Session-3

Mechanistic and Organic Structures

 Types of Organizational Structure
Organization structure can be classified into five different types:
 Machine bureaucracy (standardized structure), Professional bureaucracy
 Adhocracy or innovative forms
 Simple or entrepreneurial forms
 Divisional forms
Each structural form indicates different pattern of behaviour of the organization.

Organizational structure that conforms to machine bureaucracy emphasizes on:

 Standardization of work
 Centralized decision-making
 Limitations of behaviour and procedures for members
 Polarization of status (maintaining hierarchies)
 Enforce internal and external control on stakeholders

Characteristically such organizations are secretive, narrow-minded, prevent

internal and external cooperation, and rigorously practice insularity (preventing
employees of one department to enter into another). Such organizations
promote competition, and not collaboration among employees. Very large
organizations like; GM and Ford, Tata Steel, Tata Motors, etc. are examples of
machine bureaucracies.
Organizations that subscribe to the professional bureaucracy discard
formalizations. Professional people manage such organizations and hence
employees enjoy functional autonomy. Such organizations believe in
employees’ empowerment and total employee involvement (TEI) and even
they build employees’ capability to cope with the external eventualities. Free
and open culture promote learning environment, hence such organizations can
also practice knowledge management, competency development, and truly
transform people as good performers.
Organizations with innovative or adhocracy structure emphasize on
developing their distinctive cultural identity. They decentralize their decision
making, process, and promote open communication, discussion, negotiation
and interaction among people and divisions. They are more prone to alliance
building behaviour.
The entrepreneurial form of organization structure is simple, as a single
person (usually the entrepreneur himself/herself) directs the activities of the
organization .
The fifth and final type organizational structure is the divisional form. Such
form or organizational structure focuses on autonomous divisions, which,
however, may not always imply decentralization of decision-making. Often this
form of organization structure sparks intra-unit fighting.
 Syndromes of Adhocracy Structure

More organic structure.

Less formalization of behaviour.
Specialization based formal training.
Encouragement of mutual adjustment.
Low standardization of procedures.
Roles are not clearly defined.
Selective decentralization
Work organization rests on specialized team; hence they
become the power-centre.
Horizontal job specialization
High cost of communication
Culture based on democratic and non-bureaucratic work
Cross-departmental task forces.
Differentiation and Integration

In large organizations differentiation is evident in terms of

difference in the culture of different departments, within the
company. It indicates culture of HR department will be different
than the culture of marketing department within the same
organization.

With the increase in size of the organization, differentiation

increases, as the company tends to create different departments
and provides them autonomy.

Integration is the process of unification of different departments,

divisions or components of organizations, so that they become
more connected and interdependent. Through adoption of suitable
structure, inter-departmental coalitions and projects, organizations
become integrated.
Differentiation in Organization

•The process by which an organization allocates people and resources

to organizational tasks
•Establishes the task and authority relationships that allow the
organization to achieve its goals
•Division of labour: The process of establishing and controlling the
degree of specialization in the organization
•In a simple organization, differentiation is low because the division of
labour is low
One person or a few people perform all organizational tasks
•In a complex organization, differentiation is high because the division
of labour is high
Case of Bob and Amanda Richards

Explanation with reference to Span of Control and case of

Macquarie Group Case, also a reference mention about
Parkinson’s Law.
Organizational Roles

•Set of task-related behaviours required of a person by his or her

position in an organization
As the division of labour 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

•Organizational structure is based on a system of interlocking roles

The relationship of one role to another is defined by task-
related behaviours

•Authority: The power to hold people accountable for their actions

and to make decisions concerning the use of organizational
resources

•Control: The ability to coordinate and motivate people to work in

the organization’s interests
Functions and Divisions

•Function: A subunit composed of a group of people, working

together, who possess similar skills or use the same kind of
knowledge, tools, or techniques to perform their jobs

