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OB Model developed by Margie Parikh

Understanding Individuals in organisationsPerception/Attitude/Motivation/personaity

Understanding groups in organisationsThresholds of interperson behaviour/understanding groups and teams/communication/Conflict,stress and negotiation/decision making/power and politics

Understanding how organisations shape behaviourOrganisational design /Organisational structure/Organisational roles/organisational culture

Effectiveness through managing and leading human behaviour at work

Individual effectiveness

Effectiveness of groupRelationships

Effectiveness of Organisational roles

Group effectiveness

Organisational effectiveness

Effectiveness of systems and process

© Prof. Mary Bodra.

ORGANIZATIONAL STRUCTURES

The key is to match structures to goals

Organizational Structures

§ Organizational structure is the way in which the interrelated groups of an organization are constructed.

§ The main concerns are effective communication and coordination


Organizational Structures§ Several aspects determine the organizational

structure§ DETERMINANTS OF ORGANIZATIONAL

STRUCTURE§ Strategy§ Technology§ Size§ Environment§ Differentiation-Integration§ Power and Control-Chain and span of control


Contingency Factors§ Structural decisions are influenced by:ú Overall strategy of the organization Organizational structure follows strategy.

ú Size of the organization Firms change from organic to mechanistic organizations

as they grow in size.

ú Technology use by the organization Firms adapt their structure to the technology they use.

ú Degree of environmental uncertainty Dynamic environments require organic structures;

mechanistic structures need stable environments.


Contingency Factors§ Strategy Frameworks:ú Innovation Pursuing competitive advantage through meaningful and

unique innovations favors an organic structuring.

ú Cost minimization Focusing on tightly controlling costs requires a

mechanistic structure for the organization.

ú Imitation Minimizing risks and maximizing profitability by copying

market leaders requires both organic and mechanistic elements in the organization’s structure.


Contingency Factors § Strategy and Structure

ú Achievement of strategic goals is facilitated by changes in organizational structure that accommodate and support change.

§ Size and Structure

ú As an organization grows larger, its structure tends to change from organic to mechanistic with increased specialization, departmentalization, centralization, and rules and regulations.


Contingency Factors § Technology and Structure

ú Organizations adapt their structures to their technology.

ú Woodward’s classification of firms based on the complexity of the technology employed:

Unit production of single units or small batches

Mass production of large batches of output

Process production in continuous process of outputs

ú Routine technology = mechanistic organizations

ú Non-routine technology = organic organizations


Woodward’s Findings on Technology, Structure, and Effectiveness


Contingency Factors

§ Environmental Uncertainty and Structure

ú Mechanistic organizational structures tend to be most effective in stable and simple environments.

ú The flexibility of organic organizational structures is better suited for dynamic and complex environments.


Strategy and Goals of Organisation

§ Strategy and goals are closely linked

§ Strategy of the firm starts with selecting some goals over others


What is Strategy ?

§ Strategy is the process of positioning the organisation in the competitive environment and implementing actions to complete successfully


What are the different types of organizational goals?

§ Societal goalsú Reflect an organization’s intended contributions to the

broader societyú By contributing to the larger society organizations gain

legitimacy-a social right to operate ú By claiming to provide specific types of societal

contributions an organisation can claims over resources, individuals, markets, and products ú Example Tobacco firm(heavily taxed social contribution

highly questionable)


What are the different types of organizational goals?§ Mission statement§ Often a social contribution of the firm is a part of

its mission statement ú A written statement of organizational purposeú A good mission statement identifies whom the

firm will serve and how it will go about accomplishing its societal purpose ú A mission statement is often the first visible

outcome in developing a strategy


What are the different types of organizational goals?§ Output goalsú Define the type of business the organization is

pursuingú Provide some substance to the more general

aspects of mission statementsú Example for a bank the out goals will be retail

banking ,commercial banking ,investment advisory services and electronic payment processing


What are the different types of organizational goals?

