UNIT NAME: ORGANIZATION DEVELOPMENT

TASK: ASSIGNMENT
LECTURER: MR.GITHINJI
GROUP MEMBERS: JONES MUSAU 1038412
ENOCK MASETI 1036508
PURITY WANJIRU 1036719
ORGANIZATIONAL DESIGN
Organizational design is the process of aligning the structure of an organization with its objectives, with
the ultimate aim of improving efficiency and effectiveness. Work can be triggered by the need to improve
service delivery or specific business processes, or as a result of a new mandate.

The very process of organizational design is aimed at finding any type of defective or dysfunctional
elements related to an organization’s system, organization structure, process, and work culture.
Identification of these elements leads to their rectification so that they can better fulfill an organization’s
objective.

It clarifies different aspects like authority, the responsibility of tasks and its limitations, reporting
structure, a flaw of information, etc. With the help of organizational design, one can identify and
eliminate any kind of duplicity in work, inefficient work, and poor customer dealing, blame games,
obstacles in the decision-making process, shortfalls in systems, and processes which result in the decline
of efficiency of the employees, lack of trust among superiors and subordinates, etc.

Organizational design and organizational structure are interrelated to each other, yet have a slight
difference. The organizational structure represents organizations in an immovable or static form that
can be presented through a diagram, popularly known as “Organogram.”

Organizational design is the process of aligning the structure of an organization with its objectives, with the
ultimate aim of improving efficiency and effectiveness. Work can be triggered by the need to improve
service delivery or specific business processes, or as a result of a new mandate

In contrast, the organizational design represents the dynamic view of an organization. It is more of
processes and methods which help in organizational structuring and restructuring for smooth and
effective functioning. It is also based on change management whereby the organizational demands
change their structure and functioning to meet needs for technological advancements, market factors,
meeting regulations, customer needs and expectations, etc. With the help of the organizational design,
weaker systems of an organization can be identified and corrective steps can be taken to strengthen
them.

Elements of organizational design

Management teams consider the unique elements of organizational design in order to
craft the best plan for their company. There are six elements of organizational design
that can affect how employees and managers interact and divide primary duties. The six
elements are:
1. Work specialization
Work specialization is a process that assigns each professional to a specific task.
Because the management of the company is clear in what they expect from their
employees, each one can focus on their task, gaining special skills and experience that
can help them improve.
When using work specialization, management professionals often assign tasks to the
employee who is best suited for it. This means the professional's work history, skill set
and education align with the task. Work specialization allows an employer to focus less
on training and redirect its energy and resources to other company needs.
For example, factory and warehouse companies use work specialization for assembly
line workers. In a factory that specializes in making gift baskets, one professional may
arrange the decorative paper in the basket while another professional adds fruits to the
basket.
2. Departmentalization and compartments
Departments and compartments are teams of professionals within a larger company.
This component of organizational design allows each compartment or department to
focus on a specific task the professionals in each group work together to achieve.
Compartments refer to teams of professionals who each are from a different career path
and specialty. These professionals each use their own talents to help complete the
project. For example, when a film company wants to produce a new movie, they hire a
director, a casting agent, a costume designer and other professionals to create the film.
Departments refer to groups of professionals of a similar skill set within a company.
Each of these professionals usually has the same primary duties and uses similar
practices to meet the same goal. For example, a company's accounting department all
work to manage the company's finances and taxation records using the same
methodologies and practices.
3. Formalization of elements
Formalization specifies the relationships and roles within a company. Larger companies
often have a more distinct formalization of primary roles than smaller companies. This is
because employees may fill multiple roles in a smaller company. For example, in a
neighborhood pizza shop, the manager may be responsible for food preparations
besides their leadership responsibilities.
Formalization of elements also can clarify workplace rules, such as how many breaks
an employee can take during their shift. Because these elements can shape workplace
culture, it's important to consider them carefully when crafting a company's
organizational design plan.
4. Centralization and decentralization
Centralization and decentralization refer to the senior levels of employees who can
influence company decisions. Each company rests somewhere on a scale of
centralization.
For example, with centralization, some companies’ give the senior level of
professional’s complete influence over the decision-making process, while with
decentralization, a company may seek the input of lower-level employees as well.
Allowing more employees to influence company practices can give employees a
stronger sense of pride and satisfaction in their work. However, allowing only senior
staff members to share their input can be more time-effective.
5. Span of control
A leader can be more successful when they manage an appropriate amount of
employees. Span of control is an element of organizational design that accounts for the
number of people a leader supervises and the tasks they handle. For example, the
acquisitions department of a publishing company is likely to have a large volume of
incoming book pitches. If the department employs many readers to accommodate this
demand, the department may need multiple managers to monitor and guide the readers'
work.
Clarifying a specific span of control can ensure managers can handle all their tasks
while overseeing daily operations and monitoring the progress of their designated team
members. The ideal span of control can depend on a variety of factors including:
6. Chain of command
The chain of command of a company describes the business' hierarchy and can affect
workplace culture and the efficiency of work production. An organizational chart can
visually portray each employee's place in the company hierarchy, and the company may
have a strict or flexible chain of command.
With a strict chain of command, each employee has a direct supervisor with an
exception for the chief executive officer. In a more flexible chain of command, the owner
may be the highest point of contact, then a manager or two in the middle with the rest of
the employees ranking under the managers. In this scenario, the lowest level of
employee would report to the managers and the managers’ report to the business
owner.

