OD Block Notes

Introduction
Organization Design
Definition of OD
Choosing and implementing structures that
best arrange resources to serve the

organizations mission and objectives.
It is a deliberate process of configuring

structures, processes, reward systems,
and people practices to create an
effective organization capable of
achieving the business strategy.
A methodology which identifies dysfunctional

aspects of work flow, procedures, structures
and systems, realigns them to fit current
business realities/goals and then develops
plans to implement the new changes.
Figure 11.1 A framework for organizational

designaligning structures with situational
contingencies.
Levels of Organization Design
Designing a Position
Identify:
Major responsibilities and roles
Skills and training necessary
To whom the person and work are
accountable
The relationship of other peer positions
Designing a Work Group

Clarify
Specific purpose of group
Time frame for completing problem
solving
Boundaries of group's authority
Appoint a leader

Designing Work Groups
Group units to maximize use of:
Knowledge and skill
Work process
Time
Commonality of clients
Geographic location

Designing a Total Organization
Enormous challenge
Extensive investment
Behavioral flexibility

Designing a Network
Coordination of services and client flow
Analyze interorganizational relationships
Decide which organizations should have
most power
Identify resource transactions
Diffusing innovations
Organizational Structure
It is the result of organisational design
The tasks that each of the unit
composing the organization must carry
out (roles)
The liasons established between such
units (hierarchies and coordination
mechanisms)
ORGANIZATIONAL
EFFECTIVENESS
HISTORICAL
OPINIONS
ABOUT
ORGANIZATIONAL EFFECTIVENESS
1. FREDERICK TAYLOR
2. HENRI FAYOL
3. ELTON MAYO
FREDERICK TAYLOR
EFFECTIVENESS WAS DETERMINED BY

FACTORS
SUCH
AS
PRODUCTION
MAXIMIZATION,
COST
MINIMALIZATION,
TECHNOLOGICAL EXCELLENCE, Etc.
HENRI FAYOL
EFFECTIVENESS IS A FUNCTION OF CLEAR
AUTHORITY AND DISCIPLINE WITHIN AN
ORGANIZATION
ELTON MAYO
EFFECTIVENESS IS A FUNCTION OF
PRODUCTIVITY RESULTING FROM
EMPLOYEE SATISFACTION
NEAR
FUTURE
TIME
DIMENSION
INTERMEDIATE
FUTURE
Approx.
1 year
DISTANT
FUTURE
Approx.
5 years
The organization
must be
1.
EFFECTIVENESS
CRITERIA
2.
3.
EFFECTIVE in
accomplishing its
purpose(s)
EFFICIENT in
the acquisition
and use of
scarce resources
A SOURCE OF
SATISFACTION
to its owners,
employees,
customers and
clients, and
society.
The organization
must be
The organization
ADAPTIVE to
new
must be
opportunities
6. CAPABLE OF
and obstacles
SURVIVAL in
5. CAPABLE OF
a world of
DEVELOPING
uncertainties.
the ability of its
members and
of itself
4.
MEETING ORGANIZATIONAL OBJECTIVES AND

PRVAILING SOCIETAL EXPECTATIONS IN THE
NEAR FUTURE, ADAPTING AND DEVELOPING IN
THE INTERMEDIATE FUTURE, AND SURVIVING
IN THE DISTANT FUTURE.
APPROACHES TO MEASURING
Goal Approach: Effectiveness is the ability to
excel at one or more output goals.
Internal Process Approach: Effectiveness is the
ability to excel at internal efficiency, coordination,
motivation, and employee satisfaction.
System Resource Approach: Effectiveness is
the ability to acquire scarce and valued resources
from the environment.
Approaches to Measuring
Org. Effectiveness,
continued
Constituency Approach: Effectiveness

is the ability to satisfy multiple strategic
constituencies both within and outside
the organization.
Domain Approach: Effectiveness is the
ability to excel in one or more among
several domains as selected by senior
managers.
Flow Charts of Approaches to

Organizational Effectiveness
Goal Approach
INPUTS
TRANSFORMATION
OUTPUTS
GOAL APPROACH

Internal Process Approach
INPUTS
TRANSFORMATION
INTERNAL PROCESS APPROACH
OUTPUTS

System Resource Approach
INPUTS
TRANSFORMATION
SYSTEM RESOURCE APPROACH
OUTPUTS

Constituency Approach
INPUTS
TRANSFORMATION
STRATEGIC CONSTITUENCIES APPROACH
OUTPUTS
COMPARISON OF THE FOUR OE APPROACHES

Approach
Definition
An organization is effective
to the extent that:
Goal attainment
When Used
Preferred when:
it accomplishes its stated goals
goals are clear, time

bound and
it acquires needed resources
a clear connection
measurable
System Resource
exists
between inputs and

outputs
Constituencies
powerful
all strategic constituencies

are at least minimally
constituencies have
influence on the
organization,
satisfied
and the organization
must
respond to demands
Internal Processes
satisfaction
combines internal efficiency
costs, outputs &
OE Criteria for Selected

Constituencies
Constituency
Owners
Employees
Customers
Suppliers
Creditors
Unions
Typical Criteria
Return on Investment; growth in earnings

Compensation; fringe benefits; job satisf.
Satisf. w/price, quality, service
Satisf. w/payments, future sales
Satisf. w/debt payments
Satisf. w/competitive wages & benefits;
satif. working conditions, fairness in
bargaining
Local Communities Involvement in local affairs; environmental
damage
Government Agencies
Compliance w/laws, avoidance of penalties
The Contradictions Model of

The idea of trying to characterize a whole organization as
totally effective or ineffective is problematic. In any complex
organization there may be parts of the organization that
function well and suggest effectiveness while other aspects
of that same organization perform poorly.
Four Central Assumptions of

the Contradictions Model
1. Organizations face complex environments that place multiple and
conflicting demands and constraints on them. It may not be possible
to succeed in meeting all the environmental conditions an organization
faces.
2. Organizations have multiple, conflicting goals. It is impossible to
maximize achievement of all goals.
3. Organizations face multiple internal and external stakeholders or
constituent groups that make competing or conflicting demands. It
may be impossible to satisfy all groups of people who express
interest in a company.
4. Organizations must manage multiple and conflicting time demands.
Satisfying short- or long-term demands at the expense of the other
may result in sub-optimal performance.
Competing Values Model

