Organization Design Module 2 By: Mrs.

Archana Hegde

M2-Organization Design

Syllabus
Approaches to organizational design Organizational

designs for different excellences. - Competitive excellence Institutionalized excellence - Rejuvenatory excellence - Missionary excellence - Versatile excellence - Creative excellence External nurturance of organizational excellence : The role of super system in promoting excellence The role of domain influencing institutions in promoting excellence M2-Organization Design The role of the government in promoting

Basic Definitions
Organizational Structure: The formal configuration between individuals and groups with respect to the allocation of tasks, responsibilities, and authorities within organizations. Organizational Chart: A diagram representing the connections between the various departments within an organization: a graphic representation of organizational design.

M2-Organization Design

Organization Design meaning

Organization design can be defined narrowly, as the

process of reshaping organization structure and roles, Or it can more effectively be defined as the alignment of structure, process, rewards, metrics and talent with the strategy of the business organizations need redesigning as their markets, technologies, competitors, people, and regulations change The challenge is maintaining a balance or a fit among its organization's environments, its strategic direction, its results, and its people. Organization Design is the process of coordinating M2-Organization Design elements of an organization in the most the structural appropriate manner

CONTD
Organizational design is the process by which

managers select and manage aspects of structure and culture so that an organization can control the activities necessary to achieve its goals Organizational design has important implications for a companys competitive advantage, its ability to deal with contingencies and manage delivery, its efficiency, its ability to generate new goods and services, its control of the environment, M2-Organization Design its coordination and motivation of employees

Approaches to organization design

There are five common approaches to

organization design Functional Structure Divisional Structure Matrix Structure Team Structure Network Structure

M2-Organization Design

Functional structure
An organizational structure composed of all

the departments that an organization requires to produce its goods or services Grouping of activities according to the functions of an organization Whole task of the organization is divided into specialized functions and each function is performed by a specialist in charge Example: organizing around function like Manufacturing, Marketing, Finance, HR, R&D etc M2-Organization Design

Functional Structure

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Merits
Promotes

Demerits
Reduces coordination

specialization Work load reduction Better control Higher efficiency Encourages learning from others doing similar job Easy monitoring and evaluating performance
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between functions Responsibility for profit is at the top only Expensive Delay in decision making Slow adaptation to environmental charges Specialists become rigid and can not understand what other units do Difficult for departments to communicate with others

Divisional Structure
Structure made up of separate, semi autonomous

units or divisions A structure composed of separate business units within which are the functions that work together to produce a specific product for a specific customer Create smaller, manageable teams Develop a business unit level strategy to compete Divisions have marketing, finance, HR and other functions Functional managers report to divisional managers who report to corporate heads

Divisional Structure

Merits
Focuses on results;

Demerits
Duplication of

divisional managers are responsible for what happens to their products and services

activities and resources which increases costs and reduces efficiency

Matrix or Grid Structure

Combines two organization structures; functional

and project structures [based on projects organizational activities are grouped] Functional departments create vertical chain of command Project or product types form horizontal chain This type used to efficiently execute multiple project operations of enterprise Project managers coordinate teams of employees drawn from different functional departments Matrix organization relies on multiple command structure

Matrix or Grid Structure

Merits
Where large number

Demerits
Violates principle of

of small projects have to be executed or completed, matrix organization works out better Suitable to industries like building and construction, highly technology oriented industries etc

unity of command Costly and expensive Delay in decision making

Team Structure
When management uses teams as its coordination

device, you have a team structure Members are assigned to a team for a specific task/project Once the task is done, members disburse and join another team It breaks down departmental barriers and decentralizes decision making to the level of work teams It requires employees to be specialists and also generalists In small companies team structure can define entire organization.

Team Structure

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Merits
Flexibility Employee participation

Demerits
Loss of productive

in decision making which leads to high morale, efficiency Quick decision making Easy communication Barriers between functional departments are broken Synergy effect Employees empowerment

time in team meeting Work specialization wont workout Interpersonal relations issues

Network Structure
Company keeps core business and through

contacts with external agencies runs business [outsourcing]

Distribution Agency Manpower Consultancy Core Business : Manufact uring shoes Accounting Firm

Supplier Agency

Promotion/ Ad Firm

Marketing Firm

Network Structure

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M2-Organization Design

Merits
Focus on core

Demerits
No control over

business Cost saving

external agencies Failure in one network may affect entire network

Boundary Less Structure

Boundaries that divide employees such as hierarchy,

job function and geography as well as those that distance companies from suppliers and customers broken down Seeks to remove vertical, horizontal and external barriers so that employees, managers, customers and suppliers can work together, share ideas and identify best ideas for organization. Works without any chain of command Instead of having many hierarchical levels, it is made up of less layers, flattened or horizontal. Uses technology/intranet for better communication process It replaces functional departments with cross functional teams and organization around processes; uses lateral transfers, rotate people into and out of different functional areas Replaces departments with empowered teams

What are boundaries?

