LESSON 2

STUDY UNIT NUMBER IOP4862

TITLE OF STUDY UNIT Managerial and Organisational Psychology

TITLE OF LESSON Theme 1: A holistic perspective on organisations and their

environmental context

Lesson 2: Organisational designs and design principles

NOTIONAL STUDY HOURS

NUMBER OF PLANNED
SELF-REFLECTIVE ACTIVITIES
AND DISCUSSION ACTIVITIES

NUMBER OF ASSESSMENT-
LINKED ACTIVITIES

NOTIONAL DESCRIPTION COMMENTS

STUDY (Insert relevant icons)
HOURS

…the needs for flexibility, adaptability to change, creativity, innovation, knowledge, as well as the
ability to overcome environmental uncertainty, are among the biggest challenges facing a
growing number of organizations. The response was first to move away from the self-contained,
control-oriented, vertical hierarchical bureaucratic structures to horizontal designs (and thinking).
(Luthans 2011, p. 64)

Learning outcomes:

On completion of lesson 2, you should be able to:

 compare and apply the modern organisational designs and design principles in a case
study
Introduction

As chapter 2 of the prescribed book points out, globalisation has had a dramatic impact on
organisational structures. Theories, designs and networks have emerged to meet the
contemporary (modern) situation. The new environment has forever changed organisational
design and interorganisational relationships. Lesson 2 will describe all the fundamentals and
salient features that characterise how an organisation adjusts to its environment through a
learning culture, which is achieved through organisational design and the design principles to
that effect. Lesson 2 is depicted by the diagram below:

HOLISTIC PERSPECTIVE – Organisations

and their environment

Lesson 2: Modern organisational design

and design principles

1. Modern organisational design and design principles

The learning organisation represents contemporary organisation theory and is compatible with
and is relevant to the new paradigm (architype/model) environment facing today’s
organisations. The organisation portrayed as a learning system is certainly not new; in fact, at
the turn of the last century, Frederick W. Taylor’s learnings on scientific management were said
to be transferable to workers to make the organisation more efficient. The notion of a learning
organisation has seen organisations adapting to the demands of the current environmental
changes in order to survive the competitive environment. Modern organisations have changed
from traditional organisations, which were characterised by hierarchical structures. For example,
well-known companies, such as General Electric, have eliminated vertical structures and adopted
horizontal designs. Modern organisations have developed to be characterised by horizontal
structures, hollow and modular structures and the all-encompassing virtual organisations. Read
more on the foundation of a learning organisation by referring to the modern theoretical
foundation on page 58 of your prescribed book. In addition, read on what defines the 21st-
century organisations by referring to modern organisation designs discussed from page 63 to 71
of your prescribed book.

1.1.Organisational design
Organisational design refers to the construction and change of an organisational structure to
achieve the organisation’s goals. Organisational structure defines how tasks are allocated, who
reports to whom and the coordinating mechanisms and patterns of interaction (Robbins, 1990).

Organisational design plays an important role as an enabler that may help a company implement
environmental management, since organisational design defines how tasks are allocated, who
reports to whom and the formal coordinating mechanisms and patterns of interaction that will
be followed (Robbins, 1990). Therefore, the study of organisational design is important because
the implementation of any management system needs an appropriate organisational structure.
According to some of the main organisational design variables (specialisation, link mechanisms,
formalisation, informal social relations and decentralisation), the new organisational structure
would enable the implementation of an effective management system with little additional
effort from the management team. These organisational design variables are relevant because
they include variables that have been widely used in earlier research (formalisation,
specializations and centralisation; e.g., Hage & Aiken, 1967; Khandwalla, 1977; Reimann, 1974)
representing formal structure; and, in addition, we have introduced some softer variables
(informal social relations and link mechanisms) that are related to flexibility, and that have been
included in some recent research. They have been shown to be relevant, in general, for the
analysis of organisational structure (Jansen, Tempelaar, Van Den Bosch, & Volberda, 2009), and
especially, for the implementation of a proactive environmental strategy (Martinez-del-Rio,
Cespedes-Lorente, & Carmona-Moreno, 2012).

1.2.Design principles
Managing an organisation includes a set of principles that are applied to all aspects of the
organisation and are integrated with the key business processes and activities to satisfy different
stakeholders, especially customers. Firms that want to manage environmental problems
successfully should implement an appropriate organisational structure that can facilitate change
and cooperation between organisational units of the firm (Aragon-Correa & Sharma, 2003;
Lopez-Gamero et al., 2016; Pertusa-Ortega et al., 2018).

