Organisation Structures and Design

Introduction to Organisation Structure and Design Introduction to Organisation, Theory and Structure  Definition of Organisation Structure  The System Perspective  The Life-Cycle Perspective •

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Organisational Effectiveness Effectiveness Goal Attainment Approach The System Approach The Strategic-Constituencies Strategic-Constituencies Approach The Competing-Values Approach Dimensions of Organisation Structure Complexity Formalization Centralization Determinants - Strategy Meaning Types of Stratégies Classification Strategic Dimensions Dimensions Chandler’s Strategy-Structure Thesis Miles and Snow’s Four Strategic Types Porter’s Competitive Strategies

Determinants – Technology  Woodward’s Research  Knowledge based technology – Perrow’s Contribution Technological Uncertainty – Thompson’s Contribution  Technological Relationship between technology and complexity/Formalisation/Ce complexity/Formalisation/Centralisation ntralisation  Relationship •

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Organisational Design Options Common Elements in Organisations Organisations The Simple Structure The Bureaucracy The Divisional Structure The Adhocracy Bureaucracy: Bureaucracy: A Closer Look Features of Bureaucracy Criticism of Bureaucracy Is Bureaucracy a structural dinosaur? You can’t ignore the obvious: Bureaucracies Bureaucracies are everywhere

Adhocracy: A Closer Look  Matrix Theory A, J, Z The Collateral Form The Network Structure

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Other Examples of Adhocracy

Introduction to Organisation, Theory and Structure Definition of Organisation Structure: •

It defines

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how how tas task k are are to be allo alloca cate ted d who reports to whom formal formal coordin coordinatin ating g mechani mechanisms sms and and interac interaction tion patterns patterns that that will will be be follow followed. ed.

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Three components of Organisation Structure

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Complexi Complexity: ty: it is extent extent of differe differentiat ntiation ion withi within n the organisa organisation tion.. It includ includes es the degree of specialisation or division of labour, the number of levels in org.‘s hierarchy, and extent to which the org.’s units are dispersed geographically. geographically.

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Formalisa Formalisation tion:: It is is degree degree to which which an organisa organisation tion relies relies on on rules rules and and procedures to direct the behaviour of employees. employees.

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Centrali Centralisatio sation: n: It consi considers ders where where the locus locus of decision decision making making authori authority ty lies. lies.

The Systems Perspective •

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System A set set of interrel interrelated ated and interdep interdepend endent ent parts parts arranged arranged in a manner manner that that produces a unified whole. They They take take inpu inputs, ts, tran transfo sform rm them them and and prod produce uce some some outpu outputt Differentiation and integration Specia Specialis lised ed functi functions ons are differ different entiat iated. ed. In order order to maintain maintain unity unity among among the the differen differentiate tiated d parts parts and and form form a compl complete ete whole, every system has a reciprocal process of integration. This integratio integration n is typicall typically y achieved achieved through through devic devices es such such as coordina coordinated ted levels of hierarchy, direct supervision, rules, procedures and policies. policies. Every system system require requires s differen differentiati tiation on to identify identify its its subpar subparts ts and integratio integration n to ensure that the system doesn’t break down into separate elements. Types of Systems Closed Closed system system:: System System that receives receives no energ energy y from from an outside outside source source and and from which no energy is released to its surrounding. Self contained system. Very less relevance to the t he study of organisations. organisations. Open system: system: It recogniz recognizes es the the dynami dynamics cs intera interaction ction of the the system system with its environment. Features of Open System Envi Enviro ron nment ment awarene reness ss Feedback Cyclical ch character  Negative en entropy Steady state Move Moveme ment nt tow towar ards ds gro growt wth h and and expa expans nsio ion n Balanc Balance e of maint maintena enance nce and and adap adaptiv tive e acti activit vities ies Equifinality Importance of the System Perspective It permits permits seeing seeing the the organ organisat isation ion as a whole whole with with interdep interdepende endent nt parts. parts. It prevent prevents s lower lower level level manag managers ers to identify identify and and under understand stand the envir environme onment nt in which their system operation. It helps helps manage managers rs to see see organ organisati isation on as stable stable patterns patterns and action actions s within within boundaries boundaries and to gain insights into why organisations organisations are resistant to change.

The Life-Cycle Perspective •

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A life cycle: It refe refers rs to to a patte pattern rn of predi predicta ctabl ble e chan change. ge. There are disti distinct nct stages stages through through which which organisa organisation tions s proceed proceed,, that the stages follow a consistent pattern, and that the transitions from one stage to another are predictable rather than random occurrences. Life Cycle stages Entr Entrep epre rene neu urial rial stag stage e Collectivity vity stag tage Form Formal alis isat atio ion n and and cont contro roll stag stage e Elab Elabor orat atio ion n of str struc uctu ture re sta stage ge Decline st stage Importance of Life Cycle perspective It makes makes us aware aware that that an organ organisat isation ion hasn’ hasn’tt always always been been the the way way it is or will it always be the same in the t he future. It helps helps to decide decide approp appropriate riate action action to solve solve any any given given proble problems ms depend depending ing on stages.

