Organisation Design

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Organisation Design


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Organisation Design:

Organisation Design Dr. G C Mohanta , BE, MSc( Engg ), MBA, PhD(Mgt) Professor Al- Qurmoshi Institute of Business Management Hyderabad

Organization Design:

Organization Design Organization design is about enabling a group of people to combine, coordinate and control resources & activities in order to produce value, all in a way appropriate to the environment in which the business competes. Designing is a process and we cannot have a pre-dominant form which is fixed forever. It must constantly change and evolve with the changing environment. Appropriate organizational design enables an organization to execute better, learn faster, and change more easily. 2

Organization Design (Contd.):

Organization Design (Contd.) Organization design is one of the most important determinant which each manager must know to be successful in implementing strategy in an organization. The manager must be masters in strategy, accounting, psychology, IT & many other fields to be successful in organization design. In every job, worker’s actions are influenced by the situation in which the person works in. As a result, to achieve an effective performance, companies must align various organizational features. 3

Organization Design (Contd.):

Organization Design (Contd.) Organization design deals with modifying elements of an organization’s structure, including division of labour, allocation of decision rights, choice of coordinating mechanisms, delineation of organizational boundaries, and networks of informal relationships. Organizational performance is the result of the interaction of strategy, organizational context & individual behaviour. Managers need to choose the right approach to the right markets, create processes to deliver quality goods and/or services to those markets, and motivate people to act in line with the company’s objectives. 4

Organization Design (Contd.):

Organization Design (Contd.) Organizational design takes into account all three critical performance factors: strategy, organization, and motivation. For organization design, we have to consider different forms of organisation structure: Functional structures, process structures, product, geographical, market structures, matrix, project organizations, boundaryless organization, etc. 5

Organizational Structure & Organizational Chart:

6 Organizational Structure & Organizational Chart Organizational Structure : The formal configuration between individuals and groups with respect to the allocation of tasks, responsibilities, and authorities within organizations. Organizational Chart : A diagram representing the connections between the various departments within an organization: a graphic representation of organizational design.

Organizational Structure & Organizational Chart:

Organizational Structure & Organizational Chart

Purposes of Organizing:

Purposes of Organizing 8 Divides work to be done into specific jobs and departments Assigns tasks and responsibilities associated with individual jobs Coordinates diverse organizational tasks Clusters jobs into units Establishes relationships among individuals, groups, and departments Establishes formal lines of authority Allocates and deploys organizational resources

Elements in Organizational Design:

Elements in Organizational Design Six key elements: Work specialization Departmentalization Authority & responsibility Span of control Centralization vs . decentralization Formalization

Work Specialization:

Work Specialization The degree to which tasks in the organization are divided into separate jobs with each step completed by a different person Overspecialization can result in human diseconomies from boredom, fatigue, stress, poor quality, increased absenteeism and higher turnover 10



Authority & Responsibility:

Authority & Responsibility Authority The rights inherent in a managerial position to tell people what to do and to expect them to do it Responsibility The obligation or expectation to perform. Responsibility brings with it accountability (the need to report and justify work to manager’s superiors) Unity of Command The concept that a person should have one boss and should report only to that person Delegation The assignment of authority to another person to carry out specific duties 12

Chain of Command:

Chain of Command The continuous line of authority that extends from upper levels of an organization to the lowest levels of the organization and clarifies who reports to whom 13

Line and Staff Authority:

Line and Staff Authority Line managers are responsible for the essential activities of the organization, including production and sales. Line managers have the authority to issue orders to those in the chain of command The president, the production manager, and the sales manager are examples of line managers Staff managers have advisory authority, and cannot issue orders to those in the chain of command (except those in their own department) 14

Span of Control:

Span of Control The number of employees who can be effectively and efficiently supervised by a manager Width of span is affected by: Skills and abilities of the manager and the employees Characteristics of the work being done Similarity of tasks Complexity of tasks Physical proximity of subordinates Standardization of tasks Sophistication of the organization’s information system Strength of the organization’s culture Preferred style of the manager 15

Centralization vs Decentralization:

Centralization vs Decentralization Centralization The degree to which decision making is concentrated at a single point in the organization Organizations in which top managers make all the decisions and lower-level employees simply carry out those orders Decentralization The degree to which lower-level employees provide input or actually make decisions Employee Empowerment Increasing the decision-making discretion of employees 16


Formalization The degree to which jobs within the organization are standardized and the extent to which employee behaviour is guided by rules and procedures Highly formalized jobs offer little discretion over what is to be done Low formalization means fewer constraints on how employees do their work 17

Traditional Organizational Designs:

Traditional Organizational Designs 18 Simple Structure Low departmentalization, wide spans of control, centralized authority, little formalization Functional Structure Departmentalization by function Operations, finance, human resources, and product research and development Divisional Structure Composed of separate business units or divisions with limited autonomy under the coordination and control of the parent corporation

Contemporary Organizational Designs:

Contemporary Organizational Designs Team Structures The entire organization is made up of work groups or self-managed teams of empowered employees Matrix Structures Specialists for different functional departments are assigned to work on projects led by project managers Matrix participants have two managers Project Structures Employees work continuously on projects, moving on to another project as each project is completed 19

A Matrix Organization Structure:

A Matrix Organization Structure 20 Design Engineering Manufacturing Contract Administration Purchasing Accounting Human Resources (HR) Design Group Alpha Project Manufacturing Group Contract Group Purchasing Group Accounting Group HR Group Design Group Beta Project Manufacturing Group Contract Group Purchasing Group Accounting Group HR Group Design Group Gamma Project Manufacturing Group Contract Group Purchasing Group Accounting Group HR Group Design Group Omega Project Manufacturing Group Contract Group Purchasing Group Accounting Group HR Group

Contemporary Organizational Designs (cont’d):

Contemporary Organizational Designs (cont’d) Boundaryless Organization A flexible and an unstructured organizational design that is intended to break down external barriers between the organization and its customers and suppliers Removes internal (horizontal) boundaries: Eliminates the chain of command Has limitless spans of control Uses empowered teams rather than departments Eliminates external boundaries: Uses virtual, network, and modular organizational structures to get closer to stakeholders 21

Boundaryless Organization:

Boundaryless Organization Virtual Organization A virtual organization is one whose members are geographically apart, usually working through Information and Communication Technology, while appearing to others to be a single, unified organization. Network Organization A group of legally independent companies or subdiary business units that use various methods of coordinating and controlling their interaction in order to appear like a larger entity. Modular Organization A modular organization refers to a business that can be separated and recombined to work more efficiently. 22

Contemporary Organizational Designs (cont’d):

Contemporary Organizational Designs (cont’d) Learning Organization An organization that has developed the capacity to continuously learn, adapt, and change through the practice of knowledge management by employees Characteristics of a learning organization: An open team-based organizational design that empowers employees Extensive and open information sharing Leadership that provides a shared vision of the organization’s future, provides support & encouragement A strong culture of shared values, trust, openness, and a sense of community 23

Characteristics of a Learning Organization:

Characteristics of a Learning Organization 24 Organizational Design • Boundaryless • Teams • Empowerment Organizational Culture • Strong Mutual Relationships • Sense of Community • Caring • Trust Information Sharing • Open • Timely • Accurate Leadership • Shared Vision • Collaboration LEARNING ORGANIZATION

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