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1. Managing Organizational Design and Change
Designing Organizations
Contemporary Management

2. Factors Affecting Organizational Structure
© Copyright 2004 McGraw-Hill. All rights reserved. 7–2
Figure 7.1

3. Organizational Environment
• The quicker the environment changes, the more problems
face managers, org. design must be more flexible (i.e., flat
and decentralized authority) when environmental change is
rapid.
Strategy
• A differentiation strategy needs a more flat and
flexible structure, low cost may need a more formal
structure.
• Increased vertical integration or diversification also
requires a more flexible structure.
© Copyright 2004 McGraw-Hill. All rights reserved. 7–3
Factors Affecting Organization Design

4. Technology
Technology refers to the combination of skills, knowledge,
tools, equipment, computers and machines used in the
organization.
• Organizations utilizing complex technology require a
flexible structure to be managed efficiently.
• Organizations utilizing routine technology can be more
readily managed using a formal structure.
Human Resources
• Highly skilled workers whose jobs require working in
teams usually need a more flexible structure.
• Higher skilled workers (e.g., professors and doctors)
often have internalized professional norms.
© Copyright 2004 McGraw-Hill. All rights reserved. 7–4
Factors Affecting Organization Design

5. Organization Design Options
5

6. Functional Design
© Copyright 2004 McGraw-Hill. All rights reserved. 7–6
Figure 7.3
Works best when..
 Business environment is stable and predictable.
 Organization is small to medium in size.
 Quality is maintained through routine tasks.
An organizational structure composed of all the departments that
an organization requires to produce its goods or services.

7. Functional Design
Advantages:
• Reinforce specialized skills and resources.
• Reduces duplication of scarce resources.
• Encourages learning from others doing similar jobs.
• Easy for managers to monitor and evaluate workers.
Disadvantages:
• Short-term focus on routine tasks.
• Difficult for departments to communicate with others.
• Preoccupation with own department and losing sight of
organizational goals.
© Copyright 2004 McGraw-Hill. All rights reserved. 7–7

8. Organizational Uses of Place Design
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9. Organizational Uses of Place Design
Advantages:
• Each department or division is in direct contact with customers in
its locale and can adapt more readily to their demands.
• Lower costs for materials, freight, and perhaps labor may result.
• Marketing strategies and tactics can be tailored to geographic
regions.
Disadvantages:
• Control and coordination problems increase.
• Employees may begin to emphasize their own unit’s goals and
needs rather than those of the entire organization.
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10. Organizational Uses of Product Design
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11. Organizational Uses of Product Design
Advantages:
• Reduces the information overload that managers face in a purely
functional design.
• More effective handling of the business is possible.
Disadvantages:
• Duplicating functions and resources, e.g a different sales team
for each division.
• Dispersing technical expertise across smaller units.
• Creating negative rivalries between divisions.
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12. Organizational Uses of Multidivisional Design
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13. Organizational Uses of Multidivisional Design
• Eases problems of coordination by focusing functional expertise and
knowledge on specific goods or services
• A firm must have a large number of managerial personnel to oversee
all the product lines
• Higher costs result from the duplication of various functions
• Often reduces the environmental complexity facing any one team,
department, or division.
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14. Basic Options in Multinational Design
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15. Organizational Uses of Multinational Design
A worldwide product-line division may not be as effective at
opening new territories as a geographically organized division,
since the division operating under a place design often:
• Can establish relations with host governments.
• Invest in distribution channels.
• Develop brand recognition.
• Build competencies that no single product-line division could
afford.
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16. Organizational Uses of Network Design

17. Advantages:
• Versatile, scalable, and adaptable.
• Allows companies to outsource business activities to free staff to focus
on higher-value strategic work.
• Allows companies with multiple satellite locations or far divisions to
work with external partners flexibly.
• Allows for a more effective resolution of complex tasks.
Disadvantages:
• Since teams are independent and small, network-centric organizations
may find it difficult to achieve large-scale tasks.
• The success of the teams depends on the knowledge, skills and
motivation of individuals on each team, so an unmotivated team may
impact the overall goal achievement.
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Organizational Uses of Network Design

18. Organizational Uses of Virtual Design
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19. Organizational Uses of Virtual Design (cont.)
 Virtual networks are flexible and promote learning by integrating
information and knowledge between the different organizations that
make them up.
 Managers delegate authority and responsibility to employees while
providing a clear vision of the organization’s purpose and goals
 Structure can be changed quickly to meet changing conditions and
situations.
 Employees can respond fastly to changing customer demands with
customized products and services available at any time and place.
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20. Organizational Uses of Virtual Design (cont.)
Advantages:
• Increased Productivity
• No Unnecessary Meetings
• Healthy Work-Life Balance
• Improved Employee Retention Rates.
Disadvantages:
• Reduced Team Collaboration
• Social Isolation
• Hidden Technological Costs
• Potential Security Risks
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21. Matrix Design
© Copyright 2004 McGraw-Hill. All rights reserved. 7–21

22. Tall and Flat Organizations
Tall structures have many levels of authority and narrow spans of
control.
• As hierarchy levels increase, communication gets difficult,
creating delays in the time being taken to implement decisions.
• Communications can also become garbled as it is repeated
through the firm.
Flat structures have fewer levels and wide spans of control.
• Structure results in quick communications but can lead to
overworked managers.
© Copyright 2004 McGraw-Hill. All rights reserved. 7–22

23. Flat Organizations
© Copyright 2004 McGraw-Hill. All rights reserved. 7–23

24. Tall Organizations
© Copyright 2004 McGraw-Hill. All rights reserved. 7–24

25. Thank You
Contemporary Management