Organisational Effectiveness Effectiveness Goal attainment approach •

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It states that an org’s effectiveness must be appraised in terms of  accomplishment accomplishment of ends rather than means. Assumptions - Org. Org. are deli deliber berate ate,, ration rational, al, goa goal-s l-seek eeking ing enti entitie ties. s. - Org. Org. must must have have ulti ultima mate te goad goads. s. - These These goals goals mus mustt be ident identifi ified ed and and defin defined ed wel welll enoug enough h to be understood. - These These goal goals s must must be be few few enou enough gh to be be man manage ageabl able. e. - There There must must be gen genera erall consen consensus sus or or agree agreemen mentt on these these goad goads. s. - Progre Progress ss tow toward ards s thes these e goa goals ls mus mustt be measur measurab able. le. Problems - Whose Whose goals goals – itit is possibl possible e that that some some of of decisi decision on makers makers with real real power and influence are not the member of senior management - What an org. org. states states official officially ly as its goals goals does not always always reflect reflect the org.’s actual goals – official and actual goals may be different. - Org. short-term short-term goals goals are frequentl frequently y differen differentt from from its its long long term term goals. goals. - Org. have multiple multiple goals goals also also creates creates difficulti difficulties es such such as they can compete with each other and sometimes are even incompatible. - There There are are multip multiple le goal goals s and diver diverse se inter interest ests s within within the the org., org., consensus may not be possible unless goals are stated in such ambiguous and vague terms as to allow the varying interest groups to interpret them in a way favourable to their self interests. - Multip Multiple le goal goals s must must be ordere ordered d accord according ing to to import importan ance. ce. How How to allocate relative importance to goals that may be imcompatible. Value to managers: The validity of those goals identified can probably be increased significantly by - Ensuring Ensuring that input input is received received from all those those having having a major major influenc influence e on formulating the official goals, even if they are not part of senior  management. - Including Including actual actual goals goals obtainin obtaining g by observin observing g the behavio behaviour ur of org. member. - Recog Recogni nisin sing g that that org. org. pursue pursue both both shor shortt and lon long g term term goal goals. s. - Insisting Insisting on tangible, tangible, verifiabl verifiable e and and measu measurabl rable e goals goals than vague vague statement. - Viewin Viewing g goals goals as dyna dynamic mic entiti entities es that that chang change e over over time. time.

The system approach •

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System models emphasize criteria that will increase the long-term survival of  the org. such as the org’s ability to acquire resources, maintain itself internally as a social organism, and interact successfully with it external environment. It focuses more on means needed for the achievement of those ends. Assumptions - Org. Org. are are mad made e up of of inte interr rrel elat ated ed sub subpa parts rts.. - Effectiven Effectiveness ess requires requires awarene awareness ss and and successful successful interacti interaction on with environmental environmental constituencies. constituencies. - Surviv Survival al requi requires res a stea steady dy reple repleni nishm shment ent of thos those e resour resources ces consumed. Making System Operative The system view looks at factors such as relation with the environment environment to assure continued receipt of inputs and favourable acceptance acceptance of outputs, flexibility of response to environmental changes, the efficiency with which t he org. transforms inputs to outputs, the clarity of internal communications, the level of conflict among groups and the degree of employees job satisfaction Problem - Meas Measur urin ing g spec specif ific ic end end goa goals ls is is diffi difficu cult lt - It focuse focuses s on the the means means neces necessar sary y to achie achieve ve effec effectiv tivene eness ss rathe rather  r  then on org. effectiveness itself. - “It’s “It’s wheth whether er you you win win or lose lose tha thatt counts counts,, not how how you you play play the the game!” game!” Value to Manager  - Manage Managers rs are less less like likely ly to make make decis decision ions s that that trade trade of the org’ org’s s long-term health and survival for ones that will make them look good in the near term. - It incre increase ases s awaren awareness ess of of interd interdep epend endenc ency y of org. org. activi activitie ties. s.

