Chapter 15

Organizational Design
& Structure
Nelson & Quick
 Organizational Design
Organizational Design - the process
of constructing and adjusting an
organization’s structure to achieve
its goals.
the linking of
departments and
jobs within an
organization
H. Mintzberg, The Structuring of Organizations, Prentice Hall, © 1979, 301.
Reprinted by permission of Prentice-Hall, Inc, Upper Saddle River, NJ.
Key Organizational Design
Processes
 The process of deciding
how to divide the work
in an organization

Four Dimensions
• Goal orientation
• Time orientation
• Interpersonal orientation
• Formality of structure
 Horizontal
Differentiation

• The degree of differentiation

between organizational subunits
• Based on employee’s specialized
knowledge, education, or training
 Vertical
Differentiation

• The difference in authority and

responsibility in the organizational
hierarchy
• Greater in tall, narrow organizations
than in flat, wide organizations
 Spatial
Differentiation

• Geographic dispersion of an
organization’s offices, plants and
personnel
• Complicates organizational design, may
simplify goal achievement or protection
The process of coordinating
the different parts
of an organization

• Designed to achieve unity among

individuals and groups
• Supports a state of dynamic
equilibrium - elements of organization
are integrated, balanced
 Vertical
Integration

• Hierarchical referral
• Rules and procedures
• Plans and schedules
• Positions add to the organization structure
• Management information system
Horizontal
Integration

• Liaison roles
• Task forces
• Integrator positions
• Teams
Formalization - the degree Centralization - the degree
to which the organization to which decisions are
has official rules, made at the top of the
regulations and procedures organization

Hierarchy of Specialization -
Authority - the degree to
the degree of which jobs are
vertical
Basic narrowly
differentiation Design defined and
across Dimensions depend on
levels of unique
management expertise

Complexity - the degree to Standardization - the

which many different types degree to which work
of activities occur in the activities are accomplished
organization in a routine fashion
 Machine Bureaucracy -
Simple Structure - a a moderately
centralized form of decentralized form of
organization that organization that
emphasizes the upper emphasizes the
echelon & direct technical staff &
supervision standardization of
Structural work processes
Configurations
of
Adhocracy - a Professional
Organizations
selectively Bureaucracy -
decentralized a decentralized
form of Divisional Form - a form of
organization that moderately decentralized organization that
emphasizes the form of organization emphasizes the
support staff & that emphasizes the operating level
mutual adjustment middle level & & standardization
among people standardization of outputs of skills
 Five Structural Configurations of Organization
Structural Prime Key Part of Type of
Configuration Coordinating Organization Decentralization
Mechanism
Simple Direct Upper Centralization
Structure Supervision Echelon

Machine Standardization Technical Limited

Bureaucracy of Work Staff Horizontal
Processes Decentralization
Professional Standardization Operating Vertical &
Bureaucracy of Skills Level Horizontal
Decentralization
Divisionalized Standardization Middle Limited Vertical
Form of Outputs Level Decentralization

Adhocracy Mutual Support Selective

Adjustment Staff Decentralization
 Size Technology

Contextual Variables -
a set of characteristics that
influences the organization’s
design processes

Strategy
& Goals Environment
 Size

Basic Design Small Large

Dimensions Organizations Organizations

Formalization Less More

Centralization High Low
Specialization Low High
Standardization Low High
Complexity Low High
Hierarchy of authority Flat Tall
 Technology

Technological
Interdependence -
the degree of interrelatedness
of the organization’s various
technological elements
Relationship Between
Technology and Basic Task Variability
Design Dimensions Few Exceptions Many Exceptions

Problem Analyzability
Ill-defined & Craft Nonroutine
Unanalyzable 1. Moderate 1. Low
2. Moderate 2. Low
3. Moderate 3. Low
4. Low moderate 4. Low
5. High 5. High
6. Low 6. Low
Well-defined & Routine Engineering
Analyzable 1. High 1. Moderate
2. High 2. Moderate
Key 3. Moderate 3. High
1 Formalization 4 Standardization 4. High 4. Moderate
2 Centralization 5 Complexity 5. Low 5. Moderate
3 Specialization 6 Hierarchy-Authority
6. High 6. Moderate
Built from C. Perrow, “A Framework for the Comparative Analysis of Organization,” American Sociological Review, April 1967, 194-208
Environment - anything outside the boundaries
of an organization
Task environment - the elements of an
organization’s environment that are related to
its goal attainment
Environmental uncertainty - the
amount and rate of change
in the organization’s
environment

Environment
 Strategic Dimension Predicted Structural
Characteristics
Innovation--to understand Low formalization
and manage new processes Decentralization
and technologies Flat hierarchy
Market differentiation--to Moderate to high complexity
specialize in customer Moderate to high
formalization Moderate centralization
preferences
Cost control--to produce High formalization
standardized products High centralization
efficiently High standardization
Low complexity

Integrative Framework of
Strategy Structural & Strategic Dimensions
& Goals
The Relationship
Context of the organization
among Key Correct size
Organizational Current technology
Design Perceived environment
Current strategy & goals
Elements
Influences how manager perceive structural needs

Structural dimensions
Level of formalization
Level of centralization
Level of specialization
Level of standardization
Level of complexity
Hierarchy of authority
Which characterize the organizational processes

Differentiation & Integration

Which influence how well the structure meets its

Purposes
Designate formal
lines of authority
Designate formal
information-
processing patterns

Which influence how well the structure fits the

Context of the organization

Forces Reshaping Organizations
• Life cycles in organizations - the
differing stages of an organization’s life
from birth to death
• Globalization
• Changes in Information Processing
Technologies
• Demands on Organizational Processes
• Emerging Organizational Structures
 Structural Roles of Managers Today
versus Managers of the Future
Roles of Managers Today Roles of Future Managers
1. Strictly adhering to boss 1. Having hierarchical
-employer relationships relationships subordinate
2. Getting things done by 2. Getting things done by
giving orders negotiating
3. Carrying messages up 3. Solving problems and
and down the hierarchy making decisions
4. Performing a set of tasks 4. Creating the job through
according to a job description entrepreneurial projects
5. Having a narrow functional 5. Having a broad cross-
focus functional collaboration
6. Going through channels, 6. Emphasizing speed &
one by one by one flexibility
7. Controlling subordinates 7. Coaching one’s workers
Management Review, January 1991, Thomas R. Horton.
 Four Symptoms of Structural
Weakness
• Delay in decision Overloaded hierarchy; information
making funneling limited to too few channels
• Poor quality
Right information not reaching
decision making right people in right format
• Lack of innovative
response to changing No coordinating effort
environment
• High level of conflict Departments work against each
other, not for organizational goals
 Paranoid Depressive

Dysfunctional
Personality/Organization
Combinations
Schizoid Dramatic

Compulsive