What is the right organization structure?

Robert Duncan (1979)

Organization structure is a pattern of interactions and coordination that
links the technology, tasks, and human components of the organization to
ensure that the organization accomplishes its purpose. // Organizational
design is the allocation of resources and people to a specified mission and
the structuring of these resources to achieve the mission.
think of organization structure from an information-processing view.
Facilitates the flow of information within the organization in order to
reduce uncertainty in decision-making.
Achieve effective coordination-integration; the structure of the
organization should integrate organizational behavior across the
parts of the organization so it is coordinated.
o Pooled interdependence org parts are independent and
linked together only in contributing something to the same
overall org.
o Sequential interdependence ordering of activities; one unit
must perform activity so next unit can act.
o Reciprocal interdependence most complex; Unit A output
goes to Unit B, and unit B output goes back go Unit A. More
complex coordination required: coordination by feedback.
When organizational structure is formalized and centralized, information
flows are restricted, and, as a consequence, the organization is not able to
gather and process the information it needs when faced with uncertainty.
E.g. when org structure is highly centralized, decisions are made at the
top, and information tends to be filtered as it moves up the chain of
command.
The decentralized organization
Managers only have to worry about their own products/services
Dont have to compete for shared resources
Particularly effective when the orgs environment is very complex
(e.g. health products organization)
LIABILITY: inability to provide integration-coordination among the
divisions.
As todays org environments become more complex and interdependent,
large decentralized corporations are finding that the need to integration
has increased:
1. Increased level of regulation orgs face requires more cross-division
coordination.
2. Changing org environments.
3. Technological changes, eg. shared R&D services.
4. Cost of making wrong strategic decisions is increasing; often
results from lack of contact between divisions.

5. Scarce resources eg. capital and raw materials (eg. University to

focus on undergrad or professional schools?)
org designers must increase the information flow to reduce uncertainty
and facilitate coordination.
When coordination between units becomes more complex, an integrator
role may be necessary to coordinate and moderate diverse orientations
(units have different subgoals). The manager needs certain
characteristics:
1. Wide contacts so he possesses relevant info about the different
units
2. Understand and share the goals and orientations of different groups
3. Broadly trained technically, so he can talk the language of the
different groups
4. Groups must trust him
5. Exerts influence on the basis of his expertise rather than through
formal power; this way, they will be more committed to
implementing the solution
6. Excellent conflict resolution skills
Matrix organizations
Useful when an organization wants to focus resources on producing a
particular product or service.
However, complicated to manage: both project managers and traditional
functional area managers are involved, meaning personnel have two
bosses, and thus there is an inherent potential for conflict. when
informational/technological requirements are such that a full-time focus on
the market/product is needed, then the matrix org can be helpful. E.g.
Citibank uses the structure in its international activity to concentrate on
geographic areas.
Functions required:
1. Organizations reward structure must support and reward
cooperative problem solving that leads to coordination and
integration.
2. Managers who are assigned to participate in lateral relations must
have responsibility for implementation + line managers should be
involved.
3. Participants must have the authority to commit their units to action.
4. Lateral processes must be integrated into the vertical information
flow.
Required participants skills:
1. Must deal with conflict effectively; identifying and engaging in
problem solving.
2. Good interpersonal skills; effective communication.
3. Influence and power should be based on expertise rather than
formal power.

Costs of inappropriate organizational structure

Organizational decision makers may not be able to anticipate
problems before they occur.
Decision makers may error in trying to predict trends in their
environment; lose control over the relationship between its internal
functioning and its environment.
Organization may not be able to get key information for decisionmaking to the right place.
Poor fit between structure and environment may show at the level of the
individual in terms of an increase in role conflict or role ambiguity.

Summary
Advantages in using design decision tree?
1. Provides a broad framework for identifying the key factors a
manager should think about in considering org design.
2. Forces the manager to diagnose the decision environment.
3. Causes managers to think about how much interdependence there
is among segments of the organization.
4. Once the org is either a function or decentralized structure, the
decision tree points out what can be done to meet the increased
needs for information through the use of lateral relations.