PROJECT ON STRUCTURAL CONSIDERATION AND ORGANIZATIONAL DESIGN Submitted for Partial fulfillment for the award of the degree

of MASTERS OF BUSINESS ADMINISTRATION (MBA 2010-12)

Submitted by

Rashi Oberoi - 01419103910 Ankita Goenka - 07819103910 Harshit S. Mahey - 09419103910 Shakti Bhatia - 13719103910

GITARATTAN INTERNATIONAL BUSINESS SCHOOL

(Affiliated to GURU GOBIND SINGH INDRAPRASTHA) UNIVERSITY ROHINI, NEW DELHI-110085
STRUCTURAL CONSIDERATIONS AND ORGANIZATIONAL DESIGN The concept of an organization
The term organization has been defined in several ways. Leavitt (1962) defines it as a specific configuration of structure, people, task and techniques. Structure describes the form of departments, hierarchy and committees. It influences the organization's efficiency and effectiveness. People refer to the skills, attitudes and social interaction of the members of the organization. Task refers to the goals of the individual and the organization. Techniques refer to the methodical approach used to perform tasks. Organizational structure thus refers to the institutional arrangements and mechanisms for mobilizing human, physical, financial and information resources at all levels of the system (Sachdeva, 1990). Organization is also defined as a system incorporating a set of sub-systems (Katz and Kahn, 1978). These sub-systems are related group of activities which are performed to meet the objectives of the organization. Organization has been viewed differently by numerous theorists. However, all definitions usually contain five common features: Composed of individuals and groups of individuals; Oriented towards achieving common goals; Differential functions; Intended rational coordination; and Continuity through time.

"...organization is a particular pattern of structure, people, tasks and techniques.. " "... a system which is composed of a set of subsystems..." "... institutional arrangements and mechanisms for mobilizing human, physical, financial and information resources at all levels of the system..."

Features of an organization
1. Composed of individuals and groups of individuals 2. Oriented towards achievement of common goals 3. Differential functions 4. Intended rational coordination 5. Continuity through time Structure is thus an integral component of the organization. Nystrom and Starbuck (1981) have defined structure as the arrangement and interrelationship of component parts and positions in an organization. It provides guidelines on: Division of work into activities; Linkage between different functions; Hierarchy; Authority structure; Authority relationships; and Coordination with the environment. Organizational structure may differ within the same organization according to the particular requirements. Structure in an organization has three components (Robbins, 1989):

1. Complexity refers to the degree to which activities within the organization are

differentiated. This differentiation has three dimensions:

horizontal differentiation refers to the degree of differentiation between units based on the orientation of members, the nature of tasks they perform and their education and training

vertical differentiation is characterized by the number of hierarchical levels in the organization

spatial differentiation is the degree to which the location of the organization's offices, facilities and personnel are geographically distributed;

1. Formalization refers to the extent to which jobs within the organization are

specialized. The degree of formalization can vary widely between and within organizations;
2. Centralization refers to the degree to which decision making is concentrated at

one point in the organization. The structure of an organization is the manner in which various sub-units are arranged and inter-related. Complexity is the degree to which activities within the organization are differentiated. Such differentiations may be horizontal, vertical or spatial. In designing an organization due consideration has to be given to ensure clarity, understanding, decentralization, stability and adaptability.

researcher. This may make coordination difficult and obstruct the functioning of the organization. According to the classical approach. etc. work can be performed much better if it is divided into components and people are encouraged to specialize by components. information networks and communication . 1988). relationships and communication. it can also influence fundamental work attitudes. etc. and (ii) The patterns of relationships. There are four main causal factors which could unfavourably affect attitudes and work styles. Horizontally. administration. Work can be specialized both horizontally and vertically (Anderson. Coordination: Coordination refers to integrating the objectives and activities of specialized departments to realize broad strategic objectives of the organization. field staff. work is divided into departments like genetics.Principles of organization structure: Modern organizational structures have evolved from several organizational theories. which have identified certain principles as basic to any organization. plant pathology. At the same time. such as project leader. scientist. accounts. Specialization: Specialization facilitates division of work into units for efficient performance. It includes two basic decisions pertaining to: (i) Which units or groups should be placed together. Specialization enables application of specialized knowledge which betters the quality of work and improves organizational efficiency. Vertical specialization in a research organization refers to different kinds of work at different levels.

