Presentation Slides

to Accompany
Organizational Behavior
10th Edition
Don Hellriegel and John W. Slocum, Jr.
Chapter 14—Designing Organizations

Prepared by
Michael K. McCuddy
Valparaiso University
 Slide 14.1
Learning Objectives for
Designing Organizations
 Explain how environmental, strategic, and
technological factors affect the design of
organizations
 State the differences between mechanistic and
organic organizations
 Describe four traditional organization designs—
functional, place, product, and multidivisional
 Describe three contemporary organization designs—
multinational, network, and virtual

Chapter 14: Designing Organizati 2

 Slide 14.2
Important Factors in an
Organization’s Environment

 Suppliers

 Distributors

 Competitors

 Customers

Chapter 14: Designing Organizati 3

 Slide 14.3
Strategies for Building a
Competitive Advantage
 Low-cost strategy
 Based on an organization’s ability to
provide a product or service at a lower cost
than its rivals
 Differentiation strategy
 Based on providing customers with
something unique and makes the
organization’s product or service distinctive
from its competition

Chapter 14: Designing Organizati 4

 Slide 14.3 (continued)
Strategies for Building a
Competitive Advantage

 Focused strategy
 Designed to help an organization target a
specific niche in an industry, unlike both
the low-cost and differentiation strategies,
which are designed to target industrywide
markets

Chapter 14: Designing Organizati 5

 Slide 14.4
Types of Task Interdependence
in Organization Design

Pooled Sequential Reciprocal

C C C

A B A B A B

Simple Complex

Chapter 14: Designing Organizati 6

 Slide 14.5
Organization Design Options
Virtual Design
Complex
Network Design

Multinational Design
Environmental
Factors

Multidivisional Design

Product Design

Place Design

Simple Functional Design

Pooled Technological Factors Reciprocal

Chapter 14: Designing Organizati 7

 Slide 14.6
Mechanistic and Organic
Organizations
 Mechanistic organization
 Characterized by a reliance on formal rules and
regulations, centralization of decision making,
narrowly defined job responsibilities, and a rigid
hierarchy of authority
 Organic organization
 Characterized by low to moderate use of formal
rules and regulations, decentralized and shared
decision making, broadly defined job
responsibilities, and a flexible authority structure
with fewer levels in the hierarchy

Chapter 14: Designing Organizati 8

 Slide 14.7
Characteristics of Bureaucracy

 The organization operates according to a set

of rules that are intended to tightly control
employees’ behavior
 All employees must carefully follow extensive
impersonal rules and procedures in making
decisions
 Each employee’s job involves a specified
area of expertise, with strictly defined
obligations, authority, and powers to compel
obedience

Chapter 14: Designing Organizati 9

 Slide 14.7 (continued)
Characteristics of Bureaucracy

 Each lower-level position is under the tight

control and direction of a higher one
 Candidates for jobs are selected on the basis
of “technical” qualifications
 The organization has a career ladder;
promotion is by seniority or achievement and
depends on the judgment of superiors

Chapter 14: Designing Organizati 10

 Slide 14.8
Organic and Mechanistic
Design Features
 Hierarchy of authority
 Centralization
 Division of labor
 Rules
 Procedures
 Impersonality
 Chain of command
 Unity of command
 Span of control

Chapter 14: Designing Organizati 11

 Slide 14.9
Organizational Uses of
Functional Design
 Permits clear identification and assignment of
responsibilities
 Employees easily understand the design
 People doing similar tasks and facing similar
problems work together, thus increasing the
opportunities for interaction and mutual support
 Employees tend to lose sight of the organization
as a whole
 Coordination across functional departments often
becomes difficult

Chapter 14: Designing Organizati 12

 Slide 14.9 (continued)
Organizational Uses of
Functional Design
 With the exception of marketing, most employees
have no direct contact with customers and may
lose sight of the need to meet or exceed
customer expectations
 May be effective when the organization:
 Has a narrow product line
 Competes in a uniform environment
 Pursues a low-cost or focused business strategy
 Does not have to respond to the pressures of serving
different types of customers

