Organizational Structure

Prof. Vishal Gupta

Orgs. as Open Systems
Organizations are goal-oriented entity of differentiated components
(Session 1)
Designed as deliberately structured and coordinated activity
systems (Sessions 3, 4, 5, 6, 7, 8, 9, 10, 11, 13, 14, 16)
Components interact within a structure and are interdependent
Issues of structure, power, culture
System takes inputs from the environments and gives outputs to it
(Session 2, 13, 14, 15)
Linked to external environment and interacts with it
Feedback from output to change or correct its operation
Structure is separated from its environment by a boundary (Session 2,
13, 14, 15)
System grows, differentiates, matures and dies (Session 12)
Session 3 2
Session 3
Elements of Structure
3
Elements of Org Structure
Formal Reporting Relationships
Formal roles (formalization)
Number of levels (hierarchy of authority)
Span of control
Centralization
Grouping of Individuals
Creation of departments (specialization)
Design of Coordinating Systems
Communication, coordination and integration of efforts
Session 3 4
Session 3
Differentiation
5
Integration: Process of coordinating various tasks,
functions, and divisions so that they work together
and not at cross-purposes
Session 3
Integration
6
Integrating Mechanisms
Horizontal linkage coordinates activities across
organizational departments
Information Systems
Liaison Roles
Task Forces
Full-Time Integrator
Teams
Session 3 7
Session 3
Integrating Mechanisms
8
Types of Structures
Session 3 9
Functional Structure
Activities grouped by common function
All specific skills and knowledge are
consolidated
Promotes economies of scale
Slow response to environmental changes
Prevalent approach but few companies can
respond in todays environment without
horizontal linkages
Session 3 10
Session 3 11
Functional Structure
Session 3 12
Divisional Structure
Session 3
Product structure or strategic business units
Divisions organized according to products,
services, product groups
Good for achieving coordination across
functional departments
Suited for fast change
Loses economies of scale
Lacks technical specialization
13
Divisional Structure
Session 3 14
Integrative Mechanisms for
Divisional Structure
Centralize few key activities that cut across the divisions
(e.g., data processing)
Rotate managers between divisions
Develop cross-functional, cross-divisional team
Breaking down larger divisions into smaller divisions
Session 3 15
Matrix Structure
Session 3 16
Conditions for Matrix
Structure
Need for shared and flexible use of people
across products
Two or more critical outputs like new
products and technical knowledge
The environment is complex and uncertain
Session 3 17
Matrix: Strengths &
Weaknesses
Session 3 18
Horizontal Structure
Session 3 19
Horizontal: Strengths &
Weaknesses
Session 3 20
Virtual Network Example
Session 3 21
Virtual Network Strengths
and Weaknesses
Session 3 22
Hybrid Structure
Session 3 23
Application of Structural Design
Each structure meets different needs and is a tool
that can help managers be more effective
Structural alignment aligns structure with
organizational goals
Symptoms of Structural Deficiency:
Decision making is delayed or lacking quality
Organization cannot meet changing needs
Employee performance declines, needs are not meet
Too much conflict
Session 3 24
Structure to Organizations Need
Efficiency vs. Learning
Session 3 25
Comparison of Structures
Functional Divisional Matrix Network
Division of Labor By inputs By outputs
By inputs and
outputs
By knowledge
Coordination
Hierarchical
supervision, plans
& procedures
Division General
Manager &
Corporate Staff
Dual reporting
relationships
Cross-functional
teams
Decision rights Highly centralized
Separation of
strategy and
execution
Shared
Highly
decentralized
Boundaries Core/Periphery
Internal & external
markets
Multiple interfaces
Porous and
changing
Imp. of Informal
Structures
Low Modest Considerable High
Politics Inter-functional
Corporate-Division
& Inter-divisional
Along matrix and
resources
Shifting coalitions
Basis of Authority
Positional &
functional expertise
General
management
responsibility &
resources
Negotiating and
resources
Mutually agreed
Session 3 26
Does Structure Influence
Performance?
Yes
Structures influence behaviors
Behaviors influence performance
Structures should not be static
Continuously design and redesign according to the need of the environment
Structures should be established keeping in mind the different set
of contingencies and different constituents whom it may impact
With what frequency should structural changes be made?
Better to be incremental than radical
It takes time to grow managerial talent
Session 3 27
Thank you
Session 3 28