PROJECT REPORT ON

ORGANISATIONAL DESIGN

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 CONTENTS:

CHAPTER 1: INTRODUCTION-

1.1: introduction

1.2: objective of study

1.3: significance of study

CHAPTER 2:ORGANISATIONAL DESIGN(introduction)

CHAPTER 3: DESIGN PROCESS

CHAPTER 4: TYPES OF ORGANISATIONAL DESIGN

CHAPTER 5: CONCLUSION

CHAPTER 6: BIBLIOGRAPHY

CHAPTER 7: ACKNOWLEDGEMENT

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CHAPTER 1: INTRODUCTION

1.1 introduction

There is no one definite organizational structure and design that works for

all businesses, but almost all types of businesses have some degree of

organizational structure and design that divides, groups, and coordinates job

tasks in that business. For most companies, the design process leads to a

more effective organization design, significantly improved results

(profitability, customer service, internal operations), and employees who are

empowered and committed to the business. The hallmark of the design

process is a comprehensive and holistic approach to organizational

improvement that touches all aspects of organizational life. By design were

talking about the integration of people with core business processes,

technology and systems. A well-designed organization ensures that the form

of the organization matches its purpose or strategy, meets the challenges

posed by business realities and significantly increases the likelihood that the

collective efforts of people will be successful.

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1.2: objective of study

To study about organizational design

To study the types of organizational design.
To understand the need and importance of organizational design

1.3: significance of study

To gain knowledge about the concept of organizational design and its

types.
To gather knowledge over the importance of organizational design in

an organisation.

CHAPTER 2:
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WHAT IS ORGANISATIONAL DESIGN?

Organizational design is a step-by-step 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. The process focuses on improving both the

technical and people side of the business.The hallmark of the design process

is a comprehensive and holistic approach to organizational improvement

that touches all aspects of organizational life, so you can achieve:

Excellent customer service

Increased profitability

Reduced operating costs

Improved efficiency and cycle time

A culture of committed and engaged employees

A clear strategy for managing and growing your business

By design were talking about the integration of people with core business

processes, technology and systems. A well-designed organization ensures

that the form of the organization matches its purpose or strategy, meets the

challenges posed by business realities and significantly increases the

likelihood that the collective efforts of people will be successful.

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As companies grow and the challenges in the external environment become

more complex, businesses processes, structures and systems that once

worked become barriers to efficiency, customer service, employee morale

and financial profitability. Organizations that dont periodically renew

themselves suffer from such symptoms as:

Inefficient workflow with breakdowns and non value-added steps

Redundancies in effort

Fragmented work with little regard for good of the whole (Production

ships bad parts to meet their quotas)

Lack of knowledge and focus on the customer

Lack of ownership (Its not my job)

Cover up and blame rather than identifying and solving problems

Delays in decision-making

People dont have information or authority to solve problems

Management, rather than the front line, is responsible for solving

problems when things go wrong.

Systems are ill-defined or reinforce wrong behaviors

Mistrust between workers and management.

The need or desire for an organisation to change the way they are structured

often comes from the need to solve a problem i.e. lost revenue, disengaged

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employees, lack of customer service etc. Organisational Design focuses on

realigning all the aspects of the way a business operates to enable it to

deliver the business strategy.

"Investing time in ensuring your organisation is designed to achieve

commercial success will reap benefits including: improved customer

service, increased profits, reduced operating costs and more committed and

engaged employees, says Ken.

Having the right design for your organisation is about aligning your critical

organisational choices at both a macro and micro level. Redesigning the way

an organisation operates starts with analysing the results. Youll need to

take a careful look at the market, your financials, internal performance

metrics and recent customer and employee engagement surveys. This

ensures you are starting with the end in mind and being clear on where you

need to get to, to achieve your strategic goals. For example, says Ken you

may want to increase your customers or market share by 20% or reduce your

costs from $20 million to $15 million.

Getting the right design, also means looking at the environment you are

working in, whats it telling you? Are you able to respond quickly to

changes in the market, if not, why not? And, what would need to change to

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make this possible? Are you clear on who your stakeholders are and what

their demands and requirements are, can you meet and exceed them?

Driving for an in-depth understanding of your environment gives you the

opportunity to both validate and question your strategy. It also provides

useful information to help you understand how you (could) differentiate

yourself in the market. Structure follows strategy not the other way around.