The principle evolves from the principle of unity of command. 2. Efficient coordination can also help in resolving conflicts and disputes between scientists in a research organization. 3. particularly in large organizations or in research institutions. Therefore Fayol (1949) felt that members in such organizations could also communicate directly at the same level of hierarchy. 4. 1. Hierarchy facilitates vertical coordination of various departments and their activities. where most of the research is multidisciplinary but involves specialization. this may not always be possible. Unity of Command Every person in an organization should be responsible to one superior and receive orders from that person only. Organizational theorists have over the years developed several principles relating to the hierarchy of authority for coordinating various activities. However. The Responsibility and Authority Principle For successfully performing certain tasks. Some of the important principles are discussed below. coordination of different activities is important to achieve strategic objectives. Fayol (1949) considered this to be the most important principle for efficient working and increased productivity in an organization. with prior intimation to their superiors.In agricultural research institutions. The Scalar Principle Decision making authority and the chain of command in an organization should flow in a straight line from the highest level to the lowest. responsibility must be accompanied by proper authority. Those responsible for performance of tasks should also have the appropriate level of influence on decision making. .

It refers to the grouping of activities or jobs involving common functions. Deciding the span of control is important for coordinating different types of activities effectively. • direction and control needed by subordinates. . In a research organization the groupings could be research. 1937). personal things and place (Gullick and Urwick. product. agricultural engineering. Functional Departmentalization is the basic form of departmentalization. It is closely related to the classical bureaucratic principle of specialization (Luthans. production. extension. rural marketing and administration. • extent of planning required. process. some of the important situational factors which affect the span of control of a manager are: • similarity of functions. • coordination required within a unit and between units. 1986). function. and • Organizational help available for making decisions.5. • complexity of functions. Departmentalization is conventionally based on purpose. Span of Control This refers to the number of specialized activities or individuals supervised by one person. Departmentalization: Departmentalization is a process of horizontal clustering of different types of functions and activities on any one level of the hierarchy. According to Barkdull (1963). • proximity of the functions to each other and to the supervisor.

Departmentalization by Users is grouping of both activities and positions to make them compatible with the special needs of some specific groups of users. market. regional research stations are set up to take advantage of specific agro-ecological environments. Departmentalization by Territory or Geography involves grouping of activities and positions at a given location to take advantage of local participation in decision making. functional departments can be further differentiated by products and purpose or type of research. As organizations increase in size and diversify. distribution channel or services. . specialization and span of control. number of employees. De-centralization and Centralization: De-centralization refers to decision making at lower levels in the hierarchy of authority. decision making in a centralized type of organizational structure is at higher levels. The territorial units are under the control of a manager who is responsible for operations of the organization at that location. Departmentalization by Process or Equipment refers to jobs and activities which require a specific type of technology. The organization has to be further divided into separate units to limit the span of control of a manager to a manageable level (Luthans. machine or production process. degree of coordination. In an agricultural research institution. In contrast. Such departmentalization usually offers economic advantage. functional departmentalization may not be very effective. Other common bases for departmentalization can be time of duty.Product Departmentalization refers to the grouping of jobs and activities that are associated with a specific product. 1986). In agricultural research institutions. The degree of centralization and de-centralization depends on the number of levels of hierarchy.

Extent of concentration or delegation of decision making powers. or 3. Modern organizational structures show a strong tendency towards decentralization. but to varying degrees. that extend throughout the hierarchy (Koontz. and their main function is to support and provide help to scientists to achieve organizational goals It is the responsibility of the manager to make proper and effective use of staff through their supportive functions. centralization and de-centralization could be according to: 1.According to Luthens (1986). while staff plays a supporting role to line employees and provides services. Line and Staff Relationships : Line authority refers to the scalar chain. Line employees are responsible for achieving the basic or strategic objectives of the organization. or to the superior-subordinate linkages. scientists and researchers form the line. The staff may be specialized. Geographical or territorial concentration or dispersion of operations. In an agricultural research organization. The relationship between line and staff is crucial in organizational structure. Specialized staff conduct technical work that is . O'Donnell and Weihrich. 1980). 1988). Administrative employees are considered staff. design and efficiency. It is also an important aid to information processing and coordination. general or organizational (Anderson. 2. Every organizational structure contains both centralization and de-centralization. The extent of this can be determined by identifying how much of the decision making is concentrated at the top and how much is delegated to lower levels. Functions.

