Learning

organization
 Group members
• Devika Shinde P-34
• Pradnya Bhalerao C-03
• Sukhada Kulkarni P-17
• Puja Govekar P-09
• Dhanraj Koli P-16
• Anandita Singh C-34
• Jayashree Prabhu C-43

10/07/09 2
 Flow of presentation
•General
introduction to Organizational theories and design – Classical & Neoclassical Theory,
Differentiation, Organizational Role, Vertical and horizontal differentiation.

• Balancing
differentiation & integration – What is differentiation?, Challenges of horizontal differentiation , What is
integration?, 7-integrating mechanism, Differentiation & Integration-key aspects.

•Balancing
Centralization & Decentralization-What is Centralization?, What is decentralization?, advantages &
disadvantages.

•Balancing
standardization & Mutual adjustment –
Standardization, Mutual adjustment, Balancing standardization & Mutual adjustment, Socialization, Standardization Vs
Mutual adjustment.

10/07/09 3
 …..continued
• Mechanistic and Organic Organizational Structure – Mechanistic structure,
Organic Structure, Mechanistic v/s Organic Structure, Contingency Approach to Organizational
Design, Tom burns and G.M. Stalker theory, McDonald Changing Environment, Identify the
organization structure.

• Functional structure – Functional structure its advantages & disadvantages, control problem,
Divisional structure & types.

• Divisional Structures – Divisional Structure I- I) Product structures , types, comparison & its
advantages & disadvantages, II) Product Team Structure , Divisional Structure II- Geographic
Structure, Divisional Structure III- Market Structure.

• Matrix structure – Matrix structure its advantages & disadvantages, Multidivisional Matrix
Structure, Network Structure its advantages & disadvantages, Boundary-less Organization, conclusion

4
DEVIKA SHINDE
Roll No. – p-34
 General
introduction to
Organizational
theories and
design
 What is Organizational
Design
• Developments in or changes to the structure
of an organization

• Organization Design refers to the process of

coordinating the structural elements of an
organization in the most appropriate manner
Key elements of organizational
designs:

Work Authority and

Specialization Responsibility

Chain Centralization vs.

of Command Decentralization

Span of Control Departmentalization

 Organizational Theories

The current state of organization theory is the

result of an evolutionary process. Theories
have been introduced, evaluated and refined
over time ; new insights tend to reflect the
limitations of earlier theories.
 Classical & Neoclassical
Theory
• Classical organizational theorists (such as Weber,
Taylor ) believed that a universally best way to
design organizations exists, an approach based on
high efficiency.

• Neoclassical organizational theorists (such as

McGregor,Argyris ) their approach emphasizes the
need to pay attention to basic human needs to
succeed and express oneself.
Differentiation
 Differentiation

• The process by which an organization allocates

people and resources to organizational tasks
and establishes the task & authority
relationships that allows organization to
achieve its goal.

• Process of establishing division of labour.

 Example
• Differentiation at B.A.R. and Grille restaurant.
 Organizational Role

• The basic building block of differentiation.

• It is the set of task – related behaviors required of a

person by his or her position in an organization.

• Example of B.A.R. and Grille restaurant.

 Contd…..

• Authority

• Control
 Sub units

• Function: is a sub-unit composed of group of people,

working together, who possess similar skills or use same
kind of knowledge, tools or techniques to perform their jobs
– Support functions
– Production function
– Maintenance
– Adaptive
– Managerial
 Sub-units
• Division: A sub unit that consists of a
collection of functions or departments that
share responsibility for producing a particular
good or service.
 Vertical and horizontal
differentiation

• Hierarchy

• Vertical differentiation

• Horizontal differentiation
 PRADNYA BHALERAO
Roll No. – C-03

10/07/09 19
Balancing differentiation &
integration
 What is differentiation?

The process by which an organization allocates

people & resources to organizational tasks &
establishes the tasks & authority relationships
that allow the organization to achieve its goal.
 Challenges of horizontal
differentiation

• Development of subunit orientation

• Communication gap
Production team VS Research team

E.g. Xerox computer system,

Wal-mart television linkups
 What is integration?

• The process of coordinating various tasks,

functions and divisions so that they work
together and not at cross-purpose.
 7-integrating mechanism
1) Hierarchy of authority
2) Direct contact
3) Liaison role
4) Task force
5) Team
6) Integrating role
7) Integrating department
 Hierarchy of authority

• Simplest device
• Allocation of authority

• E.g. Becton Dickinson

 Liaison team

Marketin
Productio g
n
Team Force or Team
Sales

Productio
R&D n

Marketin Engineerin
g g
 Integrating Role or
Department
Computer
Software
Division

Integration Computer
Role or Hardwar
Departmen e
t Division
Application
Division
 Differentiation & Integration-key
aspects
Differentiation Integration
A highly complex, highly An organization that has a
differentiated organization needs relatively simple, clearly defined
high level of integration role structure needs to use only
simple integrating mechanism

Expensive –in terms of the number of managers employed & the

amount of managerial time spent on coordinating organizational
activities.