For example when a global airline decided they wanted to be able to engage

the mass market re low cost airfares they realised they couldnt do it with

their existing structure, they needed to design the relevant parts of the

organisation to make sure they were focused on and able to deliver on the

new strategy, says Ken.Ken recommends determining a clear set of design

principles directly linked to the overall strategy, which can evolve as your

strategy develops. These principles are then used to not only guide the

organisation design process but to also assess the outputs of the design work

to ensure alignment back to strategy.

NEED AND IMPORTANCE OF ORGANIZATIONAL

DESIGN

Organizational design serves as the foundation on which all company

operations are built, including such vital factors as the grouping of

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employees within different departments and the formal managerial

hierarchies within a company. Savvy early stage organizational design

choices can create a foundation for success, allowing an organization to

develop a strong company culture, grow in response to increasing demand

and adapt to changes in the marketplace.

Company Leadership

Organizational design influences the leadership structure of a company,

setting forth reporting relationships and lines of authority reaching from the

executive level to the front line. It is important to have a clear map of

managerial responsibility and accountability to keep the company running

smoothly. Without clear lines of authority, employees in different areas of

the company can become misguided or confused, while others find

themselves with an unnecessarily high level of supervision. The ideal

leadership structure depends on the industry a company is in and the

personalities of business owners.

Company Culture

The leadership structure put in place by organizational-design choices can

have a direct and lasting effect on company culture. The grouping of

employees in various departments and the managerial hierarchy influences

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the way employees interact with each other on the job. Organizational

design can influence the degree to which front-line employees are allowed

to solve complex problems on their own rather than involving a manager,

for example. An organization designed to make extensive use of

telecommuters will result in a company in which workplace relationships

are often formed and strengthened solely through online interactions, as

another example.

Future Growth

Organizational design choices made in the early stages of a business can

either help or hinder growth plans. Organizational designs built to easily

accommodate new managers and employees at different levels of the

organization can add new positions without making significant structural

changes. A company using freelancing telecommuters, for example, can add

large numbers of freelancers with a small increase in the number of

managers. A company that locates all employees in a small office, on the

other hand, must acquire new office space or expand their current office to

take on new employees.

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Adaptability

Organizational design choices can develop distinct competitive advantages.

Savvy business owners continually monitor changes in their industries and

markets, looking for opportunities to adapt and develop new competitive

advantages. Companies with taller organizational structures and complicated

bureaucracies can find it difficult to adapt to changing market conditions,

such as a growing use of lean business models or outsourcing in the

industry. Companies with less complex organizational structures can find it

easier to shift employees around, rework managerial hierarchies and

redesign job descriptions for existing employees, all of which can increase

efficiency or productivity in response to outside pressures.

Every business we work with is trying to execute a more complex strategy

than they have had to in the past. More powerful customers, the need to

pursue emerging markets, changing demographics, new competitors all

require a multi-dimensional organization. Technology has increased the pace

of business communication, product development cycle times, customer

expectations. Companies need to be able to make sound decisions faster, but

with more perspectives involved. The result is an appreciation that a well-

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designed organization is essential to create clear interfaces and decision-

rights and ensure that the critical conversations take place.

KEY ELEMENTS IN ORGANISATIONAL DESIGN

Organizational design is engaged when managers develop or change an

organization's structure. Organizational Design is a process that involves

decisions about the following six key elements:

I.WorkSpecialization

Describes the degree to which tasks in an organization are divided into

separate jobs. The main idea of this organizational design is that an entire

job is not done by one individual. It is broken down into steps, and a

different person completes each step. Individual employees specialize in

doing part of an activity rather than the entire activity.

II.Departmentalization

It is the basis by which jobs are grouped together. For instance every

organization has its own specific way of classifying and grouping work

activities.There are five common forms of departmentalization:

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Functional Departmentalization. As shown in the Figure 2-1, it groups jobs

by functions performed. It can be used in all kinds of organizations; it

depends on the goals each of them wants to achieve.

Product Departmentalization. It groups jobs by product line. Each

manager is responsible of an area within the organization depending of

his/her specialization

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Geographical Departmentalization. It groups jobs on the basis of

territory or geography.

Process Departmentalization. It groups on the basis of product or

customer flow.
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 Customer Departmentalization. It groups jobs on the basis of common

customers.

III. Chain of command

It is defined as a continuous line of authority that extends from upper

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organizational levels to the lowest levels and clarifies who reports to whom.

There are three important concepts attached to this theory:

Authority: Refers to the rights inherent in a managerial position to tell

people what to do and to expect them to do it.

Responsibility: The obligation to perform any assigned duties.

Unity of command: The management principle that each person should

report to only one manager.

IV. Span of Control

It is important to a large degree because it determines the number of levels and managers

an organization has. Also, determines the number of employees a manager can efficiently

and effectively manage.