ORGANIZATION STRUCTURE
Organization structure is the system which describes the organizational hierarchy in terms of different
functions, roles, responsibilities, supervision, etc. It demonstrates different concerns including different
roles of the employees, job descriptions, job functions, decision-making authorities, reporting structure,
allocation of tasks in the department, individuals, project team, branch, etc.

The organizational structure also defines the flow of information between different levels of an
organization, clarity of job of each employee, and its fitment in the overall system which motivates the
employees to work efficiently by keeping their morale high; hence, increasing the overall productivity of
an organization

Organization structure is the system which describes the organizational hierarchy in terms of different
functions, roles, responsibilities, supervision, etc. It demonstrates different concerns including different
roles of the employees, job descriptions, job functions, decision-making authorities, reporting structure,
allocation of tasks in the department, individuals, project team, branch, etc.

The organizational structure also defines the flow of information between different levels of an
organization, clarity of job of each employee, and its fitment in the overall system which motivates the
employees to work efficiently by keeping their morale high; hence, increasing the overall productivity of
an organization.

Refer to figure 2 below

NATURE OF ORGANIZATION STRUCTURE.

Organizational structure is the system of task reporting and authority relationships

within which the organization does its work (Griffin & Moorhead, 2010). The purpose
of organizational structure is to establish the formal alignment, arrangement, and
hierarchy of jobs within an organization. It establishes the who's who of the
organization through the positions and responsibilities of each of the employees. By
establishing the levels of management and their corresponding subordinates each
manager can establish the network for achieving the organization's goals and
objectives while at the same time maintaining the level of necessary authority to
supervise and oversee the execution of each staff member.

As the organization grows or shrinks in size or in its levels of management the

organizational structure also suffers the consequences of these actions by reducing its
overhead cost and its highest cost center its employees. In today's world economy,
every organization must be vigilant and have a strategic plan in place to overcome any
mishaps in operations and with regard to its organization structure. The organization
must have the vision that if any changes occur then the functionality and operations
will not be affected and its consumers or end users will be satisfied.
Type of Organizational Structure
There are two major categories of organizations- formal and informal.

FORMAL ORGANIZATION STRUCTURES

The formal organizational structure includes a well-defined structure of jobs that clears authority,
functions, and responsibility in organizations. Plans, processes, and policies are already defined in these
types of organizations and the teams need to follow and perform their tasks based on these. Its main
focus is on jobs and functions rather than the employees. Jobs in the formal organizations are divided
into sub-tasks and employees are assigned these tasks as per their skills. It demands the intervention of
different departments, which is based on a grouping of sub-tasks of common jobs. For example,
organizations have different departments based on their functioning i.e. production, marketing,
purchase, etc. Delegation of work is from top to the bottom level which means that supervisors assign
work to the subordinates. Supervisors are responsible for the coordination of activities of their
subordinates as well as their performance.

Types of organizational structures

1. Hierarchical org structure

2. Functional org structure
3. Horizontal or flat org structure
4. Divisional org structures (market-based, product-based, geographic)
5. Matrix org structure
6. Team-based org structure
7. Network org structure

1. Hierarchical org structure

A hierarchical structure is the chain of command within a company that

begins with senior management and executives and extends to general employees.
This organization of authority ensures management levels understand their
relationships with each other and helps companies make efficient decisions
2. Functional org structure

Similar to a hierarchical organizational structure, a functional org structure

starts with positions with the highest levels of responsibility at the top and
goes down from there. Primarily, though, employees are organized according
to their specific skills and their corresponding function in the company. Each
separate department is managed independently. 