•Division: A subunit that consists of a collection of functions or

departments that share responsibility for producing a particular
good or service

• Organizational complexity: The number of different functions

and divisions possessed by an organization

•Degree of differentiation
Subunits: Functions and Divisions Model
Vertical and Horizontal Differentiation

•Hierarchy: A classification of people according to their relative authority

and rank

•Vertical differentiation: The way an organization designs its hierarchy of

authority and creates reporting relationships to link organizational roles
and subunits

•Horizontal differentiation: The way an organization groups organizational

tasks into roles and roles into subunits (functions and divisions)
Organizational Chart of the B.A.R. and Grille
Organizational Design Challenges: Balancing Differentiation and Integration

•Horizontal differentiation is supposed to enable people to specialize and

become more productive

Specialization limits communication between subunits and prevents

them from learning from one another
People develop subunit orientation

•Integration is the process of coordinating various tasks, functions, and

divisions so that they work together and not at cross-purposes
Types of Integration Mechanisms

•Hierarchy of authority - Dictates “who reports to whom”

•Direct contact - Managers meet face to face to coordinate activities
Problematic that a manager in one function has no authority over a
manager in another
•Liaison roles: A specific manager is given responsibility for coordinating with
managers from other subunits on behalf of their subunits
•Task force: A temporary committee set up to handle a specific problem
•Task force members responsible for taking coordinating solutions back to their
respective functions for further input and approval
•Teams - A permanent task force used to deal with ongoing strategic or
administrative issues. ING’s Agile structure as example.
•Integrating role: A full-time position established specifically to improve
communication between divisions
Focused on company-wide integration
•Integrating department - A new department intended to coordinate the activities
of functions or divisions
Created when many employees enact integrating roles
Types and Examples of Integrating Mechanisms
Differentiation versus Integration
•Managers facing the challenge of deciding how and how much to differentiate
and integrate must:
Carefully guide the process of differentiation
Carefully integrate the organization by choosing appropriate integrating
mechanisms

Balancing Centralization and Decentralization

•Establishing a hierarchy of authority is supposed to improve the way an
organization functions because people can be held accountable for their actions
•As responsibility and risk taking decline so does organizational performance,
because its members do not take advantage of new opportunities for using its
core competencies
•Centralized organization: Organizational setup in which the authority to make
important decisions is retained by managers at the top of the hierarchy
•Decentralized organization: An organizational setup in which the authority to
make important decisions about organizational resources and to initiate new
projects is delegated to managers at all levels in the hierarchy
•Ideal balance entails:
Enabling middle and lower managers who are at the scene of the action to
make important decisions
Allowing top managers to focus on long-term strategy making
Balancing Standardization and Mutual Adjustment

•Standardization: Conformity to specific models or examples that are

considered proper in a given situation
Defined by rules and norms

•Mutual adjustment: The compromise that emerges when decision making

and coordination are evolutionary processes and people use their
judgment rather than standardized rules to address a problem

Formalization: Written Rules

•Formalization: The use of written rules and procedures to standardize

operations
Rules: Formal, written statement that specify the appropriate means
for reaching desired goals
Norms: Standards or styles of behavior that are considered
acceptable or typical for a group of people
Socialization: Organizational members learn the norms of an
organization and internalize these unwritten rules of conduct
Standardization versus Mutual Adjustment

•Challenge facing managers is:

To find a way of using rules and norms to standardize

behaviour
To allow for mutual adjustment to give managers
opportunity to discover new and better ways to achieve
goals
How the Design Challenges Result in Mechanistic and Organic Structures
(Reference: The Paradoxical Twins: Acme and Omega Electronics)
https://youtu.be/D6LUg-siJVs
Task and Role Relationships
Contingency Approach to Organizational Design

