ORGANIZATIONAL

DESIGN
 ORGANIZATIONAL
DESIGN
Organizational design is the set of elements and the
relationship between those elements used to manage the
organization. In addition, organizational design is the way
in which strategies are implemented to achieve goals
(Griffin, 2013)
Organizational Behaviour Defined

What is Organizational Behavior?

Organizational Behaviour has three units
of analysis: Personality
Individual differences
The individual Employee attitudes
Behaviour motivation
The group Group formation
Group decision-making
The organization
,Organizational structure
design, culture, climate
and change management
 ORGANIZATIONAL ANATOMY

This is a macro-level issue

 How managers put people together to co-ordinate
their work and to achieve the organization’s goals.
 Organization’s structure resolves two basic tasks:
1. Dividing up the work in the organization
2. Ensuring the work gets done by providing
coordination and control of work
 Mechanistic Organization

Burns and Stalker have labeled organizations as either

1- Mechanistic organizations
 High division of labour
 Low delegation of authority
 Departments with great uniformity of work activities
 Narrow spans of control
Organizations possess tight rules and policies and coordination
which is formal and written.
 Organic Organization

Burns and Stalker have labeled organizations as:

2- Organic organizations
 Less job specialization
 Greater delegation
 Low uniformity among employees in work units
 Wide span of control

Ossama Mossallam
 Organic Organization

Burns and Stalker have labeled organizations as:

2- Organic organizations
Employees in organic organizations:
Have few rules and procedures to follow
Expect face-to-face or informal coordination
Expect to be empowered to create their own plans and schedule
 ORGANIZATIONAL DESIGN

This is a macro-level issue

 Organization design is a series of decisions made
by the managers about the best organizational
arrangements to achieve the goals in their strategic
plans.
 Which Comes First –
?Strategy or Structure

Major companies (such as Oil Standard and

General Motors) follow the pattern of strategy
development and then structural change,
rather than the reverse

STRATEGY FIRST
 Which Comes First –
Strategy or Structure
• Organizations often change their
strategies in order to better utilize their
resources to fuel growth.
• The changes in strategy then lead to
management difficulties because the
current structure does not fit the new
strategy.
 Which Comes First –
Strategy or Structure
• Other research have questioned the
structure-follows-strategy thesis claiming it
is too simplistic. It appears that particular
structures are likely to influence the
strategies that organizations are most
likely to adopt.
 Which Comes First –
Strategy or Structure
• Structure may follow strategy at one point;
then the new structure may influence the
development of new strategies.
• A mismatch between strategy and
structure can lead to organizational
difficulties.
 Organization Structure
• The formal pattern on interactions and
coordination designed by management to
link the tasks of individuals and groups in
achieving organizational goals.
• Organization design: The process of
developing an organization structure
• Organization chart: A line diagram that
reflects the broad outlines of an
organization’s structure
 Organization Structure
• Chain of command: The unbroken line of
authority that ultimately links each
individual with the top organizational
position through a managerial position at
each successive layer in between.
• It is a system in a military or civil
organization by which instructions are
passed from one person to another
ORGANIZATIONAL DESIGN ISSUES

1. DIVISION OF LABOR
2. DISTRIBUTION OF AUTHORITY
3. SPAN OF CONTROL
4. DEPARTMENTALIZATION
 ORGANIZATIONAL DESIGN ISSUES

1. DIVISION OF LABOR
1. It is the degree of job specialization in a firm
2. It is the specific tasks and work methods which define
an employee’s job.
3. Its aspects are:
A. Specifying the type of work performed ( research scientist,
production manager, computer programmer)
B. The work methods or processes to be used (accounting,
marketing, production)
 ORGANIZATIONAL DESIGN ISSUES