3. Horizontal or flat org structure

A horizontal or flat organizational structure fits companies with few levels

between upper management and staff-level employees. Many start-up
businesses use a horizontal org structure before they grow large enough to
build out different departments, but some organizations maintain this
structure since it encourages less supervision and more involvement from all
employees.
4. Divisional org structure
In divisional organizational structures, a company’s divisions have control over
their own resources, essentially operating like their own company within the
larger organization. Each division can have its own marketing team, sales
team, IT team, etc. This structure works well for large companies as it
empowers the various divisions to make decisions without everyone having to
report to just a few executives. 

5. Matrix org structure

A matrix organizational chart looks like a grid, and it shows cross-functional

teams that form for special projects. For example, an engineer may regularly
belong to the engineering department (led by an engineering director) but
work on a temporary project (led by a project manager). The matrix org chart
accounts for both of these roles and reporting relationships.

6. Team-based org structure

It’ll come as no surprise that a team-based organizational structure groups
employees according to (what else?) teams—think Scrum teams or tiger
teams. A team organizational structure is meant to disrupt the traditional
hierarchy, focusing more on problem-solving, cooperation, and giving
employees more control.

7. Network org structure example (click on image to modify online)

These days, few businesses have all their services under one roof, and juggling the
multitudes of vendors, subcontractors, freelancers, offsite locations, and satellite offices
can get confusing. A network organizational structure makes sense of the spread of
resources. It can also describe an internal structure that focuses more on open
communication and relationships rather than hierarchy.

Factors Affecting Organizational Design

Although many things can affect the choice of an appropriate structure for an organization, the
following five factors are the most common: size, life cycle, strategy, environment, and
technology.
1. Organizational size
The larger an organization becomes, the more complicated its structure. When an
organization is small — such as a single retail store, a two‐person consulting firm, or a
restaurant — its structure can be simple.
In reality, if the organization is very small, it may not even have a formal structure.
Instead of following an organizational chart or specified job functions, individuals simply
perform tasks based on their likes, dislikes, ability, and/or need. Rules and guidelines
are not prevalent and may exist only to provide the parameters within which
organizational members can make decisions. Small organizations are very often organic
systems.
As an organization grows, however, it becomes increasingly difficult to manage without
more formal work assignments and some delegation of authority. Therefore, large
organizations develop formal structures. Tasks are highly specialized, and detailed rules
and guidelines dictate work procedures. Inter organizational communication flows
primarily from superior to subordinate, and hierarchical relationships serve as the
foundation for authority, responsibility, and control. The type of structure that develops
will be one that provides the organization with the ability to operate effectively. That's
one reason larger organizations are often mechanistic—mechanistic systems are
usually designed to maximize specialization and improve efficiency.