Organizational goals and performance are
defined by top and middle management. By
comparing
the
diverse
effectiveness
indicators
used
by
managers
and
researchers, Quinn & Rohrbaugh looked for
underlying similarities and found underlying
dimensions of effectiveness criteria that
reflected competing management values in
organizations.
Competing Values Dimensions I

Focus: whether dominant values concern issues that are
internal to the organization or external to it.
Internal focus reflects management concern for well-being

and efficiency of employees. External focus reflects an
emphasis on the well-being of the organization itself and its
fit with its environment.
Competing Values Dimensions II

Structure: whether stability versus flexibility is the
dominant structural consideration.
Stability reflects a management value for efficiency
and top-down control, while flexibility represents
a management value for learning and change.
Dimensions of Effectiveness
Structure
Flexibility
II
Focus Internal
External
III
IV
Control
Four Models of Effectiveness

Quadrant I : Human Relations Model internal
Focus and flexible structure.
Management concern is on the development of
Human resources.
Employees are given opportunities for autonomy
and development.
Management works toward sub-goals of cohesion,
morale, and training opportunities.
Organizations using this are more concerned with
employees than the environment.
Four Models of Effectiveness II

Quadrant II: Open Systems Model Combination
of external focus and flexible structure.
Managements goals are primarily growth and
resource acquisition.
Sub-goals are flexibility, readiness, and positive
evaluation by the external environment.
Dominant value is establishing a good
relationship with the external environment
to grow and acquire resources.
Similar to the Systems Resource Model.
Four Models of Effectiveness III

Quadrant III: Internal Process Model Reflects
the values of internal focus and structural
control.
Seeks a stable organizational setting that
maintains itself in an orderly way.
Well established in environment and just wish to keep
their current position.
Sub-goals include mechanisms for efficient
communication, information management, and
decision-making.
Four Models of Effectiveness IV

Quadrant IV: Rational Goal Model Reflects
Management values of structural control and
external focus.
Primary goals are productivity, efficiency, and
profit.
Organization wants to achieve output goals
in a controlled way.
Sub-goals include internal planning and
goal-setting, which are rational management
tools. Similar to the Goal Approach.
Competing Values
Four different opposing value sets within the
organization. Exist simultaneously, and the
right balance for the organization is subject
to managerial discretion.
Emphasis may change over time, especially as
The organization evolves through its life cycle.
Examples: hospitals, airlines
Dimensions of Organisations
These
dimensions
describe
organizations in much the same way
that personality and physical traits
describe people
Describe
characteristics
of
organisations
Dimensions of Organization
Design
1) Structural Dimensions
describe the internal characteristics of an
organization
2) Contextual Dimensions
describe everything that shapes the
structure of the organization
Structural Dimensions
1) Formalization
2) Complexity
3) Centralization
1) Formalization:
- the amount of
written
documentation in the
organization
- Include procedures,
job descriptions,
regulations, and
policy manuals
FORMALIZATION
As the level of formalization increases, so does
the probability that:
1. The strategic decision process will be initiated only in
response to problems or crises that appear in variables
monitored by the formal system;
2. Decisions will be made to achieve precise, yet remedial,
goals, and means will displace ends;
3. Strategic action will be the result of standardized
organizational processes, and moves will be incremental;
and
FORMALIZATION, CONTD
4. The level of detail achieved in the standardized

organizational processes will be the primary constraint
on the comprehensiveness of the strategic decision
process. The integration of decisions will be intermediate.
2) Centralization:
- refers to the
hierarchical level that
has authority to make
a decision
- Centralized decision
making (at top) gives
little discretion to
lower level employees
CENTRALIZATION
As the level of centralization increases, so does the
probability that:
1. The strategic decision process will be initiated only by
the dominant few, and it will be the result of proactive,
opportunity-seeking behavior;
2. The decision process will be oriented toward achieving
positive goals (i.e.- intended future domains) that will
persist in spite of significant changes in means;
3. Strategic action will be the result of intendedly rational
choices, and moves will be major departures from the
existing strategy; and
CENTRALIZATION, CONTD
4. Top managements cognitive limitations will be the
primary constraint on the comprehensiveness of the
strategic process. The integration of decisions will
be relatively high.
3. Complexity
Complexity is the degree of differentiation within the
organization
This can include differing tasks, locations of work, hierarchies
Complexity can be horizontal or vertical (or both)
A horizontally complex organization splits tasks up between individuals
Vertical complexity is the depth of a hierarchy
3. COMPLEXITY
As the level of complexity increases, so
does the probability that:
1. Members initially exposed to the decision stimulus
will not recognize it as being strategic or will ignore it
because of parochial preferences.
2. A decision must satisfy a large constraint set, which
decreases the likelihood that decisions will be made
to achieve organization-level goals;
3. Strategic action will be the result of an internal
process of political bargaining, and moves will be
incremental; and
COMPLEXITY, CONTD
4. Biases induced by members parochial
perceptions will be the primary constraint on the
comprehensiveness of the strategic decision
process. In general, the integration of decisions
will be low.
Contextual Dimensions
1) Size
2) Organizational
Technology
3) Environment
4) Strategy
5) Industry
1) Size:
- is the organizations
magnitude as
reflected in the
number of people in
the organization
- organization as a
social system
2) Organizational
Technology
- is the nature of the
production subsystem
that changes inputs
to outputs
- Includes assembly
lines, classrooms, oil
refineries, etc.
3) Environment:
- includes all elements
outside the
boundaries of the
organization
- Includes customers,
suppliers,
competitors,
government, etc.
4) Goals & Strategy:
- define the purpose
and competitive
techniques that set
one organization
apart from others
- Includes mission
statements and plans
of action
5) Culture:
- is the underlying set
of key values, beliefs,
understandings, and
norms shared by
employees
- May be observed in
stories, symbols,
ceremonies, etc.
As environments become more

turbulent, organizations
change
From vertical to
horizontal structures
From routine tasks to
empowered tasks
From formal control to
shared information
From competitive to
collaborative strategy
From rigid to adaptive
control
Contingency Approaches
to Organization Design
Universal Approach
Prescriptions or propositions are designed to
work in any circumstance
Contingency Approach
Desired organization outcomes can be
achieved in several ways
Specific conditions (environment, technology,
workforce) determine the structure
Universal and Contingency Approaches to Organization Design
The Universal Design

