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Chapter10and11.pptx
Chapter 10 and 11
Organisation Structure and Types;
Organisational Design
Autumn 2017
1
Today’s agenda (Chapter 10)
Organisational structure
Organisational forms
Differentiation and integration
Centralisation vs. Decentralisation
Thursday (Chapter 11)
Organisational fit
The contingency approach
Environment, size, technology and strategy
Organisational effectiveness
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Four characteristics common to all organisations
What is an organisation? - Organisations are everywhere as a primary context for orga. behavior
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Defining an organisation
” A system of consciously co-ordinated activities or forces of two or more persons” Barnard
Organisations allow groups of people to co-ordinate efforts to gets things done – organisations have goals and structures to achieve them.
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Hospital Organi-sation Chart
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Elements of organisational structure
Division of labour
Differentiation
Hierarchy of authority
Co-ordination and effort
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Reflection and Critical thinking
Cost’s are out of control, managers do as they please, not just with money, but also with most other decisions. You are the chief executive, hired by the board to do something….anything. What do you do? (Use the terms from the following 7 slides in your discussion)
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Division of labour
Clarification of the objective of the organisation
Decomposing the objective in a cascade of sub-elements and accompanying tasks
Allocating people to the tasks
Determining which people are responsible of the tasks and sub-elements
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Division of Labour – Specialisation – Adam Smith 1776
Specialisation involves a horizontal and a vertical dimension
Horizontal: How many activities are covered by a job
Vertical: How much a person is involved in conception, execution and administration of activities
Too much specialisation: demotivating + inflexible
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Differentiation versus integration
Differentiation: division of labour and specialisation that cause people to think and act differently
Integration: co-operation among specialists to achieve common goals
managers of today’s complex organisations need to strive constantly and creatively to achieve greater integration
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Galbraith’s co-ordination mechanisms
Rules, programs and procedures: fixing and determining each ones tasks in relation to other’s tasks;
Hierarchy: controlling tasks by gathering all information in one function with decision-making authority;
Integrators: roles, such as brand managers or project managers, or departments that have the coordination of certain tasks and units as their responsibility;
Formal groups: teams, task groups or project groups, which are groups formed to deal with interdepartmental tasks
Informal groups: spontaneous groups that develop to solve informally the interdepartmental coordination
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The Four Types of Standardisation
Standardisation of work – specifying the tasks so that tasks are streamlined (routine, simple assembly line)
Standardisation of output – what needs to be reached not how. Output determined by the number of pieces
Standardisation of skills - hiring people with the same skills – e.g. lawyers or doctors – going through the same education/training
Standardisation of norms – hiring, training or influencing people to have the same norms. Used in religious or radical organisations
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Hierarchy of authority
Unity of command: each employee should report to a single manager
Span of control: the number of people reporting directly to a given manager
Centralisation: the concentration of decision-making power at the level of the top management team
Decentralisation: the spreading of decision-making power in the organisation
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Staff and line functions
Staff personnel: provide research, advice and recommendations to line managers
Line managers: have authority to make organisational decisions
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Simple organisations - and span of control
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Functional Departmentalisation
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Product based departmentalisation
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Geographical departmentalisation
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Matrix organisation
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Weber’s Bureaucratic Organisation
Division of labour
A hierarchy of authority
Framework of rules
Administrative impersonality
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Reflection and Critical thinking
With only a handful of alternative forms – why is it that organisations still often get it wrong? (Use the following 7 slides in your discussion)
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Functional Departmentalisation
Well suited to gaining fruits of specialisation, functional expertise, efficiency and quality in a stable environment
Creates possible economies of scale, continual improvement and great career opportunities
Disadvantages: sub-optimisation, coordination difficulties and information overload
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Advantages/disadvantages of the divisional/departmental organisation
| Advantages | Disadvantages |
| Close to market | Losing economies of scale |
| Quick response to uncertainty | Losing economies of scope (producing different things together |
| Accountability is clearly defined | Divisions competing against each other |
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Advantages of matrix organisation
Combines the efficiency of the functional structure with the flexibility of the divisional (product) structure