2. Organization life cycle

Organizations, like humans, tend to progress through stages known as a life cycle. Like
humans, most organizations go through the following four stages: birth, youth, midlife,
and maturity. Each stage has characteristics that have implications for the structure of
the firm.
 Birth: In the birth state, a firm is just beginning. An organization in the birth stage
does not yet have a formal structure. In a young organization, there is not much
delegation of authority. The founder usually “calls the shots.”
 Youth: In this phase, the organization is trying to grow. The emphasis in this
stage is on becoming larger. The company shifts its attention from the wishes of
the founder to the wishes of the customer. The organization becomes more
 organic in structure during this phase. It is during this phase that the formal
structure is designed, and some delegation of authority occurs.
 Midlife: This phase occurs when the organization has achieved a high level of
success. An organization in midlife is larger, with a more complex and
increasingly formal structure. More levels appear in the chain of command, and
the founder may have difficulty remaining in control. As the organization
becomes older, it may also become more mechanistic in structure.
 Maturity: Once a firm has reached the maturity phase, it tends to become less
innovative, less interested in expanding, and more interested in maintaining itself
in a stable, secure environment. The emphasis is on improving efficiency and
profitability. However, in an attempt to improve efficiency and profitability, the firm
often tends to become less innovative. Stale products result in sales declines and
reduced profitability. Organizations in this stage are slowly dying. However,
maturity is not an inevitable stage. Firms experiencing the decline of maturity
may institute the changes necessary to revitalize.
Although an organization may proceed sequentially through all four stages, it does not
have to. An organization may skip a phase, or it may cycle back to an earlier phase. An
organization may even try to change its position in the life cycle by changing its
structure.
As the life‐cycle concept implies, a relationship exists between an organization's size
and age. As organizations age, they tend to get larger; thus, the structural changes a
firm experiences as it gets larger and the changes it experiences as it progresses
through the life cycle are parallel. Therefore, the older the organization and the larger
the organization, the greater it’s need for more structure, more specialization of tasks,
and more rules. As a result, the older and larger the organization becomes, the greater
the likelihood that it will move from an organic structure to a mechanistic structure.
3. Strategy
How an organization is going to position itself in the market in terms of its product is
considered its strategy. A company may decide to be always the first on the market with
the newest and best product (differentiation strategy), or it may decide that it will
produce a product already on the market more efficiently and more cost effectively
(cost‐leadership strategy). Each of these strategies requires a structure that helps the
organization reach its objectives. In other words, the structure must fit the strategy.
Companies that want to be the first on the market with the newest and best product
probably are organic, because organic structures permit organizations to respond
quickly to changes. Companies that elect to produce the same products more efficiently
and effectively will probably be mechanistic.
4. Environment
The environment is the world in which the organization operates, and includes
conditions that influence the organization such as economic, social‐cultural, legal‐
political, technological, and natural environment conditions. Environments are often
described as either stable or dynamic.
 In a stable environment, the customers' desires are well understood and
probably will remain consistent for a relatively long time. Examples of
 organizations that face relatively stable environments include manufacturers of
staple items such as detergent, cleaning supplies, and paper products.
 In a dynamic environment, the customers' desires are continuously changing—
the opposite of a stable environment. This condition is often thought of as
turbulent. In addition, the technology that a company uses while in this
environment may need to be continuously improved and updated. An example of
an industry functioning in a dynamic environment is electronics. Technology
changes create competitive pressures for all electronics industries, because as
technology changes, so do the desires of consumers.
In general, organizations that operate in stable external environments find mechanistic
structures to be advantageous. This system provides a level of efficiency that enhances
the long‐term performances of organizations that enjoy relatively stable operating
environments. In contrast, organizations that operate in volatile and frequently changing
environments are more likely to find that an organic structure provides the greatest
benefits. This structure allows the organization to respond to environment change more
proactively.
Advances in technology are the most frequent cause of change in organizations since
they generally result in greater efficiency and lower costs for the firm. Technology is the
way tasks are accomplished using tools, equipment, techniques, and human know‐how.
In the early 1960s, Joan Woodward found that the right combination of structure and
technology were critical to organizational success. She conducted a study of technology
and structure in more than 100 English manufacturing firms, which she classified into
three categories of core‐manufacturing technology:
 Small‐batch production is used to manufacture a variety of custom, made‐to‐
order goods. Each item is made somewhat differently to meet a customer's
specifications. A print shop is an example of a business that uses small‐batch
production.
 Mass production is used to create a large number of uniform goods in an
assembly‐line system. Workers are highly dependent on one another, as the
product passes from stage to stage until completion. Equipment may be
sophisticated, and workers often follow detailed instructions while performing
simplified jobs. A company that bottles soda pop is an example of an
organization that utilizes mass production.
 Organizations using continuous‐process production create goods by
continuously feeding raw materials, such as liquid, solids, and gases, through a
highly automated system. Such systems are equipment intensive, but can often
be operated by a relatively small labor force. Classic examples are automated
chemical plants and oil refineries.
Woodward discovered that small‐batch and continuous processes had more flexible
structures, and the best mass‐production operations were more rigid structures.
Once again, organizational design depends on the type of business. The small‐batch
and continuous processes work well in organic structures and mass production
operations work best in mechanistic structures.
THE LINE AND STAFF RELATIONSHIP

The line functions are those which are direct responsibility for achieving the
organizational goals.  Production and Sales (and sometimes finance) are
classified as line functions. Line positions are engaged with line personnel
and line managers. Line personnel carry out the primary activities of a firm
and are considered significant to the basic functioning of the organization.
Line managers make the majority of the decisions and direct line staff work
to achieve company goals. An example of a line manager is a finance
executive.