Approach
The Contingency Design

Approach
WHAT DOES INFLUENCE ORGANIZATIONAL

STRUCTURE?
STRATEGY AND
STRUCTURE
STRATEGY IMPERATIVE
1. The organization has a goal or
goals toward which it drives.
2. It moves toward its goals in a
rational manner.
3. The organization exists to transform
economic inputs to outputs.
4. The environment within which the
organization operates is a given.
STRATEGY-DEFINED
Strategy can be defined as the
determination of the basic long-term goals
and objectives of an enterprise, and the
adoption of courses of action and the
allocation of resources necessary for
carrying out these goals.
TWO VIEWS OF STRATEGY

1. Planning Mode: strategy as a plan or
explicit set of guidelines developed in
advance. Managers identify where they
want to go; then they develop a systematic
and structured plan to get there.
2. Evolutionary Mode: strategy is not
necessarily a well-thought-out and
systematic plan. Rather, it evolves time as
a pattern in a stream of significant
decisions.
STRATEGY HISTORY
Early writers assumed that the Planning
Mode was the proper way in which to view
strategy. The broader Evolutionary Mode has
been gaining acceptance in recent years.
Due to the need to cope with both static and
dynamic strategies.
LEVELS OF STRATEGY
THE STRATEGY IMPERATIVE
Environmental
Factors and
Organizational
Capabilities
STRATEGY
STRUCTURE
(1) CHANDLERS THESIS 1960s

Chandler studied almost 100 of Americas largest
firms from 1909 to 1959, including DuPont,
General Motors, Standard Oil of New Jersey, and
Sears, Roebuck.
He concluded that changes in corporate strategy
preceded and led to changes in an organizations
structure
CHANDLER, CONTD
Concluded that organization
structures follow the growth
strategies of firms.
He also found that growth strategies
tended to follow certain patterns.
GROWTH STRATEGIES I
The initial stage typically involves plants,

sales offices, or warehouses in a single
industry, a single location, and
performance of a single function. If
successful, they follow a predictable
path.
GROWTH STRATEGIES II
The first growth stage is VOLUME

EXPANSION, producing selling and
distributing more of their product or
service to customers.
GROWTH STRATEGIES III
The next stage of growth is

GEOGRAPHIC EXPANSION,
continuing what it was already
doing in new geographical areas,
with new field units.
GROWTH STRATEGIES IV
The third growth strategy is VERTICAL

INTEGRATION, as firms either buy or
create other functions.
GROWTH STRATEGIES V
The ultimate growth strategy,

PRODUCT DIVERSIFICATION,
involving the firm in new industries
either through merger, acquisition,
or creation (product development).
CHANDLER, CONTD
As a firm moves through each stage, it must
change its organization structure in successive
steps through System 1 to System 4 (Likert)
structural types. The initial System 1 structure is
appropriate because volume expansion of a
single product or service in a single industry
stresses low unit cost (efficiency) and maximum
resource utilization (production), with relatively
low concern for response to change and
uncertainty.
CHANDLER, CONTD
The change to geographic expansion, and
ultimately, product diversification increases
the firms concern for adaptability and
flexibility in the face of diverse and
complex environments. Thus, the
organization structures of such firms are
characterized by product-based divisions
and departments, decentralized authority,
and relatively wide spans of control.
CHANDLER TIME-LINE
CHANDLER - PROGRESSION
TIME t
Simple Structure. Centralized.
Single Product Line
Simplicity of strategy is compatible with a loose and simple

structure. Decisions can be centralized. Is low in both
Complexity and Formalization.
(High Centralization, Low Formalization, Low
Complexity)
CHANDLER PROGR. II
TIME t+1
As demand grows for products. Companies
expand. They increase product lines. Integrate
vertically to control sources of supply. Reducing
dependency on suppliers. To produce a greater
variety of products. They separate into product
groups within the organization.
t+1, continued
Strategies become more ambitious and
elaborate. Expand activities within their
same industry. Vertical integration requires
more complex coordination due to increased
interdependence between organizational
units. Accomplished by redesigning the
structure to form specialized units based on
functions performed.
(Moderate Centralization, Moderate
Formalization,
Moderate Complexity)
CHANDLER PROGR. III

TIME t+2
Growth and diversification give rise to the need for an
autonomous multi-divisional structure. The centralized
structure becomes inefficient and impractical for
dealing with significantly greater complexity.
t+2, continued
A product-diversification strategy requires a
structural form that allows for the efficient allocation
of resources. Accountability for performance, and
coordination between units. This can best be achieved
through the creation of a multiple set of independent
divisions, each responsible for a specified product
line.
(High Complexity, Low Centralization, Moderate
Formalization)
(2) MILES AND SNOW 1970s

Classify organizations into four strategic types:
1. Defenders: seek stability by producing only a limited
set of products directed at a narrow segment of the
total potential market. Strive aggressively to prevent
competitors from entering their limited niche or domain.
They accomplish this by standard economic actions such
as competitive pricing or production of high-quality
products.
DEFENDERS, CONTD
Defenders tend to ignore developments outside their
product line areas. They do little environmental
scanning and limit product development. There is
intensive planning towards cost and efficiency
issues.
Example Soft Soap
MILES AND SNOW II

2. Prospectors: Almost the opposite of Defenders. They
find and exploit new-product and market opportunities.
Innovation is sometimes more important than profitability
after exploiting a new opportunity, they get out. Must
have high profit margins to cover high costs.
Examples - 3M, some Magazine publishers
MILES AND SNOW III