The influence of several organisational characteristics on environmental management,

specifically specialisation, link mechanisms, formalisation, informal social relations and
decentralisation, may improve the capability of the organisation. Through environmental
proactivity, companies implement actions that improve environmental performance. To identify
this kind of environmental actions, it may be convenient that employees are specialised in their
jobs. Moreover, organisational members from different departments must also work in groups
to share information and identify possible opportunities. Therefore, specialisation and inter-
functional link mechanisms could be two organisational design variables that may favour
environmental management.

Specialisation may improve the competence of the individuals in their jobs, since they are
focused on those tasks, and it can encourage the development of methods that can be used to
improve environmental performance. Thus, specialisation helps increase expertise and
knowledge that may lead to solve environmental problems. In this regard, addressing an
environmental problem may engage several employees from different departments who are
specialised in different tasks, because environmental problems are usually solved through the
involvement of many workers, and not only the environmental manager (Lopez-Gamero et al.,
2016; Reverdy, 2006). Workers from different departments can share key information about
environmental issues (Perez-Valls et al., 2016). The coordination and integration of their skills
and knowledge can help improve environmental and economic performance (Lopez-Fernandez &
Serrano-Bedia, 2007).

Another relevant organisational design variable is formalisation, that is, the degree to which
rules, procedures, instructions and communication are formalised or written down (Khandwalla,
1977). Formalisation may promote this coordination and a flow of knowledge about
environmental practices. Formalisation may also reduce conflicts in the development of
environmental practices (Sampaio, Thomas, & Font, 2012) by improving task coordination and
reducing ambiguity with regard to procedures. Therefore, formalisation can facilitate the
coordination of activities related to environmental improvements that involve several
organisational units working together.

Another important variable in organisational design is centralisation. Centralisation refers to

the extent to which decision making is concentrated at the top of an organisation (Hage & Aiken,
1967). Therefore, decentralisation alludes to the distribution of power and decision-making
capacity to lower levels of the organisation.

Upon your reading of the section, I would like you to reflect on the following activity.

Self-reflective activity 2.1

Traditional organisational structures consisting of vertical structures have been replaced by

modern organisational structures consisting of hollow structures, modular structures, virtual and
network structures.

1. Explain what is meant by “a culture conducive to learning”.

2. What in your opinion is the most effective organisational network design structure and,
why? Explain by reflecting to an organisation of your choice.
3. Covid-19 has brought about change in the manner in which organisations arranged their
activities and operations. Do you think the description of a virtual structure as described in
the prescribed book are the same? Explain what specific features of the current virtual
organisational structures are not provided for, or not provided for in the current
organisational design structures.
Case study
Real case: Web-based organisations
There is hope, and the promise of at least partial liberation from the tyranny of time
constraints. Why? Because the long-term interests of individuals and smart companies are
aligned. To compete, successful corporations will have to make it easier and less
time-consuming for their employees to collaborate. They will learn how to live with fewer
time-sapping meetings and unnecessary feedback loops – or find themselves outrun by more
nimble competitors. The eventual result: less frustration for knowledge workers. Moves in
this direction are already under way as savvy companies analyse their internal social
networks and identify bottlenecks.

Intel Corp., for example, sees an opportunity in creating technology that lowers the time cost
of teamwork. And others, such as Eli Lilly & Co., are providing more corporate support for
both internal and external networks. “It’s a new mental model for how you run a company,”
says McKinsey’s Bryan. “The winners will be those who can handle more complexity.” At the
same time, we may see a rise in new forms of Web-based organisations where people can
contribute without having their time eaten up by existing hierarchy. Blogs, collaborative
online databases (called wikis) and open-source software development all use the Net to
handle much of the coordination among people rather than relying on top-down command
and control. Such a shift to a digital spine could eventually lessen bureaucratic time burdens
on over-worked professionals, especially those in such high-cost industries as health care.
Even high pay cannot compensate for unrelenting time pressure. Top managers have to
realise that encouraging networks and collaboration demands as much attention and
resources as supervising and measuring performance in traditional ways. Most companies
have built up large human-resources departments, but few have a department of
collaboration. “Most managers don’t manage social networks effectively,” says Babson’s
Davenport. At Intel, the drive to reduce the time spent sharing knowledge and collaborating
is an outgrowth of efforts to better coordinate far-flung operations that stretch from Israel
to India.