Unnecessary investment
 Summary
• Carefully guide the process of differentiation so that it
develops the core competencies that give the organization a
competitive advantage

• Carefully integrate the organization by choosing appropriate

integration mechanism that allow subunits to cooperate & that
build up the organization’ core competencies
Balancing Centralization &
Decentralization
 What is Centralization?
• Organizational setup whereby the authority to
make important decision is retained by
managers at the top of the hierarchy
 What is Decentralization?
• An organizational setup whereby the authority
to make important decision about
organizational resources and to initiate new
projects is delegated to managers at all levels
in the hierarchy…
 Centralization
Advantages Disadvantages

Top managers coordinate organizational Top management become overloaded &

activities effectively & keep the need to take care of day-to-day activities &
organization focused on its goal. cannot focus on long term decision making

Lower hierarchy-afraid to make news or

express their ideas

Hierarchy of authority exists , people are

constantly looking to their superiors for
help.
 Decentralization
Advantages Disadvantages

Promotes flexible & responsiveness by Planning & coordination becomes more

allowing subordinate to make on the spot difficult
decisions

Motivates to perform the best Personal goals & objectives can be pursed at
the expense of organization
SUKHADA kulkarni
p - 17
 Standardization

Which is defined by sets of rules and norms, that

are considered proper in a given situation
 Mutual adjustment.
It is a process in which people use their
judgment rather than standardized rules to
address problems
 Balancing standardization & Mutual
adjustment
• Both are very important.
• But only one can be adopted at a time.
• Eg: IBM policies tranformation.
• The real challenge faced, is to design a
structure that achieves right balance between
the two.
A right balance between the two is very
important.
• Formalization: Use of written rules and procedures to
standardize operations.
• Formalization and Mutual adjustment: High level of
formalization implies centralization of authority, and lower one implies
mutual adjustment and dynamic decision making.
• Rules: Formal and written statements
• Norms: standards and styles of behaviour
 Socialization
• Process by which organizational members
learn the norms of organization and internalize
these unwritten rules of conduct in them.

• Why is behavior rigid when rules change?

10/07/09 43
Standardization Vs Mutual
adjustment

Manager facing the challenge of balancing

the need for standardization
against need for mutual adjustments
PUJA a. govekar
Roll no. p-9
Mechanistic and Organic
Organizational Structure
`
 Mechanistic structure
• It is designed to induce people to behave in predictable,
accountable ways.
• Decision-making authority centralized.
• Task associated with role and are coordinated through
standardization.
• Each person knows his responsibility.
Mechanistic structure cont.
• At the functional level, each function is separate, and
communication and cooperation among functions are
the responsibility of someone at the top management.
• Formal written rules and procedures are main means
of organizational control.
• Vertical command structure.
• Promotion ties to performance
• Best suited to organization that face stable,
unchanging environment.
 Organic Structure
• It promotes flexibility, so people initiate change
and can adapt quickly to changing conditions.
• Decision-making authority decentralized.
• Roles are loosely defined.
• High level of integration needed.
 Organic Structure cont.
• Co-ordination is achieved through mutual adjustment as
people and functions workout role and responsibility.
• Informal norms and values.
• Status conferred by ability not by any formal position in
hierarchy.
• Best suited to organization that face unstable, changing
environment.
• Eg: Sony (Sony’s Magic Touch)
 Mechanistic v/s Organic
Structure

Mechanistic Organic
Individual Specialization Joint Specialization

Simple Integration Complex integration

Centralization Decentralization

Standardization Mutual Adjustment

10/07/09 51
 Mechanistic v/s Organic
Structure
• Individual • Joint Specialization
Specialization

• Simple Integration • Complex integration

• Decentralization
• Centralization

• Mutual Adjustment
• Standardization
 Contingency Approach to
Organizational Design
• A management approach in which design of an
organization's structure is tailored to the sources
of uncertainty facing an organization.
• Organization must design internal structure to
control the external environment.
• Tom burns and G.M. Stalker theory
 Tom burns and G.M. Stalker
theory
• They found that organizations need different
kinds of structure to control activities when
they need to adapt and respond to change in the
environment.

• Eg: Mcdonald (Mcdonald’s Changing

Environment)
 McDonald Changing
Environment
• Problems faced by McDonald due changing
Environment in early 2000s.
• Consumer taste shifting as health conscious.
• Environmentalist attacking the packaging.
• Increase in competition.
 Organizational Structure
• It had Mechanistic structure having standardized operations and
formalization.