General staff consists of staff assistants to whom managers assign work. they could frequently face conflict situations. or sectioning. goals. cultures and backgrounds. However. accounting and public relations staff) provide services to the organization as a whole. the extent of changes would depend upon the degree of influence the changing environment exerts on the efficient functioning of the organization and sub-units. . Their role is to integrate different operations across departments.' This principle is concerned with sectioning an institute into administrative units to enhance the probability of the institute achieving its goals by implementing its plans within the limits of its capabilities. A manager has to use his skills in resolving such conflicts. institutional units. Since an organization exists in an external environment. There are two rationales used for assembling. These are concerned with (1) Grouping of the institute's staff into administrative units. Consequently. such as conducting market research and forecasting. it cannot remain indifferent to changes in its external milieu. Organization staff (such as centralized personnel. One of the principles of management discussed during is 'departmentalization. Types of Organizational Structures: An important issue in organizational structuring is whether the structure of an organization should be dynamic and change according to changes in the environment or remain stable in the face of such changes. Line and staff personnel have different functions. and (2) The flow of authority and responsibility within an institute.beyond the time or knowledge capacity of top management.

bureaucratic organization and divisionalized organization. The Bureaucratic Organization: In large organizations and under well defined conditions. organization structure may be bureaucratic. The basic requirement of a simple centralized structure is that it has only one or two functions. power. diversification or other reasons. The structure of the organization can be traditional (bureaucratic) or modern (organic). Thus. this structure has to become more complex for growth. A BUREAUCRATIC ORGANIZATIONAL STRUCTURE . decision making authority and responsibility for goal setting are vested in one person at the top. A high degree of control to ensure standard performance. depending upon organizational strategies. strategic decisions within the organization and environmental complexities. and a few people who are specialists in critical functions. However. according to needs. The use of standard methods and procedures for performing work. This structure is usually found in small and single-person-owned organizations.Organizations can have simple to complex structures. TYPES OF ORGANIZATION STRUCTURE The classical organizational structure includes simple centralized design. and 2. The essential elements of a bureaucratic organization are: 1. the organization has only two hierarchical levels. The simple centralized organizational structure. The manager is generally an expert in all related areas of functions and is responsible for coordination.

Standard bureaucracy is based on efficient performance of standardized routine work. The structure of standard bureaucracy is based on functions. The bureaucratic structure is suited where standard methods and procedures . This type of organizational design is favoured when different kinds of products or services require different kinds of management.Mintzberg (1981) has identified two types of bureaucracies. Thus. The simple centralized design is suited for smaller organizations. large technical staff and many mid-level managers. In contrast. depending upon their size and activities. it requires a higher level of specialized skills. professional bureaucracy has few mid-level managers. The Divisionalized Organization: Divisionalized organizational design refers to a multiproduct or service design that separates different products or services to facilitate management planning and control. Professional bureaucracy depends upon efficient performance of standardized but complex work. decision making authority and responsibility for goal setting are vested in one or two persons. They are standard and professional bureaucracy. where power. Different divisions in the organization can further have simple centralized or functional designs.

Project design Organization: Project design is also called the team or task force type. Such a structure generally coexists with the more traditional functional designs.are employed for ensuring work performance. The divisionalized organization refers to a multiproduct or service design. project organization. The Modern Organization structure includes line-discipline organization. specific and complex problems which cannot be handled by a single department. This design facilitates inputs from different areas. in which every member provides expertise in their area of specialization. It is used to coordinate across departments for temporary. A Project-type organization . matrix organizations and line-commodities and production areas organization. Members from different departments and functional areas constitute a team.

Technical goals refer to how well work is done. The main advantage of this combination is that the matrix design balances both technical and project goals and allocates specific responsibilities to both. Functional specialists are assigned to given projects (horizontal structure).Matrix Organization: The matrix design blends two different types of designs. while project goals relate to issues such as type of work to be done and its costs. These assignments are made at the beginning of each project through collaboration between appropriate functional and project managers. Since the project type of organizational design is not considered stable. namely project and functional organizational designs (Kolodny. 1979). the matrix design attempts to provide permanent management structures by combining project and functional structures. Problems associated with Matrix Organizations are as follows:- .

• Within the organization. and even lead to power struggles unless power between line and project manager is skilfully balanced. This could reinforce group loyalties and create inter-group conflicts. STRUCTURE OF MATRIX ORGANIZATION . • Matrix organizations need more human resources. Bosses are also not clearly identified. particularly during initial periods.• Responsibility and jurisdiction are not clearly defined in matrix organizations. matrix organizations could lean towards chaos and disorder. Consequently. • Matrix organization forms are usually found at the lower level of the organization. This means higher overheads and increased expenditure. matrix organizations may encourage the formation of cliques since all decisions are made in a group.

Matrix organizations have been found to be best for complex activities in uncertain environments Benefits • Effective use of specialists’ • Job security for specialists’ • • Friendly environment for specialists’ Equipment and facilities: more and better .

