Basic Challenges of Organisational Design Flashcards
Differentiation
The process by which an organisation allocates people and resources to organisational tasks and establishes the task and authority relationships that allow the organisation to achieve its goals.
Division of labor
The process of establishing and controlling the degree of specialisation in the organisation.
In a simple organisation, differentiation is low because…
the division of labor is low
In a complex organisation, both what and what are high?
the division of labor and differentiation are high
Design Challenge 1
People in this organisation take on new tasks as the need arises, and it’s very unclear who is responsible for what, and who is supposed to report to whom
Organisational role
The set of task-related behaviours required of a person by his or her position in an organisation.
Authority
The power to hold people accountable for their actions and to make decisions concerning the use of organisational resources.
Control
The ability to coordinate and motivate people to work in the organisation’s interests.
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.
Support functions
Functions that facilitate an organisation’s control of its relations with its environment and its stakeholders.
Production functions
Functions that manage and improve the efficiency of an organisation’s conversion processes so more value is created.
Maintenance functions
Functions that enable an organisation to keep its departments in operation
Hierarchy
A classification of people according to authority and rank
Vertical differentiation
The way an organisation designs its hierarchy of authority and creates reporting relationships to link organisational roles and subunits
Horizontal differentiation
The way an organisation groups organisational tasks into roles and roles into subunits (functions and divisions).
What are the 3 other design challenges?
How to link and coordinate organisational activities.
To determine who will make decisions.
To decide which types of mechanisms are best suited to controlling specific employee tasks and roles
Subunit orientation
A tendency to view one’s role in the organisation strictly from the perspective of the time frame, goals, and interpersonal orientations of one’s subunit.
Reasons for problems in communication and coordination among subunits
The development of subunit orientations that makes communication difficult and complex.
Another reason for lack of coordination and communication is that managers often fail to use the appropriate mechanisms and techniques to integrate organisational subunits
Integration
The process of coordinating various tasks, functions, and divisions so that they work together and not at cross purposes.
Hierarchy of authority
A ranking of employees integrates by specifying who reports to whom.
Direct contact
Managers meet face to face to coordinate activities.
Liaison role
A specific manager is given responsibility
for coordinating with managers from other
subunits on behalf of his or her subunit
Task force
Managers meet in temporary committees to coordinate cross-functional activities
Team
Managers meet regularly in permanent committees to coordinate activities.
The types of integrating mechanisms
Hierarchy of authority
Direct contact
Liaison role
Task force
Team
Integrating role
Integrating department
Integrating role
A new role is established to coordinate the activities of two or more functions or divisions.
Integrating department
A new department is created to coordinate the activities of functions or divisions.
Managers facing the challenge of deciding how and how much to differentiate and integrate must do two things:
(1) carefully guide the process of differentiation so an organisation builds the core competences that give it a competitive advantage
(2) carefully integrate the organisation by choosing appropriate coordinating mechanisms that allow subunits to cooperate and work together to strengthen its core competences
Decentralised
An organisational setup in which the authority to make important decisions about organisational resources and to initiate new projects is delegated to managers at all levels in the hierarchy.
Centralised
Organisational setup in which the authority to make important decisions is retained by managers at the top of the hierarchy.
Advantage of centralisation
It lets top managers coordinate organisational activities and keep the organisation focused on its goals.
Issue with centralisation
Centralisation becomes a problem, however, when top managers become overloaded and immersed in operational decision making about day to-day resource issues (such as hiring people and obtaining inputs).
When this happens they have little time to spend on long-term strategic decision making, and planning crucial future organisational activities, such as deciding on the best strategy to compete globally, is neglected.
Advantage of decentralisation
It promotes flexibility and responsiveness by allowing lower-level managers to make on-the-spot decisions. Also, when authority is decentralised managers can make important decisions that allow them to demonstrate their personal skills and competences and may be more motivated to perform well for the organisation
Issue with decentralisation
Is that if so much authority is delegated that managers at all levels can make their own decisions, planning and coordination become very difficult
Standardisation
Conformity to specific models or examples—defined by sets of rules and norms—that are considered proper in a given situation.
Mutual adjustment
The compromise that emerges when decision making and coordination are evolutionary processes and people use their judgment rather than standardised rules to address a problem.
Formalisation
The use of written rules and procedures to standardise operations.
Rules
Formal written statements that specify the appropriate means for reaching desired goals
Norms
Standards or styles of behaviour that are considered acceptable or typical for a group of people.
A high level of formalisation typically implies
Centralisation of authority
A low level of formalisation implies
That coordination is the product of mutual adjustment among people across organisational functions and that decision making is a dynamic process in which employees apply their skills and abilities to respond to change and solve problems.
Mutual adjustment typically implies
Decentralisation of authority because employees must have the authority to commit the organisation to certain actions when they make decisions
Norms
Standards or styles of behaviour that are considered acceptable or typical for a group of people
Socialisation
The process by which organisational members learn the norms of an organisation and internalise these unwritten rules of conduct.
Individual Specialisation
Employees work separately and specialise in one clearly defined task.
Simple Integrating Mechanisms
Hierarchy of authority is clearly defined and is the
major integrating mechanism.
Mechanistic structures result when an organisation makes these choices.
Individual Specialisation
Simple Integrating Mechanisms
Centralisation
Standardisation
Centralisation
Authority to control tasks is kept at the top of the
organisation.
Most communication is vertical.
Standardisation
Extensive use is made of rules and SOPs to coordinate
tasks, and work process is predictable.
Organic structures result when an organisation makes these choices.
Joint Specialisation
Complex Integrating Mechanisms
Decentralisation
Mutual Adjustment
Joint Specialisation
Employees work together and coordinate their actions to find the best way of performing a task.
Complex Integrating Mechanisms
Task forces and teams are the major integrating mechanisms.
Decentralisation
Authority to control tasks is delegated to people at
all levels in the organisation. Most communication
is lateral.
Mutual Adjustment
Extensive use is made of face-to-face contact to
coordinate tasks, and work process is relatively
unpredictable.
Mechanistic structures
Structures that are designed to induce people to behave in
predictable, accountable ways.
Organic structures
Structures that promote
flexibility, so people initiate
change and can adapt quickly
to changing conditions
Contingency approach
A management approach in
which the design of an
organisation’s structure is tailored to the sources of
uncertainty facing an
organisation.
According to contingency theory, in order to manage its environment effectively, an organisation
should…
Design its structure to fit with the environment in which the organisation operates
In other words, an organisation must design its internal structure to control the external environment
What did Paul Lawrence and Jay Lorsch find?
They found that when the environment was perceived by each of the three departments
as very complex and unstable, the attitudes and orientation of each department
diverged significantly. Each department developed a different set of values, perspectives, and way of doing things that suited the part of the specific environment it was
dealing with. Thus the extent of differentiation between departments was greater in
companies that faced an uncertain environment than in companies that were in stable
environments.
What did Lawrence and Lorsch also find?
when the environment is perceived as unstable
and uncertain, organisations are more effective if they are less formalised, more decentralised,
and more reliant on mutual adjustment.When the environment is perceived as relatively
stable and certain, organizations are more effective if they have a more centralized,
formalized, and standardized structure. Moreover, they found that effective companies in
different industries had levels of integration that matched their levels of differentiation
The message of Lawrence and Lorsch’s study was that organizations must adapt their
structures to match the environment in which they operate if they are to be effective.
Stalker’s conclusion
Organizations should design their structure to match the dynamism
and uncertainty of their environment.
