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Chapter 21 Organization Design. Objectives. Distinguish between mechanistic and organic structures Describe the three traditional types of organizational structures and their advantages and disadvantages Describe horizontal and network structures and their advantages and disadvantages.

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Chapter 21

Organization

Design


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Objectives

  • Distinguish between mechanistic and organic structures

  • Describe the three traditional types of organizational structures and their advantages and disadvantages

  • Describe horizontal and network structures and their advantages and disadvantages

21 -1

Organizational Behavior: An Experiential Approach 8/E

Joyce S. Osland, David A. Kolb, Irwin M. Rubin and Marlene E. Turner


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…Objectives

  • Distinguish between formal and informal organizational structure

  • Describe the boundaryless organization

  • Explain the differentiation-integration issue in organization design

21 -2

Organizational Behavior: An Experiential Approach 8/E

Joyce S. Osland, David A. Kolb, Irwin M. Rubin and Marlene E. Turner


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Structure

Systems

Strategy

Style

Skills

Shared

Values/Goals

Staff

The 7-S Model

21 -3

Organizational Behavior: An Experiential Approach 8/E

Joyce S. Osland, David A. Kolb, Irwin M. Rubin and Marlene E. Turner


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Mechanistic Vs. Organic Structures

Mechanistic

Organic

Specialized

Rigidly Defined

Centralized

Vertical

Rigid Departmentalization

Clean Chain of Command

Narrow

High

Tasks

Tasks

Authority

Communication

Unit

Hierarchy

Span of Control

Formalization

Common

Broadly Defined

Decentralized

Horizontal

Cross-Functional Teams

Cross-Hierarchical Teams

Wide

Low

21 -4

Organizational Behavior: An Experiential Approach 8/E

Joyce S. Osland, David A. Kolb, Irwin M. Rubin and Marlene E. Turner


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Organizational Structure - Defined

Organizational structure refers to the pattern of roles, authority, and communication that determines the coordination of the technology and people within an organization

21 -5

Organizational Behavior: An Experiential Approach 8/E

Joyce S. Osland, David A. Kolb, Irwin M. Rubin and Marlene E. Turner


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Functional Structure

Marketing

Manufacturing

Accounting

21 -6

Organizational Behavior: An Experiential Approach 8/E

Joyce S. Osland, David A. Kolb, Irwin M. Rubin and Marlene E. Turner


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Functional Structure

Advantages

  • Develop functional expertise

  • Loyalty to function and standards of performance

  • Can assign specialists where needed reducing duplication

  • Promote standardization

  • Facilitates centralized

    purchasing

Disadvantages

  • Integration and coordination difficulties

  • Slow decision making

  • Information sharing and collaboration can be problematic

21 -7

Organizational Behavior: An Experiential Approach 8/E

Joyce S. Osland, David A. Kolb, Irwin M. Rubin and Marlene E. Turner


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When to Use a Functional Structure?

  • Size: small

  • Product or service: single

  • Number of markets: small

  • Cycle time: long

21 -8

Organizational Behavior: An Experiential Approach 8/E

Joyce S. Osland, David A. Kolb, Irwin M. Rubin and Marlene E. Turner


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Divisional Structure

Product

Division 1

Product

Division 2

Marketing

Manufacturing

Accounting

Marketing

Manufacturing

Accounting

21 -9

Organizational Behavior: An Experiential Approach 8/E

Joyce S. Osland, David A. Kolb, Irwin M. Rubin and Marlene E. Turner


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Divisional Structure

Disadvantages

  • Duplication of effort and resources

  • May require more equipment

  • Lost economies of scale

  • Decreased opportunity for technical specialization

  • Standardization is harder

  • Coordination and collaboration problems

  • Client service?

Advantages

  • Focus leads to improvements

  • Customer satisfaction

  • Responsiveness to market and environment

  • Coordination across functions

  • Decentralized decision making

21 -10

Organizational Behavior: An Experiential Approach 8/E

Joyce S. Osland, David A. Kolb, Irwin M. Rubin and Marlene E. Turner


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When to Use a Divisional Structure?