One idea being pursued by Luke Koons, director for information and knowledge
management, is “dynamic profiling” – technologies that automatically summarise areas on
which a researcher or a manager is focusing, based on the subjects of their e-mails and Web
searches. Such a regularly updated profile could make it less time-consuming to locate
potential collaborators and resources, an especially daunting prospect in a large, innovation-
minded company such as Intel. Equally important, dynamic profiling does not force
individuals to spend hours manually updating their profiles as their focus changes.
 Discussion activity 2.2

1. How can the organisation structure facilitate speed, collaboration and teamwork?
Contrast traditional bureaucratic organisations with the examples in this case.
2. What is meant by a Web-based organisation? How does this fit into the various
organisation theories discussed in the first part of the chapter?
3. Are there any downside risks inherent in the way the firms are organised in this case?
What do you think the future will be for organisation designs?

Prescribed articles

With the culture of learning comes change within the organisation. Challenges posed to an
organisation to survive and remain sustainable emanates from both the external environmental
pressures, its internal organisational processes and structures. The next lesson will deliberate on
organisational change.

SUMMARY

Lesson 2 covered the background of modern organisational designs and design principles. In this
learning unit, you were introduced briefly the learning organisation and how organisations
developed from traditional structures characterised by hierarchical structures to modern
structures which were horizontal. Other organisational structures were discussed briefly such as
the hollow structure, modular structure and virtual structures and network structures. Lesson 3
will give more detail on organisational change.

Other related references for the lesson

 Aragón-Correa, J. A., & Sharma, S. (2003). A contingent resource-based view of proactive

corporate environmental strategy. Academy of management review, 28(1), 71-88.
 Ahmed, M. & Shafiq, S. (2014). The Impact of Organisational Culture on Organisational
Performance: A Case Study of Telecom Sector. Global Journal of Management and
Business Research: Administration and Management 14 (3) 20-30.
 Barsade, S. & Bernstein, J. K., (2015). Five Steps for managing culture change. Wharton
University of Pennsylvania, Nano tools for leaders. Open Rubric
 Bulach, C., Lunenburg, F. C., & Potter, L. (2012). Creating a Culture for high performing
 schools: A comprehensive approach to school reform. Lanham: Rowman & Littlefield.
 Concepción López-Fernández, M., & Serrano-Bedia, A. M. (2007). Organizational
consequences of implementing an ISO 14001 environmental management system: an
empirical analysis. Organization & Environment, 20(4), 440-459.
 Cusick,J.J (2018). Organizational Design and Change Management for IT Transformation:
A Case Study. Journal of Computer Science and Information Technology. 6, (1), 10-25
ISSN: 2334-2366 (Print), 2334-2374 (Online). DOI: 10.15640/jcsit.v6n1a2
 Hage, J., & Aiken, M. (1967). Relationship of centralization to other structural
properties. Administrative Science Quarterly, 72-92.
 Jansen, J. J., Tempelaar, M. P., Van den Bosch, F. A., & Volberda, H. W. (2009). Structural
differentiation and ambidexterity: The mediating role of integration
mechanisms. Organization science, 20(4), 797-811.
 Khandwalla P. 1977. The design of organizations. New York: Harcourt Brace Jovanovich.
 López-Gamero, M. D., & Molina-Azorín, J. F. (2016). Environmental management and
firm competitiveness: the joint analysis of external and internal elements. Long range
planning, 49(6), 746-763.
 Martínez‐del‐Río, J., Céspedes‐Lorente, J., & Carmona‐Moreno, E. (2012). High‐
involvement work practices and environmental capabilities: How HIWPS create
environmentally based sustainable competitive advantages. Human Resource
Management, 51(6), 827-850.
 Nelson, D. L., & Quick, J. C. (2011). Understanding Organizational Behaviour. Belmont:
Cengage Southwestern. 
 Pertusa-Ortega, E. M., López-Gamero, M. D., Pereira-Moliner, J., Tarí, J. J., & Molina-
Azorín, J. F. (2018). Antecedents of environmental management: the influence of
organizational design and its mediating role between quality management and
environmental management. Organization & Environment, 31(4), 425-443.
 Reimann, B. C. (1974). Dimensions of structure in effective organizations: Some empirical
evidence. Academy of Management Journal, 17(4), 693-708.
 Reverdy, T. (2006). Translation process and organizational change: ISO 14001
implementation. International Studies of Management & Organization, 36(2), 9-30.
 Sampaio, A. R., Thomas, R., & Font, X. (2012). Why are some engaged and not others?
Explaining environmental engagement among small firms in tourism. International
Journal of Tourism Research, 14(3), 235-249.
 Tănase, I. A. (2015). The importance of organisational culture based on culture transfer.
848-852. Open Rubric. PROCEEDINGS OF THE 9th INTERNATIONAL MANAGEMENT
CONFERENCE "Management and Innovation For Competitive Advantage", November
5th-6th, 2015, BUCHAREST, ROMANIA.