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Organizational DesignOrganizational Design• Organizational Design DefinedOrganizational Design Defined

A plan for arranging and coordinating the activities of A plan for arranging and coordinating the activities of an organization for the purpose of fulfilling its mission an organization for the purpose of fulfilling its mission and achieving its goals.and achieving its goals.

• Components of Organizational DesignComponents of Organizational Design Overall organizational design is defined by three Overall organizational design is defined by three

primary components:primary components:Organizational structureOrganizational structure Integrating mechanismsIntegrating mechanismsLocus of decision makingLocus of decision making

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Figure 8.1Figure 8.1 Dimensions of Organizational DesignDimensions of Organizational Design

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Organizational StructureOrganizational Structure• Defines the primary reporting relationships that Defines the primary reporting relationships that

exist within an organization.exist within an organization. The chain of command and hierarchy of The chain of command and hierarchy of

responsibility, authority, and accountability are responsibility, authority, and accountability are established through organizational structure.established through organizational structure.

• Common Forms of Organizational StructureCommon Forms of Organizational Structure Functional structureFunctional structure Divisional structureDivisional structure Matrix structureMatrix structure

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Functional Structure: Specialization Functional Structure: Specialization and Efficiencyand Efficiency• Members of the organization are grouped Members of the organization are grouped

according to the particular function that they according to the particular function that they perform within the organization.perform within the organization. Appropriate when an organization’s greatest source Appropriate when an organization’s greatest source

of complexity comes from the diverse tasks that must of complexity comes from the diverse tasks that must be performed rather than from its products, be performed rather than from its products, geographic markets, or consumer groups.geographic markets, or consumer groups.

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Figure 8.Figure 8.2 2 Functional StructureFunctional Structure

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Functional StructureFunctional Structure• AdvantagesAdvantages

Facilitates Facilitates specializationspecialization

Cohesive work groupsCohesive work groups Improved operational Improved operational

efficiencyefficiency

• DisadvantagesDisadvantages Focus on departmental Focus on departmental

versus organizational versus organizational issuesissues

Difficult to develop Difficult to develop generalists needed for generalists needed for top-level managementtop-level management

Only top-level Only top-level management held management held accountable for accountable for profitabilityprofitability

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Divisional Structures: Providing FocusDivisional Structures: Providing Focus• Members of the organization are grouped on the Members of the organization are grouped on the

basis of:basis of: Common productsCommon products Geographic marketsGeographic markets Customers servedCustomers served

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Types of Divisional StructureTypes of Divisional Structure• Product DivisionsProduct Divisions

For organizations with relatively diverse product lines For organizations with relatively diverse product lines that require specialized efforts to achieve high that require specialized efforts to achieve high product quality.product quality.

• Geographic DivisionsGeographic Divisions For organizations with limited product lines that either For organizations with limited product lines that either

have wide geographic coverage or desire to grow have wide geographic coverage or desire to grow through geographic expansion.through geographic expansion.

• Customer DivisionsCustomer Divisions For organizations that have separate customer For organizations that have separate customer

groups with very specific and distinct needs.groups with very specific and distinct needs.

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Product Divisional StructureProduct Divisional Structure• AdvantagesAdvantages

Enhanced coordination.Enhanced coordination. Better assessment of manager performance and Better assessment of manager performance and

responsibility.responsibility. Development of generalist managers.Development of generalist managers.

• DisadvantagesDisadvantages Managers may lack expertise to operate in wide Managers may lack expertise to operate in wide

geographic areas.geographic areas. Duplication of resources.Duplication of resources.

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Figure 8.Figure 8.3 3 Product Divisional Structure: ClariantProduct Divisional Structure: Clariant

*ServicesProduction Services, Supply Chain Management, Sourcing, ESHA, IT, International Coordination**TechnologyIntellectual Property, Innovation & Knowledge Management, New Business Development

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Geographic DivisionalGeographic Divisional• AdvantagesAdvantages

Allows for focus on specific new markets.Allows for focus on specific new markets. Good structure for growth along geographic lines.Good structure for growth along geographic lines. Adaptable to local needs.Adaptable to local needs.

• DisadvantagesDisadvantages Duplication of product or product/technology efforts.Duplication of product or product/technology efforts. Coordination and integration are difficult.Coordination and integration are difficult. May be difficult to manage diverse product lines.May be difficult to manage diverse product lines.

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Figure 8.Figure 8.4 4 Geographic Divisional Structure: Canadian National Railway Geographic Divisional Structure: Canadian National Railway CompanyCompany

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Matrix Structure: A Dual FocusMatrix Structure: A Dual Focus• A structure in which the tasks of the organization A structure in which the tasks of the organization

are grouped along two organizational are grouped along two organizational dimensions simultaneously.dimensions simultaneously.

• Examples include:Examples include: Product/functionProduct/function Product/geographic regionProduct/geographic region

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Figure 8.Figure 8.5 5 Matrix StructureMatrix Structure

- Team-Based Structures - entire organization is made up of work teams

• employee empowerment is crucial • teams responsible for all work activity and performance • complements functional or divisional structures

in large organizations -allows efficiency of a bureaucracy -provides flexibility of teams

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- Boundary less Organization - design is not defined by, or limited to, the horizontal, vertical, or external boundaries imposed by a predefined structure

• strategic alliances break down barriers between the company and its customers and suppliers seeks to eliminate the chain of command, to have limitless spans of control, and to replace departments with empowered teams

• flattens the hierarchy by removing vertical boundaries • horizontal boundaries removed by organizing work around processes instead of functional departments

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Learning Organization - an organizational mind-set rather than a specific organizational design • has developed the capacity to continuously adapt • all members take an active role in identifying and resolving work-related issues

• practice knowledge management by continually acquiring and sharing new knowledge

• environment is conducive to open communication • empowered teams are important • leadership creates a shared vision for the future • organizational culture provides sense of community

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Characteristics Of A Learning Organization

Organizational Design • Boundaryless • Teams

• Empowerment

Organizational Culture The • Strong Mutual Information Sharing Relationships Learning • Open

• Sense of Community • Timely Organization • Caring • Accurate • Trust

Leadership • Shared Vision • Collaboration

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