The staff functions are those who provide service & help and advice the line
to work most effectively in accomplishing the objectives of the enterprise.
Staff positions serve the business by indirectly supporting line functions.
Staff positions include staff personnel and staff managers. Staff personnel
contribute technical competencies to support line personnel and aid top
management in various business activities. Staff managers provide support,
advice, and knowledge to other individuals in the chain of command.
Even though staff managers are not part of the chain of command related to
direct production of products or services, they do have authority over
personnel. An example of a staff manager is a legal adviser. He or she does
not actively engage in profit-making activities, but does provide legal
support to those who do. Therefore, staff positions, whether personnel or
managers, engage in activities that are supportive to line personnel.
Five Approaches to Organizational Design
Managers must make choices about how to group people together to perform their work. Five
common approaches — functional, divisional, matrix, team, and networking—help managers
determine departmental groupings (grouping of positions into departments). The five structures
are basic organizational structures, which are then adapted to an organization's needs. All five
approaches combine varying elements of mechanistic and organic structures. For example, the
organizational design trend today incorporates a minimum of bureaucratic features and displays
more features of the organic design with a decentralized authority structure, fewer rules and
procedures, and so on.

Functional structure
The functional structure groups positions into work units based on similar activities,
skills, expertise, and resources (see Figure 1 for a functional organizational chart).
Production, marketing, finance, and human resources are common groupings within a
functional structure.

Figure 1 The functional structure.

As the simplest approach, a functional structure features well‐defined channels of
communication and authority/responsibility relationships. Not only can this structure
improve productivity by minimizing duplication of personnel and equipment, but it also
makes employees comfortable and simplifies training as well.
But the functional structure has many downsides that may make it inappropriate for
some organizations. Here are a few examples:
 The functional structure can result in narrowed perspectives because of the
separateness of different department work groups. Managers may have a hard
time relating to marketing, for example, which is often in an entirely different
grouping. As a result, anticipating or reacting to changing consumer needs may
be difficult. In addition, reduced cooperation and communication may occur.
 Decisions and communication are slow to take place because of the many layers
of hierarchy. Authority is more centralized.
 The functional structure gives managers experience in only one field—their own.
Managers do not have the opportunity to see how all the firm's departments work
together and understand their interrelationships and interdependence. In the long
 run, this specialization results in executives with narrow backgrounds and little
training handling top management duties.
Divisional structure
Because managers in large companies may have difficulty keeping track of all their
company's products and activities, specialized departments may develop. These
departments are divided according to their organizational outputs. Examples include
Departments created to distinguish among production, customer service, and
geographical categories. This grouping of departments is called divisional structure (see
Figure 2). These departments allow managers to better focus their resources and
results. Divisional structure also makes performance easier to monitor. As a result, this
structure is flexible and responsive to change.

). These cross‐functional teams are composed of members from different

departments who work together as needed to solve problems and explore opportunities.
The intent is to break down functional barriers among departments and create a more
effective relationship for solving ongoing problems.

However,
divisional structure does have its drawbacks. Because managers are so specialized,
they may waste time duplicating each other's activities and resources. In addition,
competition among divisions may develop due to limited resources.
Matrix structure
The matrix structure combines functional specialization with the focus of divisional
structure (see Figure 3). This structure uses permanent cross‐functional teams to
integrate functional expertise with a divisional focus.
Employees in a matrix structure belong to at least two formal groups at the same time—
a functional group and a product, program, or project team. They also report to two
bosses—one within the functional group and the other within the team.
This structure not only increases employee motivation, but it also allows technical and
general management training across functional areas as well. Potential advantages
include
 Better cooperation and problem solving.
 Increased flexibility.
 Better customer service.
 Better performance accountability.
 Improved strategic management.
Predictably, the matrix structure also has potential disadvantages. Here are a few of this
structure's drawbacks:
 The two‐boss system is susceptible to power struggles, as functional supervisors
and team leaders vie with one another to exercise authority.
 Members of the matrix may suffer task confusion when taking orders from more
than one boss.
 Teams may develop strong team loyalties that cause a loss of focus on larger
organization goals.
 Adding the team leaders, a crucial component, to a matrix structure can result in
increased costs.
Team structure
Team structure organizes separate functions into a group based on one overall
objective (see Figure 4
The team structure has many potential advantages, including the following:
 Intradepartmental barriers break down.
 Decision‐making and response times speed up.
 Employees are motivated.
 Levels of managers are eliminated.
 Administrative costs are lowered.
The disadvantages include:
 Conflicting loyalties among team members.
 Time‐management issues.
 Increased time spent in meetings.
Managers must be aware that how well team members work together often depends on
the quality of interpersonal relations, group dynamics, and their team management
abilities.
Network structure
The network structure relies on other organizations to perform critical functions on a
contractual basis (see Figure 5). In other words, managers can contract out specific
work to specialists.
This approach provides flexibility and reduces overhead because the size of staff and
operations can be reduced. On the other hand, the network structure may result in
unpredictability of supply and lack of control because managers are relying on
contractual workers to perform important work.

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