The Strategic-Constituencies Strategic-Constituencies Approach •

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This approach seeks to appease only those in the environment who can threaten the org’s survival. Assumptions - Org. Org. are assu assumed med to to be poli politic tical al aren arenas as wher where e vested vested inte interes rests ts compete for control over resources. - Manage Managers rs pursu pursue e a numbe numberr of goal goals s and tha thatt the goal goals s select selected ed represent a response to that interest group that controls the resources necessary for the org to survive. Making Strategic Constituencies Operative - Identi Identify fy the cons constit titue uenci ncies es to be crit critica icall to the org. org. surv surviva ival. l. - Evalu Evaluate ate to dete determi rmine ne the the relati relative ve powe powerr of each each consti constitue tuency ncy.. - Identify Identify the the expec expectatio tations ns that that these these constitue constituencie ncies s hold hold in for the org. org. - This approach approach will will conclu conclude de by by compar comparing ing the various various expectati expectations, ons, determining common expectations and those that are incompatible, assigning relative weights to the various constituencies and formulating a preference ordering of these various goals for the org as a whole. Problem - It is difficult difficult to separ separate ate the the strate strategic gic consti constituen tuencies cies from each other. other. - Envi Enviro ronm nmen entt chan change ges s rapi rapidl dly. y.

Value to Manager  - Manage Managers rs under understa stand nd on whom whom the the survi surviva vall of org. org. is depen dependen dent. t. - It decrea decreases ses a chan chance ce of igno ignorin ring g or upsett upsettin ing g a group group whose whose pow power  er  could significantly hinder the org operations. - Manager Manager can modify modify its its prefere preference nce ordering ordering of goals goals as necessary necessary to reflect the changing power relationship with its strategic constituencies.

The Competing-Values Approach •

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The theme of this approach is that the criteria you value and use in assessing an org. effectiveness – return on investment, market share, new product innovation, job security – depend on who you are and the interest you represent. Assumptions - There There is no no best best criter criterio ion n for eval evaluat uating ing an an org effe effecti ctiven veness ess.. - There There is is neithe neitherr a singl single e goal goal that that everyo everyone ne can can agree agree upo upon n nor a consensus on which goals take precedence over other. - An evalu evaluato atorr choose chooses s goals goals based based on on his his person personal al valu values, es, preferences and interests. Making Competing Values Operative O perative - There There are three three basic basic sets sets of of compe competin ting g value values. s. - Flex Flexib ibil ilit ity y ver versu sus s cont contro roll Flexibility values innovation, adaptation and change. Control favours stability, order and predictability. - Wellb Wellbein eing g and dev develo elopme pment nt of peop people le versu versus s wellb wellbein eing g and development development of organisation organisation The concern for the feelings and needs of people within org. versus the concern for productivity and task accomplishment accomplishment - Org Org. mea means versus rsus ends The former stressing internal process and long t erm, latter  emphasizing emphasizing final outcomes and short term

Value to Manager  - It guide guides s Manage Managers rs in in identi identifying fying the appropri appropriaten ateness ess of differ different ent criteria to different constituencies and different life cycles.

Comparing four Organisation Effectiveness Approaches

Approach

Definition

When useful

Goal Attainment

An org is effective to the extent that it accomplishes accomplishes its stated goals.

The approach is preferred when the goals are clear, time bound and measurable.

System

An org is effective to the extent that it acquires needed resources.

The approach is preferred when a clear connection exists between inputs and outputs.

Stra Strate tegi gic c Con Const stit itue uenc ncie ies s

An org org is is eff effec ecti tive ve to the the extent that all strategic constituencies constituencies are at least minimally satisfied.

The approach is preferred when constituencies have powerful influence on the org. and org. must respond to demands.

Completing values

An org is effective to the extent that the emphasis of the org. in the four  major areas matches constituent preferences.

The approach is preferred when unclear about its own emphases, or  changes in criteria over  time are of interest.

Dimensions of Organisation Structure Complexity • •

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It refers to the t he degree of differentiation that exists within the org. There are three kinds of differentiation - Horizontal - Vertical - Spatial Horizontal differentiation - It refers to t o the degree of differentiation between units based on orientation of members,  the nature of tasks they perform  their education and training  - The most visible evidence of horizontal differentiation is specialisation and departmentation. Specialisation Specialisation refers to the particular grouping of activities performed by the individual. - Specialisation can be through functional specialisation or social specialisation. - In Functional specialisation, specialisation, jobs are broken down down into simple and repetitive repetitive tasks. It is also known as division of labour. It creates high substitutability among employees and facilitates their easy replacement by management. - Social specialisation can be achieved by hiring professionals professionals who hold skills than cannot be readily routinised. Departmentation is the way in which org. typically coordinate activities that have been horizontally differentiated. Department Department can be created on the basis of simple numbers, function, product or service, client, geography or process. Vertical Differentiation Differentiation - It refers to the depth in structure. - Differentiation Differentiation increases, and hence hence complexity, complexity, as the number of  hierarchical hierarchical levels in the org increases. Span of Control defines the number of subordinates that a manager can direct effectively. - Wide span – more number of subordinates subordinates and vice vice versa - It creates tall or flat structure. - Tall structures provide provide close supervision and boss boss oriented control and coordination and communication become complicated. - Flat structures have shorter shorter and simpler simpler communication communication chain, less opportunity for supervision, but reduced promotion opportunities. Spatial Differentiation Differentiation refers to the degree to which the location of an org’s offices, plants and personnel are dispersed geographically. geographically. Why complexity is important - The higher the complexity, the greater amount of attention they must pay to dealing with problems of communication, communication, coordination and control.

