Chapter 14

Nelson & Quick

Organizational Design
& Structure

Copyright ©2005 by South-Western, a division of Thomson Learning. All rights reserved.

 Organizational Design

Organizational Design - the process of constructing

and adjusting an organization’s
organization’sstructure to achieve its
structure
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
 Manager’s 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, but may
simplify goal achievement or protection
 Differentiation Between
Marketing and Engineering

Basis for Difference Marketing Engineering

Goal orientation Sales volume Design

Time orientation Long run Medium run
Interpersonal People Task
orientation oriented oriented
Structure Less formal More formal
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 added to the organization structure
 Management information systems
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 Basic which jobs are
vertical 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
Structure Centralization
Supervision Echelon

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

Adhocracy Mutual Support Selective

Adjustment Staff Decentralization
 Mintzberg’s Five
Basic Parts
of an Organization Strategic
Apex

Tec rt
h
stru o-n pp o
ctur Su f
e Middle S ta f

Line

Operating Core
From H. Mintzberg, The Structuring of Organizations (Upper Saddle
River, N.J.: Prentice-Hall, 1979): 20. Reprinted with permission.
 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 of 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
 Extremes of Environmental
Uncertainty
Mechanistic Structure - an organizational design that
emphasizes structured activities, specialized tasks,
and centralized decision making

Organic Structure - an organizational design that

emphasizes teamwork, open communication, and
decentralized decision making
 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
preferences formalization
Moderate centralization
Cost control—to produce High formalization
standardized products High centralization
efficiently High standardization
Low complexity

Miller’s Integrative Framework of

Strategy Structural & Strategic Dimensions
& Goals
D. Miller, “The Structural and Environmental Correlates of Business Strategy,” Strategic Management Journal 8 (1987): 55-76.
Copyright @ John Wiley & Sons Limited. Reproduced with permission.
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
 Organizational Life Cycle - 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
–employee relationships relationships subordinated
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.
HD’s Circle Organization

Create Produce
Demand Product

Provide
Support

From R. Teerlink and L. Ozley, More than a Motorcycle: The Leadership Journey at Harley-Davidson. Boston, MA, 2000. P. 139.
Copyright © 2000 by the Harvard Business School Publishing Corporation; all rights reserved.
 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 Departments work against each
other, not for organizational goals
conflict
 Paranoid Depressive

Dysfunctional
Personality/Organization
Combinations

Schizoid Dramatic

Compulsive