outputs. • Eg: employees at FedEx Kinko’s do custom design and print jobs for individual customers. ENVIRONMENT • Mechanistic organizations are most effective in stable environments. • Organic organizations are best matched with dynamic and uncertain environments. • Dynamic environmental forces: – Global competition – Accelerated product innovation by competitors – Knowledge management – Increased demands from customers for higher quality and faster deliveries COMMON ORGANIZATIONAL DESIGNS • Simple structure – Organizational design with low departmentalization, wide spans of control, authority centralized in a single person, and little formalization. • Functional structure – Organizational design that groups similar or related occupational specialties together and applied to the entire organization. COMMON ORGANIZATIONAL DESIGNS (cont…) • Divisional structure – An organization structure made up of separate business units or divisions. CONTEMPORARY ORGANIZATIONAL DESIGNS • Team structure – The entire organization is made up of work teams that do the organization’s work. – Employee teams design and do work that they think is best and held responsible for their work. • Matrix-Project structure – Assigns specialists from different functional departments to work on a projects led by a project manager. – When finish, they go back to their functional departments. CONTEMPORARY ORGANIZATIONAL DESIGNS (cont…) • Matrix structure – Project structure: Which employees continuously work on projects. – Has no formal departments where employees return at the completion of a project. – Employees take their specific skills, abilities, and experiences to other projects. CONTEMPORARY ORGANIZATIONAL DESIGNS (cont…) • Boundaryless organization – Which an organization whose design is not defined by, or limited to, the horizontal, vertical, or external boundaries imposed by a predefined structure. – Two types: • Internal • External CONTEMPORARY ORGANIZATIONAL DESIGNS (cont…) • Internal – The horizontal ones imposed by work specialization and departmentalization and the vertical ones that separate employees into organizational levels and hierarchies. • External – The boundaries that separate the organization from its customers, suppliers, and other stakeholders. – Eg: Virtual and network organization CONTEMPORARY ORGANIZATIONAL DESIGNS (cont…) • Virtual organization – Consists of a small core of full time employees and outside specialists temporarily hired as needed to work on projects. • Network organization – Which is one that uses its own employees to do some work activities and networks of outside suppliers to provide other needed product components or work process. ORGANIZATIONAL DESIGN CHALLENGES • Employees connected • Managing global structural issues • Building a learning organization • Designing flexible work arrangements EMPLOYEES CONNECTED • Managers is finding a way to keep widely dispersed and mobile employees connected to the organization. • Technologies such as: – Handheld devices with e-mail, calendars and contacts. – Videoconferencing using broadband networks and webcams. – Giving employees key fobs to log onto corporate network to access e-mail and company data. – Cell phones switch between cell networks and corporate Wi-Fi. MANAGING GLOBAL STRUCTURAL ISSUES • Researchers concluded that structures and strategies of organizations worldwide are similar, while the behavior between teams is maintaining its cultural uniqueness. • So basically, when designing or changing structures, managers need to think about cultural implications. BUILDING A LEARNING ORGANIZATION • Learning organization – An organization that has developed the capacity to continuously learn, adapt, and change. – Employees are practicing knowledge management by continually acquiring and sharing new knowledge and are willing to apply that knowledge in making decisions or performing their work. ORGANIZATIONAL DESIGN • Employees are free to work together and collaborate in doing the organization’s work the best way they can, and learn from each other. • Employees work in teams on whatever activities need to be done, and these employee teams are empowered to make decisions about their work or resolving issues. • Managers serve as facilitators, supporters, and advocates. INFORMATION SHARING • Information must be shared among members meaning, employees must engage in knowledge management by sharing information openly, timely manner, and as accurately as possible. • Environment is conducive to open communication and extensive information sharing. LEADERSHIP • Important functions: – Facilitating the creation of a shared vision for the organization’s future and then keeping organizational members working toward that vision. – Support and encourage the collaborative environment that’s critical to learning. ORGANIZATIONAL CULTURE • Everyone agrees on a shared vision and everyone recognizes the inherent relationships among the organization’s processes, activities, functions, and external environment. • Foster strong sense of community, caring for each other, and trust. • Employees feel free to communicate openly, share, experiment, and learn without fear of criticism or punishment. DESIGNING A FLEXIBLE WORK ARRANGEMENTS • Telecommuting – Which employees work at home and linked to workplace by computer. • Compressed workweeks – Which employees work longer hours per day but fewer days per week. • Flextime – Scheduling system in which employees are required to work a specific number of hours a week but are free to vary those hours within certain limits. DESIGNING A FLEXIBLE WORK ARRANGEMENTS (cont…) • Job sharing – The practice of having two or more people split a full time job. • Contingent workers – Temporary, freelance, or contract workers whose employment is contingent upon demand for their services.