§ Systems goalsú Concerned with the conditions within the organization that

are expected to increase the organization’s survival potential

ú Typical systems goals include growth, productivity, stability, harmony, flexibility, prestige, and human resource maintenance

ú System goals provide a road map that helps them link together various units of their organisation to assure survival


What are the different types of organizational goals?§ Well-defined systems goals can:ú Focus managers’ attention on what needs to be

doneú Provide flexibility in devising ways to meet

important targetsú Be used to balance the demands, constraints, and

opportunities facing the firmú Form a basis for dividing the work of the firm-

basis for developing a formal structure


Defining Organizational Structure§ Successful organizations develop a structure

consistent with the pattern of goals established by senior management

§ The formal structure shows the planned configuration of positions, job duties, and the lines of authority among different parts of the organization


Defining Organizational Structure§ Organizational Structureú The formal arrangement of jobs within an

organization.

§ Organizational Designú A process involving decisions about six key elements:

Work specialization

Departmentalization

Chain of command

Span of control

Centralization and decentralization

Formalization


Organizational Structure§ Work Specializationú The degree to which tasks in the organization are

divided into separate jobs with each step completed by a different person.ú Overspecialization can result in human

diseconomies from boredom, fatigue, stress, poor quality, increased absenteeism, and higher turnover.


Departmentalization by Type

§ Functional ú Grouping jobs by functions

performed

§ Productú Grouping jobs by product

line

§ Geographicalú Grouping jobs on the basis

of territory or geography

§ Process ú Grouping jobs on the basis

of product or customer flow

§ Customerú Grouping jobs by type of

customer and needs


Exhibit 10–2 Functional Departmentalization

• Advantages• Efficiencies from putting together similar specialties and

people with common skills, knowledge, and orientations• Coordination within functional area• In-depth specialization

• Disadvantages• Poor communication across functional areas• Limited view of organizational goals


Product Departmentalization

+ Allows specialization in particular products and services+ Managers can become experts in their industry+ Closer to customers– Duplication of functions– Limited view of organizational goals


Geographical Departmentalization

• Advantages• More effective and efficient handling of specific

regional issues that arise• Serve needs of unique geographic markets better

• Disadvantages• Duplication of functions• Can feel isolated from other organizational areas


Process Departmentalization

+ More efficient flow of work activities– Can only be used with certain types of products


Customer Departmentalization

+ Customers’ needs and problems can be met by specialists- Duplication of functions- Limited view of organizational goals


Organization Structure

§ Chain of commandú A listing of who reports to whom up and down the

organization§ Unity of commandú Each person has only one boss and each unit one

leader§ Span of controlú The number individuals reporting to a supervisor


Organization Structure § Span of Controlú The number of employees who can be effectively and

efficiently supervised by a manager.

ú Width of span is affected by: Skills and abilities of the manager

Employee characteristics

Characteristics of the work being done

Similarity of tasks

Complexity of tasks

Physical proximity of subordinates

Standardization of tasks


Exhibit 10–3 Contrasting Spans of Control


Organization Structure § Centralizationú The degree to which decision-making is concentrated at a

single point in the organizations. Organizations in which top managers make all the

decisions and lower-level employees simply carry out those orders.

§ Decentralizationú Organizations in which decision-making is pushed down to

the managers who are closest to the action.

§ Employee Empowermentú Increasing the decision-making authority (power) of

employees.


Factors that Influence the Amount of Centralization

•• More CentralizationMore CentralizationØØ Environment is stable.Environment is stable.

ØØ LowerLower--level managers are not as capable or experienced at level managers are not as capable or experienced at making decisions as uppermaking decisions as upper--level managers.level managers.

ØØ LowerLower--level managers do not want to have a say in decisions.level managers do not want to have a say in decisions.

ØØ Decisions are relatively minor.Decisions are relatively minor.

ØØ Organization is facing a crisis or the risk of company failure.Organization is facing a crisis or the risk of company failure.

ØØ Company is large.Company is large.

ØØ Effective implementation of company strategies depends on Effective implementation of company strategies depends on managers retaining say over what happens.managers retaining say over what happens.


Factors that Influence the Amount of Centralization

•• More DecentralizationMore DecentralizationØØ Environment is complex, uncertain.Environment is complex, uncertain.ØØ LowerLower--level managers are capable and experienced at making level managers are capable and experienced at making

decisions.decisions.ØØ LowerLower--level managers want a voice in decisions.level managers want a voice in decisions.ØØ Decisions are significant.Decisions are significant.ØØ Corporate culture is open to allowing managers to have a say in Corporate culture is open to allowing managers to have a say in

what happens.what happens.ØØ Company is geographically dispersed.Company is geographically dispersed.ØØ Effective implementation of company strategies depends on Effective implementation of company strategies depends on

managers having involvement and flexibility to make decisions.managers having involvement and flexibility to make decisions.