Vertical Boundaries: Boundaries between layers

within the organization. VP Marketing ->Marketing manager - > Marketing executive. Problem: Lower layer employee has ideas, but thinks in terms of chain of command, and does not inform to boss Horizontal: boundaries that exist between organizational functional units. Each unit has a singular function. Problem: each unit maximizes its own goals, but not overall goals of the organization. External: barriers between organization and outside world like customers, suppliers, government agencies, public etc. Problem: lack of awareness of customers needs and suppliers requirements Geographical: Barriers among organization units Refer: wikipedia.com, www.scribd.com/doc/23027675/semester-2-Assign-2-Bureaucra -Vs-Matrix-structure different countries. Problem: no located in

Boundary Less Structure

suppliers
Prodn HR

society

Top Mgt Mktg R&D

customers
Fin

Governm ent Agencies

Organizational design for different excellences

Excellence means outstanding achievements

Excellence is important to society as it sets example,

a standard of behaviour that is socially useful Forms of human excellence Being best among competitors Performing better than previous performance Doing something unique, something no one has done before Developing ones own potentiality
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 Organizations can be hot beds of politics or cold

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blooded commercialism, they can also be nurseries of human excellence Human excellence can also be developed through team effort More an organization promotes individual and team excellence, more the organization itself is likely to excel Organizational design for excellence is largely a matter of promoting individual and group level excellence and synchronizing it to facilitate excellence in achieving organizational level M2-Organization Design goals

6 forms of organizational excellence

Competitive excellence Institutionalized excellence Rejuvenatory excellence Missionary excellence Versatile excellence Creative excellence

For any kind of excellence, structure and systems must be appropriate to organization and the context in which it operates
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1. Competitive excellence
Refers being outstanding within a field of competitors It is needed to increase the adaptability, market

orientation and resourcefulness of the 3rd world organizations. Mission, vision, core values: specific, local, few missions, values compatible with organizations purpose and operating context, vision of high performance on a few key indicators. Management style: professional, participatoryaltruistic, also entrepreneurial organic. Policy framework: focused, related diversification, market orientation, pursuit of dominance, operating, M2-Organization Design autonomy to managers but simultaneously emphasis 28

 Management structures and systems: powerful

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domain influencing system consisting of environmental scanning, marketing, lobbying, public relations and networking. Use of tried indigenous systems preferable to untried alien systems. Flexible, relatively flat structure, decentralization through responsibility centers, some standardization of routine activities, location of staff experts in line departments, strategically placed coordination committees, chasers to speed coordination, performance control related MIS. Renewal mechanisms and processes: need to supplement single loop learning by periodic double loop learning through survey feedback, M2-Organization Design recognition studies, sensitivity training etc.

2. Institutionalized excellence
Means sustained high achievement over a long period

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of time on important performance parameters. Sustained high achievement / performance requires institutionalization of good management practices and high order of professionalism. Institutionalized excellence is needed because in 3rd world organizations competitiveness is weak. Mission, vision, core values: specific, local, few missions, wide set of core values that embrace organizational purpose, operating context, social concerns, and human concerns, vision of sustained high performance and quality of functioning as an organization. M2-Organization Design Management style: professional, altruistic-

 Policy framework: offering of novel, high quality

products, /services, market orientation, team decision making, paternalism, human resource development emphasis, decentralization, management by persuasion and discussion rather than orders, recruitment of innovative professionals. Management systems and structures: comprehensive, sophisticated, professional management systems, complex, multidimensional differentiation and negotiation. Renewal mechanisms and processes: periodic reorganization studies , exnovation survey feedback, SWOT, long range forecasting, Delphi M2-Organization Design 31 etc.

3. Rejuvenatory Excellence
Organizational sickness is rather common in the third

world. There may be many reasons for it, political & bureaucratic interference, government policies, lack of power & other infrastructure facilities, insufficient raw materials, inappropriate management etc. Such a weak competitiveness can mean that excellence does not get institutionalized [ right norms, values, practices & systems does not get internalized] So organization has to rejuvenate itself or reclaim its position. Thus Rejuvenatory Excellence is needed because of the unhealthy conditions and the need for turn around activity in most large 3rd world organizations.
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 Mission, vision, core values: specific, few, local missions,

core values related to organizational purpose and context and also staff motivation. A vision of much better performance and quality of organizational functioning. Management style: organic style in the initial phase of rejuvenation and professional participative style in the consolidation phase. Policy framework: for the initial phase strong market orientation, opportunism, pursuit of quick pay-off activities, recruitment of bright professionals, seeking participation of external stakeholders in rejuvenation. For consolidation phase policies similar to those for institutionalized excellence. Management systems & structures: In initial phase rectification of grave deficiencies. Changes in systems and structures must depend heavily on the main cause of M2-Organization sickness. Design 33

 Renewal

mechanisms and processes: credibility building, mobilization of the organization through effective communications, problem solving & decision making, periodic performance review meetings of managers, mobilization of external stakeholders by treating them as partners. Institutional building by incorporating organizations appropriate values and management systems. Also useful to have brainstorming, use of consultants, SWOT etc.

