1. Knowledge Objectives • Explain the concept of contingency organization design. • Distinguish between mechanistic and organic organizations. • Discuss the roles that differentiation and integration play in organization structure.

2. Contingency Design • Organizing • The structuring of a coordinated system of authority relationships and task responsibilities. • Contingency Design • The process of determining the degree of environmental uncertainty and adapting the organization and its sub units to the situation. • How much environmental uncertainty is there? • What combination of structural characteristics is most appropriate? • There is no single best organization design.

3. Contingency Design (cont’d) • The Burns and Stalker Model • Mechanistic organizations are rigid in design, rely on formal communications, and have strong bureaucratic qualities best suited to operating in relatively stable and certain environments. • Organic organizations have flexible structures, participative communication patterns and are successful in adapting to change in unstable and uncertain environments.

4. Contingency Design (cont’d) • Joan Woodward’s Study • When task complexity is either high or low, organizations with organic structures are more effective. • When task complexity is moderate, organizations with mechanistic structures are more effective.

5. Contingency Design (cont’d) • Differentiation & Integration (Lawrence & Lorsch) • The relationship of two opposing structural forces and environmental complexity. • Differentiation: the tendency of specialists to think and act in restricted ways, i.e., building deep functional expertise (e.g., in customer segments, R&D, manufacturing, finance, etc.) • Integration: the linkages among specialists necessary to coordinate behavior to achieve the goal. • Both differentiation and integration increase as environmental complexity increases.

6. Basic Structural Formats • Departmentalization • The grouping of related jobs or processes into major organizational units. • Overcomes some of the effect of fragmentation caused by differentiation (job specialization). • Permits coordination (integration) to be handled in the least costly manner. • Sometimes refers to division, group, or unit in large organizations.

7. Basic Structural Formats (cont’d) • Functional • Categorizing jobs according to the activity performed (e.g., Marketing, Finance, R&D, etc.) • Product-Service • Grouping around a specific product or service. • Geographic • Mapping structure to the location of resources & and customers (e.g., NAFTA, EU, APEC). • Customer • Mapping structure to customer segments, e.g. for a B2B this could be small business customers, Fortune 500 Customers, State & Local Gov’t, etc.

8. Basic Structural Formats (cont’d) • Work Flow Process Departments in Reengineered Organizations • Creating horizontal organizations that emphasize speedy work flow between two points: • Identifying customer needs • Satisfying customer needs

9. Contingency Design Alternatives • The Contingency Approach to Spans of Control • Both overly narrow and overly wide spans of control are counterproductive. • Situational factors dictate the width of spans of control. • Wide spans of control for departments where many workers work close together and do the same job. • Narrow spans of control for departments where work is complex and/or workers are widely dispersed.

10. Contingency Design Alternatives (cont’d) • Centralization • The consolidation of decision-making authority by top management. • Decentralization • The distribution of decision-making authority to lower-level employees. • The Need for Balance • The challenge is to balance the need for responsiveness to changing conditions (decentralization) with the need to create low-cost shared resources (centralization).

11. The Changing Shape of Organizations • New Organizations • Fewer organizational layers • More teams • Smallness within bigness • New Organizational Configurations • Hourglass organization: a three-layer structure with constricted middle (management) layer. • Cluster organization: collaborative structure in which teams are the primary unit. • Virtual organizations: internet-linked networks of value-adding subcontractors.