• The burger and fries served in London tasted & looked same as in New York.
 Solution McDonalds came up
with..
• McDonalds new approach to production was
based on flexibility.
• Designed menu that would appeal to local
customer.
• This led to shift McDonald from mechanistic
to organic structure
 Identify the organization
structure
Rayon mill
• Used standard well-understood
technology
• Had bureaucratic structure
• organizational style
Factory bible explained all
procedures
• A system of hierarchically linked job
positions with clear responsibilities
• to find their own place in the
Treat problem situations as temporary
deviations from the norm
• Sometimes ask sales dept to slow
down so as to not overwhelm the
production dept.
High-Tech Electronics Firm
• Creating new industries, such as
computers, space technologies,
equipment, etc.,
• There was an even more fluid
• Jobs allowed to shape themselves
• People hired for general expertise and
brains and then allowed/encouraged
organization to make their
contribution
• As situations changed, people would
take on different activities but without
changing jobs
• People continually inquiring into
what they should be doing and then
acting
DHANRAJ koli
P - 16
 Functional structure

A design that group people on the basis of their

common expertise and experience or because
they uses the same resources.

10/07/09 60
 Functional structure

10/07/09 61
 Functional structure
Advantages

• Specialization – each department focuses on its own work

• Accountability – someone is responsible for the section
• Clarity – know your and others’ roles
• Learning- from one another

10/07/09 62
 Functional structure

Disadvantages

• Closed communication could lead to lack

of focus.
• Departments can become resistant
to change.
• Coordination .
• Customer problem.

10/07/09 63
 Control problems

10/07/09 64
 continue

10/07/09 65
 Divisional structure
• Divisional structure is one in which set of
relatively autonomous units or divisions are
governed by central corporate office, but each
operation division has its own functional
specialist who provides product and services
different from those of other divisions

10/07/09 66
 Types of Divisional structure

• Product structure
– Divisions by the product group or category
• Market structure
– Divisions by type of customer
• Geographic structure
– Global or regional divisions

10/07/09 67
ANANDITA singh
C - 34
 Divisional Structures

Functions according to the specific

demands of products, markets, or
customers.
 Divisional Structures

10/07/09 70
 Divisional Structure I
structure in which functions are grouped
together according to the specific demands
of products, markets, or customers.

he type of divisional structure selected is

driven by the specific type of control
problem experienced.

10/07/09 71
 I) Product structures

10/07/09 72
 Types of product structures

10/07/09 73
 a) Product Division
Structure
• Characterized by splitting of the manufacturing
function into different product lines or divisions.
• Centralized support functions.
• Service needs of a number of different product lines.
• Typically used by organizations whose products are
broadly similar and aimed at the same market.
• E.g. Food processors, furniture makers, personal care
products, paper products, etc.

10/07/09 74
 Product Division
Structure
Large Food Processor – E.g. Heinz CEO

Vice Vice Vice Vice

President President President President
Sales and Research Materials Finance
Marketing and Manageme
Developme nt
nt

PDM PDM PDM PDM

Centralized support
10/07/09 functions 75
4-19
Divisions
 Product Division Structure
– Contd.
• Design decision increases horizontal differentiation
within the organization.
• For each division, there is a separate manufacturing unit
that has it’s own hierarchy .
• Each division is headed by a product division manager
(PDM).
• Each PDM is responsible for the division’s product
activities and coordinating with the central support
functions.
• Increases vertical hierarchy in an organization.

10/07/09 76
 b) Multidivisional Structure
• To manage complex and diverse value
creation activities.
• Support functions are placed in self-
contained divisions.
• Typically used by an organization whose
products are very different and that
operates in several different industries.
• E.g. Cars and fast food industries.

10/07/09 77
 Multidivisional Structure.
CEO
Consumer Products
Company. Corporate Headquarters Staff

Corporate Senior VP Senior VP Senior VP Senior VP

Managers Marketing Finance Materials Research and
Management Development

Divisional Division A Division B Division C Division D

Managers

Functional
Managers

Support functions Support functions Support functions Support functions

10/07/09 78
4-21
 COMPARISON
MULTIDIVISIONAL PRODUCT DIVISION
STRUCTURE STRUCTURE

Independence of each division – self Divisions shares the services of a set

contained. of centralized functions.

New level of management – a No such level – control is lesser.

corporate head quarters staff – adds
more control.

Structure is designed to allow a Structure can only be used to control

Company to operate in many different the activities of a Company that is
businesses. operating in one business or Industry.

10/07/09 79
 ADVANTAGES
• Increased Organizational Effectiveness.
• Increased control.
• Profitable growth.
• Internal Labour Market.

10/07/09 80
 DISADVANTAGES
• Managing the Corporate- Divisional relationship.
• Coordination problems between divisions.
• Transfer pricing.
• Bureaucratic costs.
• Communication Problems.