Benefits of decentralization

ú Higher subordinate satisfactionú Quicker response to a series of unrelated

problemsú Assists in on-the-job training of subordinates for

higher-level positionsú Encourages participation in decision making


§ Formalizationú The written documentation of policies, procedures, and

rules to guide behavior and decision making

§ Standardizationú The degree to which the range of allowable actions in a

job or series of jobs is limited so that actions are performed in a uniform manner


What are bureaucracies and what are the common forms?§ Bureaucracyú Form of organization that emphasizes legal

authority, logic, and orderú Relies on a division of labor, hierarchical control,

promotion by merit with career opportunities for employees, and administration by rule


What are bureaucracies and what are the common forms?§ Mechanistic typeú Emphasizes vertical specialization and controlú Stresses rules, policies, and procedures; specifies

techniques for decision making; and use well-documented control systems


What are bureaucracies and what are the common forms?§ Benefits of the mechanistic typeú Efficiency.

§ Limitations of the mechanistic typeú Employees dislike rigid designs, which makes work

motivation problematicú Unions may further solidify rigid designs.ú Key employees may leaveú Hinders organization’s capacity to adjust to subtle

environmental changes or new technologies


What are bureaucracies and what are the common forms?§ Organic typeú Emphasizes horizontal specializationú Procedures are minimal, and those that do exist

are not highly formalized


What are bureaucracies and what are the common forms?§ Benefits of the organic typeú Good for problem solving and serving individual

customer needsú Centralized direction by senior management is

less intenseú Good at detecting external changes and adjusting

to new technologies


What are bureaucracies and what are the common forms?§ Limitations of the organic typeú Less efficient than mechanistic typeú Restricted capacity to respond to central

management direction


Organizational Design Decisions§ Mechanistic Organizationú A rigid and tightly controlled

structure

High specialization

Rigid departmentalization

Narrow spans of control

High formalization

Limited information network (downward)

Low decision participation

§ Organic Organizationú Highly flexible and adaptable

structure

Non-standardized jobs

Fluid team-based structure

Little direct supervision

Minimal formal rules

Open communication network

Empowered employees


Mechanistic versus Organic Organization

• High specialization

• Rigid departmentalization

• Clear chain of command

• Narrow spans of control

• Centralization

• High formalization

• Cross-functional teams

• Cross-hierarchical teams

• Free flow of information

• Wide spans of control

• Decentralization

• Low formalization


§ Divisional departmentsú individual and departments are grouped by

products, territories, services, clients, or legal entities


§ Matrix departmentationú uses both the functional and divisional forms

simultaneously


What are the hierarchical attributes of organizations?§ Controlú The set of mechanisms used to keep actions or

outputs within predetermined limitsú Deals with: Setting standards Measuring results against standards Instituting corrective action


What are the hierarchical attributes of organizations?§ Output controlsú Focus on desired targets and allow managers to

use their own methods to reach defined targetsú Part of overall method of managing by exception


What are the hierarchical attributes of organizations?§ Process controlsú Attempt to specify the manner in which tasks are

accomplished

§ Types of process controlsú Policies, procedures, and rulesú Formalization and standardizationú Total quality management controls


What are the hierarchical attributes of organizations?§ Policyú Guideline for action that outlines important

objectives and broadly indicates how activities are to be carried out

§ Proceduresú Indicate the best method for performing a task,

show which aspects of a task are most important, or outline how an individual is to be rewarded


What are the hierarchical attributes of organizations?§ Rulesú Describe in detail how a task or a series of tasks is

to be performed, or indicate what cannot be done


What are the hierarchical attributes of organizations?§ Total Quality Managementú process approach to continual improvement

based on statistical analyses of the firm’s operationsú Late W.Edwards Deming’s modern day founder of

the TQM movementú Deming’s 14 points


Strengths and Weaknesses of Traditional Organizational Designs


How is work organized and coordinated?§ Coordinationú The set of mechanisms that an organization uses

to link the actions of its units into a consistent pattern


How is work organized and coordinated?§ Personal methods of coordinationú Produce synergy by promoting dialogue,

discussion, innovation, creativity, and learning, both within and across unitsú Common personal methods of coordination are

direct contact between and among organizational members and committee memberships


