ORGANIZATION

THEORIES FOR
EFFECTIVE
BUSINESS
WHAT YOU NEED TO
KNOW
There are two main classifications of theories
regarding organizational design(how management
achieves the right combination of differentiation
and integration of the organization’s operations, in
response to the level of uncertainty in its external
environment). According to Robbins &
Coulter(2009): Traditional and Modern Traditional
pertains to the usual or old fashion ways while
modern refers to contemporary or new design
theories.
TRADITIONAL
THEORIES
Traditional Theories Include:

Simple Functional

Divisional
Simple
This organizational design has a few
departments, wide spans of control, or
a big number of subordinates directly
reporting to a manager: has a
centralized authority figure and has
very little formalization of work:
usually used by companies that start
as entrepreneurial ventures.
Simple Organizational
Design
• Flexible
• Fast decision-making
Strengths and result
• Clear accountability
Simple Organizational
Design
• The risk that over
dependence with
Weaknesses overdependence on a
single person.
• No longer appropriate
as the company grows.
Functional
This organizational design
groups together similar or
related specialties. Jobs are
grouped in departments with
the specified skills and/or
business functions.
Example of the functional organization includes:

a. An English department for a

particular school teaches all the
English subject
regardless of what grade level
the students are.
Example of the functional organization includes:

b. The municipal water

district is responsible for
all the water needs in a
particular town.
Example of the functional organization includes:

c. The purchasing department of an

enterprise buys all the materials,
supplies, and other resources required
by an enterprise, whether these inputs
are required by marketing, finance,
accounting, human resources, or other
departments.
Functional Organizational
Design
• Cost-saving
advantages.
Strengths • Management is
facilitated because
workers with similar
tasks are grouped.
Functional Organizational
Design
• Managers have little
knowledge of other
Weaknesses units’ function.
Divisional
This organizational design is made
up of separate business divisions
or units, where the parent
corporation acts as overseer to
coordinate and control the
different divisions and provide
financial and legal support
services.
Example of the divisional organization includes:

• NORSU set up
university branches
located in the
different towns in
Negros Oriental.
Example of the divisional organization includes:

• Health Centers set up

“barangay health units”
to provide the health
services of each
barangay in the town
Divisional Organizational
Design
• Focused on results.
• Managers are
Strengths responsible for what
happens to their
products and services.
Divisional Organizational
Design
• Possible duplication of
activities and resources.
Weaknesses • Increased cost and
reduced efficiency.
MODERN
THEORIES
 Modern Theories Include:
Matrix-Project
Team Design
Design

Boundary-less
Project design
Design
Team Design
This organizational design is
made up of workgroups or teams.
They define team structures such
as roles and responsibilities, and
they collaboratively identify
working arrangements that allow
their team to deliver on their
purpose and goals.
 • Better Communication
Team Organizational Design • Teams Resolve
Problems Quicker.
• Flexible and
Empowered Workforce.
• Empowerment of team
Strengths members and reduced
barriers among
functional areas.
Team Organizational Design
• Potential conflict.
• Some people are not
team players.
Weaknesses • Under-performing
employees hide behind
the team.
Matrix-Project Design
This refers to an organization design
where specialists from different
departments work on projects that are
supervised by a project manager. This
design results in a double chain of
command wherein workers have two
managers - their functional area manager
and their project manager-who share
authority over them.
 • A specialist is involved in
Matrix-Project the project.
• Increased communication
Organizational Design efficiency.
• Improved employee
motivation.
Strengths • Increased teamwork.
• Maximize resource usage.
• Increase professional
development.
 • Task and personality
Matrix-Project conflicts.
Organizational Design • The potential conflict
between managers and
projects.
• Authority confusion.
Weaknesses • Reduced employees
effectiveness.
• Increased management
overhead costs.
Project design
It refers to an
organizational design
where employees
continuously work on a
project.
Project Organizational
Design
• Flexible designs.
• Fast decision
Strengths making.
Project Organizational
Design
• Task and
Weaknesses personality
conflict.
Boundary-less Design
This refers to an organization design where the
design is not defined or limited by vertical,
horizontal, and external boundaries. There are no
hierarchical levels that separate employees, no
departmentalization, and no boundaries that
separate the organization from customers,
suppliers, and other stakeholders. The key to this
design is electronic communication, where
information is shared with the member enterprise
with distinct competencies.
Boundary-less Organizational
Design
• Highly flexible.
• Responsive and
Strengths draws ontalent
where it is found.
Boundary-less Organizational
Design
• Lack of control.
• Presents
Weaknesses communication
difficulties.
Thank you
very much!
 Written Work #3

• What are the three traditional organization design theories?

Briefly define each.
• What are the advantages and disadvantages of simple
organizational design? Do you agree or disagree with these
advantages and disadvantages?
• Name the different modern organizational design theories.