  • Products or services: several

  • Environment: rapidly changing and unpredictable

  • Technology: nonroutine and depends on several functional areas

  • Size: large

  • Strategy: adaptive, customer service

21 -11

Organizational Behavior: An Experiential Approach 8/E

Joyce S. Osland, David A. Kolb, Irwin M. Rubin and Marlene E. Turner


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Matrix Structure

Marketing

Manufacturing

Accounting

Product Division 1

Product Division 2

21 -12

Organizational Behavior: An Experiential Approach 8/E

Joyce S. Osland, David A. Kolb, Irwin M. Rubin and Marlene E. Turner


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Matrix Structures - Defined

Matrix structures have a dual focus, usually

products and functions. It is an attempt to

profit from the advantages of both functional

and product structures

  • However, having both a product boss and a functional boss can cause confusion and conflict

21 -13

Organizational Behavior: An Experiential Approach 8/E

Joyce S. Osland, David A. Kolb, Irwin M. Rubin and Marlene E. Turner


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When to Use a Matrix Structure?

  • Pressure to share scarce resources across product lines

  • Environmental pressure for two or more critical outputs

  • Environment is both complex and uncertain

21 -14

Organizational Behavior: An Experiential Approach 8/E

Joyce S. Osland, David A. Kolb, Irwin M. Rubin and Marlene E. Turner


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Horizontal Structures - Defined

Horizontal corporations are flat structures

with minimal layers of management and

self-managing multidisciplinary teams

organized around core processes

21 -15

Organizational Behavior: An Experiential Approach 8/E

Joyce S. Osland, David A. Kolb, Irwin M. Rubin and Marlene E. Turner


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Horizontal Hospital Structure

Senior

Management

Nurse Coordinators

Team

Team

Team

Patient Flow

Nurse Coordinators

Team

Team

Team

Patient Flow

21 -16

Organizational Behavior: An Experiential Approach 8/E

Joyce S. Osland, David A. Kolb, Irwin M. Rubin and Marlene E. Turner


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When to Use Horizontal Structures?

  • Short product life and development cycles

  • Customer satisfaction is a goal

  • Environment is uncertain

21 -17

Organizational Behavior: An Experiential Approach 8/E

Joyce S. Osland, David A. Kolb, Irwin M. Rubin and Marlene E. Turner


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Network Structure - Defined

Network organizations consist of brokers

who subcontract needed services to

designers, suppliers, producers, and

distributors linked by full-disclosure

information systems and coordinated by

market mechanisms

21 -18

Organizational Behavior: An Experiential Approach 8/E

Joyce S. Osland, David A. Kolb, Irwin M. Rubin and Marlene E. Turner


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Network Organization Structure

Designers

Producers

Brokers

Suppliers

Marketers &

Distributors

21 -19

Organizational Behavior: An Experiential Approach 8/E

Joyce S. Osland, David A. Kolb, Irwin M. Rubin and Marlene E. Turner


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When to Use Network Structures?

  • Need to concentrate on core function and can subcontract the rest

  • Can’t afford large start-up costs

  • Fast-paced changing industries

  • Environment is uncertain

21 -20

Organizational Behavior: An Experiential Approach 8/E

Joyce S. Osland, David A. Kolb, Irwin M. Rubin and Marlene E. Turner


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Network Idealists - Defined

Networked idealists are initially non-

profit entrepreneurs who develop

organic, cellular distributed network

structures to accomplish their work

21 -21

Organizational Behavior: An Experiential Approach 8/E

Joyce S. Osland, David A. Kolb, Irwin M. Rubin and Marlene E. Turner


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Characteristics of Networked Idealists

  • Guerilla infrastructures and radical architectures – bypass traditional entry barriers

  • Winning by not trying – “a different game”

  • Value-based motivation – do good and make $

  • Attack strengths – attack strong incumbents

  • Knowledge from the people – partners and customers add value

21 -22

Organizational Behavior: An Experiential Approach 8/E

Joyce S. Osland, David A. Kolb, Irwin M. Rubin and Marlene E. Turner


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Networked Idealists

Inner circle

Founder

Active users

Passive users

21 -23

Organizational Behavior: An Experiential Approach 8/E

Joyce S. Osland, David A. Kolb, Irwin M. Rubin and Marlene E. Turner


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Characteristics of Boundaryless Organizations

  • Permeable internal and external boundaries

  • Good ideas welcomed regardless of their source

  • Cross-functional customer service teams

  • Delegated authority

  • Shared information

21 -24

Organizational Behavior: An Experiential Approach 8/E

Joyce S. Osland, David A. Kolb, Irwin M. Rubin and Marlene E. Turner


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Informal Structures - Defined