3. Analyzers: Capitalize on the best of both
Defenders and Prospectors. Minimize risk and
maximize opportunities for profit. They move into
new innovations and new markets only after
Prospectors have proven the viability of the
market. They live by imitation. They take the
ideas of Prospectors and copy them.
Analyzers must have the ability to respond to
leading Prospectors, but maintain operating
efficiency. They tend to have smaller profit
margins than Prospectors, but are more efficient.
ANALYZERS CONTD
Analyzers seek both flexibility and stability. They develop
a structure made up of dual components. Parts have high
levels of standardization, routinization, and mechanization
for efficiency. Other parts are adaptive to maintain
flexibility.
Examples IBM, Catapillar, Digital Equipment Corp.
MILES AND SNOW IV

4. Reactors: A residual strategy. Inconsistent and unstable
patterns when one of the other three strategies is pursued
improperly.
In general, Reactors respond inappropriately, perform poorly,
and are reluctant to commit themselves aggressively to a
specific strategy.
ENVIRONMENT STRATEGY
CONTINUUM
Little Change
and Uncertainty
Defender
Reactor
Rapid Change
& High Uncertainty
Analyzer
Prospector
TWO-VARIABLE ANALYSIS OF
INDUSTRIES
MILES & SNOW:

INDUSTRY-STRUCTURE
TYPE A and C INDUSTRIES: The high capital
requirements tend to result in large organizations and
a limited number of competitors. Firms in Type A and
C industries will be highly structured and
standardized, with the Type As (text error) being
more decentralized to facilitate rapid response to
innovations introduced by competitors.
INDUSTRY-STRUCTURE II
TYPE B and D INDUSTRIES: Because of low capital
requirements. These industries tend to be made up of a large
number of small firms. Type D, however, will likely have
more division of labor and more formalization than Type Bs
because low innovation rates allow for greater standardization.
in the same way that capital requirements influence
organizational size and number of competitors. We should
expect high product-innovation rates to result in less
formalization and more decentralization of decision-making.
(3) Porters
Porters Generic
Generic Strategies
Strategies
(3)
Cost Advantage
Lower Cost
Differentiation
Broad
Target 1. Cost Leadership2. Differentiation
Competitive
Scope
Narrow 3A. Cost Focus 3B. Differentiation

Focus
Target
LIMITATIONS OF THE STRATEGY

IMPERATIVE
1. Some theorists claim that the impact of
strategy on structure is greater at the
earliest stages of organization
development. Once huge investments
are made in plants, equipment and
personnel managers become
much more severely restricted in their
ability to alter structure.
LIMITATIONS, II
2. Another observation of theorists is that
when there is a major change in strategy
there is normally not any major change in
structure soon.
Some claim because of this that there is a
lag between changes in structure and
changes in strategy, or vice-versa. Some
feel that this is a cop-out.
Organizations that do not face stiff
competition are slower to change their
structures than others.
LIMITATIONS, III
3. A study of the upper half of the Fortune 500
firms found that structure influences and
constrains strategy, rather than the other way
around.
Strategy
Size
Technology
Organisational
Structure
Strategic
Choice
Environment
Environment & Structure
The Organization Environment

All the elements that exist outside the
boundary of the organization
Potential to affect all or part of the
organization
Domain is the chosen environmental field of
action
Sectors or subdivisions that contain similar
elements
The Organization in its

Environment
The Task Environment (task/market)
Sectors that the organization interacts

with directly to achieve goals
Typically the industry and market sectors
Human Resources
International Sector
Raw Materials Sector
General Environment/macro
Sectors that might not have a direct impact on the
daily operations of a firm
Political: regulation
Economic
Sociocultural sector: the green movement
Economic conditions: global recession
Technology sector: massive and constant
changes
Ecological
International Environment
Can directly affect many organizations
Has grown in importance
Distinction between foreign and domestic
operations
All organizations face domestic and global
uncertainty
Organizational Domain
The domain of an organization is the claim it stakes
out for itself with respect to: (1) range of products
offered, (2) markets served, and (3) services rendered.
Domain is closely related to the task environment of the
organization.
The Organizational Domain
DOMAIN CONSENSUS
Domain consensus is the extent that there is general
agreement on an organizations expectations both for
members of an organization and for others with whom
they interact, about what the organization will and will
not do.
Selection of a specific domain significantly influences
other choices that an organization must make (financing,
structure, personnel, etc.)
Organizations may have multiple domains.
DOMAIN CONFLICT
Domain conflict exists when there is a lack of
recognition or agreement about the organizations
role within its larger environment.
Establishment of a domain cannot be an arbitrary,
unilateral action.
The Changing Environment

The dimensions of the environment range:
Unstable
Homogeneous
Heterogeneous
Simple
Complex
Organizations must
cope with and manage
uncertainty to be
effective.
The dimensions boil down to:

The need for information about the
environment
The need for resources from the environment
Dimensions of the Environment

Simple-complex: heterogeneity; the
number of dissimilarity of external
elements
Stable-Unstable: whether elements in the
environment are dynamic
Framework for Assessing

Environmental Uncertainty
UNCERTAINTY IN THE
ENVIRONMENT
Simple
DEGREE OF
HOMOGENEITY
Small number of
external elements.
Elements remain the
same or change slowly
Small number of
external elements.
Elements are in
continuous change
Large number of
Large number of
external elements.
external elements.
Element remain the
Elements are in
same or change slowly continuous change.
Complex
Stable
Dynamic
DEGREE OF CHANGE
UNCERTAINTY IN THE
ENVIRONMENT
Simple
LEAST
UNCERTAINTY
MODERATE
UNCERTAINTY
DEGREE OF
HOMOGENEITY
MODERATE
UNCERTAINTY
MOST
UNCERTAINTY
Complex
Stable
Dynamic
DEGREE OF CHANGE
UNCERTAINTY IN THE
ENVIRONMENT
Simple
DEGREE OF
HOMOGENEITY
Soft drink bottlers,

beer distributors,
container manuf.,
local utilities
Personal computers,
fashion clothing,
music industry, toy
manufacturers
Universities, hospitals,
Insurance companies
American Airlines,
oil companies,
electronic firms,
aerospace firms
Complex
Stable
Dynamic
DEGREE OF CHANGE
(1) BURNS & STALKER