1. DIVISION OF LABOR, WHY?

4. It is the primary source of increasing productivity as a result
of specialization.
5. Output per employee increases as more employees
performing related tasks are grouped together
6. Technological advances in communication and process
control overcome coordination problems as work unit size
increases. Such advances make it possible for one manager
to supervise a large number of employees.
 ORGANIZATIONAL DESIGN ISSUES

1. DIVISION OF LABOR
7. Division of labour makes companies effective because
managers break down jobs into subtasks at which employees
develop expertise through repetition.
8. So companies capture efficiencies in production systems
which can be transformed into lower cost per unit of output
and sustainable competitive edge.
 ORGANIZATIONAL DESIGN ISSUES

2. DISTRIBUTION OF AUTHORITY (Delegation)

Delegation of authority is a manager’s decision about
.how much authority to give to subordinate
Authority is a legitimate right to give direct orders to
teams or individuals. It flows to a manager from his
position in hierarchy or chain of command
Getting more authority can be a powerful motivator
(intrinsic reward)
 Principles of Delegation of Authority

2. DISTRIBUTION OF AUTHORITY (Delegation)

1. For each responsibility delegated to a team or

subordinate, an equal amount of authority must be
given.
2. All decisions should be delegated to the lowest
organizational level possible.
3. Practice management by exception
 Principles of delegation of authority

2. DISTRIBUTION OF AUTHORITY (Delegation)

4. Managers should tell the teams or subordinates not

only what to do but how to do it.
5. The subordinate’s responsibility to his superior is
absolute, and superiors cannot escape responsibility
for the performance of their subordinates. Managers
are responsible for the work of their subordinates.
 ORGANIZATIONAL DESIGN ISSUES

3. SPAN OF CONTROL
The number of subordinates who report to a given
manager.
There is no agreement on the ideal span control
Most experts note that span of control is influenced by
the number and intensity of interpersonal relationships
 ORGANIZATIONAL DESIGN ISSUES
3. SPAN OF CONTROL
Experts note that three factors affect a manager’s span
of control:
SPAN OF CONTROL

A. REQUIRED B. DEGREE OF C. ABILITY TO

CONTACT SPECIALIZATION COMMUNICATE
 ORGANIZATIONAL DESIGN ISSUES

3. SPAN OF CONTROL
Experts note that three factors affect a manager’s span
of control:
A.Required contact: frequent face to face contact: e.g.
medical services & self directed team
 ORGANIZATIONAL DESIGN ISSUES

3. SPAN OF CONTROL
Experts note that three factors affect a manager’s span
of control:
B. Degree of specialization: Modern computer based
communication system makes employees performing
complicated work from home and stay in instant contact
with work colleague by being on line. But in general,
manager lower in the firm can have a wider span if he
oversees many specialized employees doing the same thing.
 ORGANIZATIONAL DESIGN ISSUES
3. SPAN OF CONTROL
Experts note that three factors affect a manager’s span of
control:
C. Ability to communicate: Managers who can clearly and
concisely convey company policies, procedures and work
expectations to subordinates can manage a wider span of
control.
Geographic separation no longer means ineffective
communication
 ORGANIZATIONAL DESIGN
FUNDAMENTAL ISSUES

4.DEPARTMENTALIZATION
Departmentalization refers to how work activities are grouped
together.
Departmentalization can be based upon functions, technology,
customers, geographic regions, products or distribution channels.
Departmentalization is the logical grouping of work activities to
create divisions, branches, units and sections in the company.
ORGANIZATIONAL STRUCTURE

