Lecture 7 - Internal Organization Flashcards
2 interdependent aspects of designing an organization
- Structure
- Organizational control
2 views on organizational theory
- Contingency theory
o There’s no universally best way of organizing/hierarchy. It depends on contingencies/factors such as technology, dynamism, strategy, etc.) - Configurational theory (article 2)
o Mechanisms that ensure coordination & cooperation in firms tend to cluster in discrete configurations/bundles (e.g. the five configurations in article 2)
Advantages of hierarchy
- Economizes on coordination costs
- Fewer interactions
- However, self-organizing teams may be preferred due to quality
- Easing adaption / more flexible
- In self-organizing teams all units need to adapt to a change in one unit.
- In hierarchy only one unit need to change.
Concepts of designing a hierarchy
- Types of departmentalization:
o Grouping jobs together and defining units so that similar or associated tasks and activities can be coordinated - Span of control / number of hierarchical layers:
o How many employees does a manager supervise?
o How many layers does the hierarchy have? - Delegation:
o Allocation of authority (see lecture 6)
Types of departmentalization
- Task
- Product
- Process
- Geographic
Advantages & Disadvantages of Narrow span of control
Advantages
* Higher degree of control
* Manager is more familiar with individuals
* Close supervision can provide immediate feedback
Disadvantages
* More management levels, more expensive
* Slower decision making
* Isolation of top management
* Discourages employee autonomy
Research on delayering
- Spans of control increasing –> fewer layers
- Top managers delayer to get closer to decision-making –> faster decision making
- More functional specialists get into top management team
- Divisional managers salaries go down; top manager salaries increase
2 frameworks for internal organization structures
Traditional forms
* Simple hierarchy
* U-form (unitary, functional)
* M-form (multidivisional)
* Matrix form
Minzberg’s 5 configurations
* Simple structure (simple hierarchy)
* Machine bureaucracy (U-form)
* Professional bureaucracy (law firms)
* Divisionalized form (M-form)
* Adhocracy
Discrete, not flexible, because:
changes in structure also requires changes in organizational control mechanisms.
Simple hierarchy: Advantages & Disadvantages
Advantages
* Clear view of organizational goals
* Wide spans of control and centralized authority allow quick decision making
* Little formalization ensures flexibility
Disadvantages
* Often unfeasible for larger organizations with high variety/complexity of tasks
* Depends critically on the CEO
Functional structure: Advantages & Disadvantages
Advantages
* Efficiencies from putting together similar specialties and people with common skills, knowledge, and orientations
* In-depth specialization
* Coordination within function
** Disadvantages**
* Risk of poor communication across functional areas
* Limited view of organizational goals
* Silo’ing
Divisional structure: Advantages & Disadvantages
Advantages
* Allows specialization in particular products, services, geographies
* Closer to customers
* Facilitates cross-functional collaboration
* In-built accountability
* Each division can make a profit at managers’ salary can therefore be linked to profit
Disadvantages
* Duplication of functions
* Limits learning / knowledge sharing in functional areas
* Can create unwanted rivalry between divisions
Matrix: Advantages & Disadvantages
Advantages
* Fluid design that can respond to environmental changes
* High information carrying capacity
* High degree of coordination
Disadvantages
* Expensive and complex
* Dual authority can lead to task and personality conflicts and slow down decision making
Forces determining organizational designs
Size:
* e.g., as firms grow, they rely more on formalization and delegation because their internal division of labor increases.
Strategy:
* e.g., which of Porter’s generic strategies the firm follows.
Technology:
* type of interdependence.
Uncertainty:
* makes it harder to plan in advance what to do, who should do what, when, where, etc.
Potentially everything that impacts the organization’s need for coordination and cooperation.
Size & strategy effect on organizational design
As companies grow, they increasingly diversify.
This caused a change from U-form to M-form.
In the M-form divisions handle business-level strategies and operating decisions, while the central HQ concentrates on strategic planning, budgeting, and providing common services.
A DoL that is more appropriate for a product-diversified firm
Uncertainty effect on organizational design
Low uncertainty
Rules, programs, SOPs
Mechanic organizations
Medium uncertainty
Hierarchy – for making decisions in infrequent situations
High uncertainty
Targets & goals - for emplyee behavior
Organic organizations
* Flexible division of labour
* Distributed decision making
* Lat structure
* High span of control