- The higher complexity demands on management management to ensure that differentiated and dispersed activities are working smoothly and together  toward achieving the org’s goals. Formalisation • •

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It refers to the t he degree to which jobs within the org are standardised. The formalisation is high, if there are explicit job descriptions, lots of org rules and clearly defined procedures covering work processes in org. The formalisation is low, if employee’s employee’s behaviour is relatively non programmed. Such job offer employee a great freedom to exercise discretion in work. Range of formalisation - High degree of formalisation: formalisation: Unskilled jobs, repetitive jobs, production jobs - The greater the degree of professionalisation, lesser formalisation - The higher level in org, lesser formalisation Why is formalisation important - Standardising Standardising behaviour reduces variability. - It promotes coordination. coordination. - Standardisation leads to less discretion. More discretion can cost money. - Org with formalised jobs jet most effective performance from employees at lower cost. Formalisation technique t echniques s - Selection: An effective selection process will be designed to determine if  candidates is fit into the org. This technique control employee discretion. discretion. It tries to prevent the employment of misfits. - Roles requirements: requirements: - Every job carries with its expectations on how the role incumbent is supposed to behave. - Job analysis defines the jobs that need to be done in the org and outlines what employee behaviours are necessary to perform the jobs. It results into Job Descriptions and Job specifications. - Rules: - Rules are explicit explicit statements that tell an employee what what he ought or  ought not to do. - It tells employees what they can do, how they are to do it and when they are to do it. - Rules leave no room for employee judgement or discretion. - Procedures: - Policies are established to ensure standardisation standardisation of work processes. - The same input is processed in the same way and output is the same each day. - Policies: - Rather than specifying a particular and specific behaviour, policies allow employees to use discretion but within limited boundaries. boundaries. - The discretion is created by including judgemental terms (such as best, satisfied, competitive) which the employee is left to interpret. - Training:

- This includes on the job variety where understudy assignments, coaching and apprenticeship methods are used to teach employees preferred job skills, knowledge and attitudes. - New employees are required to undergo a brief orientation program in which they are familiarised with org objectives, history, philosophy, rules. Centralisation • •

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It concerned with the dispersion of authority to make decisions within the org. A high concentration implies high centralisation, whereas a low centralisation centralisation indicates decentralisation. decentralisation. Centralisation Centralisation can be described as the degree to which the formal authority to make discretionary choices is concentrated in an individual, unit or level (usually high in the org) thus permitting employees (usually low in the org) minimum input into their works. Why decentralisation is important - Managers are limited in their ability to give attention to the date they receive. - Org needs to respond rapidly to changing conditions at the point at which the change is taking place. - Decentralisation can provide more detailed input into the decision. - It also provides motivation motivation to employees by allowing them to participate in decision making process. - It is the training opportunity that it creates for low level managers. When centralisation is preferred - A comprehensive comprehensive perspective is needed in decision. - A lot of economics involved. involved.

Determinants - Strategy Meaning •

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It can be defined as the determination determination of the basic long-term goals and objectives of an enterprise and the adoption of courses of action and the allocation of resources necessary for carrying out these goals. Views on Strategy: - Planning mo mode - Evolutionary mode Planning mode - Strategy is a plan or explicit set of guidelines developed in advance - Managers identify where they want to go; then they develop systematic and structured plan to get there. Evolutionary mode - Strategy is not necessarily a well-though-out and systematic plan. - It evolves over time as a pattern in a stream of significant decisions.

Types of Strategy •

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Corporate-level Corporate-level strategy: It determines the roles that each business in the organisation will play. Business-level Business-level strategy: For organisations in multiple businesses, businesses, each division will have its own strategy that defines the products or services that it will offer, the customer it wants to each.

Classifying strategic dimensions •

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Innovation: It does not mean a strategy merely for simple or cosmetic changes from previous offerings but rather one for meaningful and unique innovations. Marketing Differentiation: Differentiation: It strives to create customer customer loyalty by uniquely uniquely meeting a particular need. The org seeks to create a favourable image for its product through advertising, market segmentation and prestige pricing. Breadth: It refers to the scope of the market to which the business caters; the variety of customers, their geographic range and numbers of products. Cost Control: It considers the extent to which the org tightly controls costs, refrain from incurring unnecessary innovation or marketing empences and cuts prices in selling a basic product.