Combines functional expertise with product (or project) expertise
Dual attention for functional goals and product goals
Flexibility to extend the number of products or to regroup
Maximises the value and use of individual experts
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Disadvantages of matrix organising
Conflict due to dual lines of authority
Impossibility to combine the dual attention for functional and product/project demands
Difficult allocation of functional experts over the different product groups
Imbalance between the two interests, resulting in the domination of one of the two and loosing the advantages of the matrix
Confusion about responsibilities
Costly coordination due to the more complex structure
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Mechanistic or organic organisations
| Characteristic | Mechanistic | Organic |
| Task definition and knowledge required | Narrow, technical | Broad, general |
| Linkage between individual’s contribution and organisation’s purpose | Vague or indirect | Clear or direct |
| Task flexibility | Rigid, routine | Flexible, varied |
| Specification of techniques, obligations and rights | Specific | General |
| Degree of hierarchical control | High | Low |
| Primary communication pattern | Top-down | Lateral |
| Primary decision-making style | Authoritarian | Democratic, participative |
| Emphasis on obedience and loyalty | High | Low |
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Mechanistic or organic organisations
Evidence from research findings:
One is not superior to the other
Managerial skill has a greater impact on effectiveness in organic organisations
Intrinsic motivation decreases in mechanistic organisations
Bureaucracy causes greater bureaucracy
Mechanistic organisations have command-and-control communication
Organic organisations have more participative communication
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New organisation types
| New | Old |
| Dynamic, learning | Stable |
| Information rich | Information is scarce |
| Global | Local |
| Small and large | Large |
| Product/customer focus | Functional |
| Skills oriented | Job oriented |
| Team oriented | Individual oriented |
| Lateral/networked | Hierarchical |
| Lateral/networked | Hierarchical |
| Customer focus | Job requirements oriented |
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Mintzbergs elements
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Mintzberg’s Organisation Parts
Strategic apex: managers and directors
Middle line: middle line managers having responsibility for sub-elements of the organisation’s activity and authority over line personnel
Operating core: line personnel responsible for the core tasks of the organisation
Technostructure: staff personnel analysing and taking care of the work of the line personnel
Support staff: not dealing with core tasks but providing necessary support for operational tasks
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Reflection and Critical thinking
Please give some examples of companies which had great success due to a specific organisational structure! (Use the Mintzberg terminology from the following 2 slides in your discussion)
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Mintzberg’s organisation types, 1
| Division of labour and key organisation part | Coordination | Hierarchy of authority | |
| Entre- preneurial | Small, limited specialisation Strategic apex | Informal Direct supervision | Autocratic leader Centralisation |
| Machine | Strong specialisation Functional unit structure Technostructure | Very formal, bureaucratic Rules and procedures as coordination – standardisation processes | Centralised and hierarchic decision-making with unity of command |
| Diversified | Large product-based structure Middle line | Formal - can be bureaucratic Full range of coordindation mechanisms but emphasis on standardisation of output | Decentralised divisions, but centralisation and heirarchy at headquarters and divisions possible |
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Mintzberg’s organisation types, 2
| Professional | Highly specialised with very autonomous workers Operating core | Bureaucratic Standardisation of skills in combination with a few rules as co-ordindation mechanisms | Low hierarchy, decision-making power resides with the professionals |
| Innovative | Lower specialisation though change but with experts able to innovate | Flexible and organic Coordination in formal and informal teams and through liaison personnel informally – mutual adjustment | Decentralised with low levels of hierarchy Unity of command is violated |
| Missionary | Loosely organised small units, tasks and roles are clear and focused through the clarity of the mission | Co-ordination by standardisation of values and norms and often also strict explicit rules | Centralisation through charismatic leader and central mission bu decentralisation in daily operations |
| Political | Different work deviations are possible but the choice will be political | Formal and mainly informal coordindation by power | Decentralisation through politicking Enforcing or destroying hierarchy of authority |
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Tomorrow’s organisations
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Tomorrow’s organisations
Horizontal organisations: few hierarchical levels, built around core processes
Hourglass organisations: limited number of middle managers
Virtual organisations: geographically dispersed people accomplishing tasks together thanks to modern IT
Project organisations: temporarily semi-autonomous project groups
Platform organisations: combines the new flexible types with more classic organisation types
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Organisational boundaries
Value chain considerations
Vertical integration
Horisontal integration
The make or buy question!
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Chapter 11
Organisational Design:
Structure, technology and effectiveness
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37
Chaos and Systems Theory
Chaos theory: the environment is extremely uncertain and turbulent, highly complex and disordered but patterns of order are still recognisable in the chaos.