They stress managerial styles which do not depend upon formal structures. An adhocratic structure is flexible.Disadvantages • Stress • Specialists with several bosses • • • Project managers requiring several specialists or shared specialists Functional managers providing shared specialists Sacrifice of territorial incentive Exhibit 1: Responsibilities and interests of matrix research organisations Adhocracy: Adhocratic structures are also called 'free form' or organic organization structures. adaptive and organized around special . They are well suited for complex and non-standard work and rely on informal structures.

style of functioning. reporting relationship and sources of information. Such a design is suitable for high technology and high growth organizations where an arranged and inflexible structure may be a handicap. tasks. These experts have decision making authority and other powers. 1989). . with an ill-defined hierarchy. ADHOCRATIC ORGANIZATIONAL STRUCTURE Designing organizational structures: Some important considerations in designing an effective organizational structure are: Clarity: The structure of the organization should be such that there is no confusion about people's goals.problems to be solved by a group consisting of experts with diverse professional skills (Robbins. The adhocratic Structure is usually small.

The task (or type of work to be done). and positions that we have available to meet management’s needs. Hospitals tend not to be structured like fast food restaurants. Stability and adaptability: while the organizational structure should be adaptable to environmental changes. and banks are not organized like a manufacturing plant. jobs. there are real constraints on the forms of organization available to us. complex designs are necessary when organizational strategies involve complex interactions. But. While a simple design is needed for simple strategies. De-centralization: The design of an organization should compel discussions and decisions at the lowest possible level. The choice of any type of organizational design should be in consonance with the organizational requirements. The simple centralized and bureaucratic organizational design based on functional departmentation focuses on work and is thus better suited for getting work done efficiently.Understanding: The structure of an organization should provide people with a clear picture of how their work fits into the organization. The divisional structure is appropriate if performance and results are to be assessed. strategy and environment. Organizational Design: We tend to view organizing a matter of decision-making: we decide to arrange the people. The team or project type of organizational design is appropriate where inputs from several functional areas are required. and our knowledge of what . Matrix and adhocratic designs focus on coordination and relationship. the technology (the way we know how to do something). it should remain steady during unfavourable conditions. Choosing the organizational structure: Organization design is a continuous process.

and hierarchically layered characterizes the organization’s complexity. resources (wealth). To achieve greater coordination. or capacity provide measures of an organization’s size. Also. with growth organizations begin to divide the work into ordered units that perform specialized work. Increased organizational size has important implications for management: it can limit the flexibility of individual work. and there is a tendency for division of labor with more and more specialists and departments. Fayol. The extent to which an organization is departmentalized.has worked and what does not work influence and limit our choice of organizational design. This formalization of organizational rules helps to maintain order across the growing organization and ensures conformity and continuity in practices. But. but to retain some degree of standard operational procedures. the organization increasing relies on written policies and procedures. Taylor. sales). Increased specialization of work into departments is termed differentiation. Decentralization can occur as lower level managers assume decision-making. As hierarchy increases power becomes difficult to concentrate at the top and there can be a distribution of power to lower managers. The classic theorists. organizations grow and the structure changes with increases in size. divisionalized. affect how much authority can be delegated. As organization’s grow there is a greater need to regain the coordination that could be accomplished informally in a small group. outputs (customers. and Weber contributed to the architectural perspective on organizations by focusing on their structural attributes: Size .Number of personnel. and . layers of management may be added to create hierarchy.

The tight supervision inherent in the mechanistic structure is characteristic of bureaucracy. The tall pyramid structure is created by the hierarchical layering required to maintain a low manager-toemployee ratio. called organic structure. The flat pyramid is characteristic of organizations with low hierarchy. the high span of control produces a flat organization. . and there is high specialization or departmentalization. Span of Control – “How many employees can or should a manager oversee?” That is the issue of span of control. Span of control has interesting implications for work. and the organizational structure. little variability of tasks is permitted. Technology/Task – The knowledge or technology of how work is to be performed affects how we organize. such as the processing of checks at a bank. Work is performed under tight controls. Consider: If the work requires tight controls and can tolerate few mistakes.lead to an emphasis on results rather than how the work is actually performed (because results are easier to monitor). Control is sacrificed for creativity. Less hierarchy with a larger number of employees per manager means that workers have more autonomy or freedom to perform their tasks. When a manager oversees a large number of employees. A narrow span of control describes a low number of workers under a manager. how work is performed. the repetitive and mechanical work requires high formalization. or mechanistic. The structure that is created is tall.