Chandler’s Chandler’s Strategy-Structure Thesis •

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“A new strategy required a new or at least refashioned structure if the enlarged enterprise was to be operated efficiently …. Unless structure follows strategy, inefficiency results.” “Unless new structures are developed to meet new administrative needs which result from an expansion of a firm’s activities into new areas, functions, or product lines, the technological, financial and personnel economies of growth and size cannot be realised.” Argument: - The efficient structure for an org with a single product strategy is one that is simple – high centralisation, centralisation, low formalisation formalisation and low complexity - From single-product single-product line, companies companies typically t ypically expand activities within same industry. This vertical integration strategy makes for increased interdependence interdependence among org units and creates the need for a more complex coordinative device. This desired complexity is achieved by redesigning redesigning the structure to form specialised units based on functions performed. - If growth proceeds further into product diversification, again structure must be adjusted if efficiency is to be achieved. This can best be achieved through the creation of a multiple set of independent independent divisions, each responsible responsible for a specified product line. Research: The related and unrelated business strategies were associated with multidivisional structures, while single-business single-business strategies were linked with functional structure. Conclusions - He loo looke ked d only only at at larg large, e, pro profi fitt-ma maki king ng org org.. - He focus focussed sed on on growth growth as as measur measure e of effec effectiv tiven eness ess rath rather er than than profitability. - Defin Definiti ition on of of strat strateg egy y is is far far from from all-i all-incl nclusi usive. ve.

Miles and Snow’s four strategic types •

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They have classified org based on the rate at which they change their  products or market into one of four strategic types: defenders, prospectors, analyzers and reactors. Defenders - They seek stability by producing only a limited set of products directed at a narrow segment of the total potential market. - Within this limited niche, defenders strive aggressively aggressively to prevent competitors from entering their ‘turf’ through standard economic actions such as competitive pricing or production of high-quality products. - They ignore development, environment to find out new areas of  opportunity but there is intensive planning oriented towards cost and other efficiency issues. - Their structure is made up of high horizontal differentiation, differentiation, centralised control and an elaborate formal hierarchy of  communication. Prospectors - Their strength is finding and exploiting new product and market opportunities. - Innovations are more important than high profitability. - They are built its reputation and long term profitability on developing innovative products, getting quickly to the market with those products, exploiting opportunities opportunities while they are still innovative and then getting out. - Their success depends on developing and maintaining maintaining the capacity to survey a wide range of environmental conditions, trends and events. - So it has a low degree of routinisation, mechanisation, flexible structure. Analysers - They try to capitalise on the best of both the preceding types. - Their strategy is to move into new products or new markets only after  viability has been proved by prospectors. - They essentially follow their smaller and more innovative competitors With superior products, but only after their competitors have demonstrated that the market is there. - They seek both flexibility and stability. - They have a dual structure – part of these organisations have high levels of standardisation, routinisation and mechanism for efficienty. Other part are adaptive, to enhance flexibility. Reactors - This label is meant to describe the inconsistent and unstable patterns that arise when one of the other three strategies are pursued improperly. - In general, reactors respond inappropriately, inappropriately, perform poorly and as a as a result are reluctant to commit themselve t hemselves s aggressively to a specific strategy for the future.

Porter’s Competitive Strategies •

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He proposes that management must select a strategy that will give its org competitive advantage. It can choose from among three strategies – Cost leadership, leadership, differentiation and focus. Which one management chooses depends on the org’s strengths and competitor’s weaknesses. weaknesses. Cost-leadership Cost-leadership strategy - These org sets out to t o be the low-cost producer in the industry. - Success requires that the org be the cost leader. - Typical means to become cost leaders are efficiency of operations, economy of scale, low-cost labour or preferential access to raw material. - Best structure is high in complexity, formalisation, centralised. Differential strategy - These org seeks to be unique in its industry in ways that are widely valued by buyer. - It might emphasise high quality, extraordinary service, innovative design, technological capability or an unusual, positive brand image. - The key is that t hat the attribute chosen must be different from those offered by rivals and significant enough to justify a price premium that exceeds the cost of differentiation. differentiation. - It demands a high degree of flexibility, f lexibility, low complexity, complexity, low formalisation and decentralised decision making. Focus Strategy - It aims at a cost advantage or differentiation advantage in a narrow segment. - Org will select a segment or group of segment in an industry (such as product variety, type of end buyer, distribution channel, or  geographical geographical location of buyer) and tailor the strategy to serve them to the exclusion of other. Stuck in the middle - It describes org that are unable to gain a competitive advantage by on of the previous strategy.

