Organizational Design

Organizational Design

Introduction Definition Classical & Neoclassical Approaches : Contingency approach Mechanistic organization Organic organization Simple structure Machine bureaucracy Interorganizational Designs Technology as a factor in OD

Introduction

‘Organizing’ is a subject of the larger activity of ‘managing’. it is the process by which the structure of an organization is created & maintained.

The word “organization” may be used to refer to the process of organizing, the structure that evolves out of this process and the processes/activities that take place within it.

All activities involving two or more persons entails the formation of an organization.

Definition

Organization Design refers to the process of coordinating the structural elements of an organization in the most appropriate manner.

Classical & Neoclassical Theory The Quest for the One Best Design

Classical organizational theorists (such as Weber, Taylor ) believed that a universally best way to design organizations exists, an approach based on high efficiency.

Neoclassical organizational theorists (such as McGregor,Argyris ) their approach emphasizes the need to pay attention to basic human needs to succeed and express oneself.

The Evolution of Organization Theory Meaning : The current state of organization

theory is the result of an evolutionary process. Theories have been introduced, evaluated and refined over time ; new insights tend to reflect the limitations of earlier theories.

Types : 1 through 4

Evolution of Contemporary Organization TheoryApproximate Time Frame

1900-1930 1930-1960 1960-1975 1975-?

System Perspective Ends Perspective

Central theme

Closed

Rational

Mechanical efficiency

(Taylor, Fayol ,Max

Weber)

Closed

Social

People & human relations

(Elton Mayo, McGregor, Bernard)

Open

Rational

Contingency designs

(Herbert Simon, Katz & Kahn, Joan W, Charles Perrow)

Open

Social

Power & Politics

(March, Simon, Pfeffer)

Theoretical classification

Type 1 Type 2 Type 3 Type 4

Based on W. Richard Scott, “Theoretical Perspectives”, in Marshall W. Meyer, ed., Environments & organizations

Types

1. The early approaches to organization theory in this century conceived of organizations as mechanical devises to achieve goals.

2. Management could design formal relationships, rules, and the like but there were informal patterns of communication, status, norms, and friendships created to meet the social needs of organization members.

Types contd.

3. Argued that properly aligning structure to its contingency variables would facilitate the achievement of the organization’s goals. Conversely, implementation of the wrong structure could threaten the organization’s survival.

4. Political nature of the organizations. The outcome of the political struggles among coalitions within the organization for control.

Classical View Point Contd.

The classical theorists on the whole, with scientific management stream consider the three streams of classical theories briefly i.e. Bureaucracy : The rigid structures, fixed jurisdictions, impersonal rules and mundane routine, often results in delays, produces inertia, encourages buck-passing, leads to wastage of resources, and causes frustration.

The Classical View Point contd. Administrative Theory : It views organizations

as power centered & does not provide underpinning the elements of a democratic form of organization.

Scientific Management : Concerned with micro aspects such as physical activities of work through time and motion study & examination of men-machine relationships.

Neoclassical View Point

The neoclassical theory recognizes the primacy of psychological and social aspect of the worker as an individual and his relations within and among groups and the organization.

The Neoclassical viewpoint thus gave birth to human relations movement and provided the thrust toward democratization of organizational power structures & participative management.

Developing Framework

Type 1 theorists : Known as classical school, models that would apply in all situations.

Frederick Taylor & Scientific Management Henri Fayol & Principles of Organization :

He proposed 14 principles that he argued were universally applicable & could be taught in schools and universities.

14 Principles

1. Division of Work

2. Authority

3. Discipline

4. Unity of command

5. Unity of direction

6. Subordination of individual interest to the general interest

7. Remuneration

14 Principles contd.

8. Centralization

9. Scalar chain

10. Order

11. Equity

12. Stability of tenure of personnel

13. Initiatives

14. Esprit de corps. Promoting team spirit

Frame Work contd.

Type 1 theorists contd. Max Weber & Bureaucracy : A German

sociologist, proposed “ideal type’’ organizational structure.

Ralph Davis : Introduced Rational Planning Perspective. It offered a simple & straightforward model for designing an organization.

Max Weber’s Theory of Bureaucracy(1929) Theory of authority structures Ideal type of organization Negative Connotation Prototype for all organizations today. Complex organizations.

Max Weber’s Theory of Bureaucracy(1929) FEATURES:

1) Division of Labour

2) Authority Hierarchy

3) Formal Selection

4) Formal Rules & Regulations

5) Impersonality

6) Career Orientation

7) Centralization of Authority

EFFECT / IMPACT ON OB Positive Effects :

1) Hierarchy & Specialization, Productivity

2) Stability Negative Effects / Dysfunctions

1) Conflicts and differences

2) Distorted communication

3) Dull, gray, conditioned “organization man”.

4) Group Think

5) System of control & authority

6) No informal organizations

7) Bureaucratic Rules

8) Cannot assimilate influx of new techniques

“ NO REAL WORLD ORGANIZATION EXACTLY FOLLOWS THE WEBER MODEL”.

Frame Work contd.

Type 2 theorists Elton Mayo : Hqwthorne Studies Chester Bernard : Introduced the notion of

Cooperative System. Douglas McGregor :Two distinct views of

human beings : one basically negative – Theory X and other positive –Theory Y.

Warren Bennis and the Death of Bureaucracy

Frame Work contd. Type 3 theorists Herbert Simon : He argued that organization theory

needed to go beyond superficial& oversimplified principles to a more open, rational & contingent design.

Katz and Kahn : Have investigated the environmental structure relationship.

Joan Woodward, Charles Perrow & James Thompson have made an impressive case for the importance of technology in determining the appropriate structure for an organization.

It also include those who advocate organization size as an important factor influencing structure.

Frame Work contd.

Type 4 theorists March & Simon : Cognitive Limits to

Rationality. Pfeffer’s Organizations : As Political Arenas

Miller’s Integrative FrameworkStrategic Dimension Challenge Predicted Structural Characteristics

Innovation To understand & manage more products, customer types, techno-logies & markets

Scanning of markets to discern customer requirements; low formalization; decentr- alisation; extensive use of coordinate committees & task force

Market Differentiation

To understand & cater to consumer prefer-ences

Moderate to high complexity;extensive scanning & analysis ofcustomer reaction &competitors’ strategies; moderate to high formalization& moderate decentralization

Breadth Innovation To select the right range of products, services, customers& territory

High complexity; low formalization ;decentralization

Breadth Stability High complexity; high formalization ;high centralization

Cost ControlTo produce standardized products efficiently

High formalization ;high centralization