Examples include: Ford car factories in 1920’s. artistic creations. but this requires tight supervision. division of labor is not clear. For example. • Continuous (process) Production – This technology is controlled by the manufacturing process itself and requires little worker involvement. craftsmanship and ability of the worker. therefore work supervision is not helpful and there is no economy of scale. . The assembly line production can make plant costs (fixed costs) high which are spread over large production to achieve low unit costs. Joan Woodward in the 1950’s first demonstrated that organizational structure is associated with the type of technology employed. If the work is creative. Examples include: tailored suits. private yachts. creativity is required and the organization is not formalized. meat and poultry processing. and decision-making is highly decentralized. such as Research and Development. • Mass Production (large batch) – The manufacture of products for a mass market requires controls to insure a standardize product. Custom technology relies on the skill.specialization. and division of labor. there is no “standard” way for manufacturer. Woodward’s classified technology as: • Custom (small batch or job order) – Production is in small quantities or one of a kind. oil refining intakes continuous crude oil for transformation into petroleum products. The skill level of a large labor force is low to keep variable costs low. Because the product is novel or designed for a specific buyer or use. Management controls are important to ensure no variations in the making of the standardized product.

high level technology (production is dependent upon machines) is matched with an organic structure. This form is often characterized as organizing inputs for transformation into a single output. and process technologies are in Woodward’s work “ideal” types. matched their technology base with the structural type illustrated at the right. deliver and manage a product. This simple form is organized around a division of labor into specialized functions (or departments) that interrelate to create. mass production that combines labor resources with machines requires mechanistic structures.Custom. Other researchers have found similar results to conclude that there is an inverted U relationship between use of technology and structural complexity. but are typical of certain industries. and. Strategy – For most of America’s business history firm’s produced a single product for a local market. Low level technology (Custom) requires an organic structure. she found. mass production. . Successful firms. The organizational structure to support this business strategy is the functional form.

By the 1950’s nearly all of the diversified firms listed in the Fortune 500 organized using the Multi-Divisional form (MDF). strategist. finance. the matrix form has been suggested by some theorists and has been embraced by a few corporations. and production).By the turn of the century a new organizational form had begun to emerge. a diversified corporation may manage businesses as decentralized under the MDF organization. and coordinator for multiple business units (sometime termed “strategic business units” or SBU’s). Therefore. This form is often characterized as organizing by outputs (products). As businesses expanded into new markets and new products. The MDF structure organized businesses under a headquarters that functions as banker. the functional form failed to be efficient for managing a diversification strategy. not by corporate headquarters. they are controlled and managed by division managers. The theoretical (if not practical) problem with MDF is that once functional resources are decentralized to strategic business units. It will be apparent (from the picture to the right) that there is a . To retain direct control of each business unit’s functions (human resources.

In the early 1960’s the Scottish researchers Burns and Stalker showed that there is a simple correlation between environments and structure: organic structures are found in changing or dynamic environments. Consider: how would you as a human resources manager like to report both to the Vice President in charge of your product and to a Vice President in change of corporate-wide human resources? Suppose each had different ideas about policies. Most firms are not willing to invest this kind of time in training. For a global firm the ability to organize around geographical markets and also around products is an advantage. and the matrix is not often adopted by businesses. mechanistic structures are found in static or stable . The exception is international businesses. which boss would you follow? In theory. Research has shown that it take about five years for a first-line manager to learn how to work under the matrix.problem with the matrix: a manager located within a division has two lines of reporting. Nestle has a manager in charge of a product line. rather than “manage”. The matrix form serves companies like Nestle quite well. but each product line is also coordinated with a manager in charge of a specific geographical area Environment – The environment represents factors outside the organization to which management reacts. the Product and Functional managers reach agreement on conflictive policies at headquarters. but this does not always happen. two bosses. A first line manager reports to the corporate product (market) manager and to the corporate functional manager.

it offers little insight as to how a successful structure arises. Tall. The interpretation of this relationship is that in dynamic environments. such as textile manufacturing. are hard to change. have static environments. Successful organizations provide models to other organizations as to what a survival form looks like. Organizations develop a capability or competency to do something: 3-M makes . Structures.environments. Therefore. most new organizations fail within the first few years. and have mechanistic structures.A problem with the ecology theory is that it may explain why existing firms tend to all look like one another – they imitate the form of successful firms – but. The mechanism that connects the organization to its environment is important as it helps us understand why and how organizational structures change as external forces change. such as in the software development industry. organizations needs to promote creativity and interpersonal communications for problem solving. Industries.. The resource dependency view is that organizations adapt to environmental resources. Indeed. The environment – structure linkage is modeled by different theories: Natural Selection or Ecology Theory. not much innovation and not many changes to the way the product is made. Resource Dependency Theory. then. Organizations whose structures are not fitted to the environment will not perform well and will die-out. successful forms are imitated and become the dominant structural type. There is a structural inertia to change that maintains the existence of structural types and limits the successful adaptation of a new form. hierarchical structures afford the controls necessary to manufacture a product that is well understood. – Ecology theories draw on Darwin’s theory of natural selection to explain the persistence of certain organizational forms.