•A management approach in which the design of an organization’s structure is

tailored to the sources of uncertainty facing an organization
•Organization should design its structure to fit its environment
Fit Between the Organization and Its Environment
Lawrence & Lorsch on Differentiation, Integration, and the Environment
•Investigated how companies in different industries differentiate and integrate their
structures to fit the environment
Three industries that experienced different levels of uncertainty:
The plastics industry
The food-processing industry
The container or can-manufacturing industry
The Effect of Uncertainty on Differentiation and Integration in Three Industries

Findings: Lawrence and Lorsch

•When environment is perceived as very complex and unstable:
The attitudes and orientation of each department diverged significantly
•When environment is perceived as unstable and uncertain:
Organizations are more effective if they are less formalized, more decentralized, and more
reliant on mutual adjustment
Functional Differentiation and Environmental Demands
Burns and Stalker Model

•Organizations need different kinds of structure to control their

activities based on the environment

Organic structures are more effective when the environment is

unstable and changing
Mechanistic structures are more effective in stable environments
The Relationship Between Environmental Uncertainty and Organizational Structure
 Authority: How and Why Vertical Differentiation Occurs

• The hierarchy begins to emerge when the organization

experiences problems in coordinating and motivating
employees effectively
• Division of labour and specialization make it hard to determine
how well an individual performs
• Impossible to assess individual contributions to performance when
employees cooperate
• To deal with coordination and motivation problems, the
organization can:
• Increase the number of managers it uses to monitor, evaluate,
and reward employees
• Increase the number of levels in its managerial hierarchy

Size and height limitations

• Tall organization: The hierarchy has many levels relative to the size of
the organization
• Flat organization: Has few levels in its hierarchy relative to its size
Flat and Tall Organizations Example

With the increase in size number of levels in the organization also

increases
Relationship Between Organizational Size and Number of Hierarchical Levels
Types of Managerial Hierarchies
Relationship Between Organizational Size and the Size of the Managerial
Component

•Problems with tall hierarchies:

Communication problems
Motivation problems
Bureaucratic costs

•Parkinson’s Law Problem

Argues that the number of managers and hierarchies are based on two
principles
A manager wants to multiply subordinates, not rivals
Managers make work for one another

•Ideal number of hierarchical levels determined by:

Principle of minimum chain of command: An organization should
choose the minimum number of hierarchical levels consistent with its
goals and the environment in which it operates
Span of control: The number of subordinates a manager directly
manages
Spans of Control

•There is a limit to how wide a manager’s span of control should be

•If the span is too wide, the manager loses control over subordinates and cannot hold them
accountable for their actions
•Dependent on the complexity and interrelatedness of the subordinates’ tasks
Complex and dissimilar tasks – small span of control
Routine and similar tasks (e.g., mass production) – large span of control
 SPAN of Management

• SPAN OF MANAGEMENT IS THE LIMITATION OF THE NUMBER OF SUBORDINATES WHO CAN BE

EFFECTIVELY SUPERVISED BY A MANAGER IN THE DISCHARGE OF HIS MANAGEMENT DUTIES. THERE
ARE VARIOUS APPROACHES IN DETERMINING IDEAL SPAN OF MANAGEMENT.

 CLASSICAL APPROACH – THIS APPROACH HAS DEALT WITH GENERALIZATIONS EMBODYING SPECIFIC
NUMBER OF SUBORDINATES FOR AN EFFECTIVE SPAN.

 A.V. GRAICUNAS’ THEORY ON SUPERIOR-SUBORDINATE RELATIONSHIPS (1933) – A.V. GRAICUNAS, A

FRENCH MANAGEMENT CONSULTANT, ANALYSED SUPERIOR SUBORDINATE RELATIONS AND
CLASSIFIED THESE RELATIONSHIPS INTO THREE FORMS

1) DIRECT SINGLE RELATIONSHIPS

2) DIRECT GROUP RELATIONSHIPS

3) CROSS RELATIONSHIPS

33
 SPAN OF MANAGEMENT (CONTD)
SPAN OF MNAGEMENT - GRAICUNAS’S MATHEMATICAL FORMULAE :

Direct single relationships = n

Direct group relationships = n ( 2n – 1)

