BA 5201 Organization and Management Patterns of strategic organizational design

1. BA 5201Organization and ManagementPatterns of strategic organizational design Instructor: Çağrı Topal

2. Organizational design • Grouping of individuals or tasks into work units, departments, and divisions • Critical role in integration • Functional: grouping according to the nature of the work or functions • Output: grouping according to outcomes or products, markets, and geography

3. Functional design • Grouping employees on the basis of functions or equipments • Based on specialized knowledge, skills, information, and equipment • Assigning partial responsibility • Best suited for organizations of small- or medium-size, single-product or few-closely related-product, low-interdependence and routine technology, and fairly stable environment

4. Functional design-strengths • Workers can develop refined expertise andskills • Communication and thus coordination isfacilitated within functions • Newly hired employees can be easily socializedto acquire functional and interactional skills • Economies of scale is more likely to emerge

5. Functional design-weaknesses • It is difficult to coordinate the activities of different functions • A narrow functional view of the organization may emerge • Coordination may be pushed up the hierarchy, wasting top managerial resources • It is likely that innovation will be inhibited

6. Output design • Including groupings of products or services, markets, and geographical regions • Based on output, its type or market, or geography where it is sold • Involving semi-autonomous departments or divisions • Suitable for uncertain environments and non-routine interdependent technologies

7. Output design-strengths • Adaptation to environmental demands in general is easier • Output rather than department orientation makes coordination easier • The need for centralized coordination is less • It is easier to identify and track responsibility for efficiency and profitability

8. Output design-weaknesses • Product, market, or geographical biases are likely to occur • The potential for economies of scale is considerably reduced • The ability to share information and resources across divisions is low

9. Mixed designs: hybrid • Combining both functional and output groupings • Gaining economies of scale • Functional departments serving the entire company • Output divisions responding to product, market, or geographical requirements • Suitable for uncertain environments • Possibility of lack of a common vision shared by both functional headquarters units and divisional units

10. Mixed designs: matrix • Overlapping existence of functional and output groups • Functional resources allocated among output groups of products, projects, or programs • Proper technical advice and expertiseat the proper location and at the desired time • When functional resources in short supply • Responsive and flexible • Suitable for complex\dynamic environments, and non-routine\highly interdependent tasks

11. Mixed designs: matrix-problems • Possibility of domination of one group over other groups • Violation of the unity of command principle and high mediation need • Inherent potential for conflict • Difficulty in responding to very fast circumstances

12. Evolving designs: virtual • Core organization and critical functions • Non-critical functions perfomed by partners or temporary workers • Linkages kept if productive • Flexibility

13. Evolving designs: virtual-problems • Less control over outside partners • Displacing labor to other nations • Destabilizing jobs • Socio-economic stratification

14. Evolving designs: federal • Extension of product-based design • A small central organization and a number of loosely affiliated subsidiaries • Financial controls by the central organization • The Japanese keiretsu and the Korean chaebol

15. Evolving designs: federal-keiretsu • Major banks and trading companies at the core • Member companies as independent entities tied together through cross holding of shares, overlapping boards of directors, and formal or informal agreements • Cooperation to ensure individual companies’ viability and competitiveness • Problem of inflexibility

16. Evolving designs: federal-chaebol • Formed with the cooperation and support of the government • Family-based • Cross-ownership and long-standing family ties • Features of family control and management, paternalistic leadership, centralized planning and control, entrepreneurial orientation, close ties with the government, and strong ties to schools