Session 7: Internal organization II Flashcards
GALBRAITH (1974): Task uncertainty and information processing
The greater the task uncertainty, the greater the amount of information that must be processed among decision-makers during task execution in order to achieve a given level of performance
Integrating mechanisms: As the amount of uncertainty increases, and therefore information processing increases, the organization must adopt integrating mechanisms which increase its information processing capabilities
1. Coordination by rules and programs: For routine predictable tasks
2. Hierarchy
3. Coordination by targets and goals: As the uncertainty of the organization’s task increases, coordination increasingly takes place by specifying outputs, goals or targets
GALBRAITH (1974): Design strategies
As the task uncertainty increases the organization must again take organization design action. It can proceed in either of two general ways
1. First, it can act in two ways to reduce the amount of information that is processed.
- Creation of stack resources
- Creation of self-contained tasks
2. And second, the organization can act in two ways to increase its capacity to handle more information.
- Investment in vertical information systems
- Creation of lateral relations
GALBRAITH (1974): Design strategies elaborated
Creation of slack resources: As the number of exceptions begin to overload the hierarchy, one response is to increase the planning targets so that fewer exceptions occur
* Costs: The strategy of using slack resources has its costs. E.g., relaxing budget targets has the obvious cost of requiring more budget
Creation of self-contained tasks: The second method of reducing the amount of information processed is to change the subtask groupings from resource (input) based to output based categories and give each group the resources it needs to supply the output
* Costs: The cost of the self-containment strategy is the loss of resource specialization
Investment in vertical information systems: The organization can invest in mechanisms which allow it to process information acquired during task performance without overloading the hierarchical communication channels
* Costs: The cost of this strategy is the cost of the information processing resources consumed in transmitting and processing the data
Creation of lateral relationships: The last strategy is to employ selectively joint decision processes which cut across lines of authority. This strategy moves the level of decision making down in the organization to where the information exists but does so without reorganizing around self-contained groups
* Costs: the greater the use of lateral relations the greater the managerial intensity. This cost must be balanced against the cost of slack resources, self-contained groups and information systems
GALBRAITH (1974): Choice of strategy
The organization must adopt at least one of the four strategies when faced with greater uncertainty. It will choose that strategy which has the least cost in its environmental context
MINTZBERG (1981): Introduction + key to organizational design
The author of this article has found that many organizations fall close to one of five natural “configurations,” each a combination of certain elements of structure and situation
Organizational design: When managers and organizational designers try to mix and match the elements of different ones, they may emerge with a misfit that won’t wear very well. The key to organizational design, then, is consistency and coherence
MINTZBERG (1981): The five basic parts of the organization
- Strategic apex
- Techno-structure
- Middel line
- Support staff
- Operating core
- Strategic apex: Top management
- Middle line: Intermediate managers (between management and core)
MINTZBERG (1981): The five configurations (See notes for elaboration)
Direct supervision: In the simplest case, coordination is achieved at the strategic apex by direct supervision—the chief executive officer gives the orders. The configuration called simple structure emerges, with a minimum of staff and middle line
Machine bureaucracy: When coordination depends on the standardization of work, an organization’s entire administrative structure—especially its technostructure, which designs the standards—needs to be elaborated
Professional bureaucracy: When coordination is through the standardization of skills of its employees, the organization needs highly trained professionals in its operating core and considerable support staff to back them up. Neither its technostructure nor its middle line is very elaborate
Divisionalized form: Organizations will sometimes be divided into parallel operating units, allowing autonomy to the middle-line managers of each, with coordination achieved through the standardization of outputs (including performance) of these units.
Adhocracy: The most complex organizations engage sophisticated specialists, especially in their support staffs, and require them to combine their efforts in project teams coordinated by mutual adjustment. This results in the adhocracy configuration, in which line and staff as well as a number of other distinctions tend to break down
MINTZBERG (1981): Examples of companies within the five structures
Simple structure: The classic entrepreneurial company
Machine bureaucracy: Large, mature, mass-production companies (McDonalds, automobile manufacturers, insurance companies)
Professional bureaucracy: Hospitals, universities, accounting firms
Divisionalized form: Not so much an integrated organization as a set of rather independent entities joined together by a loose administrative overlay. The divisionalized structure has become very fashionable in the past few decades, having spread in pure or modified form through most of the Fortune “500”
Adhocracy: Aerospace, think-tank consulting, filmmaking. Suits many of the industries in our age. The newest of the five configurations
The process of organizational design
See picture in notes
Galbriath and Mintzberg key takeaway
Contingency theory” + “Configurational theory”
* No universally best form of hierarchy; this depends on “contingencies” (e.g., technology, dynamism, strategy, etc.)
* Mechanisms that ensure coordination, cooperation in firms tend to cluster in discrete configurations/bundles (e.g., Mintzberg’s five configs)
* Org theory: But close to the theory of the firm (= economic organization theory)
Hierarchy + benefits of hierarchy
Hierarchy: The fundamental feature of organization structure. The primary means by which firms achieve coordination, cooperation. Essential for efficiency and flexibility in firms. Hierarchy applies to complex systems
Benefits of hierarchy: The same five guys can reduce complexity by organizing themselves in a hierarchy. Here, hierarchy economizes on coordination costs, however, this says nothing about the quality of the coordination
If the organization is hit by a big chock, it is easier for the company to adapt under hierarchy
(See picture in notes)
Bureaucracy
Often used interchangeably with hierarchy which is not correct
* Specialized roles
* Recruitment based on merit (e.g. tested through open competition)
* Uniform, transparent principles of placement, promotion, transfer
* Careerism with systematic salary structure
* Hierarchy, responsibility and accountability
* Subjection of official conduct to strict rules of discipline and control
* Impersonal authority
Designing the hierarchy (Span of control)
Types of departmentalization: How can you departmentalize?
* Tasks: Based on the primary functions performed
* Product: Based on the goods/services produced or sold
* Process: Based on the production process used
* Geographic: Based on the segmentation of organizational units
Narrow span of control: A lot of management levels (many middle managers)
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
Wide span of control: Fewer layers and fewer middle managers
Advantages:
- Increased efficiency and reduced costs
- Quicker decision-making
- Greater flexibility
Disadvantages:
- Less control
- Possible lack of familiarity
- Managers spread thin
- Lack of coordination
Hierarchical forms / configurations (other than proposed by Galbraith)
- Simple hierarchy
- (Multi)divisional structure
- Functional structure
- Matrix (multidimensional) structure
Contingencies
What determines organizational design? Potentially everything that impacts on the organization’s need for coordination, corporation (Size, strategy, technology and uncertainty) (Contingency theory)
Types of interdependence and their implications
- See picture in notes
The role of uncertainty
- See picture in notes