V. Centralization and Decentralization

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VI. Formalization

It refers to the degree to which jobs within the organization are standardized

and the extent to which employee behavior is guided by rules and

procedures.

CHAPTER 3: ORGANISATIONAL DESIGN PROCESS

Although adaptable to the size, complexity and needs of any organization,

the design process consists of the following steps.

Charter the design process

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As senior leaders, you come together to discuss current business results,

organizational health, environmental demands, etc. and the need to embark

on such a process. You establish a charter for the design process that

includes a case for change, desired outcomes, scope, allocation of

resources, time deadlines, participation, communications strategy, and other

parameters that will guide the project.

(At times, senior teams may go through either a strategic planning process

or an executive team development process prior to beginning a redesign

initiative, depending on how clear they are about their strategy and how well

they work together as a team.)

Assess the current state of the business

You dont want to begin making changes until you have a good

understanding of the current organization. Using our Transformation Model,

we facilitate a comprehensive assessment of your organization to understand

how it functions, its strengths and weaknesses, and alignment to your core

ideology and business strategy. The assessment process is astounding in the

clarity it brings an organizations leaders and members, not only regarding

how the organization currently works but how the various parts are

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interrelated, its overall state of health and, most importantly, what needs to

be done to make improvements.

Design the new organization

The senior team (and/or others who have been invited to participate in the

process), look to the future and develop a complete set of design

recommendations for the ideal future. At a high level, the steps in this

process include the following:

Defining your basic organizing principle. (Will you organize

primarily around functions, processes, customer-types, technologies,

geographies, etc.?)

Streamlining core business processesthose that result in revenue

and/or deliverables to customers.

Documenting and standardizing procedures.

Organizing people around core processes. Identifying headcount

necessary to do core work.

Defining tasks, functions, and skills. What are the performance

metrics for each function/team? How are they evaluated and held

accountable?

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 Determining facility, layout and equipment needs of various teams

and departments throughout the organization.

Identifying support resources (finance, sales, HR, etc.), mission,

staffing, etc. and where should these should be located.

Defining the management structure that provides strategic,

coordinating and operational support.

Improving coordinating and development systems (hiring, training,

compensation, information-sharing, goal-setting, etc.).

At some point the design process morphs into transition planning as critical

implementation dates are set and specific, concrete action plans created to

implement the new design. And a key part of this step includes

communicating progress to other members of the organization. A

communications plan is developed that educates people in what is

happening. Education brings awareness, and everyones inclusion brings the

beginning of commitment.

Implement the design

Now the task is to make the design live. People are organized into natural

work groups which receive training in the new design, team skills and start-

up team building. New work roles are learned and new relationships within

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and without the unit are established. Equipment and facilities are rearranged.

Reward systems, performance systems, information sharing, decision-

making and management systems are changed and adjusted. Some of this

can be accomplished quickly. Some may require more detail and be

implemented over a longer period of time.

Example:

A few years back we worked with a company within the aluminum industry.

The company recognized they were becoming bureaucratic and

unresponsive to their customers needs. Following a period of assessment of

the strengths and weaknesses of the existing organization, they went through

a process of organizational redesign in which they organized their front

office functions to become more collaborative and customer focused. The

diagrams below illustrate, at a high level, this change

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.

The first chart illustrates the tendency of most people within organizations

to think in terms of silos and organize people according to the similarity of

their functions.

The second chart illustrates how the company redefined structural

boundaries to become much more cross-functional on the front end of their

business. They combined people from a number from a number of

departments into teams that took full responsibility for managing customer

orders. The company was able to improve their total billings of a major

product line by 50% and increase their margins by 25%.

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CHAPTER 4: TYPES OF ORGANISATIONAL DESIGN

Organizational designs fall into two categories, traditional and

contemporary. Traditional designs include simple structure, functional

structure, and divisional structure. Contemporary designs would include

team structure, matrix structure, project structure, boundaryless

organization, and the learning organization. I am going to define and discuss

each design in order to give an understanding of the organizational design

concept.

I. Traditional Designs

1 Simple Structure
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A simple structure is defined as a design with low departmentalization, wide

spans of control, centralized authority, and little formalization. This type of

design is very common in small start up businesses. For example in a

business with few employees the owner tends to be the manager and

controls all of the functions of the business. Often employees work in all

parts of the business and dont just focus on one job creating little if any

departmentalization. In this type of design there are usually no standardized

policies and procedures. When the company begins to expand then the

structure tends to become more complex and grows out of the simple

structure.