however.The contribution of contingency theory on our understanding how structure relates to environment is that structure is dependent upon environmental influences. Most resource dependency theorists link structure to environmental factors. Mintzberg has developed an alternative resource dependency theory based on power distributions of stakeholders. and other stakeholders and economic factors. Burns and Stalker’s association of organic structures with dynamic environments. Organizations change as the political environment changes. and mechanistic structures with stable environments falls into this kind of approach. suppliers. Structure should. under conditions of scarcity. These controls are relaxed in a prosperous environment. Institutional Theory. In many ways the institutional approach accommodates the other process theories with current interest in culture and “ideational” systems (the way we think about and understand the outside world). organizations try to conserve resources by implementing greater controls through hierarchy. customers.. match the environment in which it is situated. financial markets. Organizations are social inventions – we make them up.In the research literature this approach is now in vogue.innovative uses of adhesives and Disney is a top entertainment firm. These include labor markets. and that there is no one way to organize a business. This dependency has implications for how organizational structure. Contingency Theory. To develop a competency the organization not only must develop internal resources. In this scheme the organizational form is the product of competing political claimants. The models available for this are based on our experience and what we teach and . and formalization.. Understanding which structures fit which environments become the research objective. For example. but it is dependent upon external resources. centralization.

Consider the way we organize to deliver movies: the historical institution is derived from traditional theater. And. I suspect that we see few drive-ins today because movies are made to exploit the technologies available through the theater experience (which we value) and because it is simply more efficient (less costly) to show multiple screenings in small rooms than to bear the costs of land to construct a large drive-in a city. Usually with success. The new form competes with old forms for acceptance. Why forms are rejected and others are accepted can be explained by social values and by the economics of organizational forms. business stopped building drive-ins. The institutional perspective suggests that there may be many ways to organize but some forms are accepted. Today. Although higher learning could be configured in alternative forms. if I saw Sam’s University operating from an e-mail address and website. movies are delivered to homes via pay-per-view. Banks look the way they do because there is a dominant. in the 1950’s people would see movies seated in their cars at a drive-in movie. Institutions do change.maybe some form of distance learning.write about organizations. and the dominant way to “correctly” organize a movie today is the theater. but. which today is not as valued culturally as a higher education. and sometimes simply through perseverance. I would know that this is not a “real” university . accepted view of what a “bank” ought” to look like. others are not. novel forms of organization do become institutionalized. . universities have historically come to pretty much look like one another – we have a cultural and institutional agreement on what they ought to look like. An entrepreneur or innovator tries some new form. The same logic applies to other forms of institutions and organizations. People stopped going to drive-ins.

ORGANIZATIONAL CHANGE and LEARNING ORGANIZATION Organization theory provides insight into the importance of design considerations and the factors that affect structure. This approach views the organization as interrelated systems of people and directs our attention to the possibilities of improvement through a commitment to shared learning as a process. sensitivity training (diversity issues). there are a variety of academic and commercial approaches available that focus on diverse management issues including leadership development. OD is the purposeful and systematic application of what we know about organizations and people to facilitate management. and the currently popular approach among practitioners is the learning organization. Changing organizations in this context is organizational development or OD. we are more often interested in making the organization or organizational unit that we have inherited work more effectively or reorder organizational resources (within the larger organizational models available) to implement strategies. . The theory in this area of management is less well developed into accepted systems of thought and language. team building. Because OD can be eclectic in content. and conflict management. rather than a engineering or design approach. Most approaches build on the early work of Kurt Lewin. Senge. Director of the Center for Organizational Learning at MIT's Sloan School of Management and author of The Fifth Discipline: The Art and Practice of the Learning Organization. specialty training. This approach to organizational development has been popularized by Peter M. career development. but for us (as practitioners) OD is of most interest. Practitioners rarely have the opportunity to redesign whole organizations or create new structures.

