Organizational

Structure & Design

An organization is a formal group of
people with one or more shared goals.
The word itself is derived from the
Greek word ὄργανον (organon)
meaning tool.
The Issues
 Definitions: Design & structure
 Differentiation
 The integration challenge
 Centralization
 Formalization
 Rules & norms
 Multi-organization design & structure
Organizational Design
 Definition: The process of defining and
coordinating organizational structure
elements. This is an architectural task.
 Purpose: To create a design that will
coordinate organizational tasks & motivate
people to achieve objectives.
 Challenge: To choose appropriate levels
and types of vertical and horizontal
differentiation and integration.
Organizational Structure
 The definition, distribution, and
arrangement of interlocking roles (i.e.,
who does what). This is created by
“building” what the architects designed.

Challenges
 Authority  Horizontal
differentiation
 Control
 Integration
 Sub-units
 Centralization
 Vertical  Formalization
differentiation
Impact of Design
& Structure
 Physical appearance of organization
 Nature of jobs
 Efficiency of organization
 Effectiveness of organization
 Relationships with other organizations
 Nature and quality of work experience for
organizational members
 Organizational culture
Differentiation
(Division of Labor)

 Definition: Allocation of people and

resources to tasks & establishment of task &
authority relationships
 Identifies total set of organizational tasks
 Divides tasks into jobs, departments,
divisions
 Assigns authority & authority relationships
Sub-Unit Choices
Departments, Divisions, etc.
 Functional: Based on functions performed (e.g.,
production, sales, research)
 Product: Based on products and services produced
(e.g., food, cleaning supplies, pharmaceuticals)
 Customer: Based on customers served (e.g.,
convenience stores, supermarkets)
 Geography: Based on physical location
 Matrix: Based on a combination of function, product,
customer and/or geography. Creates dual authority
and dual responsibility
Vertical Differentiation

 Vertical differentiation: Design of hierarchy

with reporting relationships to link roles and
sub-units
 Defines who reports to whom

 Defines areas of responsibility

 Hierarchy: Classification of people

according to authority and rank
Hierarchy of Authority
 Tall
organizations
have many
levels
 Flat
organizations
have few levels
Span of Control
 The number of organizational
members who report to a manager
 Wide span of control means one
manager supervises many members
 Narrow span of control means one
manager supervises a small number of
members
Horizontal Differentiation
Horizontal differentiation: The way an
organization groups tasks into jobs/roles and
jobs/roles into sub-units
 Establishes the division of labor and level of
specialization
 Defines personal tasks & responsibilities

 Highly specialized jobs have narrow range

of tasks
 Less specialized jobs have broad range of
tasks
The Integration Challenge

 Integration: The process of

coordinating tasks, functions, sub-units
so they work effectively together & not
at cross-purposes
 Challenge: Now that we have
differentiated both vertically and
horizontally, how do we integrate?
Integrating Mechanisms
 Hierarchy of authority: Ranking of
employees specifies who reports to whom
 Direct Contact: Face-to-face meetings to
coordinate activities
 Liaison Role: Person assigned responsibility
for coordinating his/her unit with persons from
other units (part of job)
 Task Force: Temporary committees with
members from multiple units coordinate
activities

Cont.
Integrating Mechanisms (cont.)

 Team: Permanent committees with

members from multiple units coordinate
activities
 Integrating role: Person assigned
responsibility for coordinating activities of
multiple units (person’s entire job)
Highly Centralized
Authority
 Authority given to a few top
managers, allowing decisions to be
made by those with the “big picture”
 Facilitates development of a few
“masters of knowledge”
 Provides non-decision makers the
freedom to perform technical tasks
with fewer distractions
Decentralized Authority
 Authority distributed throughout the
organization
 Allows leaner organizations and fewer levels
 Allows those closest to problems and
opportunities to make decisions
 Is received favorably by many
organizational members
Formalization
 High formalization: Formal rules and
procedures used to standardize operations (Do
it “by the book”)
 Usually associated with centralized authority

 Low formalization: Coordination by mutual

adjustment rather than formal rules &
procedures
 Usually associated with decentralized

authority
Rules and Norms
 Rules: Formal, written statements
that specify appropriate behavior &
means for reaching desired goals
 Norms: Unwritten but generally
agreed upon standards of behavior
that are considered acceptable
and appropriate & means for
reaching desired goals
Multi-Organization Design
& Structure Issues
 Conglomerate: Separate companies without
close product or service relationship that are
overseen by a single parent company
 Strategic alliance: Two or more firms combine
competitive capabilities to operate a business
without sharing ownership or general
management
 Network design: Very small central
organizational structure contracts with other
organizations to develop and deliver the network
organization's products and services
 Matrix Structure