10/07/09 81
 Product Team Structure
• Specialists from the support functions are combined into
product development teams.
• Typically used by an organization whose products are very
technologically complex.
• Or whose characteristics change rapidly to suit customer
needs.

10/07/09 82
 Product Team
Structure. CEO

Functions

V
ice President V
ice President V
ice President V
ice President V
ice President
Research and Sales and Manufacturing Materials Finance
Development Marketing Management

Product
Development
Teams
PTM PTM PTM

Product Product Product

Division Division Division

Functional specialist
PTMProduct Team Manager
10/07/09 834-29
 Product Team Structure…
Contd.
• Each team is a self contained division and is headed by a
Product Team Manager (PTM).
• PTM supervises the operational activities associated with
developing and manufacturing the product.
• Product teams focus on the needs of one product or few
related products.
• Overall functional control – V.P. of the functions.
• Decision-making and responsibility for each product is
decentralized to the team.

10/07/09 84
 Divisional Structure II
Geographic Structure:

• Used when an organization experiences

control problems that are a function of
geography.
• Such a structure organizes divisions
according to the requirements of different
locations.

10/07/09 85
 Geographic
Structure Regional
Operations

CEO
Regional Regional
Operations Operations
Central Support
Functions

Individual
stores
Regional
Operations

10/07/09 864-31
 Divisional Structure III
Market Structure :
• When an organization experiences control
problems that are a function of the differences in
the various customer groups being served.
• Such a structure aligns functional skills and
activities with different customer needs.

10/07/09 87
 Market Structure

CEO

Central Support Functions

Commercia Consumer Governme Corporate

l Division nt Division
Division Division

10/07/09 88
JAYASHREE prabhu
C - 43
 MATRIX
STRUCTURE
 Matrix Structure

•The search for better and faster ways to

develop products and meet customer needs
led to the matrix structure.

•A matrix structure groups people and

resources in two ways simultaneously:
-by function and
-by product

10/07/09 91
 CEO
Matrix Structure

Vice President Vice President Vice President Vice President Vice President
Engineering Sales and Finance Research and Purchasing
Marketing Development

Product A
Manager

Product B Product Team

Manager

Product C
Manager

Product D
Manager

Two-boss employee
10/07/09 92
 Advantages of a Matrix
Structure
1. Uses cross-functional teams.
2. Better communication between functional specialists,
opportunity for learning, progress, innovation.
3. Enables organization to maximize its use of skilled
professionals, who move from product to product as
needed.
4. The dual functional and product focus promotes concern
for both cost and quality.

10/07/09 93
 Disadvantages of a Matrix
Structure
1. Lacks the advantages of bureaucratic structure – role
ambiguity, role conflict
2. Conflict between function and product teams over the
use of resources, power.
3. Lack of coordination, stress, uncertainty.
4. Over a time, people experience a vacuum of authority
and responsibility.

10/07/09 94
 Multidivisional Matrix
Structure
•A multidivisional matrix structure provides for
more integration between corporate and
divisional managers, and between divisional
managers.

•This structure makes it easier for top

executives from the divisions and from
corporate headquarters to coordinate
10/07/09
organizational activities. 95
 Multidivisional Matrix
Structure

CEO

Senior Vice Senior Vice Senior Vice Senior Vice

President President President President
Marketing Finance Research and Materials
Development Management

Automobile
Products
Division

Personal
Computer
Division

Consumer
Electronics
Division
10/07/09 96
 Network Structure
•A recent innovation in organizational
architecture is the use of network structures.

•A network structure is a cluster of different

organizations whose actions are
coordinated by contracts and agreements
rather than through a formal hierarchy.

10/07/09 97
 Network Structure

Network structures often

result from outsourcing.

Outsourcing is the process of moving

activities that were previously performed
inside the organization to the outside
(where they are done by other companies).

10/07/09 98
 Advantages of Network
Structure

1. Organization can find a network partner –

reduction in production cost.
2. Avoids the high bureaucratic costs of
operating a complex organizational structure.
3. Organization acts in organic way.
4. Organization can gain access to low cost
foreign sources of inputs and functional
expertise.
10/07/09 99
 Disadvantages of Network
Structure
1. Outsourcing ??
2. Coordination problem- different companies
perform different parts of the work.
3. Trust among groups, Trust that outsourcing
will not leak confidential information of
company to it’s competitors.

10/07/09 100
 Boundaryless Organization
• The boundaryless organization is composed of
people who are linked by computers, faxes,
computer-aided design systems, and video
teleconferencing, and who may rarely or ever
see one another face to face.

10/07/09 101
 CONCLUSION

10/07/09 102
 Bibliography
• Organizational Theory, design, and Change –
Fourth Edition, Gareth R. Jones.

10/07/09 103
10/07/09 104