Contemporary organization design

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Contemporary organization design

The current proliferation of design theories and alternative forms of organization gives practicing managers a dizzying array of choices. The task of the manager or organization designer is to examine the firm and its situation and to design a form of organization that meets its needs. A partial list of contemporary alternatives includes such approaches as downsizing, rightsizing, reengineering the organization, team-based organizations and the virtual organization.

These approaches often make use of total quality management, employee empowerment, involvement and participation, reduction in force, process innovation, and networks of alliances. Practicing managers must deal with the new technology, the temptation to treat such new approaches as fads, and their own organizational situation before making any major organizational design shifts.

Reengineering the organization

Reengineering is the radical redesign of organizational processes to achieve major gains in cost, time and provision of services. It forces the organization to start from scratch to redesign itself around its most important processes rather than beginning with its current form and making incremental changes. It assumes that if a company had no existing structure, departments, jobs, rules, or established ways of doing things, reengineering would design the organization as it should be for future success. The process starts with determining what customers actually want from the organization and then developing a strategy to provide it.

Once the strategy is in place, strong leadership from top management can create a core team of people to design an organizational system to achieve the strategy. Reengineering is the process of designing the organization that does not necessarily result in any particular organizational form, it the process of adopting the changing behavior of the industry and business environment.

Rethinking the organization

Also currently popular is the concept of rethinking the organization. Rethinking the organization is also a process of restructuring that throws out traditional assumptions that companies should be structured with boxes and horizontal and vertical lines. Robert Tomasko makes some suggestions for new organizational forms for the future. He suggests that the traditional pyramid shape of organizations may be inappropriate for current business practices. Traditional structures, he contends, may have too many levels of management arranged in a hierarchy to be efficient and to respond to dynamic changes in the environment.

Rethinking organizations might entail thinking of the organization structure as a dome rather than a pyramid, the dome being top management, which acts as an umbrella, covering and protecting those underneath but also leaving them alone to do their work. Internal units underneath the dome would have the flexibility to interact with each other and with environmental forces. Firms like Microsoft Corporation have some of the characteristics of this dome approach to organization design.

Global organization structure

Managers in a global environment must consider not only similarities and differences among firms in different cultures but also the structural features of multinational organizations.

Between-culture issues: “Between-culture issues” are variations in the structure and design of companies operating in different cultures. As might be expected, such companies have both differences and similarities. For example, one study compared the structures of 55 US and 51 Japanese plants. Results suggested that the Japanese plants had less specializations, more “formal” centralizations (but less “real” centralization), and taller hierarchies than their US counterparts. The Japanese structures were also less affected by their technology than the US plants.

Many cultures still take a traditional view of organization structure not unlike the approaches used in this country during the days of classical organization theory. For example, Tom Peters, a leading US management consultant and co-author of ‘In Search of Excellence’, spent sometime lecturing to managers in China. They were not interested in his ideas about decentralization and worker participation, however. Instead, the most frequently asked question concerned how a manager determined optimal span of control.

Multinational company: More and more firms have entered the international arena and have found it necessary to adapt their designs to better cope with different cultures. For example, after a company achieved a moderate level of international activity, it often establishes an international division, usually at the same organizational level as other major functional divisions.

For an organization that has become more deeply involved in international activities, a logical form of organization design is in the international matrix. This type of matrix arrays product managers across the product departments. A company with three basic product lines, for example, might establish three product departments (of course it would include domestic advertising, finance and operations departments as well). Foreign market managers can be designated for, say, Canada, Japan, Europe, Latin America, and Australia. Each foreign market manager is then responsible for all three of the company’s products in his or her market. Finally, at the most advanced level of multinational activity, a firm might become an international conglomerate.

Dominant themes of contemporary designs

The four dominant themes of current design strategies are:

  • The effects of technological and environmental change.
  • The importance of people.
  • The necessity of staying touch with the customer.
  • The global organization.

Technology and the environment are changing so fast, and in so many unpredictable ways, that no organization structure will be appropriate for long. The changes in electronic information processing, transmission, and retrieval alone are so vast that employee relationships, information distribution, and task coordination need to be reviewed almost daily.

The emphasis on productivity through people that was energized by Thomas Peters and Robert Waterman Junior in the 1980s continues in almost every aspect of contemporary organization design. In addition, Peters and Austin further emphasized the importance of staying in touch with customers at the initial stage in organization design.

These popular contemporary approaches and the four dominant factors argue for a contingency design perspective. Unfortunately, there is no “one best way.” Managers must consider the impact of multiple factors, the structural imperatives, socio-technical systems, strategy, changing IT, people, global considerations, and a concern for end users on their particular organization and design the organization structure accordingly.

Design issues

Universal approaches— top organization design attempts to specify the one best way to structure organizations for effectiveness. Contingency approaches, on the other hand, propose that the best way to design organization structure depends on a variety of factors. Important contingency approaches to organization design centre on the organizational strategy, the determinants of structure, and strategic choice.

Initially, strategy was seen as the determinant of structure: the structure of the organization was designed to implement its purpose, goals and strategies. Taking managerial choice into account in determining organization structure is a modification of this view. The manager designs the structure to accomplish organizational goals, guided by an analysis of the contextual factors, the strategies of the organization, and personal preferences.

The structural imperatives are size, technology, and environment. In general, large organizations have more complex structures and usually more than one technology. The structures of small organizations, on the other hand, may be dominated by one core operations technology.

The structure of an organization is also established to fit with the environmental demands and buffer the core operating technology from uncertainties and environmental changes.

Organization designs can take many forms. A mechanistic structure relies on the administrative hierarchy for communication and directing activities.

In the socieo-technical systems view, the organization is an open system structured to integrate two important subsystems: the technical (task) subsystem and the social subsystem. According to this approach, organizations should structure the task, authority, reporting relationships around the work group, delegating to the group decisions on job assignments, training, inspection, rewards, and punishments.

The task of management is to monitor the environment and coordinate the structures, rules, and procedures. Henry Mintzberg’s ideal types of organization design were derived from a framework of coordinating mechanisms. The five types are simple structure, divisionalised form, machine and professional bureaucracy, and adhocracy. Most organizations have some characteristics of each type, but one is more likely to predominate.

Mintzberg believed that the most important consideration in designing and organization is the fit among parts of the organization.

 

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