The informal structure refers to natural

formations, informal leadership, and

communication patterns that evolve in an

organization and run parallel to the formal

structure

21 -25

Organizational Behavior: An Experiential Approach 8/E

Joyce S. Osland, David A. Kolb, Irwin M. Rubin and Marlene E. Turner


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Differentiation:

The differences in

cognitive and

emotional orientations

among managers in

different functional

departments, and the

difference in formal

structure among

these departments

Integration:

The behaviors and

structures used by

differentiated

organizational subunits

to coordinate their work

activities

Differentiation Vs. Integration -Defined

21 -26

Organizational Behavior: An Experiential Approach 8/E

Joyce S. Osland, David A. Kolb, Irwin M. Rubin and Marlene E. Turner


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Characteristic

R&D Department

Manufacturing Department

Sales Department

Goals

New developments, quality

Efficient production

Customer satisfaction

Time horizon

Long

Short

Short

Interpersonal orientation

Mostly task

Task

Social

Formality of structure

Low

High

High

Differentiation

21 -27

Organizational Behavior: An Experiential Approach 8/E

Joyce S. Osland, David A. Kolb, Irwin M. Rubin and Marlene E. Turner


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Contingencies That Influence Design

  • Strategy

  • Environment

  • Technology

  • Size

  • National culture

  • People and their shared values

21 -28

Organizational Behavior: An Experiential Approach 8/E

Joyce S. Osland, David A. Kolb, Irwin M. Rubin and Marlene E. Turner


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Stable

Low Uncertainty

Formal, centralized mechanistic structure with few departments

Moderate Uncertainty

Formal, centralized mechanistic structure with many depts. and integration roles

Unstable

Moderate Uncertainty

Decentralized, organic structure with participation and teamwork; few departments; boundary spanning roles

High Uncertainty

Decentralized, organic structure; participation and teamwork; numerous departments and boundary spanners

Simple

Complex

Environmental Characteristics and Recommended Organizational Designs

Environmental Rate of Change

Environmental Complexity

21 -29

Organizational Behavior: An Experiential Approach 8/E

Joyce S. Osland, David A. Kolb, Irwin M. Rubin and Marlene E. Turner


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International Structures – Strategic Alliances

  • Licensing – allow products to be sold for a fee by foreign firms with access to global markets and distribution channels

21 -30

Organizational Behavior: An Experiential Approach 8/E

Joyce S. Osland, David A. Kolb, Irwin M. Rubin and Marlene E. Turner


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…International Structures – Strategic Alliances

  • Joint ventures – separate business entities designed to enter new markets, formed by two or more firms that share development and production costs

  • Consortia – groups of independent companies that join together to share skills, resources, costs, and access to one another’s markets

21 -31

Organizational Behavior: An Experiential Approach 8/E

Joyce S. Osland, David A. Kolb, Irwin M. Rubin and Marlene E. Turner


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International Structures - Integrated Network Models

  • Distributed, specialized resources and capabilities

  • Large flows of components, products, resources, people, and information among interdependent units

  • Complex processes of coordination and cooperation in an environment of shared decision making

21 -32

Organizational Behavior: An Experiential Approach 8/E

Joyce S. Osland, David A. Kolb, Irwin M. Rubin and Marlene E. Turner


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International Structures – The Family Business

  • Most common structure worldwide is the family business

  • Dominant values in Chinese family businesses are: patrimonialism, paternalism, hierarchy, mutual obligations, responsibility, familialism, personalism, and connections

21 -33

Organizational Behavior: An Experiential Approach 8/E

Joyce S. Osland, David A. Kolb, Irwin M. Rubin and Marlene E. Turner


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Keiretsu and Chaebols - Defined

  • Japanese keiretsu – complex inter-firm networks that combine market exchange and non-economic social relations

  • Korean chaebols – business group consisting of large companies owned and managed by family members or relatives in many diversified business areas

21 -34

Organizational Behavior: An Experiential Approach 8/E

Joyce S. Osland, David A. Kolb, Irwin M. Rubin and Marlene E. Turner


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When Does Culture Matter in Design?

  • High power distance cultures tend toward structures with centralized decision making. Low PD cultures prefer decentralization

  • High uncertainty avoidance generally correlates with greater formalization and more formal structures

  • Matrix structures did not fit the French respect for hierarchy and unity of command

21 -35

Organizational Behavior: An Experiential Approach 8/E

Joyce S. Osland, David A. Kolb, Irwin M. Rubin and Marlene E. Turner


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