Organisational Theory and Design
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UNIT2updated.pptxBMG 320/03
Organisational Theory and Design
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1
Unit 2
ORGANISATIONAL PURPOSE AND STRUCTURAL DESIGN
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2
2.1 Organisational Structure
There are three key components in the definition of organisation structure:
Organisation structure designates formal reporting relationships, including the number of levels in the hierarchy and the span of control of managers
Organisation structure identifies the grouping together of individuals into departments and of departments into the total organisation.
Organisation structure includes the design of systems to ensure effective communication, coordination, and integration of efforts across departments.
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2.2 Application of the structural design
Organisations can have structures such as :
Functional structure
Divisional structure
Matrix structure
Horizontal structure
Network structure
Hybrid structure
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Functional Structure
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Divisional Structure
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Matrix Structure
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Horizontal Structure
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Network Structure
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Hybrid Organisation Structure
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2.2 Application of the structural design
Functional structure – uses task specialisation and strict chain of command for efficient control of resources but it tends to be inflexible and not innovative
Horizontal structure – innovative and promotes learning but tends to waste resources
Virtual network structure – greater flexibility and rapid response
Hybrid structure – combines characteristics of various structural types.
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Question for discussion
Why do companies using horizontal structure have cultures that emphasis openness, employee empowerment and responsibility?
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2.2 Structural Alignment
Managers need to find the balance between vertical control and horizontal co-ordination.
Vertical control is associated with goals of efficiency and stability
Horizontal co-ordination is associated with learning, innovation and flexibility
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Symptoms of Structural Deficiencies
Managers try to achieve the best fit between internal reporting relationships and the needs of the external environment.
When organisation structure is out of alignment with organization needs symptoms of structural deficiency appears such as:
Decision making is delayed or lacking in quality.
The organization does not respond innovatively to a changing environment.
Employee performance declines
Absence of collaboration among units/departments
Goals are not being met
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2.3 Role of Strategic Direction in Organisation Design
| External Environment |
| Opportunities Threats Uncertainty Resource Availability |
| Internal Situation |
| Strengths Weaknesses Distinctive competence Leader Style Past Performance |
| Strategic Intent | ||
| Define Mission, Official Goals | Select Operational Goals, Competitive strategies |
| Organisation Design |
| Structural Form- le arning vs efficiency Information & control systems Production Technology HR policies, incentives Organisational culture Interorganisational linkages |
| Effectiveness Outcomes |
| Goal attainment Resources Efficiency Strategic constituents |
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SWOT Analysis & Strategic Intent
The direction setting process begins with SWOT analysis – assessing the Strengths, Weaknesses, Opportunities and Threats in the external and internal environment.
Next is defining the strategic intent which involves defining the overall mission and goals
Leaders then formulate operational goals & strategies to accomplish the overall mission
Organisation design reflects the way goals & strategies are implemented so that the organisation’s attention & resources are consistently focused towards achieving the mission and goals.
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Examples of Mission Statements
Tesla: To accelerate the world’s transition to sustainable energy.
IKEA: To create a better everyday life for the many people.
Amazon: To be Earth’s most customer-centric company, where customers can find and discover anything they might want to buy online.
Google: To organize the world’s information and make it universally accessible and useful.
Loreal: To provide the best in cosmetics innovation to women and men around the world with respect for their diversity.
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Organisation Design
Organisation Design is the administration & execution of the strategic plan.
Managers make decisions about the structural form – organic (learning & innovation) or mechanistic (efficiency
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Effectiveness & Outcomes
Managers evaluate the effectiveness of organisational efforts
The performance measurements feedback to the internal environment so that past performance of the organisation is assessed by managers in setting new goals & strategic direction for the future.
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Measuring Organisational Effectiveness
Resource
Inputs
Product & Service Outputs
Organisation
Internal Activities & processes
Resource- based Approach
Goal Approach
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Measuring Effectiveness
Goal approach
The goal approach to effectiveness consists of identifying an organisation’s output goals and assessing how well the organization has attained those goals.
This is a logical approach because organizations do try to attain certain levels of output, profit, or client satisfaction.
The goal approach measures progress toward attainment of those goals.
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Measuring Effectiveness
Indicators tracked with the goal approach include:
Profitability—the positive gain from business operations or investments after expenses are subtracted
Market share—the proportion of the market the firm is able to capture relative to competitors
Growth—the ability of the organization to increase its sales, profits, or client base over time
Social responsibility—how well the organization serves the interests of society as well as itself
Product quality—the ability of the organization to achieve high quality in its products or services
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Measuring Effectiveness
Resource based approach
The resource-based approach looks at the input side of the transformation process.
It assumes organizations must be successful in obtaining and managing valued resources in order to be effective.
From a resource-based perspective, organizational effectiveness is defined as the ability of the organization, in either absolute or relative terms, to obtain scarce and valued resources and successfully integrate and manage them.
The resource-based approach is valuable when other indicators of performance are difficult to obtain.
In many nonprofit and social welfare organizations, for example, it is hard to measure output goals or internal efficiency
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Measuring Effectiveness
Indicators tracked with the resource-based approach include:
Bargaining position – the ability of the organization to obtain valuable resources eg. Quality employees, financing, raw materials etc
The ability of the organization’s decision makers to perceive and correctly interpret the external environment
The abilities of managers to use tangible and intangible resources to achieve superior performance
The ability of the organization to respond to changes in the resource sector of the environment
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End of Slide
Thank you for your attention!
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