Used interviews with managers and their own
observations to evaluate the impact of environment
on organizational structure and management practice.
The type of structure that existed in rapidly changing
and dynamic environments was different from that
in organizations with stable environments.
B & S labeled the two types organic and mechanistic,
respectively
ORGANIC ORGANIZATION
Organic organizations are relatively flexible and adaptable.
They rely on lateral communication rather than vertical
communication. Influence is based upon expertise and
knowledge rather than on authority of position.
Responsibilities are defined loosely rather than rigid job
definitions. Emphasis is on exchanging information rather
than on giving direction.
MECHANISTIC ORGANIZATION
Mechanistic structures are characterized by high

complexity, formalization and centralization. They
perform routine tasks, rely heavily on programmed
behaviors, and are relatively slow in responding to
the unexpected.
BURNS & STALKER

CHARACTERISTIC
MECHANISTIC ORGANIC
Task Definition
Rigid
Flexible
Communication
Vertical
Lateral
Formalization
High
Low
Control
Centralized
Diverse
Influence
Authority
Expertise
Adapting to a Changing Environment

Organizations need the right fit between
internal structure and the external
environment
Adding Positions and Departments
Building Relationships
Boundary-spanning roles
Business intelligence
Differentiation and Integration

Organic vs. Mechanistic Management Process
Planning, Forecasting, and Responsiveness
Different Goals and Orientations

among Departments
Environmental Uncertainty and

Organizational Integrators
Mechanistic and Organic Forms

Tasks are specialized
Tasks are rigidly defined
Employees contribute to the

common task of the
department
Strict hierarchy of
authority and control
Tasks are adjusted and

redefined through teamwork
Knowledge and control of

tasks are centralized
Communication is vertical
Less hierarchy of authority

and control
Knowledge and control of
tasks are located anywhere in
the organization
Communication is horizontal
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Organic vs. Mechanistic
Mechanistic characterized by machinelike standard rules and procedures with

clear authority
Organic design of organization is looser,
free-flowing, and adaptive
Depends upon:
Structure
Tasks/Roles
System Formality
Communication
Hierarchy versus Collaboration
Organic and Mechanistic Designs
Contingency Framework for Uncertainty and

Organizational Responses
Dependence on External
Resources
Resource-dependence perspective
means organizations depend on the
environment
Strive to acquire control over resources to
minimize dependence
Organizations are vulnerable if resources are
controlled by other organizations
Minimize vulnerabilities
Will team up with others when resources are
scarce
Influencing External Resources

Balance linkages and independence
Reach out and change or control elements
in the environment
1. Establish favorable relationships with key
elements of the environment
2. Shape the environment by influencing key
sectors
Organizing Strategies for

Controlling
the External Environment
Environmental Characteristics
and
Organizational Actions
Design Essentials
Change and complexity have major implications for
organizations
Organizational environment differs regarding uncertainty
and resource dependence
The goal for organizations is managing efficiencies and
survival
Managers must understand how the environment
influences the structure of an organization
When risk is great, organizations can attempt to change
or influence the environment
Organizations can learn and adapt to the environment
(2) EMERY & TRIST

Offer a model that identifies four kinds of environments
that organizations might confront:
1.
2.
3.
4.
Placid-randomized
Placid-clustered
Disturbed-reactive
Turbulent-field
Placid-randomized is least complex, Turbulent-field is

the most complex.
PLACID-RANDOMIZED ENVIRONMENTS
This environment is relatively unchanging. Therefore,
environmental uncertainty is low. Environmental
demands are distributed randomly, and change slowly.
Managerial decision making does not give much
attention to the environment.
PLACID-CLUSTERED ENVIRONMENT
Environment changes slowly, but threats are clustered,
not random. The forces in the environment are linked,
and pose a higher threat than randomized changes.
These organizations use long-range planning and
forecasting to learn as much as possible about their
environments. Structures will tend to be centralized.
DISTURBED-REACTIVE ENVIRONMENTS
A more complex environment than either placid one.
Many similar organizations seeking similar ends. One
or more may be large and have ability to influence the
environment. Two or three large companies can
dominate an industry.
Organizations in this type of environment used planned
tactical initiatives, calculate reactions by other, and
develop counteractions. This requires flexibility and a
structure with some decentralization.
TURBULENT-FIELD ENVIRONMENTS
The most dynamic of the environments and has the
highest level of uncertainty associated with it.
Environmental elements are increasingly organized
and interrelated.
Major, dynamic shifts can occur in the environment as
one, or a small group of large companies change the
rules of competition. Thus, planning is not as useful
here.
STRUCTURAL IMPLICATIONS
Emery and Trist did not recommend specific structural
configurations associated with each environmental
type. However, the two placid environments should be
responded to with mechanistic structures, whereas the
disturbed and turbulent environments require more
organic structures. As the environment becomes more
volatile, increasing flexibility Is needed to cope with or
manage the uncertainty that increases.
ENVIRONMENTAL UNCERTAINTY THOMPSON

The central core of the organization requires technical
rationality.
Norms of rationality require that the organization
attempt to seal-off or protect its technical core from
environmental influences.
INTERNAL STRATEGIES
Organizations regulate the flows of inputs and outputs to