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M2-Organization Design

4. Missionary Excellence
Needed to foster the achievement of vast social and economic

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missions in the context of 3rd world backwardness. Here organizational goals will be dedicated to some social mission or ideal. In the third world context mission is not altruistic, but it is also good business. A good mission attracts talented & dedicated professionals, motivates employees to perform heroic deeds & make sacrifices, attracts financial & other support of government and society. Mission, vision, core values: specific, local, few missions, core values anchored in social development and the satisfaction and the growth of beneficiaries. Vision of excelling at mission achievement. Management style: altruistic, participatory professional. Policy framework: Priority to social over financial criteria, M2-Organization Design networking with complementary organizations, integrity &

 Management systems and structures: broad based apex

decision making structure that co-opts beneficiaries, stakeholders, complementary organizations. Matrix structure. Eclectic/ diverse decentralization, self, peer, ideological means of control, need to develop appropriate management systems for planning project management, financing etc. Renewal mechanisms and processes: renewal of organizations through social learning mechanisms, renewal of target beneficiary organization and systems through credibility building, mobilization of the beneficiary system, mobilization of the stakeholders in the beneficiary system and institution building.

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M2-Organization Design

5. Versatile excellence
It means organization performing creditably on a

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number of diverse, possibly conflicting, indicators of performance. Such excellence is usually aimed at when the organization has diverse powerful stakeholders, each one seeking its own pound of flesh. It is the ability to meet the expectations of all stakeholdersowners, staff, suppliers, customers, government, bankers, unions etc Mission, vision, core values: specific, local, varied missions. Core values need to be varied to permit efforts in multiple directions & need to be anchored to the organizational purposes & operating context. A vision projecting excellent performance on key M2-Organization Design indicators.

 Policy

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framework: global perspective in choosing domain, technologies, plant locations, management practices etc. policies of networking with external stakeholders for furthering multiple goals of organization, staff commitment through participative team decision making, employee loyalty through paternalism Management systems and structures: 2 structural alternatives available; 1] set up several organizational sub systems, each dedicated to pursuit of a particular dimension of excellence. 2] train general mangers to pursue several objectives simultaneously. First option would result in high differentiation, & powerful integrative mechanisms need to be utilized. If second option is to be pursued, performance related management information system should be designed, M2-Organization Design formal training & job rotation must be designed.

6. Creative excellence
Needed to spur innovations in third world societies. Mission, vision, core values: general, global, varied

missions to promote creativity, core values need to be anchored to developmental imperative to stimulate search for changes and innovations. Vision of unique, pioneering organization. Management style: flexibility, openness, informality and nurturance, organic familial style supplemented by either altruistic or entrepreneurial mode. Policy framework: policies of rapid, opportunistic growth & diversification through risky, highly potential ventures, offering novel products, open communication channels, decentralization etc.
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 Management systems and structures: it should facilitate

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both generation of innovations and their effective implementation. Collegial, organic, informal management systems, global scanning for ideas and opportunities, relatively flat hierarchy, large span of control, matrix, flexible structure, a motivational system, a personnel management system which focuses on creativity & resourcefulness in recruiting, promoting staff. Decentralized system are needed. One option is to split the creative part of the organization from the rest and try to develop it. Second option is to train managers in 2 different modes; a] collegially while generating ideas, b] professionally when implementing it. Renewal mechanisms: brainstorming, organizational experiments, intrapreneurship, think tank, creativity training to facilitate innovative ideas. effective planning of innovations, their pilot testing, their periodic review, M2-Organization Design stabilization, and scale up.

 Refer the link for more details

http://books.google.co.in/books?id=fWVwW6DQs

zAC&pg=PA285&dq=organization+design+for+mi ssionary+excellence&hl=en&ei=EbuVTpD_OIPLr QfU6JGVBg&sa=X&oi=book_result&ct=result&re snum=1&ved=0CD4Q6AEwAA#v=onepage&q=or ganization%20design%20for%20missionary%20e xcellence&f=false

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M2-Organization Design