DWO

IIM - L
23rd to 25th OCT, 2019
MEASURING ORGN EFFECTIVENESS- 4 APPROACHES
Strategy constituents
approach

Employees

Owners Govt

Customers
Suppliers

Creditors Community
Organization:
Activities &
Product/service output
Resource inputs Processes

Resource based approach Product

Internal process
approach approach
EFFECTIVENESS VALUES – 4 APPROACHES
Structure -
Flexibility

HUMAN RELATIONS EMPHASIS OPEN SYSTEM EMPHASIS

Primary goal: Human resource
development.
Sub goals: Cohesion, morale,
training
Internal
control
INTERNAL PROCESS ANALYSIS
Primary goal: Stability, equilibrium
Sub goals: Information
management, communication.
Primary goal: Growth and resource
acquisition.
Sub goals: Flexibility, readiness,
external evaluation.
External
control
RATIONAL GOAL EMPHASIS
Primary goal: Productivity, efficiency,
profit.
Sub goals: Planning, goal setting

Structure –
Control
EFFECTIVENESS VALUES – 4 APPROACHES
Structure -
Flexibility

HUMAN RELATIONS EMPHASIS OPEN SYSTEM EMPHASIS

ORGANIZATION- A
Internal External
control control

ORGANIZATION- B

INTERNAL PROCESS ANALYSIS RATIONAL GOAL EMPHASIS

Structure –
Control
 Two Organization Design Approaches

MECHANICAL SYSTEM DESIGN NATURAL SYSTEM DESIGN

VERTICAL
HORIZONTAL
STRUCTURE
STRUCTURE
ORGANIZATIONAL
CHANGE FOR
ROUTINE RIGHT PERFORMANCE ADAPTIVE
EMPOWERED
TASKS CULTURE ROLES CULTURE

FORMAL COMPETITIVE SHARED COLLABORATIVE

SYSTEMS STRATEGY INFORMATION STRATEGY
STABLEENVIRONMENT;EFFICIENT TURBULENT ENVIRONMENT;
PERFORMANCE LEARNING ORGANIZATION
 Challenge – Managing Differentiation
DIFFERENTIATION: ALLOCATION OF PEOPLE TO TASKS AND ESTABLISHING AUTHORITY STRUCTURE
IN SIMPLE ORGANIZATIONS DIFFERENTIATION IS LOW; FEW PROBLEMS OF COORDINATION

OWNERS MANAGER
OWNERS CHEFS
CASHIERS
BARTENDERS
SERVER KITCHEN STAFF
SERVERS
Building Blocks of Differentiation
ORGANIZATION

DIVISION
SUBUNIT OF PEOPLE WORKING TOGETHER
FUNCTION
AS ORGANIZATIONS GROW IN SIZE – FURTHER DIFFERENTIATE
INTO 5 FUNCTIONS:

1. MAINTENANCE
ROLES; BUILDING BLOCKS OF DIFFERENTIATION
2.SUPPORT
ROLE 3. PRODUCTION
4. ADAPTIVE
5. MANAGERIAL
 Managing Vertical/Horizontal Differentiation
ORGANIZATION OF ROLES ACCORDING TO AUTHORITY IS HIERARCHY
VERTICAL DIFFERENTIATION: DESIGN OF AUTHORITY STRUCTURE TO LINK ROLES/SUBUNITS TO CONTROL
ACTIVITIES AND INCREASE ABILITY TO CREATE VALUE.
HORIZONTAL DIFFERENTIATION: ORGANIZING TASKS INTO ROLES AND ROLES INTO SUBUNITS TO ENABLE
PEOPLE TO EXERCISE SPECIALISATION AND INCREASE ABILITY TO CREATE VALUE.

OWNERS MANAGER
OWNERS CHEFS
CASHIERS
BARTENDERS
SERVER KITCHEN STAFF
SERVERS
Organizational Design Challenges

BALANCING
DIFFERENTIATION INTEGRATION

BALANCING
CENTRALIZATION DECENTRALIZATION

BALANCING
MUTUAL
STANDARDIZATION
ADJUSTMENT
Building Authority and Control
• We will now look at the following issues:

Why hierarchy of authority emerges and process of vertical

differentiation.
Issues involved in designing hierarchy and its impact on coordination
and motivation.
Size and Height Limitations

Flat
Tall structure
structure
Relationship Between Size and Levels
NUMBER OF HIERARCHICAL LEVELS

10 9 8 7 6 5 4 3 2 1 0

1,000 3,000 9,000 10,000 100,000

NUMBER OF EMPLOYEES
Relationship Between Size and Managerial Component
0 100 200 300 400 500 600 700 800
14% INCREASE
NUMBER OF MANAGERS