Determinants – Technology Woodward’s research Her research, which focused on production technology, was the first major  attempt to view org structure from a technological technological perspective. Background - She chose approx one hundred manufacturing firm in the south of England. - She categorised categorised the firms into one of of three types of technology technology – unit, mass or process production. - She treated these categories as a scale with increasing degrees of  technological technological complexity, with unit being the least complex and process the t he most complex. - Unit producers would manufacture custom-made products such as tailor  made suits, turbines. Mass producers would make large-batch or mass produced products such as refrigerators or ford automobiles. automobiles. Process production included heavily heavily automated continuous process such as oil and chemical refiners. •

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Conclusion - There were distinct relationships between these technology technology classifications and the subsequent structure of firm. - The effectiveness of org were related to the fit between technology and structure. Summary of Woodward’s finding on the relationship between technological complexity and structure Low ------------------------------------------------------------------------------------------------------------------------H ---------------------High igh

Structural Characteristic

Technology Unit Production

Number of vertical levels Supervisor’s Supervisor’s span of control Manager/total employee ratio Proportion of  Skilled workers Overall Complexity

Mass Production

Process Production

3

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6

24

48

14

1:23

1:16

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High

Low

High

Low

High

Low

Formalisation

Low

High

Low

Centralisation

Low

High

Low

Knowledge based Technology – Perrow’s Contribution •

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It considers only manufacturing base as it represents more than 50% of all the org. Background - It looked at knowledge technology rather than at production technology. - According to Perrow, technology means ‘ the action that an individual performs upon an object, with or without the aid of tools or mechanical devices in order to make some change in that object.’ - There are two underlying dimension of knowledge technology technology – Task variability and Problem analyzability. analyzability. - Task variability: - It is the number of exceptions encountered in one’s work. - These exceptions will be few in numbers if the job is high in routineness and vice versa. - Problem analyzability: - It assesses the type of search procedures followed followed to find successful methods for responding adequately to task exceptions. - It can be well defined or ill defined. Using this two dimensions, he has constructed a two by two matrix representing four cells – Routine technologies, technologies, Engineering technologies, Craft technologies and Nonroutine technologies. technologies. - Routine technologies: - Few exceptions and easy to analyse problems. - e.g. mass production processes such as steel, automobiles, bank teller  - Engineering technologies: - A large number of exceptions but can be handled in a rational and systematic manner. - e.g. construction of office building, activities of tax consultants - Craft technologies: technologies: - Relatively difficult problems with a limited set of exceptions - e.g. shoemaking, furniture restoring or performing artist. - Nonroutine technologies: - Many exceptions and difficult to analyse problems - e.g. strategic planning, planning, basic research activities Conclusion Technology

1

Routine

High

Structural Characteristic Centra tralisati satio on Span pan of  control High Wide

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Engineering

Low

High

Moderate

3

Craft

Moderate

Low

4

Nonroutine

Low

Low

Moderatewide Moderatelow

For Formal malisati satio on

Coordination and control Planning and rigid rules Reports and meetings Training and meetings Group norms and group meetings

Technological Technological uncertainty: Thompson’s contribution Thomson’s contribution lies in demonstrating demonstrating that technology technology determines the t he selection of a strategy for reducing uncertainty and that specific structural arrangement can facilitate uncertainty reduction. Background - He proposed three types of technology that are differentiated by the tasks that an organisational unit performs – Long-liked, Long-liked, Mediating, Intensive technology - Long-linked technology - Tasks or operations are sequentially interdependent. - Mass production assembly lines - It requires efficiency and coordination among activities, owing to sequential interdependencies, interdependencies, the major uncertainty facing management lies on the input and output sides of management. - Mediating technology - It is one that links clients on both the input and output sides of the organisation. - e.g. Banks, telephone, telephone, retail stores, employment employment agencies, post offices - Mediators perform an interchange function liking units that are otherwise independent. independent. The linking unit responds with standardising the org transactions and establishing conformity in clients’ behaviour. - Intensive technolog t echnology y - It represents a customised response to a diverse set of contingencies. contingencies. - The exact response depends on the nature of problems and variety of  problems. - Hospitals, research labs, management management consulting firms, military combat teams - A number of multiple resources are available to the org, but only a limited combination is used at a given time depending on the situation. Conclusion - Long linked technology is accompanied by sequential interdependence – the procedures are highly standardised and must be performed in a specified serial order – low complexity and high formalisation - Mediating technology has pooled interdependence interdependence – two or more units each contribute separately to a larger unit – moderate complexity and formalisation - Intensive technology creates reciprocal interdependence interdependence – the outputs of  units influence each other in a reciprocal fashion – high complexity and low formalisation •

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Relationship Relationship between technology and Complexity/Formalisation/Ce Complexity/Formalisation/Centralisation ntralisation Technology and Complexity - Routine technology is positively associated with low complexity. - The greater the routineness, the fewer the number of occupational groups and the less training possessed by professional. professional. - The nonroutine technology is likely lead to high complexity. - As the work becomes more sophisticated sophisticated and customised, the span of  control narrows and vertical differentiation differentiation increases. •

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Technology and Formalisation - Routine technolog t echnology y is positively related with formalisation. Technology and Centralisation Centralisation - The routine technologies technologies would be associated with a centralised structure whereas the nonroutine technology, which would rely more heavily on the knowledge of specialist, would be characterised by delegated decisions.