1. FUNCTIONAL 4. MATRIX

DIVISIONAL .2 3. HYBRID
FUNCTIONAL STRUCTURE -1

• Functional Structure: A structure in which

positions are grouped according to their
main functional (or specialized) area such
as: Operations, Finance, Marketing, Human
Resources, Sales, R&D, etc
FUNCTIONAL STRUCTURE -1
• Advantages • Disadvantages
– In-depth development – Slow response time on
of expertise multifunctional
– Clear career path problems
within function. – Backlog of decisions at
– Efficient use of
top of hierarchy.
resources
– Ease of coordination – Restricted view of
within function organization among
– Potential technical employees
advantage over – Narrow training for
competitors potential managers
FUNCTIONAL STRUCTURE -1
• Uses of functional Structure
– Small and medium size organizations
– Domino’s Pizza has a functional structure
– Functional structure is suitable for large
organizations that operate in a stable
environment and when considerable
coordination is required among products.
 DIVISIONAL STRUCTURE -2
• A STRUCTURE IN WHICH POSITIONS
ARE GROUPED ACCORDING TO
SIMILARITY OF PRODUCTS,
CUSTOMERS, GEOGRAPHICAL
REGIONS, TECHNOLOGY, SERVICES,
OR MARKETS.
long product lifecycles suggest the benefit of organizing the firm into product
.divisions to achieve economies of scale and scope in production
Citicorp Investment Management: 4 major divisions
1- national corporate 2- specialized fund 3- Regional companies 4- International
USAID
 DIVISIONAL STRUCTURE -2
• Advantages • Disadvantages
– Fast response to – Duplication of
environmental change resources in each
– Simplified coordination division
across functions – Reduction of in-depth
– Strong orientation to
expertise
customer requirements
– Accurate measurement – Limited sharing of
of division performance expertise across
– Broad training in divisions
general management – Neglect of overall goals
skills. – Restriction of
innovation to divisions
 DIVISIONAL STRUCTURE -2

• A divisional structure is likely to be used in

fairly large organizations in which there
are substantial differences among either
the products or services, geographic
areas, or customers served.
 HYBRID STRUCTURE -3

• A structure that adopts parts of both

functional and divisional structures at
the same level of management.
• It reflects a design that accounts for
differences among customers.
IBM’ hybrid Structure
 HYBRID STRUCTURE -3
• Advantages • Disadvantages
– Alignment of corporate – Conflicts between
and divisional goals corporate departments
– Functional expertise and division
and/or efficiency – Excessive administrative
– Adaptability and overhead
flexibility in divisions – Slow response to
exceptional situation
 HYBRID STRUCTURE -3
• Functional departments are usually created to
take advantage of resource utilization,
efficiencies, economies of scale or in depth
expertise.
• At IBM, functional departments handle such areas
as communication, finance, HR and research
• At the same time, divisional departments are used
when there are potential benefits from a stronger
focus on products, services, or markets.
 HYBRID STRUCTURE -3
• A hybrid structure tends to be used in
organizations that not only facing considerable
environmental uncertainty that can be best met
by divisional structure but also require functional
expertise and/or efficiency.
• Typically, the hybrid approach is reserved for
medium-size or large organizations that have
sufficient resources to justify divisions as well as
functional departmentalization.
 MATRIX STRUCTURE -4

• A structure that superimposes a horizontal

set of divisional reporting relationships
onto a hierarchical functional structure
 MATRIX STRUCTURE -4
• Advantages • Disadvantages
– Decentralized decision
making
– Strong project or
product coordination
– Fast response to
change
– Flexible use of human
resources
– Efficient use of support
systems
– High administrative cost
– Potential confusion over
authority and
responsibility
– Heightened (increase)
prospects for
interpersonal conflicts
– Possible slow reaction
to change
– Over emphasis on group
decision making
 MATRIX STRUCTURE -4

• A matrix designs are not suited for many

organizations. For example, Texas
Instruments abandoned its matrix
structure, after blaming it for the company
failure to keep up with competition.
• Matrix design suits products with short life
cycle.
 MATRIX STRUCTURE -4

• A matrix designs are usually appropriate

when the following conditions exist:
– A simultaneous and strong focus on both
functional and divisional dimension. e.g.
sophisticated technology and diverse product
– Pressure for shared resources
– Demands are changing and unpredictable.
• Microchip industry, foreign competitors frequently
make technological improvement and lower
prices simultaneously.