33% INCREASE

66% INCREASE
50% INCREASE

1,000 2,000 3,000 6,000 10,000

NUMBER OF ORGANIZATIONAL MEMBERS

Span of Control

x y X U
Y

Z V
z
W
Factors Affecting the Hierarchy
THE LEVEL OF HORIZONTAL
DIFFERENTIATION

THE LEVEL OF VERTICAL

THE LEVEL OF
DIFFERENTIATION IS
DECENTRALIZATION
AFFECTED BY

THE LEVEL OF
STANDARDIZATION
Horizontal Differentiation into Functional Hierarchies
CEO

3 3 7

2
5
2

1 1 2
1
R&D SALES MANUFACTURING MATERIALS ENGINEERING
Horizontal Differentiation Within R&D Functions
CEO

R&D SALES & MKT MANUFACTURING MATERIALS FINANCE

Designing Organizational Structures
• How to group and coordinate tasks that increase efficiency and
organizational performance. – by creating optimal pattern of vertical
and horizontal relationships among roles, functions, etc.
STRUCTURAL DESIGN
• Examine how application of basic structures depends on various
contingencies.
• Outline symptoms of structural misalignment
STRUCTURAL DESIGN
ORGANIZATION STRUCTURE
• Designates formal reporting relationships, number of levels in
hierarchy and span of control.
• Identifies grouping together of individuals into departments and
departments into total organization.
• Includes design of systems to ensure effective communication,
coordination and integration of effort across departments.
STRUCTURAL DESIGN
Information sharing perspective on structure
Vertical information sharing.
• Vertical linkages to coordinate activities between top and lower for
control – devices such as hierarchical referral, rules, plans, MIS.
Horizontal information sharing and coordination.
• Information sharing
• Liaison roles
• Task forces
STRUCTURAL DESIGN
• Full time integrator
• Teams

Relational coordination
• Frequent, timely, problem solving communication carried out through
relationship of shared goals, shared knowledge and mutual respect.
Not a device but part of organization culture – achieves highest level
of horizontal communication.
 Functional Structure
CEO

R&D SALES & MKT MANUFACTURING MATERIALS FINANCE

STRUCTURAL DESIGN
FUNCTIONAL STRUCTURE
Strengths
• Allows economies of scale within functional departments.
• Enables in depth knowledge and skill development.
• Enables accomplishment of functional goals.
• Is best with only one or few products.
Weaknesses
• Slow response to environment challenges.
Functional Structure - Problems
• Communication – sub unit orientation
• Measurement
• Location
• Customer problems
• Strategic problems – tied down by coordination issues
STRUCTURAL DESIGN
• May cause decisions to pile up at top – hierarchy overload
• Poor horizontal coordination
• Restricted view of organizational goals.

• Remedy lies in divisional structure

Divisional Structure
• 3 choices
• Depending on whether control problem is due to complexity of
products, locations or customers.
 Product Division Structure
CEO

VP – SALES & MKT VP – R&D VP - MATERIALS VP - FINANCE

CAN FROZ FROZ BAKED

SOUP VEG ENTRE GOODS
DIV DIV DIV DIV
Product oriented functional teams for divisions
REASEARCH AND DEVELOPMENT

TEAM - 1 TEAM - 2 TEAM - 3 TEAM - 4

CAN FROZ FROZ BAKED

SOUP VEG ENTRE GOODS
DIV DIV DIV DIV
 Multidivisional Structure
CEO
CORPORATE HQ STAFF

VP - MARKETING VP -FINANCE VP - MATERIALS VP – R&D CORPORATE MANAGERS

DIVISION DIVISION DIVISION DIVISION DIVISIONAL

A B C D MANAGERS

FUNCTIONAL MANAGERS
Divisional Structure: Geographic Structure

REGIONAL
OPERATIONS

CEO
REGIONAL REGIONAL
OPERATIONS CENTRAL SUPPORT OPERATIONS
FUNCTIONS

REGIONAL
OPERATIONS

Individual Stores
STRUCTURAL DESIGN
DIVISIONAL ORGANIZATION STRUCTURE
Strengths
• Suited to fast changes in unstable environment
• Leads to customer satisfaction because product responsibility clear.
• Involves high coordination across functions.
• Allows units to adapt to product differences, regions, customers.
• Best in large organizations with several products.
• Decentralizes decision making.
STRUCTURAL DESIGN
Weaknesses
• Eliminates economies of scale in functional departments
• Poor communication across product lines
• Eliminates in-depth competence and technical specialization.
• Makes integration and standardization across product lines difficult.
 Divisional Structure – Market Structure
CEO

CENTRAL SUPPORT
FUNCTIONS

COMMERCIAL CONSUMER GOVERNMENT CORPORATE

DIVISION DIVISION DIVISION DIVISION