their central technical cores through such internal
responses as buffering, smoothing (leveling), forecasting,
and rationing.
BUFFERING
On the input side, buffering usually takes the form of
stockpiling critical resources whose supply is uncertain
or whose price fluctuates widely over time.
On the output side, buffering typically involves building
and keeping up warehouse and distribution inventories.
By buffering, environmental uncertainties are absorbed
because an organizations technical core produces at a
constant rate. Other methods of buffering might include
preventative maintenance and recruiting and training.
SMOOTHING (LEVELING)
Where buffering absorbs environmental uncertainties,
smoothing involves efforts to manage environmental
uncertainties. Smoothing attempts to protect the technical
core by reducing uncertainties associated with cyclical
variations in product or service demand.
Examples might include differential costs of long distance
telephone calls that are lower during non-peak times,
discount airline fares for off-time flights.
FORECASTING
When buffering and smoothing will not effectively protect
an organizations technical core, organizations can often
reduce uncertainty and behave in a logical, rational manner
by developing accurate forecasting capabilities. To the
degree that environmental fluctuations can be predicted,
they can be treated as constraints and adapted to.
RATIONING
Finally, when the organization finds that neither buffering,
smoothing, nor forecasting is sufficient to prevent
environmental penetration, organizations can turn to
rationing. The allocation or assignment of resources
according to established priorities can be seen in
restaurant reservations, reserved seats at theaters, etc.,
and rationing (such as gasoline rationing during the
oil embargo). In general, rationing is a less than
satisfactory solution, because it indicates that the
organization is not fully serving its task environment.
It can be costly in terms of lost revenue and customer
goodwill (Atari, Cabbage Patch dolls, etc.)
EXTERNAL STRATEGIES
Besides strategies for dealing with uncertainty in their
internal environments, organizations also have strategies
for dealing with uncertainty in their external (general)
environments.
The actual relations, or interactions, between organizations
are the responsibility of boundary personnel. The boundary
spanners or gatekeepers, are important because they mediate
the flow of information, products or services, and personnel
between organizations in its environment.
ROLE OF THE BOUNDARY SPANNER
EXTERNAL STRATEGIES II
Thompson identified two direct strategies for managing
external dependencies such as suppliers, customers,
banks, etc.:
COMPETITIVE STRATEGIES
COOPERATIVE STRATEGIES
COMPETITION
Refers to rivalry between two or more organizations which
is mediated by a third party. In the case of a manufacturer,
the third party might be a customer, distributor, supplier or
potential employee. In each instance, the third party must
select among alternative courses of action (For example,
which of several competing products to purchase).
(3) LAWRENCE & LORSCH

Studied ten firms in three industries: plastics, food and
containers. The three industries were deliberately
chosen as they differ significantly in the environmental
uncertainty associated with each one.
The underlying hypothesis was that internal environments
of the firms must match the external environmental
requirements. The better the match, the more successful
the firm.
DIFFERENTIATION & INTEGRATION

Differentiation and integration was posited as the variables
to examine to determine the state of the internal environment.
Differentiation, according to Lawrence & Lorsch,
closely resembles the traditional definition of horizontal
differentiation, but in addition to task segmentation,
suggested that managers will differ in their:
(1)time frame,
(2) interpersonal orientation,
and (3) goal orientation
Integration is the quality of collaboration needed to overcome
differentiation and achieve unity of effort among units.
LAWRENCE & LORSCH

MODEL
DEPARTMENTAL DIFFERENTIATION
BASED UPON SUBENVIRONMENT
CHARACTERISTICS
INTEGRATION TECHNIQUES AND

APPROPRIATE ENVIRONMENTS
Strategy
Size
Technology
Organisational
Structure
Strategic
Choice
Environment
Industry & Structure
INDUSTRY-STRUCTURE
RELATIONSHIP
Industry
Strategy
Structure
Technology and
Organizational Structure
Borrows from the strategy imperative
Strategy is largely determined by
industry
Technology is seen an intervening
variable
Size is also seen as a contributing
variable in explaining the relationship
INDUSTRY-TECHNOLOGY-SIZESTRUCTURE IMPERATIVE
Technology & Structure
TECHNOLOGY INFLUENCES
ORGANIZATIONAL STRUCTURE
Defining TECHNOLOGY
we are referring either to a practical
application of science to address a particular
product or manufacturing need, or to an area of
specialized expertise the practical
application of science. (A.D. Little)
its a specific process that produces a specific
product a manufacturing process as a way
a company does business or attempts a task.
(McKinsey)
WHAT IS TECHNOLOGY?
COMPANY
(Robbins, 1990)
WHERE IS TECHNOLOGY?
INFRASTRUCTURE
HRM
R
MA
G IN
TECNOLOGY DEVELOPMENT
PRIMARY
INBOUND
OUTBOUND
MARKETING
LOGISTIC OPERATIONS LOGISTIC
& SALES
GIN
PROCUREMENT
SERVICES
MA
R
SUPPORT
(1) WOODWARD (60s)

Hypothesis: There is a best organizational/technology
fit that leads to optimal efficiency!
WOODWARD
(2) PERROWS TECHNOLOGY CLASSIFICATION

Task Variability
Few
Many
Exceptions Exceptions
Problem
Analyzability
Ill defined
and
unanalyzable
Craft
Nonroutine
Well defined
and
analyzable
Routine
Engineering
PERROWS TECHNOLOGY-STRUCTURE
PREDICTIONS
(3) THOMPSONS TECHNOLOGY

CLASSIFICATION
Input
Output
Sequential
interdependence
Client a
Transformation
Process
Client b
Pooled
interdependence
Resources
a
b
c
d
Inputs
Feedback
Transformation
Process
Output
Reciprocal
interdependence
THOMPSONS types of technology

coordination mechanisms
A: Long-Linked Technology:
moderate complexity and
formalization (planning and
scheduling)
B: Mediating Technology: low

complexity and high level of
formalization (rules and
procedures)
C: Intensive Technology: high

complexity and low level of
formalization (mutual adjustment)
Input
client
T.P.
Resources
a
b
c
d
client
Inputs
Feedback
Transformation
Process
Output
Output
Common elements
Routineness as common denominator
Complexity (-)
Formalization (+)
Centralization (+/-)
Conflicting empirical results, since

companies adopts several technologies
at the same time. SMEs as fertile field of
research!
3 theoretical perspectives on
the relationship S-T
T is a vital part of the S
planning process
T as input to S (Resource
Based Strategy)
S influences the T choices
Technological Learning
Average
Unit Cost
Accumulated Production (~ time)
The technological choice

1. Selection
2. Acquisition
3. Exploitation
(Dussauge 1992)
1. Selection: the Familiarity matrix

New &
unfamiliar
Markets
New but
familiar
Current
Technologies
Current
New but fam.
New and unfam.
1. Success Rate of Innovations

New &
unfamiliar
Markets
30%
New but
familiar
10%
40%
90%
30%
Current
Technologies
Current
New but fam.
New and unfam.
1. Selection: the Risk matrix

