Challenges of Organizational Design

Balancing Differentiation / Integration

Balancing Centralization / Decentralization

Mechanistic versus Organic Structures

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Differentiation
Design Challenge 1

People in this organization take on new tasks

as the need arises and its very unclear who
is responsible for what and who is supposed
to report to whom. This makes it difficult
to know whom to call on when the need
arises and difficult to coordinate peoples
activities so they work together as a team.

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Differentiation and Integration
 Alternative
Departmentalization Formats
Departmentalization Formats
(contd)
Departmentalization Formats
(contd)
Differentiation

Differentiation: assigning people and resources

to tasks

simple organization -> low differentiation

complex organization -> high

differentiation

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Differentiation
The basic building blocks of differentiation are
organizational roles.

An organizational role is a set of task-related

behaviors required of a person by his or
her position in an organization.

For example:
Maintenance Technician
Design Engineer
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Differentiation
As the division of labor increases, managers
specialize in some roles and hire people
to specialize in others.

Specialization allows people to develop their

individual abilities and knowledge within
their specific role.

The identification of roles leads to authority

and control issues.
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Differentiation

Authority is the power to hold people

accountable for their actions and to make
decisions concerning the use of resources.

Control is the ability to coordinate and

motivate people to work in an organizations
interests.

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Differentiation

In most organizations, people with similar roles

are grouped into a subunit.

The main subunits that develop in

organizations are:
functions (or departments)
divisions

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Differentiation
A function is a subunit composed of a group of
people who possess similar skills and
knowledge to perform their jobs.

marketing dept. maintenance dept.

A division is a subunit that consists of a

collection of functions that are related to a
particular good or service.

Motorolas semiconductor division

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Differentiation

The number of functions and divisions in

an organization is a measure of its
complexity.

Differentiation increases control and allows

an organization to accomplish tasks
effectively.

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Differentiation
As organizations grow in size, they differentiate
into five different kinds of functions:

1) Support functions facilitate relations with

the environment and stakeholders

purchasing sales
marketing legal affairs
public relations

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Differentiation
As organizations grow in size, they differentiate
into five different kinds of functions:

2) Production functions manage the efficiency

of the conversion processes

production operations
production control
quality control

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Differentiation
As organizations grow in size, they differentiate
into five different kinds of functions:

3) Maintenance functions enable an

organization to keep its departments
in operation

personnel
engineering
janitorial services
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Differentiation
As organizations grow in size, they differentiate
into five different kinds of functions:

4) Adaptive functions allow adjustment to

changes in the environment

research and development

market research
long-range planning

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Differentiation
As organizations grow in size, they differentiate
into five different kinds of functions:

5) Managerial functions facilitate the

control and coordination of activities within
and among departments.

top management
middle managers
lower-level managers
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Differentiation
An organization chart is a drawing that
shows the end result of organizational
differentiation.

The organization chart is a snapshot of the

way things are divided up along
two dimensions:

vertical horizontal

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Differentiation
Vertical differentiation refers to the way an
organization designs its hierarchy of
authority (i.e., reporting relationships).

Horizontal differentiation refers to the way an

organization groups tasks into roles and
roles into subunits (i.e., functions and
divisions).
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Integration
Design Challenge 2

We cant get people to communicate and

coordinate in this organization. Specifying
tasks and roles is supposed to help
coordinate the work process, but here it
builds barriers between people and
functions.

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Integration

Integrating Mechanisms

1) Hierarchy of Authority: who reports to whom

2) Direct Contact: subunit representatives meet face

to face

3) Liaison Role: a specific person coordinates with

other subunits

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Integration
4) Task Force: temporary committee to
coordinate cross-functional activities

5) Team: permanent committee

6) Integrating Role: A new role is established

to coordinate the activities of two or more
functions or divisions

7) Integrating Department: A new department

is created to coordinate the activities of
functions or divisions
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Balance differentiation and integration.

24
Decision Making

Centralized
High managerial control
Low employee empowerment

Decentralized
Low managerial control
High employee empowerment
Crucial in fast-changing environments

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 Factors in Relative
Centralization/Decentralization
Types of Structures

Two general categories of structure types:

organic and mechanistic

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Mechanistic Structures
Designed to induce people to behave in
predictable ways.

Decision making is centralized

Subordinates are closely supervised
Information flows downward in the hierarchy
Tasks are clearly defined
Integrating mechanisms are simple
Work is very standardized

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Organic Structures
Promote flexibility, so people initiate change
and can adapt quickly

Decision making is decentralized

Roles are loosely defined
Integrating mechanisms are complex
Tasks rely on mutual adjustment
Information flows freely

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 Design Goal

Anticipate environmental, social, and

procedural constraints and
opportunities

Satisfy interests of primary

stakeholders

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