Session 6 Flashcards
What determines whether an organization should centralize or decentralize decision-making?
- Centralization vs. Decentralization depends on the cost of transferring knowledge.
- General Knowledge has a low transfer cost ($) → More likely to centralize.
- Specific Knowledge has a high transfer cost ($$$) → More likely to decentralize.
What are the characteristics of general and specific knowledge in organizational design?
General Knowledge:
- Easy and fast to communicate → more likely to centralize.
- Not firm-specific → applicable across contexts.
- Low transfer cost ($).
Specific Knowledge:
- Difficult to communicate → more likely to decentralize.
- Firm-specific → applies only to that organization.
- High transfer cost ($$$).
What are the different types of specific knowledge?
- Perishable: Loses value over time.
- Unforeseeable: Requires frequent communication due to uncertainty.
- Complex: Involves many variables and interactions, making transfer harder.
- Subjective: Difficult to describe without direct experience.
- Technical: Requires advanced expertise, difficult for non-experts to understand.
What are the implications of specific knowledge for organizational design?
- Decentralization is preferred when knowledge is firm-specific, complex, or difficult to transfer.
- Centralization is more efficient for general, easily transferable knowledge.
How does organization design apply to individuals?
Understanding Organizational Structure:
- Identifying levels of power.
- Recognizing bonding and bridging positions in networks.
- Learning how to develop and exercise influence.
- Understanding constraints within the organization.
How Structure Emerges at Different Levels:
- Team level: How is your team structured, and can you influence it?
- Relationship level: How should you structure interactions with colleagues?
- Work level: Can you influence or control your work structure?
How do organizations use structure to solve coordination problems?
Two types of coordination problems:
1. Synchronization:
- Ensures proper timing, rate, and form of output.
- Units do not need direct communication if timing is aligned.
- Example: Assembly line with predefined sequences.
2. Integration:
- Requires combining specific knowledge from different sources.
- Deals with complex, qualitative, and subjective information.
- Units must communicate to align contributions.
- Example: Product development team (marketing, design, engineering collaboration).
Implications for Organizations:
- Tasks with minimal communication but timing needs → Synchronization strategies work best.
- Tasks requiring knowledge sharing and adaptation → Integration strategies are necessary.
What are the characteristics, benefits, and costs of hierarchy structures in organizations?
Characteristics:
- Communication, supervision, and decision-making follow clear linear paths from top to bottom.
- Employees primarily interact with those directly above and below them.
- Ultimate authority rests with the most senior member (chief executive).
Benefits:
- Single decision maker → Faster decision-making, less confusion.
- Politics plays a less important role (supposedly).
Costs:
- Information is lost and distorted during transmission.
- Inhibits environmental sensing and learning.
- Inhibits adaptation to change.
How does the hierachy structure look
What are the benefits and costs of a functional hierarchy in organizations?
Benefits:
- Solves some synchronization problems.
- Economies of scale in skill investment → Deep knowledge.
- Narrow jobs → Employees develop specialized expertise.
- More accurate performance evaluation (supposedly).
Costs:
- Employees struggle to understand how their work affects other functions.
- Poor coordination between functions.
- Distorted incentives (specialization, tribalism).
How does the functional structure look
What are the benefits and costs of a divisional hierarchy in organizations?
Benefits:
- Solves some synchronization problems.
- Economies of scale from a narrow focus on specific segments → Deep knowledge.
- More accurate performance evaluation (supposedly).
Costs:
- Employees struggle to understand how their work affects other divisions.
- Inadequate cooperation reduces benefits from positive externalities between divisions.
- Excessive competition exacerbates negative externalities between divisions.
How does the divisional structure look
What are the benefits and costs of a matrix hierarchy in organizations?
Benefits:
- Solves some types of integration problems.
- Increases communication across functions and divisions.
- May enhance coordination among employees at lower levels.
Costs:
- Employees have multiple supervisors with different (contradictory) goals.
- Disagreements over performance evaluation.
- Increased emphasis on politics → More inter- and intrapersonal conflict.
- More bureaucracy → Slower decision-making.
How does the matrix structure look
What are the characteristics of a network structure in organizations?
- Network structures lack a clear definition and emphasize informal social ties over rigid hierarchies.
- Employees exchange knowledge, resources, and favors in internal “markets” based on trust and collaboration.
- Organizations can influence informal structures by fostering cross-functional teams, mentorship, and open communication.
Can informal structures be designed?
Organizations can encourage them, but they evolve organically.
What are the differences between I-shaped, Generalist, and T-shaped professionals?
I-shaped (Specialist)
- Expert in one area.
- Limited adaptability outside their expertise.
- Example: A data scientist focusing solely on machine learning models.
Generalist
- Capable in many areas but not an expert in any.
- Adaptable but may lack deep problem-solving skills.
- Example: A manager who understands finance, marketing, and operations at a surface level.
T-shaped (Hybrid)
- Capable in many areas while being an expert in one.
- Example: A product manager who understands tech, design, and business while being an expert in user research.
What are additional considerations for organization design?
- Hierarchy Levels: How many management layers exist?
- Span of Control: How many employees report to a manager?
- Coordination Costs: Does the structure slow down decision-making?
- Externalities Between Units: Does collaboration help or hinder performance?
Implication:
Organizations need a balance of specialists, generalists, and T-shaped employees depending on industry, innovation needs, and complexity.
What are the coordination mechanisms for solving synchronization and integration problems?
1. Solving Synchronization Problems
Synchronization issues arise when units need to coordinate timing, rate, and form of output without direct communication.
Organizations use:
- Central planning – Budgeting and planning reduce discretion.
- Training & SOPs – Standard procedures guide decision-making.
- Culture – Shared values and norms align behavior.
- Standardized communication – Newsletters, memos, meetings reduce distortion.
- Performance management – Incentives and feedback influence behavior.
2. Solving Integration Problems
Integration problems occur when specific knowledge from multiple sources must be combined.
Solutions include:
- Collaboration – Cross-functional teams improve knowledge transfer.
- Knowledge sharing – Databases & communities of practice capture expertise.
- Liaisons (e.g., managers) – Facilitate coordination between specialists.
- Cognitive diversity – Different perspectives improve decision-making.
- Social networks – Personal relationships enhance cohesion & cooperation.
- Performance management – Aligns goals & interdependencies through incentives.
Key Takeaway: Synchronization mechanisms reduce variability & standardize processes. Integration mechanisms enhance knowledge flow & problem-solving across units.