High
Business
Exposure
Medium
Low
Technical Uncertainty
(A.D.Little, 1981)
Low
Medium
High
1. Selection: the Impact/Success matrix
Potential
competitive
impact
Probability of Success
2. Acquisition: means (1)

Internal
development
Strategic
Autonomy
Acquisition
External R&D
contracts
Joint Venture
Licences
Time
2. Acquisition: means (2)

New &
unfamiliar
Markets
New but
familiar
Joint Venture
Internal Vent.
Educational
Acquisition
Spin off
Sell
I.D
Acquisition
I.D
Licensing
Acquisition
Educational
Acquisition
Internal
development
I.D
Licensing
Acquisition
Joint Venture
Internal Vent.
Current
Technologies
(Roberts and Berry, 1985)
Current
New but fam.
New and unfam.
3. Exploitation
Internal or External
External exploitation in case of:
protection (patent)
barriers to entry / exchange of technologies
imposition of it as a standard
Formulating a
technological strategy
Business growth
potential
Market position
Technological
capabilities
If mkt posistion and technology

converge
The BCG matrix

Market Share (relative)
High
High
STAR
Maintain the
position
Business
Growth
$
Low
Low
CASH
COW
Exploit (deploy,
licence)
QUESTION
MARK
Invest heavily
or abandon
DOG
Abandon
If mkt position and technology

diverge, in high growth context
Compensate to your weaknesses through alliances
If mkt posistion and technology

diverge, in low growth context
Minimize investments in order to generate
the largest possible CF
G
Abandon the business

redeploying your capabilities
Industries and
Investments in Technology
CAPACITY
driven
(textile, metals,
basic
chemicals,
paper)
PHYSICAL
CAPITAL
CUTOMER
driven
(households
durables,
food)
KNOWLEDGE
driven
(software,
electrical
equipment)
CUSTOMER
RELATIONSHIP
R&D
Organization Size & Structure
Size
Total number of employees in the
organization
Problem with part time and seasonal
workers
Size based on sector
Size mediated by efficiency
Advocates of Size Imperative

(1) Peter Blau
1. Studied govt. agencies, universities
and department stores
2. Concluded that size is the most
important condition affecting the
structure of the organizations
3. Increasing size promotes structural
differentiation but at a decreasing rate

(2) Aston Group
1. Studied 46 organizations
2. Also found size to be a major determinant of
structure
3. Increased size was associated with
formalization and specialization
4. Increased scale of operation was associated
with recurrent events and repetition of
decisions which required standardization

Replication of Aston Study
Found size to be positively related to specialization,
formalization and vertical span and negatively to
centralization
Larger organizations are more specialized, have
more rules, documentation, more extended
hierarchies, and a greater decentralization of decision
making further down such hierarchies
As size increased specialization, formalization and
vertical span also increased but at a declining rate,
whereas centralization decreased at a declining rate
as size increased
(3) Meyer
1. Did a causal, longitudinal study
2. Size caused structure not structure
causing size
3. When size is controlled the impact of
other variables disappeared
Impact of Large Size on Organization Structure
Critics of Size Imperative

(1) Chris Argyris
Size affects structure only in
organizations that have professional
managers and not among owner
controlled
Size may relate to structure but does
not cause it

(2) Aldrich
1. Size is the result and not the cause
2. Technology determines structure
which in turn determines size
Aston Researchers
1. Questioned their initial position though
size decreased over time the measure
of structure dimension increased

(3) Hall
1. Also found mixed results for size structure
relationship
Another study of small and medium size
organizations showed that size structure
relationship was found among professionally
driven organizations and not among owner
driven.
This could be the reason for the mixed results
as the type of ownership was not controlled in
the above studies
Conclusions on Size Structure

Relationship
Size does not dictate all of the
organizations structure but is important
in predicting some dimensions of
structure

Relationship
1.
2.
3.
4.
5.
Size & Complexity (span of control,

departmentalization, specialization)
Blau: impact of size on complexity was at a
decreasing rate.
The view supported by Meyer & Argyris but
applicable only to govt. organizations
The same impact in professionally driven
organizations was questionable
Some conclude that size structure relationship is
circular: each determining the other
Size has an impact on vertical (functional) and
horizontal (division of labor) differentiation

Relationship
1.
2.
3.
4.
Size and Formalization

The relation between size and formalization is high,
positive and statistically significant
Larger the organization more formalized the behavior,
especially those which have the probability to occur
again and therefore standardization (rules,
procedure, description and predictability)
Moderating variable: whether the firm is a subsidiary
of a larger firm or an independent entity
If a subsidiary then greater formalization than size
would dictate

Relationship
Size and Centralization

1. Size leading to decentralization: the
results are mixed
2. Possible reason the variable of
professionally managed and owner
driven organization was not controlled
Strategic Choice
The Strategic Choice Approach to

Organization Design
Includes the role of the top
management decision maker in
determining the organizations
structure.
Strategic Choice
Strategic Choice
Role of the manager
Evaluates the imperatives and organization strategy
Designs organization structure accordingly
Managers choices are affected by:

Organization strategy (purposes and goals)
Imperatives (contextual factors)
Personal value system and experience
17204
2012 South-Western, a part of

Cengage Learning
17.5
17205
The Strategic Choice Approach to Organization Design
2012 South-Western, a part of

Cengage Learning
Figure 17-9
Relationship Between Strategic Choice

and Organizational Structure
Organizationa
l objectives
Environment
al
constraints
Strategic
decisions
made by
dominant
coalition
Organizational
Strategies
Organization
al structure
Target
markets
Capital
sources/uses
Decision
makers
personal
beliefs,
attitudes,
values, and
ethics
17-206
Human
resources
Technology
Total quality
management
Corrective action
Organization
al
effectiveness
Future Organisation
Structures
Influences on Future
Organization Designs
The Mission
Specificity is important to determine design
The Future Environment
Changing demographic characteristics