Organisational Design Options Common elements in Organisations Organisations The operating core: Employees who perform the basis work related to the production of products and services. The strategic apex: Top-level managers who are charged with the overall responsibility responsibility for the org. The middle line: Manager, who connect the operating core to the strategic apex. The technostructure: Analyst who have the responsibility responsibility for effecting eff ecting certain forms of standardisation in org. The support staff: People who fill the staff units, who provide indirect support services for the org. •

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The Simple Structure The simple structure is depicted best as a flat organisation, with an organic operating core and almost everyone reporting to one person where the decision-making power is centralised. Strength - Simplicity - Fast and flexible - Clear accountability, minimum amount of goal ambiguity Weakness - Limited applicability - With increased size, this structure proves inadequate. - Concentrate power in one person - Concentration of power can work against the org’s effectiveness and survival. When should be used - Small or in formative stage of development development - Environment is simple and dynamic - Org faces high hostility or crisis or senior management management is owner  - Number of employees are few •

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The Machine Bureaucracy Features - Highly routine operating tasks - Tasks are grouped into functional department - Centralised authority - Decision making that follows the t he chain of command - An elaborate administrative administrative structure with a sharp distinction between line and staff activities Strength - Ability to perform standardised activities in a highly efficient manager  - It requires less talented hence less costly middle and lower level managers - The pervasiveness pervasiveness of rules and regulations substitute for managerial discretion. - Standardised operations coupled with high formalisation, allow decision making to be centralised. Weakness - Specialisation creates subunit conflicts. - Functional unit goals can override the overall goals of org. - Not effective for solving new problems When should be used •

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- Large size, a simple and stable environment and technology that contains routine work that can be standardised. The Professional Bureaucracy It has been created to allow org to hire highly trained specialists specialists for the operating core, while still achieving achieving the efficiencies from standardisation. Features - Jobs require a high level of specialised expertise - The power in this design rests with the operating core because they have the critical skills that the org needs and they have t he autonomy – provided through decentralisation to apply their expertise. - These professionals professionals perform their activities relatively relatively autonomously, autonomously, but the structure is high in complexity complexity and there are lots of rules and regulations; however, the formalisation is internalised rather than imposed by the org. Strengths - It can perform specialised specialised tasks that require the skills of highly trained professional. Weaknesses - Tendency for subunit conflicts to develop - Compulsive in their determination to follow f ollow the rules. When should be used - Large size, a complex and stable environment and a routine technology internalised internalised through professionalisation. professionalisation. - The org’s operating core will be dominated by skilled professionals who have internalised difficult-to-learn but nevertheless well defined procedures. •

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The Divisional Structure Feature - The divisional divisional structure is actually a set of autonomous units, each typically a machine bureaucracy into itself, coordinated by a central HQ. - Middle management gets a great deal of control - Each division is generally autonomous with divisional managers responsible for performance and holding complete strategic and operating decision making authority. - Central HQ provides support services to the divisions. - The division tend to be organised into functional groups with high division of  labour, high formalisation and centralised authority in the division managers. Strengths - It provides more accountability accountability and focus on outcomes. - HQ staff can concentrate on long term, strategic decisions instead on day to day operating details. - Excellent vehicle for training t raining and developing developing general managers - Ineffective performance in one division has little effect on the other divisions. - Creation of self-contained self-contained business ‘within a business’. business’. Weaknesses - Duplication of activities and resources - It stimulates conflicts. - Autonomy is more in theory than in practice. - It creates coordination problems problems When should be used - Product and market diversity - Org technical system can be efficiently separated into segments - Environment is neither very complex nor dynamic •

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The adhocracy Features - High horizontal differentiation, differentiation, low vertical differentiation, low formalisation, decentralisation decentralisation and great flexibility and responsiveness responsiveness - Staff are professional with a high level of expertise - Few rules and regulations - Power flows to anyone with expertise regardless of his or her position Strength - Ability to respond rapidly to change and innovation and to facilitate the coordination of diverse specialists - Adaptable and creative Weaknesses - Conflict - No clear boss-subordinate relationship relationship - Ambiguities over authorities and responsibilities - lacks advantages of standardised standardised work - Employees undergo stress and tensions as it is not easy to set up and dismantle work relationship on a continuing basis When should be used - Strategies of diversity, change and high risk - When requires flexibility - Technology is non routine and complex - Environment Environment is dynamic dynamic and complex - In the early years of org’s life cycle •

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Bureaucracy: Bureaucracy: A Closer Look Features of Bureaucracy • • • • • • •

Division of labour  Well-defined Well-defined authority hierarchy High formalisation formalisation Impersonal nature Employment decisions based on merit Career track for employees Distinct separation of members’ organisational organisational and personal lives

