Key Concepts of Organizational Design University of Phoenix Key Concepts of Organizational Design This paper will provide key concepts of organization design. It will describe the five best design choices and also will provide information regarding some common organizational structures. An organization will have to continuously look at the design and structure it uses to ensure that it is going to establish its goals and vision. Importance of Organizational Design Choices Organizational Design will allow an organization to improve itself.
With organizational design, employee satisfaction is improved, customer satisfaction is improved, financial performance is improved and a competitive edge is gained. In order for an organization to have innovative success the best design choices are hierarchy, integration, control, formalization, and authority. Hierarchy According to Jones (2004), “Hierarchy is the classification of people according to authority and rank” (p. 101). With a hierarchy, individuals at the top level have more authority and rank. Each level down form the highest rank is under the control of the higher rank.
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A hierarchy provides an organization with structure. An organization can structure itself by vertical differentiation or horizontal differentiation. According to Jones (2004), “ Vertical differentiation is the way an organization designs its hierarchy of authority and creates reporting relationships to link organizational roles and subunits, horizontal differentiation is the way an organization groups organizational task into roles and roles into subunits” (p. 102). Employees are able to become more specialized with horizontal differentiation. Vertical differentiation allows for chain of authority.
It gives more control to the organization. Integration According to Jones (2004), “Integration is the process of coordinating various task, functions, and divisions so that they work together and not at cross-purposes “(p. 104). Integration allows for departments to work together. This strengthens the organization and improves communications within the organization. There are seven integration mechanisms that can be used as differentiation increases; they are the hierarchy of authority, direct contact, liaison role, task force, team, integration role and integrating department.
Hierarchy of Authority separates individuals by how much authority they have. Direct contact allows for managers and leaders to meet so that they may coordinate activities. When communications increases amongst different units, one or more managers must take on a liaison role. Task forces and teams are established to address issues and solve problems. Control According to Jones (2004), “Control is the ability to coordinate and motivate people to work in the organization’s interest (p. 99). Control allows for employees to be motivated and allows for coordination within the organization.
A great leader will have more ability to motivate and control his or her subordinates. Formalization According to Jones (2004), “Formalization is the use of written rules and procedures to standardize operations” (p. 112). Part of my organizations responsibilities is to follow written rules and procedures. Without them we would not be certified by the FAA to perform maintenance and without them we would not be able to meet the safety requirements and standards set by the FAA. With these types of procedures, like the military, there is no slack to stray from the written rules and procedures.
Authority According to Jones (2004), “Authority is the power to hold people accountable for their actions and to make decisions concerning the use of organizational resources” (p. 99). Authority allows for each individual to clearly understand their roles and responsibilities, According to my classmate Kevin Bragg (2009), “where would the military be without authority” (discussion posting). Authority and control go hand and hand and when a person clearly understands his roles and responsibilities, control can be established. Organizational Structures
Organizational structures can be defined as the way or method through use of a hierarchy that a group, business, organization, people or objects collaborate to achieve success on One common goal (http://organizationalstructure. net). The type of organization structure used depends on the size of the organization and what the goals of the organization are. It includes what the organization is looking to accomplish. Most often, all organizations start out as a functional structure and will branch out into another structure or a combination of structures.
Functional Structure According to Jones (2004), “Functional structure is a design that groups people on the basis of their common expertise and experience or because they use the same resources” (p. 160). Functional structures have two advantages. Functional structures allow employees to learn from one another, they become more productive and are more specialized. Highly skilled employees can train new employees and they also can be promoted within the organization to supervisors and managers. By doing this, an organization is able to maintain its skills and abilities.
In a functional structure people are grouped together by their skills. They can supervise each other and have some control over each other’s behavior. Many disadvantages exist in a functional structure. They include control problems, communication problems, measurement problems, location problems, customer problems and strategic problems. Control problems exist because as an organization grows it is hard to keep control of the new activities that it faces due to the growth. Communication problems exist because of the separate groups that are created in a functional structure. Communication is lacking amongst the groups.