How is work organized and coordinated?§ Impersonal methods of coordinationú Produce synergy by stressing consistency and

standardization so that individual pieces fit togetherú Contemporary use of matrix departmentation and

management information systems for coordination


Contemporary Organizational Designs

Team StructureTeam Structure• What it is:• What it is: A structure in which the entire organization is made up of A structure in which the entire organization is made up of

work groups or teams.work groups or teams.• Advantages:• Advantages: Employees are more involved and empowered. Reduced Employees are more involved and empowered. Reduced

barriers among functional areas.barriers among functional areas.• Disadvantages:• Disadvantages: No clear chain of command. Pressure on teams to perform.No clear chain of command. Pressure on teams to perform.

MatrixMatrix--Project StructureProject StructureWhat it is:What it is: A structure that assigns specialists from different functional A structure that assigns specialists from different functional

areas to work on projects but who return to their areas when areas to work on projects but who return to their areas when the project is completed. Project is a structure in which the project is completed. Project is a structure in which employees continuously work on projects. As one project is employees continuously work on projects. As one project is completed, employees move on to the next project.completed, employees move on to the next project.

• Advantages:• Advantages: Fluid and flexible design that can respond to environmental Fluid and flexible design that can respond to environmental changes. Faster decision making.changes. Faster decision making.

• Disadvantages:• Disadvantages: Complexity of assigning people to projects. Task and Complexity of assigning people to projects. Task and personality conflicts.personality conflicts.


(cont’d) Contemporary Organizational Designs

Boundaryless StructureBoundaryless StructureWhat it is:What it is: A structure that is not defined by or limited to artificial A structure that is not defined by or limited to artificial

horizontal, vertical, or external boundaries; includes virtual horizontal, vertical, or external boundaries; includes virtual and network types of organizations.and network types of organizations.

• Advantages:• Advantages: Highly flexible and responsive. Draws on talent wherever it’s Highly flexible and responsive. Draws on talent wherever it’s found..found..

• Disadvantages:• Disadvantages: Lack of control. Communication difficulties..Lack of control. Communication difficulties..


New Design options§ Contemporary Organizational Designsú Team structures The entire organization is made up of work groups or self-

managed teams of empowered employees.

ú Matrix and project structures Specialists from different functional departments are

assigned to work on projects led by project managers.

Matrix and project participants have two managers.

In project structures, employees work continuously on projects; moving on to another project as each project is completed.


Organizational Designs § Contemporary Organizational Designs (cont’d)

ú Boundaryless Organization

An flexible and unstructured organizational design that is intended to break down external barriers between the organization and its customers and suppliers.

Removes internal (horizontal) boundaries:

Eliminates the chain of command

Has limitless spans of control

Uses empowered teams rather than departments

Eliminates external boundaries:

Uses virtual, network, and modular organizational structures to get closer to stakeholders.


Removing External Boundaries

§ Virtual Organizationú An organization that consists of a small core of full-time

employees and that temporarily hires specialists to work on opportunities that arise.

§ Network Organizationú A small core organization that outsources its major business

functions (e.g., manufacturing) in order to concentrate what it does best.

§ Modular Organizationú A manufacturing organization that uses outside suppliers to

provide product components for its final assembly operations.


Today’s Organizational Design Challenges§ Keeping Employees Connectedú Widely dispersed and mobile employees

§ Building a Learning Organization§ Managing Global Structural Issuesú Cultural implications of design elements


Organizational Designs

§ The Learning Organizationú An organization that has developed the capacity to

continuously learn, adapt, and change through the practice of knowledge management by employees.

ú Characteristics of a learning organization: An open team-based organization design that empowers

employees

Extensive and open information sharing

Leadership that provides a shared vision of the organization’s future, support and encouragement

A strong culture of shared values, trust, openness, and a sense of community.


§ Common types of hybrid structuresú Divisional firm Composed of quasi-independent divisions so that

different divisions can be more or less organic or mechanistic

ú Conglomerate A single corporation that contains a number of

unrelated businesses


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