2. Functional Structure

A functional structure is defined as a design that groups similar or related

occupational specialties together. It is the functional approach to

departmentalization applied to the entire organization.

3. Divisional Structure

A divisional structure is made up of separate, semi-autonomous units or

divisions. Within one corporation there may be many different divisions and

each division has its own goals to accomplish. A manager oversees their

division and is completely responsible for the success or failure of the

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division. This gets managers to focus more on results knowing that they will

be held accountable for them.

II. Contemporary Designs

1. Team Structure

A team structure is a design in which an organization is made up of teams,

and each team works towards a common goal. Since the organization is

made up of groups to perform the functions of the company, teams must

perform well because they are held accountable for their performance. In a

team structured organization there is no hierarchy or chain of command.

Therefore, teams can work the way they want to, and figure out the most

effective and efficient way to perform their tasks. Teams are given the power

to be as innovative as they want. Some teams may have a group leader who

is in charge of the group.

2. Matrix Structure

A matrix structure is one that assigns specialists from different functional

departments to work on one or more projects. In an organization there may

be different projects going on at once. Each specific project is assigned a

project manager and he has the duty of allocating all the resources needed to

accomplish the project. In a matrix structure those resources include the

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different functions of the company such as operations, accounting, sales,

marketing, engineering, and human resources. Basically the project manager

has to gather specialists from each function in order to work on a project,

and complete it successfully. In this structure there are two managers, the

project manager and the department or functional manager.

3. Project Structure

A project structure is an organizational structure in which employees

continuously work on projects. This is like the matrix structure; however

when the project ends the employees dont go back their departments. They

continuously work on projects in a team like structure. Each team has the

necessary employees to successfully complete the project. Each employee

brings his or her specialized skill to the team. Once the project is finished

then the team moves on to the next project.

4. Autonomous Internal Units

Some large organizations have adopted this type of structure. That is, the

organization is comprised of many independent decentralized business units,

each with its own products, clients, competitors, and profit goals. There is

no centralized control or resource allocation.

5. Boudaryless Organization

A boundaryless organization is one in which its design is not defined by, or

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limited to, the horizontal, vertical, or external boundaries imposed by a

predefined structure. In other words it is an unstructured design. This

structure is much more flexible because there is no boundaries to deal with

such as chain of command, departmentalization, and organizational

hierarchy. Instead of having departments, companies have used the team

approach. In order to eliminate boundaries managers may use virtual,

modular, or network organizational structures. In a virtual organization work

is outsourced when necessary. There are a small number of permanent

employees, however specialists are hired when a situation arises. Examples

of this would be subcontractors or freelancers. A modular organization is

one in which manufacturing is the business. This type of organization has

work done outside of the company from different suppliers. Each supplier

produces a specific piece of the final product. When all the pieces are done,

the organization then assembles the final product. A network organization is

one in which companies outsource their major business functions in order to

focus more on what they are in business to do.

6. Learning Organization

A learning organization is defined as an organization that has developed the

capacity to continuously learn, adapt, and change. In order to have a

learning organization a company must have very knowledgeable employees

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who are able to share their knowledge with others and be able to apply it in

a work environment. The learning organization must also have a strong

organizational culture where all employees have a common goal and are

willing to work together through sharing knowledge and information. A

learning organization must have a team design and great leadership.

Learning organizations that are innovative and knowledgeable create

leverage over competitors.

CHAPTER 5: CONCLUSION

The approach to redesign results in dramatic improvements in quality,

customer service, decreased cycle times, lower turnover and absenteeism,

productivity gains from 25 to at least 50%, etc. The good news is that it can

be used in most any type and size of business. The length of time required to

complete a redesign varies depending on the nature, size and resources of

the organization. Large and complex redesign projects can be completed

within several days. Smaller organizations require much less time and fewer

resources. Since organization design is about power allocation, leaders are

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more attuned to the need for the right balance among axes in the structure

function, geography, product, customer and competing objectives such as

cost, speed, quality, and innovation. Leaders only have three levers to pull

strategy, organization design, and talent on the top team. Strategy and talent

have gotten a lot of attention over the past decade. Academics and

consultants have developed sophisticated and well tested models in both

arenas. But leaders find that unaligned organizations can undermine good

strategies and competent people cant do their best work when the

organization is an obstacle to the right conversation.

CHAPTER 6: BIBLIOGRAPHY

www.centerod.com
http://www.emaytrix.com/mgmt307/section3.php
http://kateskesler.com
Wikipedia
Ref book- Organisational learning and organisational design

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