Lecture 11 & 12

Factors Affecting Organizational

Structure

Factors Influencing Organizational

Structure & Design
Internal Factors
Informational & Control Processes
Organizational Size and Life cycle
Workplace Technology & Design
External Factors
Global Organizational Design
Impact of environment

Informational & Control Processes

Information Technology
Today most successful organizations are
generally those that most effectively apply
information technology (IT).
IT systems have evolved to a variety of
applications to meet organizations
information needs operations applications
are applied to well-defined tasks at lower
organization levels and help improve
efficiency.
These include:
Transaction processing systems,
Data warehousing
Data mining.

Information for Decision-making

Advanced computer-based systems are
also used for better decision-making,
coordination, and control of the
organization.
Decision-making systems include
management information systems
Reporting systems or decision support systems
(middle of the organization).
Executive information systems (typically used by
upper levels of the organization).

Information for Control

At the organization level of control, an innovation called
the balanced scorecard provides managers with a
balanced view of the organization by integrating
traditional financial measurements, customers, internal
business processes, and learning and growth.
Managers also use strategy maps to see the cause-effect
relationships among these critical success factors.
At the department level, managers use behavior control
or outcome control.
Behavior control involves close monitoring of employee
activities, whereas outcome control measures and rewards
results.
Most managers use a combination of behavior and outcome
control, with a greater emphasis on outcome control because it
leads to better performance and higher motivation.

Strengthening Internal Coordination

Today, all the various computer-based
systems have begun to merge into an
overall IT system that adds strategic
value by enabling close coordination
internally and with outside parties.
Intranets, Web 2.0 tools, knowledge
management systems, and enterprise
resource planning are used primarily to
support greater internal coordination and
flexibility.

Strengthening External Coordination

The integrated enterprise uses advanced
IT to enable close coordination among a
company and its suppliers, partners, and
customers.
Systems that support and strengthen external
relationships include extranets and supply
chain management systems, customer
relationship systems, and e-business.

To establish an e-business, companies can

choose among an in-house division, a
spin-off, or a strategic partnership. Each
has strengths and weaknesses.

Impact on Organization Design

Advanced IT is having a significant impact on
organization design, and some experts suggest that it
will eventually replace traditional hierarchy as a primary
means of coordination and control.
Technology has enabled creation of the network
organization structure, in which a company subcontracts
most of its major functions to separate companies.
In addition, most other organizations are also rapidly
evolving toward greater interorganizational
collaboration.
Other specific implications of advanced IT for
organization design include smaller organizations,
decentralized organization structures, and improved
internal and external coordination.

Organization Size and Life Cycle

Organization Size
Organizations experience many pressures to grow.
In some industries large size is crucial to become
economically healthy.
Size enables economies of scale, provides a wide variety of
opportunities for employees, and allows companies to
invest in expensive and risky projects.
However, large organizations have a hard time adapting to
rapid changes in the environment.
Large organizations are typically standardized, mechanistically
run, and complex.

Small organizations typically have a flatter structure and an

organic, free-flowing management.
They can respond more quickly to environmental changes and are
more suited to encouraging innovation and entrepreneurship.

Managers in large or growing firms try to find mechanisms

to make their organizations more flexible and responsive .

Organizations life-cycle
Organizations evolve through distinct life-cycle
stages as they grow and mature.
Organization structure, internal systems, and
management issues are different for each stage
of development.
Growth creates crises and revolutions along the
way toward large size.
A major task of managers is to guide the
organization through the entrepreneurial,
collectivity, formalization, and elaboration
stages of development.

Stages of Life Cycle

Entrepreneurial
Organization is born, emphasis is on creating
products & services, founders are entrepreneurs, it is
informal & non bureaucratic, control is based on
owner personal supervision. Crisis (need for
leadership)

Collectivity
If the leadership crisis is resolved, strong leadership
is obtained and organization begins to develop clear
goals and directions. Establish departments,
hierarchy, job assignments and division of labor.
Crisis (need for delegation)

Stages of Life Cycle (cont.)

Formalization:
It involves the installation of rules, procedures, and
control systems. Communication is less frequent and
more formal. Engineers, human resource specialists,
and other staff may be added. Top management
becomes concerned with issues like strategy and
planning and leaves the operation to middle
managers. Crisis (too much red tape)

Elaboration:
The solution to the red tape crisis is a new sense of
collaboration and teamwork. Managers develop skills
for confronting problems and working together.
Bureaucracy may have reached its limits. Crisis
(need for revitalization)

Organizational Size and

Bureaucracy
As organizations progress through the life cycle
and grow larger and more complex, they generally
take on bureaucratic characteristics, such as rules,
division of labor, written records, hierarchy of
authority, and impersonal procedures.
Bureaucracy is a logical form of organizing that
lets firms use resources efficiently.
However, in many large corporate and
government organizations, bureaucracy has come
under attack with attempts to decentralize
authority, flatten organization structure, reduce
rules and written records, and create a smallcompany mindset.

Organizational Size and Bureaucracy

(Cont.)

These organizations are willing to trade

economies of scale for responsive, adaptive
organizations.
Many organizations are subdividing to gain
small-company advantages.
Another approach to overcoming the problems
of bureaucracy is to use temporary systems,
enabling the organization to glide smoothly
between a highly formalized, hierarchical style
that is effective during times of stability and a
more flexible, loosely structured one needed to
respond to unexpected or volatile
environmental conditions.

Other Forms of Control

All organizations, large and small, need systems for
control.
Managers can choose among three overall control
strategies: bureaucratic, market and clan.
Bureaucratic control relies on standard rules and the
rational-legal authority of managers.
Market control is used where product or service outputs
can be priced and competition exists.
Clan control, and more recently self-control, are
associated with uncertain and rapidly changing
organization processes. They rely on commitment,
tradition, and shared values for control.
Managers may use a combination of control
approaches to meet the organization's needs.

Organizational Decline
Many organizations have stopped growing, and some
are declining.
Organizations go through stages of decline, and it is
the responsibility of managers to detect the signs of
decline, implement necessary action, and reverse
course.
One of the most difficult decisions pertains to
downsizing the workforce.
To smooth the downsizing process, managers can
communicate with employees and provide as much
information as possible, provide assistance to
displaced workers, and remember to address the
emotional needs of those who remain with the
organization.