change is executed. The key elements of Senge’s theory are: • Systems Thinking – our decision. and plans impact throughout the organization in ways that we may not think about. and a new stable order emerges. System change engages forces resistant to and in favor of change. the individual and the collective membership. The limitation of Lewin’s work is that organizations may always be undergoing some change and period of stability are hard to identify. Organizational change depends upon the ability for organizational members to accept and make a change that is beneficial to the organization. the outcome may not coincide with our intent. A few organizations may even to be out of equilibrium for an extended period of time-. This is where organizational learning begins to contribute to our understanding of OD. Lewis viewed the organization as a system of interrelated parts and competing forces or opposing transient groups. Lewin recognized that even when we attempt a change.for example. presenting the new equilibrium Lewin’s framework is helpful in that it allows us to think about a staged approach to changing things. called force field theory. the new order is institutionalized.The roots of the learning organization approach are in Kurt Lewin’s early work in organizational change. actions. a business in search of a new strategy. The change process has three distinct stages: • • • Unfreezing. Certainly an organization in serious trouble is already “unfrozen”. especially if we view our . There is a stable starting point that requires change. at this stage a sense that change is needed must be developed Changing. organizational change is implemented Re-freezing.

“solutions” to “problems” as isolated from the way the rest of the organization works. • Personal Mastery – the “organization” is what we call a number of individuals trying to do something together. Both “learning” and “metanoia” (a Greek work meaning “above or beyond the mind”) emphasize the cognitive basis of the theory. Culture is defined as shared beliefs. • Shared Vision – the emphasis here is on “shared”. We don’t always have a good understanding of the problem. we will learn and share what we learn. order. and unrelated to the issues that we now confront. meaning a shift of the collective mindset. In organizational learning the closest concept to OD is “metanoia”. Our understanding of organizational events is framed by our culture. how to . this is the rub. • Team Learning and Dialogue – it’s a “messy” process. organizational members understand and agree to work towards a common objective. and plans come from models that we have in our head. there is no perfection of the whole without the improvement of the individual. Culture provides the cognitive scheme by which we assign meaning. one to another as we try to improve. actions. and value to our experiences. And. values and norms. inaccurate. these models can be incomplete. A learning organization is one that creates an environment conducive to learning and problem-solving. Culture orders our perceptions and provides prescriptions about what to do when things happen . much less the solution. At the root of organization is the fact that we act individually and together on the basis of what we know. • Mental Models – our decisions.

Culture affects organizations at several levels. rituals. stories.by providing an interpretation of what we see or experience. for example. symbols. and “head. provides the broad meanings by which we interpret business events. and gender groupings. At Hampton University we have a culture that is reinforced by myths. heart and hands”. “Don’t walk on the grass in front of Ogden Hall until you graduate!”. rather culture. the founding story rooted in Reconstruction. political. and. Within the institutional culture at Hampton we can identify sub-culture . Organizational culture is maintained in a fashion similar to the larger culture. The larger culture values business. religious. age. and what to value. Washington’s education and his statute. by myths. Organizations have their own culture. geographical. These groups include ethnic.behave under certain circumstances. occupational. but also take on the characteristics of its unique membership. creates “reality”-. the art of Biggers and Tanner. and symbols: the “Hampton way“ is loosely linked to “freedom tree”. how markets ought to work. “Wigwam”. Although we share this larger culture. importantly. our shared understanding of things. racial. provides its legal context. and what products are valued. Culture is reinforced by the stories we tell. in a sense. American organizations will have certain characteristics that are drawn from the larger American culture. the story of Booker T. and heroes. As we share a larger culture. This is not to say that culture can be disjoint with reality. we also belong to socially defined groups that have common experiences that further filter our interpretation of events. we convey similar meanings to events. how management ought to behave. The prevalence of multiple groups (multiple individual identities) provides diversity to values and understanding.

Leaders are “designers. it also requires a culture that supports the well-being and growth of members. Building the organization involves creating a common mindset based on traditional structural characteristics of decentralization and a lack of hierarchy. even faculty and administration – transient cliques that bring opposing values and interpretations to events. The traditional view of leader as director.groups of students. There may be no definitive textbook solutions. It is creating as a way of thinking and opening up the organization to an on-going discussion about change. only us struggling together. The creation of a learning organization is the creation of an organizational culture that is open to possibilities of what the organization can be – uniquely identified by its history. someone who knows what to do and leads others in the right direction. stewards. The learning organization acknowledges that “we are in all in this together and we need to work together” to find and invent our destiny. . is antithetical to the learning organization. In this process of creating a learning organization the idea of leader or manager is different from that typically conceived. and teachers” responsible for building the learning organization. as well as organizational success. but continually reinvigorating itself to the needs of the time.

e. HR. etc. Also. It provides ample opportunities for vertical as well as cross functional growth to its . Zee Telefilms Limited has a flat organizational structure with few levels of hierarchy. manufacturing. It was flexible to adapt to the needs of the employees and hence Reliance went for a multidivisional structure with the operational and day to day decisions taken by the business units independently function wise i. the coordination of these divisions was done by an Executive Committee while the top management had to take all strategic decisions.CASE EXAMPLES Reliance Industries in 2006. formulated its growth strategy to suit the changing business environment. It created such a structure that was less bureaucratic and enabled decisions to be made faster.