Criticism of Bureaucracy •

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Goal Displacement - It means displacement of org goals by subunit or personal goals - Rules become more important than the ends that they were designed to serve, the result being goal displacement displacement and loss of org effectiveness. - Specialisation and differentiation create subunits with different goals. The goals of each separate subunit become primary to the subunit members. - Rule and regulations not only define unacceptable behaviours behaviours but also define minimum levels of acceptable performance. - Decision makers use adherence to rules to protect themselves from making errors. Inappropriate application application of rules and regulations - Bureaucracies breed such devotion to rules that members blindly repeat decisions and actions that they have made a number of times before, unaware that conditions are changed. Employee alienation - Members perceive the impersonality of the org as creating distance between them and their work. - High formalisation further reinforces one’s feeling of being irrelevant – routine activities can be easily learned by others, making employees feel interchangeable and powerless. Concentration of power  - It generates an enormous degree of power in the hands of very few. Non member frustration

Is Bureaucracy a structural dinosaur? • • • •

Rapid and unexpected change Growth in size Increased diversity Changes in managerial behaviour  - a new concept of human being - a new concept of power  - a new concept of org values

You cannot ignore the obvious: Bureaucracies are everywhere •

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It works - Regardless of technology, environment environment and so on, it is effective in a wide range of organised activities. Large size prevails - It is efficient with large size. Societal values are unchanging unchanging - Bureaucracy is consistent with the values of order and regimentation. regimentation. Environmental Environmental turbulence is exaggerated - Environment may not be as dynamic as assumed - Changes are no more dynamic now - Impact of uncertainties uncertainties in the environment on the org are substantially reduced as a result of managerial strategies. The professional bureaucracy has emerged - The increased need for technical expertise in org and the rapid expansion of  knowledge based industries has been handled neatly by professional bureaucracy. Bureaucracy maintained control - High standardisation preferably with centralised power in the hands of the dominant coalition, coalition, is desired by those in control.

Adhocracy: A Closer Look 

Matrix •

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It is a structural design that assigns specialists from specific functional departments to work on one or more interdisciplinary teams, which are led by  project leaders. It breaks unity of command. Employees in the matrix have two bosses – their functional department manager and their project manager. Authorities are shared between two managers Situation under which it should be used - Environmental pressure from two or more critical sectors - Interdependence between departments - Economies of scale in the use of internal resources Types of Matrix Structures – Temporary, Permanent

Theory A, J, Z Theory A Short-term employment Spec Specia iali lissed care career er path ath

Theory J Life-time employment Nonsp onspec ecia iali lise sed d care career er path ath

Individual decision making Ind Individ ividua uall res respons ponsib ibil ilit ity y Frequent appraisal Explicit, formalised appraisal

Consensual decision making Coll Collec ecti tiv ve res resp pons onsibil ibilit ity y Infrequent appraisal Implicit, informal appraisal

Rapid promotion Segmented concern for   people

Slow promotion Comprehensive concern for people

Theory Z Long-term employment Mode Modera rate tely ly speci pecial alis ised ed career paths Consensual decision making Indi Indiv vidu idual resp respo onsib nsibil ilit ity y Infrequent appraisal Implicit, informal appraisal with explicit, formalised measures Slow promotion Comprehensive concern for people

The Collateral Form •

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It is a loosely structured organic appendage designed to coexist side by side with a bureaucracy on a relatively permanent basis. They are typically small teams or separate business units that are given the independence and resources to experiment. They can pursue their own ideas without rules, time consuming analysis and approvals. By creating adhocracies within bureaucracies, a large corporation can stimulate creativity and innovation, cut product-development time and hold on to bright and achievement oriented employees.

The Network Structure •

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It is a small central organisation that relies on other organisations to perform manufacturing, distribution, marketing or other crucial business functions on a contract basis. Management contracts out all the primary functions of the business. The core of the network organisation is a small group of executives. Their job is to oversee directly any activities that are done in-house and to coordinate relationships with the other organisations that manufacture, distribute and  perform other crucial functions.

Other Examples of Adhocracy •

The Task Force - It is a temporary structure formed to accomplish a specific, defined and complex task that involves a number of organisation subunits. - Members serve on the task force until its goal is achieved. - It is desirable when org is confronted with a task whose success is critical to org which has specific time and performance standards is unique and unfamiliar and requires functions that are independent.

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The Committee Form - It is desirable when - A broad range of experience and backgrounds be brought to bear on a decision - When those who will be affected by a decision are allowed to be represented - When it is desirable to spread the work load

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The Collegial Form - A structural form of adhocracy fashionable in universities, research labs and other highly professional organisation. - Full democracy in the making of all important decisions. - All the key decisions are made by the department as a whole. - It represents the utmost in decentralisation.