Public and consumer sophistication
Range of services provided outside
traditional hospitals
Involvement in community to address

underlying health issues
Increasing competition
Increasing regulatory pressures
Changing reimbursement systems
Expanding private sector involvement
Involvement of trustees, physicians, and
other health professionals in strategic
planning
External standards for professional
conduct
Demand for accountability and value
Focus on patient safety and quality of care
Rapidly developing medical technologies
Information demands
Development of information systems
Artificial intelligence
The Organization
Greater emphasis on teamwork
Social contract accountability for
governance
Corporatization of health services
organizations
Demands to improve the quality of care
The Organization
Demands to control costs, efficiency,
productivity, and value
Comprehensive and integrated clinical and
financial information systems
Constrained financial resources
The Organization
Changing working relationships
Increasing use of information technology
Increasing need to coordinate activities
internally
The Organization
Managing conflict creatively
Collaboration among public and private
organizations to address preventable
diseases
Culture
Focus on "customer" and patient-centered care

Patient satisfaction surveys to modify care
Broad sets of performance indicators
Community-based care
Culture
Use of evidence and health outcome measures

Challenges to traditional ways of operations
Value of employees committed to organization
Value of employees who are adaptable
Culture
Value of nonhierarchical leaders who can lead

change processes
Emphasis on teamwork and collaboration with
nontraditional partners
Culture
Integrating functions and clinical processes

Trust development
Creating a culture of patient safety
Promoting ethical work practices
Human Resources
Acute shortage of nursing personnel
Emphasis on cross-training vs. traditional
professional training
Human Resources
Emphasis on horizontal teams and
collaborative practices
Pressure to substitute "cheaper" health
care workers for more expensive health
professionals
Human Resources
More women in management require flexibility

Accessibility of day care and job sharing
Greater ethnic and cultural diversity of
workforce
Need to experiment with new work
arrangements
Human Resources
Physicians becoming employees

Shortages of key health services
professionals
Increasing need for managers with
professional training
Human Resources
Increasing unionization of workers

Closer scrutiny by unions as some organizations
retrench
Need to educate all employees in strategic
management
Adopting a marketing orientation
Human Resources
Succession planning, career planning, and

management development
Pressure to provide continuing education,
especially for clinical managers
The Political Process
Informal leaders may be helpful
Better management to identify key players
in redesign process
Organization in Transition
Life Cycles
Four phases (Starkweather and Kisch):
Search
Success
Bureaucratic
Succession
Organization in Transition
Designs for Quality Improvement
Quality of care
Quality is an organizational problem
Emphasize:
Organizing work around patient
Reframing role of hospital in health
services system
22
Benefits of Organizational
Design
Organizational design can help an
organization achieve increases in
efficiency, quality, innovation and creativity,
and responsiveness to customers.
Increasing efficiency is most closely
associated with a cost-leadership strategy.
Increases in quality, innovation, and
customer responsiveness are most closely
associated with a differentiation strategy.
23
Increasing Efficiency
Designing structure
Keep the structure as flat as possible
Decentralize authority
Reevaluate form of differentiation
being used
Reevaluate integrating mechanisms
being used
Managing culture
Create a cost-cutting culture
24
Increasing Quality
Designing structure
Keep the structure as flat as possible
Decentralize authority
Use cross-functional teams
Increase standardization
Managing culture
Create a quality-oriented culture
25
Increasing Innovation
Designing structure
Use a matrix structure
Use cross-functional teams
Managing culture
Create a creative and innovationoriented culture
Stress instrumental values of risk
taking and exploration
26
Increasing Customer
Responsiveness
Designing structure
Employ a geographic structure
Employ a market structure
Managing culture
Create a quality-oriented culture
Promote instrumental values of caring
for customers, attentive service, and
speedy after-sales support
27
Advice to Managers
Evaluate the way you are currently pursuing
your strategy, and decide how you might
improve efficiency, quality, innovation, or
customer responsiveness to increase
performance.
Consider implementing a T.Q.M. program to
discover ways to increase performance.
Evaluate how your organizations structure and
culture are helping or hurting organizational
performance, and implement any organizational
design changes that will help to increase your
competitive advantage.
When a design should be reconsidered

Severe performance problems
Change in environment that affects internal
policies
New programs or product lines
Leadership change

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Introduction

best arrange resources to serve the

It is a deliberate process of configuring

A methodology which identifies dysfunctional

Figure 11.1 A framework for organizational

Levels of Organization Design

Levels of Organization Design

Designing a Work Group

Levels of Organization Design

Levels of Organization Design

Levels of Organization Design

EFFECTIVENESS WAS DETERMINED BY

MEETING ORGANIZATIONAL OBJECTIVES AND

Constituency Approach: Effectiveness

Flow Charts of Approaches to

Flow Charts of Approaches to

INTERNAL PROCESS APPROACH

Flow Charts of Approaches to

SYSTEM RESOURCE APPROACH

Flow Charts of Approaches to

STRATEGIC CONSTITUENCIES APPROACH

COMPARISON OF THE FOUR OE APPROACHES

it accomplishes its stated goals

goals are clear, time

it acquires needed resources

between inputs and

all strategic constituencies

and the organization

combines internal efficiency

costs, outputs &

OE Criteria for Selected

Return on Investment; growth in earnings

The Contradictions Model of

Four Central Assumptions of

Competing Values Model

Competing Values Dimensions I

Internal focus reflects management concern for well-being

Competing Values Dimensions II

Four Models of Effectiveness

Four Models of Effectiveness II

Four Models of Effectiveness III

Four Models of Effectiveness IV

4. The level of detail achieved in the standardized

As environments become more

Universal and Contingency Approaches to Organization Design

The Universal Design

The Contingency Design

WHAT DOES INFLUENCE ORGANIZATIONAL

TWO VIEWS OF STRATEGY

THE STRATEGY IMPERATIVE

(1) CHANDLERS THESIS 1960s

The initial stage typically involves plants,

The first growth stage is VOLUME

GROWTH STRATEGIES III

The next stage of growth is

The third growth strategy is VERTICAL

The ultimate growth strategy,

Single Product Line

Simplicity of strategy is compatible with a loose and simple

CHANDLER PROGR. III

(2) MILES AND SNOW 1970s

MILES AND SNOW II

MILES AND SNOW III

MILES AND SNOW IV