Measurement problems exist because in a functional structure, the organization does not have the capability to evaluate itself. Location problems can become a factor if the organization expands to other locations because of the way the functional structure is designed to group individuals together by expertise and experience. Customer problems become an issue because it is difficult to service the needs of new customers. Strategic problems exist because managers do not have the time to plan for the future, they are spending too much of their time trying to solve day to day problems. Multidivisional Structure
According to Jones (2004), “Multidivisional structure is a structure in which support functions are placed in self-contained divisions. Self-contained division is a division that has its own set of support functions and controls its own value-creation activities” (p. 170). A multidivisional structure can provide a large organization with many advantages. The advantages are increased organizational effectiveness, increased control, profitable growth, and internal labor market. Because there is a clear division of labor between corporate and divisional managers, organizational effectiveness is increased.
Because the corporate managers are responsible reviewing the performance of the divisional managers, increased control is gained. Because each division is its own profit center, corporate can decide what divisions will give the greatest return on its investments. Divisional managers are motivated because they have the opportunity to be promoted to corporate managers. Disadvantages of multidivisional structures include managing the corporate-divisional relationship, coordination problems between divisions, bureaucratic costs, and communication problems.
If the corporate-divisional structure is not managed on a continuous basis, the organization can fail. Because each division can be measured separately, divisions may begin to compete for resources and this competition may not allow them to work together. Multidivisional structures are expensive and it must be measured and evaluated to ensure the benefits outweigh the cost. Because the organization is centralized, communication will be a problem. Matrix Structure According to Jones (2004), “Matrix structure groups people and resources in two ways simultaneously: by function and by product “(p. 83). The advantages of a matrix structure are the use of a cross-functional team, it opens communication, maximizes its use of skilled professionals and it focuses on quality and is also able to keep cost down. The cross-functional team allows the entire organization to work together. Communication is improved because the organization is working together. The major disadvantage to a matrix structure is that it lacks the advantages of a bureaucratic structure. Conflict can exist because of the lack of authority in a matrix structure. Network Structure
According to Jones (2004), “Network structure is a cluster of different organizations whose actions are coordinated by contracts and agreements rather than through a formal hierarchy of authority” (p. 197). Network structures of usually complex because organizations form agreements with many suppliers and manufactures. They also outsource many activities. Advantages of a network structure include lowering production cost because an organization is able to utilize a network partner which reduces cost. A network structure is able to survive organically.
If the environment changes, the organization is able to respond quickly with new products, processes and services. A disadvantage to a network structure would be an organization that provided high-technical products or services because it would be very hard for the organization to outsource this work. My organization, Pratt & Whitney would be an example of an organization where a network structure provides a disadvantage. Due to the high-technical repairs my organization performs, many other organizations are unable or not certified to perform certain repairs.
We are limited to the work we out-source. Strategy, Structure, and Process in Organizations Organizational Strategy, Structure, and Process focuses on how an organization is able to adapt to their environment. An organization that has elements of being organic is more likely to be able to adapt to its environment. An organization needs to look at it strategy to ensure that it is effectively aligned with its environment. Organizational Design and Decision-Making Processes An organizational that as a well though out organizational design will have improved communications, productivity, and innovation.
Employees will work effectively. Organizational design allows for an organization to look at what it wants for results and to change its structure and processes to establish its goals. Long-term commitment is needed and you must constantly make design choices that have an impact on your organization. Conclusion While each structure has advantages and disadvantages, an organization must choose the structure that will provide them with the best operational design elements. An organization will need to continuously look to use decision making to improve and change its organizational design.
References Davila, T. , Epstein, M. , and Shelton, R. (2006). Making innovation work: How to manage it, measure it, and profit from it. Retrieved from the University of Phoenix eBook Collection. Jones, G. (2004). Organizational theory, design, and change. Retrieved from the University of Phoenix eBook Collection Miles, R. , and Snow, C. (2003). Organizational Strategy, Structure, and Process. Tucker, R. (2001). Innovation: The new core competency. Strategy & Leadership, Retrieved on November 24, 2009 from Emerald database.