OB – II

Org. Des.

Term - II

CBS-K
What are the essentials of organizational
design?

 Organizational design
– Choosing and implementing structures that best
arrange resources to serve the organization’s
mission and objectives.
– A problem-solving activity that should be
approached from a contingency perspective.

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Figure: A framework for organizational
design—aligning structures with situational
contingencies.

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What are the essentials of organizational
design?

 Organizational effectiveness
– Sustainable high performance in using resources to
accomplish mission and objectives.
– Approaches:
• Systems resource approach  focuses on inputs.
• Internal process approach  focuses on transformation
process.
• Internal process approach  focuses on outputs.
• Internal process approach  focuses on environment.
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What are the essentials of organizational
design?
 Short-run, medium-run and long-run criteria for
evaluating organizational effectiveness:
– Short-run focus.
• Goal accomplishment.
• Performance efficiency in resource utilization.
• Stakeholder satisfaction.
– Medium-run focus.
• Adaptability in the face of changing environments.
• Development of people and systems to meet new challenges.
– Long-run focus.
• Survival under conditions of uncertainty.

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What are the essentials of organizational
design?

 Bureaucracy
– A form of organization based on logic, order, and the
legitimate use of formal authority.
– Bureaucratic designs feature …
• Clear-cut division of labor.
• Strict hierarchy of authority.
• Formal rules and procedures.
• Promotion based on competency.

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What are the essentials of organizational
design?
 Contingency perspective on bureaucracy asks the
questions:
– When is a bureaucratic form a good choice for an
organization?
– What alternatives exist when it is not a good choice?
 Environment determines the answers to these
questions.
– A mechanistic design works in a stable environment
– An organic design works in a rapidly changing and
uncertain environment.

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Figure: A continuum of organizational design alternatives:
from bureaucratic to adaptive organizations.

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What are the essentials of organizational
design?
 Structural characteristics associated with design
alternatives:
– Goal  predictability versus adaptability.
– Authority  centralized versus decentralized.
– Rules and procedures  many versus few.
– Spans of control  narrow versus wide.
– Tasks  specialized versus shared.
– Teams and task forces  few versus many.
– Coordination  formal and impersonal versus informal
and personal.
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What are the essentials of organizational
design?
 Mechanistic Designs  Organic Designs
– Predictable goals – Adaptable goals
– Centralized authority – Decentralized authority
– Many rules and – Few rules and
procedures procedures
– Narrow spans of – Wide spans of control
control – Shared tasks
– Specialized tasks – Many teams and task
– Few teams and task forces
forces – Informal and personal
– Formal and impersonal means of coordination
means of coordination
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How do contingency factors influence
organization design?
 Checklist for identifying contingency factors in
organizational design:
– Does the design fit well with the major problems and opportunities
of the external environment?
– Does the design support implementation of strategies and the
accomplishment of key operating objectives?
– Does the design support core technologies and allow them to be
used to best advantage?
– Can the design handle changes in organizational size and different
stages in the organizational life cycle?
– Does the design support and empower workers and allow their
talents to be used to best advantage?
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How do contingency factors influence
organization design?

 Environment and organizational design —

– Certain environment …
• Relatively stable and predictable elements.
• Bureaucratic organizations and mechanistic designs
are appropriate.
– Uncertain environment …
• More dynamic and less predictable elements.
• Adaptive organizations and organic designs are
appropriate.
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How do contingency factors influence
organization design?

 Strategy and organizational design —

– Structure follows strategy.
– Stability strategy is supported by:
– Bureaucratic organizations using mechanistic
designs.
– Growth strategies are is supported by:
– Adaptive organizations using organic designs.

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Figure: Environmental uncertainty and the
performance of vertical and horizontal
designs.

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How do contingency factors influence
organization design?

 Technology

– The combination of knowledge, skills,

equipment, computers, and work methods
used to transform resource inputs into
organization outputs.

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How do contingency factors influence
organization design?
 Core manufacturing technologies:
– Small-batch production.
• A variety of custom products are tailor-made to order.
– Mass production.
• A large number of uniform products are made in an assembly-
line system.
– Continuous-process production.
• A few products are made by continuously feeding raw
materials through a highly automated production system with
largely computerized controls.
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How do contingency factors influence
organization design?

 Technology and organization design —

– The technological imperative
• Technology is a major influence on organizational
structure.
• The best small-batch and continuous process plants
have more flexible organic structures.
• The best mass-production plants have more rigid
mechanistic structures.
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How do contingency factors influence
organization design?
 Core service technologies:
– Intensive technology
• Focuses the efforts of many people with special expertise on
the needs of patients or clients.
– Mediating technology
• Links together parties seeking a mutually beneficial exchange
of values.
– Long-linked technology
• Functions like mass production, where a client is passed from
point to point for various aspects of service delivery.
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How do contingency factors influence
organization design?
 Organization size, life cycle, and design —
– Larger organizations tend to have more mechanistic
designs, but it is not always best.
– Organizational life cycle:
• Birth stage — small size, simple structure.
• Youth stage — rapid growth in size, simple structure
experiences stress.
• Midlife stage — growing to large size, more complex and
formal structure.
• Maturity stage — stabilizes at large size, mechanistic structure.
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Figure: Simultaneous “loose-tight”
properties of team structures support
efficiency and innovation.

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How do contingency factors influence
organization design?

 Coping with the disadvantages of large size:

– Downsizing.
• Reducing the scope of operations and number of employees.
– Intrapreneurship.
• The pursuit of entrepreneurial behavior by individuals and
subunits within large organizations.
– Simultaneous structures.
• Organizations that combine mechanistic and organic designs.

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How do contingency factors influence
organization design?
 Human resources and good organization
design —
– Provides people with supporting structures
needed for both high performance and work
satisfaction.
– Produces a good “fit” between organization
structures and human resources.
– Allows the expertise and talents of organization
members to be unlocked and utilized.
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