autonomous business units. HUL and group have about 15. This system not only helps in creating the feeling of equality but also helps in developing project leaders. 4 Executive Directors and 5 Independent non-executive Directors. A member who might have been team leader in one project may be replaced by another member of the same team for another project. The functional distribution is as follows: • Sales and Marketing • Human resources • Commercial • Information Technology • Research • Technical . In Sony Corporation each network company is delegated with authority from the corporate headquarters. essential support functions and R&D laboratories are transferred from the corporate headquarters to each unit. Software development is undertaken through teams and the constitution of teams is based on the principle of flexibility. Everyone is known as associates irrespective of his position in the company. and pursues the management of their respective business domains as self-contained. companies and divisional companies were formed under the network company structure. The organizational structure at Tata Power is as follows: Infosys Technologies Limited has adopted a free form organization devoid of hierarchies. To enable each network company to operate autonomously. According to the company’s growth policy. The Apex body consist of a Non-executive Chairman (Unilever). a management trainee can reach the level of Executive Vice President within a span of 12-15 years.performers. Unilever's new organization provides single point accountability and has fewer management layers to deliver faster decisions and faster execution.000 employees with a total of 1200 managers. In addition.

the hierarchical structure is as follows: CHAIRMAN MODULE LEADER VERTICAL DELIVERY MANAGER CEO PROJECT ENGINEER MANAGER MANAGER PROJECT .The category distribution is as follows: • Soaps and Detergents • Exports • Processed foods • Beverages • Personal products • Ice-creams • Others For Wipro Technologies.

and GM recognized that the relationship must be changed to one of trust and cooperation. Such change at General Motors (BM) must begin with new relations with its union. the National Thermal Power Corporation has a complex structure with many levels of management. the United Automobile Workers (UAW). ITC has a 3-tier management structure with the Chairman and the board of Directors at the top for strategic supervision followed by a Corporate Management Committee for strategic management and the SBU CEO is in the third tier for executive management.NTPC i. CHANGING GENERAL MOTORS As Japanese auto producers continue to take more and more sales away from General Motors. the relationship has been adversarial. .e. the world’s largest automaker has realized that a major change within the company is essential if it is to successfully meet the Japanese competition. In the past.

6.General Motors and the UAW agreed to mutually fund and support a Human Resources Centre dedicated to task of maximizing their human resources while creating a new spirit of cooperation. 2. Health and Safety Program – a five-day program of both classroom and hands-on workshops aimed at eliminating job related injuries and deaths. 5. Area Centres for Skill Development and Training-provides needed training for the workforce. The Human Resource Centre hopes to meet its change challenge through eight ongoing programs: 1. Tuition Assistance Plan-a plan providing from $50 to $5. The funding level contributed by both GM and the UAW and . 3. Joint Skill Development and Training-a plan that charges committees at the plant level with the task of developing comprehensive training programs based on the actual needs of the workforce.000 for workers who wish to go to school to improve their skills. 4. Quality of Work Life Program-A program designed to “democratize” the workplace by encouraging all employees to participate in the decision making process. Preretirement Program-a program to aid workers deal with the problems of retirement planning. 8. 7. Paid Education Leave-a plan to pay union leaders who take leave to study the problems facing the auto industry. Attendance Procedure Program-A program designed to reduce absenteeism through a process of awarding bonuses for good attendance.

• Cleland. & King. . This exercise may be completed by a single reader. Harvard Business Review. (Source: UAW-G Human Resource Center Booklet. 15 (3). 1978. USA: Allyn and Bacon.L. Functions and Organization Performance. Time Required – 45 Minutes Step 1: Individual activity (completed prior to exercise) Step 2: Small-group activity (completed prior to exercise) Step 3: Discussion-45 minutes References • Anderson. 1963. • Davis. Systems Analysis and Project Management. Span of Control: A method of evaluation. 1968.. Problems of Matrix Organizations. but greater insight may be gained by completing the exercise as part of a group. C. New York.R. 1986). S.the personal support given to individual programs indicate that the overall plan is off to a good start with both sides predicting a new era of mutual cooperation. & Lawrence. W. Management: Skills. P. EXERCISE: FORCES FOR CHANGE The purpose of this exercise is to help the reader gain a better understanding of the forces of change. 56 (3). NY: McGraw-Hill. 1988.W.. C. • Barkdull. Michigan Business Review. D.M.R.R.

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