BOH4M – Grade 12 Business Leadership – Organizational Design & Work Processes

 

Chapter 11: Organizational Design & Work Processes

 

Organizational Design Essentials

 

  • Organizational Design: The process of creating structures that accomplish the organization’s mission and objectives
  • Organizational effectiveness: Sustainable high performance in using resources to accomplish the mission and objectives
  • Any organizational design should advance organizational effectiveness
  • No universal design that applies to all circumstances
  • Goal is to achieve a best fit between structure and the unique situation faced by the organization

 

Organizational Design Choices

 

Bureaucratic organizations

  • Bureaucracy was viewed by Weber as the model form of organizational design
  • Emphasizes formal authority, fairness, and efficiency
  • Today, the term “bureaucracy” has come to represent a negative connotation
  • Organizations with more mechanistic designs are highly bureaucratic in nature (Burns and Stalker)
  • Features of a mechanistic design include:
    • Centralized authority
    • Many rules and procedures
    • Narrow spans of control
    • Specialized tasks
    • Few teams/task forces
    • Formal and impersonal coordination
  • Tend to thrive in a stable environment

 

 

 

 

Adaptive organizations

  • In contrast, the trend in today’s changing and uncertain environments is toward organizations that operate with a minimum of bureaucratic features and encourage worker empowerment and teamwork
  • Display features of an organic design:
    • Decentralized authority
  • Fewer rules and procedures
  • Wider spans of control
  • Shared tasks
  • Many teams/task forces
  • More informal and personal means of coordination

 

 

Contingencies In Organizational Design

 

  • Good organizational design utilizes contingency thinking
  • Results in supportive structures that satisfy situational demands and advance organizational effectiveness
  • Contingency factors in organizational design include environment, strategy, technology, size and life cycle, and human resources

 

Environment

  • The organization’s external environment and degree of uncertainty it offers are of great importance in organizational design
  • Certain environment with relatively stable and predictable elements
    • Bureaucratic organizations and mechanistic designs are appropriate
  • Uncertain environmentwith more dynamic and less predictable elements
    • Requires more adaptive organizations and organic designs

 

 

 

 

 

 

Strategy

  • Structure should follow strategy. The nature of organizational strategies and objectives should influence the choice of structure
  • When strategy is stability orientedwith the expectation that little significant change will be occurring in the external environment
    • The choice of structure should be bureaucratic organizations using mechanistic designs
  • When strategy is growth orientedand likely to change frequently in response to changing external environment
    • The choice of structure should be adaptive organizations using organic designs

 

Technology

  • Combination of knowledge, skills, equipment, computers, and work methods used to transform resource inputs into organization outputs
  • Core manufacturing technologies:
    • Small-batch production: A variety of custom products are tailor-made to order
    • Mass production: A large number of uniform products are made in an assembly-line type of system
    • Continuous-process production: A few products are made by continuously feeding raw materials through a highly automated production system with largely computerized controls

 

  • Woodward’s study of English manufacturing firms found that the right combination of structure and technology is critical to organizational success
    • The best small-batch and continuous process plants had more flexible organic structures
    • The best mass-production plants had more rigid mechanistic structures
  • Implications of this research have become known as the technological imperative: Technology is a major influence on organizational structure

 

 

 

  • Importance of technology and organizational design also applies in services sector as well as manufacturing
  • Core service technologies:
  • Intensive technology: Focuses the efforts of many people with special expertise on the needs of patients or clients (health care, education)
  • Mediating technology: Links together parties seeking a mutually beneficial exchange of values – typically a buyer and a seller (real estate transactions)
  • Long-linked technology: Functions like mass production, where a client is passed from point to point for various aspects of service delivery (banking)

 

Size and Life Cycle

  • Number of employees or organizational size is another contingency factor to organizational design
  • Larger organizations tend to have more mechanistic designs than smaller ones
  • Also important to understand the evolution of the organization over time or the organizational life cycle:
    • Birth stage – Organization is founded; small size, simple structure
    • Youth stage – Organization starts to grow rapidly; simple structure begins to experience stresses of change
    • Midlife stage – Organization has grown large with success; more complex and formal structure
    • Maturity stage – Organization stabilizes in size; mechanistic structure; run the risk of becoming complacent and slow in competitive markets. Ways of coping with disadvantages of large size at this stage include:
      • Downsizing: Reducing scope of operations and employees
      • Intrapreneurship: Fostering entrepreneurial behavior by individuals and subunits within large organizations
      • Simultaneous structures: Combining mechanistic and organic designs (“loose-tight” concept)

 

 

 

 

 

Human Resources

  • Good organizational design provides people with supporting structures needed for both high performance and work satisfaction
  • Produces good “fit” between organization structures and people
  • Any organizational design should allow the expertise and talents of organization members to be unlocked and utilized to their fullest, especially in an age of information and knowledge workers

 

 

Subsystems Design and Integration

 

  • Organizations are composed of subsystems: Departments or work units headed by a manager that operate as a smaller part of the larger, total organization
  • Ideally, the work of each subsystem supports the work of others
  • Lawrence and Lorsch’s findings on subsystems design:
    • The total system structures of successful firms match the challenges of their environments
    • The subsystems structures of successful firms match the challenges of their own respective situations or subenvironments
    • Subsystems in successful firms worked well with each other, even when they were very different from one another

 

  • Differentiation: The degree of difference that exists among the internal components of an organization. Four common sources of subsystems differentiation include:
  1. Time orientation – Short versus longer term horizons
  2. Objectives – Cost versus volume-conscious
  3. Interpersonal orientation – Patterns of communication, decision making and social interaction
  4. Formal structure – Mechanistic versus organic settings

 

 

 

 

  • Integration: Level of coordination achieved among an organization’s internal components
  • Organization design paradox involves the creation of both differentiated structures and integrating mechanisms
  • Increased differentiation among subsystems creates the need for greater integration; however, integration is more difficult to achieve as differentiation increases

 

Work Process Design

 

  • Emphasis on subsystems integration and more cross-functional collaboration on organizational design has become known as process reengineering: Systematic and complete analysis of work processes and the design of new and better work ones
  • Radical and disciplined approach to changing the way that the work process is carried out in organizations
  • Work process: A related group of tasks that together create a result of value for the customer (Hammer)
  • Central to understanding this process is the concept of workflow: Movement of work from one point to another in the manufacturing or service delivery process

 

  • Process value analysisis used to identify and evaluate core processes for their performance contributions. Typically involves the following steps:
    • Identify core processes
    • Map core processes in respect to workflows
    • Evaluate all tasks for core processes
    • Search for ways to eliminate unnecessary tasks or work
    • Search for ways to eliminate delays, errors, and misunderstandings
    • Search for efficiencies in how work is shared and transferred among people and departments

 

 

 

 

    • Customers, teamwork and efficiency are central to Hammer’s notion of process reengineering
    • Process driven organizations have adopted this approach in an attempt to:
  • Locate control for processes with an identifiable group of people
  • Focus each person and the entire system on meeting customer needs and expectations
  • Eliminate duplication of work and system bottlenecks to reduce costs, increase work efficiency, and build capacity for change