Chapter 14: Designing Organizati 13

 Slide 14.10
Organizational Uses of Place Design

 Each department or division is in direct contact

with customers in its locale and can adapt more
readily to their demands
 Lower costs for materials, freight, and perhaps
labor may result
 Marketing strategies and tactics can be tailored
to geographic regions
 Control and coordination problems increase
 Employees may begin to emphasize their own
unit’s goals and needs rather than those of the
entire organization

Chapter 14: Designing Organizati 14

 Slide 14.11
United Technologies
CEO

Pratt & Carrier Otis UT Auto- Flight

Whitney * Heating * Elevators motive Systems
& air * Escalators
* Jet engines * Automotive * Helicopters
conditioning * Moving
* Rocket electrical * Propellers
* Building walks
engines systems * Space life
controls
* Industrial * Electric support
* Refriger-
gas motors systems
ation
turbines * Automotive
equipment
interior &
exterior trim

Source: http://www.utc.com

Chapter 14: Designing Organizati 15

 Slide 14.12
Organizational Uses of
Product Design
 Reduces the information overload that managers face
in a purely functional design
 More effective handling of the business is possible
 Addition of product lines, diverse customers, and
technological advances increases the complexity and
uncertainty of an organization’s business environment
 Product design may incorporate features of functional
and place designs into the organization of each product
division

Chapter 14: Designing Organizati 16

 Slide 14.13
Organizational Uses of
Multidivisional Design
 Eases problems of coordination by focusing
functional expertise and knowledge on specific goods
or services
 A firm must have a large number of managerial
personnel to oversee all the product lines
 Higher costs result from the duplication of various
functions
 Often reduces the environmental complexity facing
any one team, department, or division
 Horizontal mechanisms help in dealing with complex
environments

Chapter 14: Designing Organizati 17

 Slide 14.14
Basic Options in Multinational Design
ti ons ti o ns
c c
Fun Fun
e t ing
rk
Ma g
c t urin
a
a nu f
M
Product line n ce
Fi n a
s
o u rc e
R es
m an
Hu
ers
Oth
Place

Country or Region Matrix Global Product

Organization Organization
Country Responsiveness, Global Integration,
Adaptation, Competitors, Products, Competitors,
Manufacture, Customer Factories, Customers

Chapter 14: Designing Organizati 18

 Slide 14.15
Organizational Uses of
Multinational Design
 Worldwide product-line divisions will be more dominant
than geographically based divisions under certain
conditions
 A worldwide product-line division may not be as
effective at opening up new territories as a
geographically organized division
 A division operating under a place design often:
 Can establish relations with host governments
 Invest in distribution channels
 Develop brand recognition
 Build competencies that no single product-line division could
afford

Chapter 14: Designing Organizati 19

 Slide 14.16
Key Elements of Network Design
 Distinctive competence
 Responsibility
 Goal setting
 Communication
 Information technology
 Organization design
 Balanced view

Chapter 14: Designing Organizati 20

 Slide 14.17
Organizational Uses of
Network Design
 Effective in creating alliances of flexible
partnerships
 Can create successful external relationships
through:
 Importance
 Investment
 Interdependence
 Integration
 Information
 Institutionalization

Chapter 14: Designing Organizati 21

 Slide 14.18
Key Developments in
Information Technology

 Open systems

 Distributed computing

 Real time

 Global networking

Chapter 14: Designing Organizati 22

 Slide 14.19
Organizational Uses of
Virtual Design
 Structure can be changed quickly to meet
changing conditions and situations
 Boundaries between an organization and
its customers and suppliers are blurred
 Employees continually master new
manufacturing and information
technologies, speeding the production
process and the flow of information
through the organization

Chapter 14: Designing Organizati 23

 Slide 14.19 (continued)
Organizational Uses of
Virtual Design
 Employees respond quickly to changing
customer demands with customized
products and services available at any
time and place
 Employees are reciprocally
interdependent
 Managers delegate authority and
responsibility to employees while
providing a clear vision of the
organization’s purpose and goals

Chapter 14: Designing Organizati 24