Systems theory: every element is a subsystem of a larger system and every system is composed of subsystems, depending on each other and on the whole
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Organisational Fit
Closed System: “A self-sufficient entity, closed to the surrounding environment.” (For example, a battery-powered clock)
Open system: “Depends on constant interaction with the surrounding environment for survival.” (For example, the human body)
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Reflection and Critical thinking
How often should managers spend time trying to understand contingency models to optimize the organisational structure? (Use the following 5 slides in your discussion)
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Contingency and Organisational Design
A contingency approach to organisational design aims at achieving
an effective organisation - environmental fit
Depends on the current surrounding and organisational situation/context
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Contigency factors and organisational elements
| Typical contingency variables |
| Technology |
| Environment |
| Strategy |
| Size |
| Culture |
| Structure |
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Dimensions of environmental uncertainty
| Simple | Complex | |
| Low perceived uncertainty | Moderately low perceived uncertainty | |
| Small numbers of factors and components in the environment Factors and components are somewhat similar to one another Factors and components remain the same and are not changing Example: soft drink industry | Large numbers of factors and components in the environment Factors and components are not similar to one another Factors and components remain basically the same Example: food productions | |
| Moderately high perceived uncertainty | High percieved uncertainty | |
| Small number of factors and components in the environment Factors and components are somewaht similar to one another Factors and components are in continual process of change Example: fast-food industry | Large number of factors and components in the environment Factors and components are not similar to one another Factors and components of environment are in a continual process of change Example: commercial airline industry |
Static
Dynamic
Environmental uncertainty and structure
| Simple environment | Complex environment | |
| Low formalisation | Low formalisation | |
| A need for many flexible coordination mechanisms Organic Large need for information about the environment Simple structure Despecialisation | A need for many flexible coordination mechanisms Large need for information about the environment Divisional Large differentiation Decentralised | |
| High formalisation | High formalisation | |
| Limited use of coordination mechanisms Simple structure Low differentiation Centralisation | Limited use of coordination mechanisms Standardisation Mechanic Division Large specialisation |
Stable environment
Dynamic environment
Critics of the contingency approach
Neither the organisation, nor its processes or the environment remain stable – therefore it is (almost) impossible to determine an optimal fit
Assumes that organisations are determined by their environment and have few possibilities to influence their environment
The resource dependency perspective states that organisations depend on other organisations for acquiring their resources, which creates a natural source of uncertainty
Karl Weick’s enacted environment: key individuals in organisations construct their environment and react to their own constructed environment
“Although contingency theory is criticised, it is still useful. We need to make assumptions about relationships in organisations, knowing that the world is much more complex and that every assumption only holds within certain boundaries”
Drazin & Van de Ven
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Strategy as a contingency factor
Chandler – “structure follows strategy”
Cost leadership: products offered at low prices based on efficient low cost production
Differentiation: products offered at premium price based on the uniqueness or image of the product
Focus: selecting a niche in the market where competition is low or even absent
Miles & Snow - strategy typologies
Defender
Analyser (combination)
Prospector
Reactors
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A strategic choice model
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Reflection and Critical thinking
Discuss how Lego might approach the “technology” factor when considering whether they should apply the same structural approach in the factories in Denmark, Hungary and Mexico or not. (Use the following 8 slides in your discussion)
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Technology as a contingency factor: Joan Woodward’s pioneering study
Three levels of complexity:
Single piece production or small amounts
Mass production
Continuous or flow production
The higher the complexity, the more specialisation and the more overhead
Conclusion: technology is the overriding determinant of organisational structure
Focus on production = limitation
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Thompson’s Technology Types
Four types of interdependency
Sequential: output of task 1 is input for task 2
Reciprocal: both tasks use each others output as input
Pooled: tasks are independent but all contribute to the organisation’s goals
Intensive interdependency: complex bundles of independent tasks that need strong integration to allow a common output
Also service organisations
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Task interdependence and technology Thompson’s technology types continued
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Perrow’s technology types
| Rarely | Very frequent | ||
| Low | Analysable and understandable routine Centralisation and formalisation Standardisation, rules and procedures as coordination mechanisms Mass production and sequential technology Large span of control | Analysable and understandable with many exceptions Standardisation of skills, rules and processes, but low formalisation Engeering based production | |
| High | Low analysability routine Low standardisation Formalisation Decentralisation Continuous production flow Non-routine production | Low analysability & decentralisation Low standardisation, except for standardisation of skills and low formalisation Low span of control Intense technology Single piece production |
Changes in the technology
Complexity of the technology
Galbraith’s View
Information can reduce uncertainty caused by the variability in technology
Each mechanism for coordinating and structuring the organisation is different in the amount and type of information that can be shared
The higher the need for information, the more different coordination mechanisms are required
Other forms of coordination: vertical information systems and lateral relations
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Benefits of new technology
New opportunities for workers
New roles and communication lines allowing to break through the traditional functional and vertical boundaries
New ways of horizontal cooperation
More communication is made possible allowing more teamwork
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Drawbacks of new technology
Dependency of technology and alienation of humans
IT can be used by managers to reinforce their hierarchical power
Workers can be more extensively controlled and monitored resulting in a climate of distrust
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Research findings
The more the technology requires interdependence between individuals and/or groups, the greater the need for integration
As technology moves from routine to non-routine, subunits adopt less formalised and less centralised structures.
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Stakeholders
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Organisational diagnosis
Organisational diagnosis is a normative approach to the design of organisations based on strict fit relationships between the elements of the organisation:
Step 1: assessment of fit between the different contingency elements (goals and strategy, environment, technology and size)
Step 2: analysis of fit between those elements and organisation design and culture
Step 3: search for gaps in the working of the organisation and altering the design to bridge the gaps
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Organisational effectiveness the generic organisational effectiveness criteria for efficiency and productivity
Different criteria, approaches, theoretical schools etc.
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Generic Organisational-Effectiveness Criteria
Goal accomplishment
Resource acquisition
Internal processes
Strategic constituencies satisfaction
“ No single approach to the evaluation of effectiveness is appropriate in all circumstances or for all organisational types.”
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Learning outcome
Organisational structure, different types
Organisational forms, Mintzberg and more
Differentiation and integration, vertical and horisontal
Centralisation vs. Decentralisation, coordination
Organisational fit, resources and the environment
The contingency approach, ”not an island”
Environment, size, technology and strategy; factors
Organisational effectiveness; goal orientation
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