Structural dimensions of organization design

Module 3

Organization design:

• OD is concerned with making decisions about the forms of coordination, control and motivation that best fit the enterprise.

• In making these decisions, it is necessary to consider external factors like market and internal factors like the needs and aspirations of the members of the enterprise

• Organizational design is intimately concerned with the way in which decision-making is centralized, shared or delegated and with the way the enterprise is governed.

Components of org design:

I. ComplexityA. Horizontal complexityB. Vertical complexityC. Spatial complexityII. FormalizationD. Organizational and professional formalizationE. Formalization techniquesIII. CentralizationF. Organizational decision-making processG. Centralization and decentralization

I. complexity

• It refers to “the degree of differentiation that exists within org.”

• It focuses on the number of specific jobs, roles, hierarchical levels, work-centres etc., in the org.

• The greater is there such a differentiation in the org, the more complex would be the org.

• Organization can be complex in three ways: Horizontally (the degree of differences in the nature of jobs in the organization), Vertically (the number of hierarchical levels, or the depth in the structure) and Spatially (the degree of geographical separation among the work-units)

A. Horizontal complexity

• It refers to the degree of differentiation between the organizational units/subunits in terms of nature of work, requirement of skills and knowledge, and employees’ orientations.

• Other terms used to describe horizontal complexity in research literature are differentiation, division of labour, departmentation and functional specialization.

B. Vertical complexity

• It refers to the number of hierarchical levels which exists between the top management and the lowest level operators in the organization.

• One factor which determines the number of hierarchical layers in the organization is the Span of control.

C. Spatial complexity

• It refers to the degree to which the subunits and personnel of an organization are geographically separated.

II. Formalization

• It refers to the degree to which jobs in an organization are standardized

There can be various reasons for an org to introduce formalization:-

• Formalization of jobs reduces the variability of outputs.

• Formalization is one way of dealing with the complexity of mgt problems.

• Formalization reduces the need for direct supervision and control.

• Formalization reduces the changes of mistake occurring in the execution of the job.

A. Organizational and professional formalization

Organizational formalization Professional formalization

•Usually achieved through rules, procedures, job-descriptions, etc..•Focuses primarily on moulding the external behavior of the individual.•Based on extrinsic rewards and punishments.•Most often used for routine, unskilled work.•Usually found in more complex org.

•Usually achieved through years of professional training.

•Focuses primarily on the internal attitudes and orientations of the person.•Based on internalized values and socialization•Most often used for skilled, non-routine work.•Usually found in less complex org.

B. Formalization technique

1.Selection and recruitment2.Role/JD3.Rules and procedures4. Training5. Culture and organizational socialization

III. Centralization

• The third building of organizational design is the level of centralization (or decentralization) in decision making.

• C/D is an important dimension of organisational effectiveness, since it refers directly to how appropriately and swiftly the organisation is able to deal with critical issues and arrive at relevant decisions.

• One of the most comprehensive definition was offered by Robbins who defined centralisation as: the degree to which the formal authority for making discretionary choices is concentrated in an individual, unit or level (usually high in the org), thus permitting employees(usually low in the org) minimum input in their work.

Paterson described the various steps involved in the organizational decision making process

situationinformation input

interpretation and advice choice

authorization execution

action

B. Centalisation and decentralisation

• There is no totally centralised or decentralised org. Rather, in practice, the designing decision focuses on the specific activities and decision areas which need to be centralised or decentralised, and the extent to which this would be appropriate for organisaitonal effectiveness.

Departmentalization

• Horizontal differentiation of tasks or activities into discrete segment is called departmentation.

• There are several bases for departmentation depending upon the nature and size of org, goals strategies and environment.

• Deparmentation is done using some of the following criteria:

• By product• By project• By process• By geography• By time• By simple numbers

Departmentation based on products:

• This is suitable for a large org that manufactures a vast variety of products.

• Under this separate group or departments are created and each dept is controlled by a manager who will be responsible, for all the activities of that sub group.

• Each subgroup will have its own facilities required foe manufacture, purchase , marketing and accounting.

Departmentation based on project:

• In many companies the activities of the whole company are divided in terms of projects.

• This is true especially for construction companies like L&T whose activities can be divided as airport project, fly over project, stadium project etc..

Departmentation based on process:

• Some organisation may be divided into various departments based on various process.

• For eg., in a manufacturing industry all the activities could be divided on the basis of their process of production.

• Similar machines such as lathes, drilling machines, milling machines, forging presses, welding equipments etc.. Are grouped into separate sections such as turning centre, driling section, forging shop etc…

Departmentation based on geography:

• Departmentation by territory is common in org that operate over a wide geographical area.

• The activities of an enterprise are divided into territory like, western region, northern region, eastern region, southern region etc..

Departmentation based on time:

• One of the oldest forms of departmentation, generally used at lower levels of an org, is grouping of activities on the basis of time.

• The use of shifts is common in some org due to economic or technological reasons.

• For service org like hospitals, fire dept, security, chemical plants, round the clock work is essential.

Departmentation based on simple numbers:

• This was one of the most widely used ancient methods of departmentation.

• This is achieved by tolling of persons performing the same job and grouping them together under one supervisor. This is not common use now.

Advantages of departmentation

• Sepcialisation• Increase in efficiency• No interference• Competitive spirit• Initiative to managers• Easy evaluation• Ease of budgeting• flexibility

Disadvantages

• Duplication of work• Inadequate centalisaition• Clamour for the same dept• Narrow thinking• Only for big organisaiton• Under utilization

Span of control

• Span of control refers to the number of subordinates who report to a manager or the number of subordinates a manager can effectively supervise.