2
Cross relationships = n (n – 1)

Total Relationships = n ( 2n + n – 1)
2
[Where n = number of subordinates. ]

On the basis of the above formula, possible relationships with variable number of subordinates rise very
rapidly.
Where there are 4 subordinates under one superior, relationships will be:
4 ( 24 + 4 – 1) = 44
2
When the subordinates are increased by one, i.e., from 4 to 5, number of relationships will be:
5 ( 25 + 5 – 1) = 100
2
Factors Affecting the Shape of the Hierarchy

•Horizontal differentiation: An organization that is divided into subunits has many

different hierarchies, not just one
Each function or division has its own hierarchy
•Horizontal differentiation is the principal way an organization retains control over
employees without increasing the number of hierarchical levels

Factors Affecting the Shape of the Hierarchy

Horizontal Differentiation into Functional Hierarchies
Horizontal Differentiation Within the R&D Functions
The Principles of Bureaucracy

•Bureaucracy: A form of organizational structure in which people can be held accountable

for their actions because they are required to act in accordance with rules and standard
operating procedures

The Principles of Bureaucratic Structure

Advantages of Bureaucracy

•It lays out the ground rules for designing an organizational hierarchy that
efficiently controls interactions between organizational members
•Each person’s role in the organization is clearly spelled out and they can be
held accountable
•Written rules regarding the reward and punishment of employees reduce the
costs of enforcement and evaluating employee performance

The Problems of Bureaucracy

•Managers fail to properly control the development of the organizational

hierarchy
•Organizational members come to rely too much on rules and standard
operating procedures (SOPs) to make decisions
•Such overreliance makes them unresponsive to the needs of customers and
other stakeholders
Management by Objectives

•Management by objectives (MBO): A system of evaluating subordinates on

their ability to achieve specific organizational goals or performance
standards and to meet operating budgets

Steps in Management by Objectives

•Step 1 - Specific goals and objectives are established at each level of the
organization
•Step 2 - Managers and their subordinates together determine the
subordinates’ goals
•Step 3 - Managers and their subordinates periodically review the
subordinates’ progress toward meeting goals
The Influence of the Informal Organization

•Decision making and coordination frequently take place

outside the formally designed channels as people
interact
•Rules and norms sometimes emerge from the
interaction of people and not from the formal rules
blueprint
•Managers need to consider the informal structure when
they make changes as it may disrupt informal norms that
work
•Informal organization can actually enhance
organizational performance
IT, Empowerment, and Self-Managed Teams

•The use of information technology (IT) is making it easier to cost

effectively design structures to control subordinates
•IT provides people with the information they need at all levels
•IT is encouraging decentralization and use of teams
•Empowerment: The process of giving employees the authority to
make important decisions and to be responsible for their outcomes
•Self-managed teams: Self-lead work groups consisting of people who
are jointly responsible for ensuring that the team accomplishes its
goals
•Cross-functional teams: Groups of employees from across an
organization’s different functions who are empowered to direct and
coordinate the value-creation activities
•Contingent workers: Workers who are employed temporarily by an
organization and who receive no indirect benefits such as health
insurance or pensions
Formal Theory of Differentiation in Organizations: Lessons

•Increasing size generates structural differentiation in organizations along

various dimensions at decelerating rates.
•Larger an organization is, the larger the average size of its structural
components of all kinds
•The proportionate size of the average structural component, as
distinguished from its absolute size, decreases with the increases in
organizational size.
•The larger the organization is, the wider the supervisory span of control.
•If the proportion of managerial personnel declines with size, their span of
control, expands with size.
•The economy of scale in administrative overhead itself declines with the
increasing organizational size. This is because large size of an organization
indirectly raises the ratio of administrative personnel through the structural
differentiation it generates. Differentiation of large organizations into
subunits stems the decline in the economy of scale in management with
increasing size.