Organizational Design Chapter 10 MANAGEMENT Meeting and Exceeding Customer Expectations EIGHTH EDITION Prepared by Deborah Baker Texas Christian University Copyright ©2005 by South-Western, a division of Thomson Learning All rights reserved learning objectives Explain the meaning of organizational design Describe the four objectives of organizational design Distinguish between mechanistic and organic organizational structures Discuss the influence that contingency factors —organizational strategy, environment, size, age, and technology—have on organizational design Chapter 10 Describe the characteristics, advantages, and disadvantages of functional, divisional, matrix, team, and network structural designs Copyright ©2005 by South-Western, a division of Thomson Learning All rights reserved Organizational Design 11 Chapter 10 Organizational Organizational Design Design The creation of or change to an organization’s structure  Develop the overall layout of positions and departments  Develop the interrelationships of the departments  Create the means to implement plans, achieve goals, and ultimately satisfy the customer Copyright ©2005 by South-Western, a division of Thomson Learning All rights reserved 22 Common Elements of Organizations Chapter 10  They operate with authority  They have departments  They use line and staff positions Copyright ©2005 by South-Western, a division of Thomson Learning All rights reserved 22 Objectives of Organizational Design Respond Respond to to Change Change Integrate Integrate New New Elements Elements Chapter 10 Coordinate Coordinate Components Components Encourage Encourage Flexibility Flexibility Copyright ©2005 by South-Western, a division of Thomson Learning All rights reserved 33 Organizational Structures Mechanistic Mechanistic Structure Structure Chapter 10 Organic Organic Structure Structure A tight organizational structure characterized by rigidly defined tasks, formalization, many rules and regulations, and centralized decision making A flexible, free-flowing organizational structure that has few rules and regulations and decentralizes decision making right down to the employees performing the job Copyright ©2005 by South-Western, a division of Thomson Learning All rights reserved Chapter 10 33 Organizational Structures Copyright ©2005 by South-Western, a division of Thomson Learning All rights reserved 44 Contingency Factors Affecting Organizational Design Strategy Strategy Environment Environment Size Size Chapter 10 Age Age Technology Technology Copyright ©2005 by South-Western, a division of Thomson Learning All rights reserved Chapter 10 44 Influence of Strategy on Structure Copyright ©2005 by South-Western, a division of Thomson Learning All rights reserved Environment 44 Requirements for an Unstable Environment The organization must be able to adapt to change The organization needs greater Chapter 10 coordination between departments Copyright ©2005 by South-Western, a division of Thomson Learning All rights reserved 10 Chapter 10 44 Organizational Life Cycle Copyright ©2005 by South-Western, a division of Thomson Learning All rights reserved 15 44 Technology Small Small Batch Batch Mass Mass Production Production Continuous Continuous Process Process Chapter 10 Flexible Flexible Manufacturing Manufacturing Systems Systems Copyright ©2005 by South-Western, a division of Thomson Learning All rights reserved 16 Chapter 10 44 Technology Copyright ©2005 by South-Western, a division of Thomson Learning All rights reserved 17 55 Structural Options Functional Functional Matrix Matrix Divisional Divisional Chapter 10 Team Team Network Network Copyright ©2005 by South-Western, a division of Thomson Learning All rights reserved 18 Chapter 10 55 Structural Options Copyright ©2005 by South-Western, a division of Thomson Learning All rights reserved 19 55 Functional Structure Advantages Disadvantages  Economies of scale  Minimizes duplication  Comfortable  Employees have little environment for employees understanding of or concern for areas outside their own area  Barriers in communication, cooperation, and coordination  Simplifies training Chapter 10  Slow response time to changes in the environment Copyright ©2005 by South-Western, a division of Thomson Learning All rights reserved 20 Chapter 10 55 Functional Structure Copyright ©2005 by South-Western, a division of Thomson Learning All rights reserved 21 55 Divisional Structure Advantages  Focuses the attention Disadvantages  Duplication of activities and resources  Loss of efficiency and economies of scale  Lack of technical specialization, expertise, and training  Different divisions may feel they are competing with one another on results  Flexible and responsive to change  Responsibility and accountability are easier to target  Excellent vehicle for Chapter 10 developing senior executives Copyright ©2005 by South-Western, a division of Thomson Learning All rights reserved 22 Chapter 10 55 Divisional Structure Copyright ©2005 by South-Western, a division of Thomson Learning All rights reserved 23 Matrix Structure 55 Chapter 10 Advantages   Flexible  Increase in employee motivation Increase in communication and coordination  Sense of commitment and satisfaction  Training in functional and management skills  General perspective Disadvantages   Dual chain of command   Time loss to meetings Copyright ©2005 by South-Western, a division of Thomson Learning All rights reserved Pits divisional objectives against functional objectives Balance of power between functional and divisional sides 24 Chapter 10 55 Matrix Structure Copyright ©2005 by South-Western, a division of Thomson Learning All rights reserved 25 Team Structure 55 Advantages  Chapter 10  Breaks down departmental barriers Speeds up decision making   Motivates employees  Does not involve the problem of double reporting  Team membership Disadvantages  Performance suffers if training is not provided  Time required for team meetings Lower administrative costs Copyright ©2005 by South-Western, a division of Thomson Learning All rights reserved 26 Chapter 10 55 Team Structure Copyright ©2005 by South-Western, a division of Thomson Learning All rights reserved 27 Network Structure 55 Advantages  Flexibility  Low administrative overhead  Communication by e-mail Disadvantages  Lack of control  Reliance on contractors  Supply unreliability  Lack of technical Chapter 10 expertise Copyright ©2005 by South-Western, a division of Thomson Learning All rights reserved 28 Chapter 10 55 Network Structure Copyright ©2005 by South-Western, a division of Thomson Learning All rights reserved 29 ... communication and coordination  Sense of commitment and satisfaction  Training in functional and management skills  General perspective Disadvantages   Dual chain of command   Time loss to meetings... tasks, formalization, many rules and regulations, and centralized decision making A flexible, free-flowing organizational structure that has few rules and regulations and decentralizes decision making... attention Disadvantages  Duplication of activities and resources  Loss of efficiency and economies of scale  Lack of technical specialization, expertise, and training  Different divisions may feel