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Chapter 21
OrganizationDesign
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 -1Organizational Behavior: An Experiential Approach 8/EJoyce S. Osland, David A. Kolb, Irwin M. Rubin and Marlene E. Turner
…Objectives
Distinguish between formal and informal organizational structure
Describe the boundaryless organizationExplain the differentiation-integration
issue in organization design
Organizational Behavior: An Experiential Approach 8/EJoyce S. Osland, David A. Kolb, Irwin M. Rubin and Marlene E. Turner
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Organizational Behavior: An Experiential Approach 8/EJoyce S. Osland, David A. Kolb, Irwin M. Rubin and Marlene E. Turner
The 7-S Model
Skills
Strategy
Staff
Structure
Style
SharedValues/Goals
Systems
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Mechanistic Vs. Organic Structures
Tasks
Tasks
Authority
Communication
Unit
Hierarchy
Span of Control
Formalization
Specialized
Rigidly Defined
Centralized
Vertical
Rigid Departmentalization
Clean Chain of Command
Narrow
High
Common
Broadly Defined
Decentralized
Horizontal
Cross-Functional Teams
Cross-Hierarchical Teams
Wide
Low
Mechanistic Organic
Organizational Behavior: An Experiential Approach 8/EJoyce S. Osland, David A. Kolb, Irwin M. Rubin and Marlene E. Turner
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Organizational Behavior: An Experiential Approach 8/EJoyce S. Osland, David A. Kolb, Irwin M. Rubin and Marlene E. Turner
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
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Organizational Behavior: An Experiential Approach 8/EJoyce S. Osland, David A. Kolb, Irwin M. Rubin and Marlene E. Turner
Functional Structure
Marketing Manufacturing Accounting
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Organizational Behavior: An Experiential Approach 8/EJoyce S. Osland, David A. Kolb, Irwin M. Rubin and Marlene E. Turner
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
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Organizational Behavior: An Experiential Approach 8/EJoyce S. Osland, David A. Kolb, Irwin M. Rubin and Marlene E. Turner
When to Use a Functional Structure?
Size: smallProduct or service: singleNumber of markets: smallCycle time: long
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Organizational Behavior: An Experiential Approach 8/EJoyce S. Osland, David A. Kolb, Irwin M. Rubin and Marlene E. Turner
Marketing AccountingAccountingManufacturing
Divisional Structure
Marketing Manufacturing
Product
Division 1
Product
Division 2
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Organizational Behavior: An Experiential Approach 8/EJoyce S. Osland, David A. Kolb, Irwin M. Rubin and Marlene E. Turner
Divisional StructureAdvantages
Focus leads to improvements
Customer satisfaction Responsiveness to
market and environment
Coordination across functions
Decentralized decision making
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? 21 -10
Organizational Behavior: An Experiential Approach 8/EJoyce S. Osland, David A. Kolb, Irwin M. Rubin and Marlene E. Turner
When to Use a Divisional Structure?
Products or services: severalEnvironment: rapidly changing and
unpredictableTechnology: nonroutine and depends
on several functional areasSize: largeStrategy: adaptive, customer service
21 -11
Organizational Behavior: An Experiential Approach 8/EJoyce S. Osland, David A. Kolb, Irwin M. Rubin and Marlene E. Turner
Matrix Structure
AccountingManufacturingMarketing
Product Division 1
Product Division 2
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Organizational Behavior: An Experiential Approach 8/EJoyce S. Osland, David A. Kolb, Irwin M. Rubin and Marlene E. Turner
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
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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
Organizational Behavior: An Experiential Approach 8/EJoyce 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
Organizational Behavior: An Experiential Approach 8/EJoyce S. Osland, David A. Kolb, Irwin M. Rubin and Marlene E. Turner
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Organizational Behavior: An Experiential Approach 8/EJoyce S. Osland, David A. Kolb, Irwin M. Rubin and Marlene E. Turner
Horizontal Hospital StructureSenior
Nurse Coordinators
Nurse Coordinators
Patient Flow
Team Team Team
Management
Patient Flow
Team Team Team
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When to Use Horizontal Structures?