Note the duplication of core functional skills across each

product line.
Matrix organizations provide clear accountability within a
specific business function and allow more efficient allocation of
specialized skills across the entire business. By taking advantage
of the shared services and skills and not having to develop and
manage those skills themselves, the divisional or product line
organizations can better focus on their core business objectives
 Weak/Functional Matrix – A project with only limited
authority is assigned to oversee the cross-functional
aspects of the project. The functional managers maintain
control over their resources and project areas.
 Balanced Functional Matrix – A project manager is
assigned to oversee the project. Power is shared equally
between the project manager and the functional
managers.
 Proponents of this structure believe it strikes the correct
balance, bringing forth the best aspects of functional and
projectized organizations. However, this is the most
difficult system to maintain as the sharing of power is a
very delicate proposition.
 Strong/Project Matrix – A project manager is primarily
responsible for the project. Functional managers provide
technical expertise and assign resources on an as-needed
basis.
 Because project resources are assigned as necessary there
can be conflicts between the project manager and the
functional manager over resource assignment. The
functional manager has to staff multiple projects with the
same experts.
VIRTUAL ORGANISATION
Growing complexity in the business environment makes
"business as usual" ineffective. Globalization extends
the need for communication and coordination across
different time zones and locations. Change has become
the norm, an unpredictable basic reality. Corporations
are evolving into virtual enterprises using integrated
computer and communications technologies. These
collaborative networks are not defined by concrete walls
or physical space, but make it possible to draw upon
vital resources as needed, regardless of where they are
physically located and regardless of who owns them.
Learning Organization
 A boundary less environment is required by learning
organizations to facilitate team collaboration and the sharing of
information. When an organization develops the continuous
capacity to adapt and survive in an increasingly competitive
environment because all members take an active role in
identifying and resolving work-related issues, it has developed a
learning culture.
 A learning organization is one that is able to adapt and
respond to change. This design empowers employees because
they acquire and share knowledge and apply this learning to
decision-making. They are pooling collective intelligence and
stimulating creative thought to improve performance.
Supervisors facilitate learning by sharing and aligning the
organization's vision for the future and sustaining a sense of
community and strong culture.
REORGANIZATION

Customer Focused
Organizational Redesign is structuring
an organization, division or department
to optimize how it supplies products
and services to its clients and
customers.
Traditional
Steps in Reorganization
 Determining How the Company Goes to Market
 Sketch how the current organizational structure (e.g.,
departments, roles, responsibilities, information
flow, decision-making, etc.) supports how the
company goes to market. Include:
 What the current structure does well.

 What the current structure does not do well.

 If possible, "numbers" that put a value to what is

done well and what not.
 Draw an ideal organizational structure.
Focus on:
 How it can improve upon the current situation (in
"numbers")
 What it can improve upon.
 How it will affect the organization and its parts,
processes and people.
Planning
 Determine who should be involved in the planning
process, in particular "RACI", i.e. who is Responsible,
Accountable, Consulting and who should be kept
Informed.
 List the major players who perform or are involved in
the key processes that support the current structure.
 What would the ideal organization (processes, roles,
people) look like (first draft)? Who would fill what
position? How can the current players be utilized in this
new schema?
 What new equipment, technology, resources, people,
skills or systems would be needed in the new structure?
Implementation
 Develop a schedule (dates and RACI) for the
change from the current situation to the ideal
state. Create flowcharts that capture the
changeover. Be specific about:
 When and how the change from the old to
the new will occur.
 Impediment that might appear during the
transition .Create scenarios of what might
occur and how they can be handled.
 Create a program that would prepare
employees for the change.
Administrative Issues

Regular communication to staff regarding the

progress, decisions, plans, etc., of the project.
 A written plan that is shared with key

personnel, that is referred to periodically,

updated when necessary and referred to
continually.
 Scheduled "monitoring" meetings between

the Project Team, Sponsor, Oversight

Committee.
MUL

Shinzo Nakanishi
Chairman

Jagdish Khattar
M.D

Hirofum i
JMD

Kinji Sait o Osamu Suzuki R C Bhargava S V Bhave

Kumar Mangalam Birla Amal Ganguli Pallavi Shroff

Infosys