Short product life and development cyclesCustomer satisfaction is a goalEnvironment is uncertain
Organizational Behavior: An Experiential Approach 8/EJoyce 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
Organizational Behavior: An Experiential Approach 8/EJoyce S. Osland, David A. Kolb, Irwin M. Rubin and Marlene E. Turner
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Organizational Behavior: An Experiential Approach 8/EJoyce S. Osland, David A. Kolb, Irwin M. Rubin and Marlene E. Turner
Network Organization Structure
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Marketers & Distributors
Brokers
ProducersDesigners
Suppliers
When to Use Network Structures?
Need to concentrate on core function and can subcontract the rest
Can’t afford large start-up costsFast-paced changing industries Environment is uncertain
Organizational Behavior: An Experiential Approach 8/EJoyce S. Osland, David A. Kolb, Irwin M. Rubin and Marlene E. Turner
21 -20
Network Idealists - Defined
Networked idealists are initially non-
profit entrepreneurs who develop
organic, cellular distributed network
structures to accomplish their work
Organizational Behavior: An Experiential Approach 8/EJoyce 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 incumbentsKnowledge from the people – partners and
customers add value
Organizational Behavior: An Experiential Approach 8/EJoyce S. Osland, David A. Kolb, Irwin M. Rubin and Marlene E. Turner
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Networked Idealists
Founder
Inner circle
Active users
Passive users
Organizational Behavior: An Experiential Approach 8/EJoyce S. Osland, David A. Kolb, Irwin M. Rubin and Marlene E. Turner
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Organizational Behavior: An Experiential Approach 8/EJoyce S. Osland, David A. Kolb, Irwin M. Rubin and Marlene E. Turner
Characteristics of Boundaryless OrganizationsPermeable internal and external
boundaries Good ideas welcomed regardless of
their sourceCross-functional customer service
teams Delegated authority Shared information
21 -24
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
Organizational Behavior: An Experiential Approach 8/EJoyce S. Osland, David A. Kolb, Irwin M. Rubin and Marlene E. Turner
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Differentiation Vs. Integration -Defined
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
Organizational Behavior: An Experiential Approach 8/EJoyce S. Osland, David A. Kolb, Irwin M. Rubin and Marlene E. Turner
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Organizational Behavior: An Experiential Approach 8/EJoyce S. Osland, David A. Kolb, Irwin M. Rubin and Marlene E. Turner
Differentiation
HighHighLowFormality of structure
SocialTaskMostly taskInterpersonal orientation
ShortShortLongTime horizon
Customer satisfaction
Efficient production
New developments, quality
Goals
Sales Department
Manufacturing Department
R&D DepartmentCharacteristic
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Contingencies That Influence Design
StrategyEnvironmentTechnologySizeNational culturePeople and their shared values
Organizational Behavior: An Experiential Approach 8/EJoyce S. Osland, David A. Kolb, Irwin M. Rubin and Marlene E. Turner
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Organizational Behavior: An Experiential Approach 8/EJoyce S. Osland, David A. Kolb, Irwin M. Rubin and Marlene E. Turner
Environmental Characteristics and Recommended
Organizational Designs
Env
iron
men
tal R
ate
of
Cha
nge
Environmental Complexity
ComplexSimple
High Uncertainty
Decentralized, organic structure; participation and teamwork; numerous departments and boundary spanners
Moderate Uncertainty
Decentralized, organic structure with participation and teamwork; few departments; boundary spanning roles
Unstable
Moderate Uncertainty
Formal, centralized mechanistic structure with many depts. and integration roles
Low Uncertainty
Formal, centralized mechanistic structure with few departmentsStable
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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
Organizational Behavior: An Experiential Approach 8/EJoyce 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
Organizational Behavior: An Experiential Approach 8/EJoyce S. Osland, David A. Kolb, Irwin M. Rubin and Marlene E. Turner
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International Structures - Integrated Network Models
1) Distributed, specialized resources and capabilities
2) Large flows of components, products, resources, people, and information among interdependent units
3) Complex processes of coordination and cooperation in an environment of shared decision making
Organizational Behavior: An Experiential Approach 8/EJoyce 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
Organizational Behavior: An Experiential Approach 8/EJoyce 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
Organizational Behavior: An Experiential Approach 8/EJoyce 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
Organizational Behavior: An Experiential Approach 8/EJoyce S. Osland, David A. Kolb, Irwin M. Rubin and Marlene E. Turner
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