Basic Challenges of Organizational Design

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  • Topic: Management, Organization, Structure
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  • Published : October 28, 2010
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Basic Challenges of Organizational Design

Basic Challenges of Organizational Design
Differentiation:- It is the process by which organization allocates people and resources to organizational task and establishes the task and authority relationships that allow the organization to achieve its goals. Organizational Roles

An organizational role is a set of task-related behavior required of a person by his or her position in an organization. Organizational structure is based on a system of interlocking roles, and the relationship of one role to another is defined by task-related behaviors. Authority:- is the power to hold people accountable for their actions and to make decisions about how to invest and use organizational resources.

Subunits: Functions and divisions
In organizations, people with similar and related roles are grouped into a sub unit. The main subunits that develop in organizations are functions or departments. A function is a subunit composed of a group of people, working together, who possess similar skills or use the same kind of knowledge, tools, or techniques to perform their jobs. A division is a subunit that consists of a collection of functions or departments that share responsibility for producing a particular good or service. The number of different functions and divisions that an organization possesses is a measure of organizations complexity – its degree of differentiation. As organizations grow in size, they differentiate kinds of functions. Support functions: - facilitate an organizations control of its relations with its environment and its stakeholders. Eg. Sales and marketing, public relation and legal affairs. Production functions: - manage and improve the efficiency of an organizations conversion process so that more value is created. Eg. Production operations, production control and quality control. Maintenance functions: - enables an organization to keeps its departments in organization. Eg. Personnel, engineering. Adaptive functions: - allow an organization to adjust to changes in environment. It includes research and development, market research, long-range planning Managerial functions: - facilitate the control and coordination of activities within and among department. Eg. Acquisition, investment, control of resources.

Vertical and Horizontal differentiation
Vertical differentiation:- refers to the way an organization designs its hierarchy of authority and creates reporting relationships to link organizational roles and subunits. It establishes distribution of authority between levels to give the organization more control over its activities and increase its ability to increase value. Horizontal differentiation: - refers to the way an organization groups organizational tasks into roles and roles into subunits. It establishes division of labor that enables people in an organization to be more specialized and productive and increase its ability to create value.

Organizational Design Challenges

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Balancing differentiation and integration
Horizontal differentiation limits communication between subunits and prevents them from learning from one another. Members develop subunit orientation - tendency to view ones Role in the organization strictly from the perspective of time frame, goals and interpersonal orientation of one’s subunit. When different function see things differently, communication and co-ordination becomes difficult. Organizations try to find a new or better ways to integrate functions. Increasingly, companies are using electronic means of communication like email, teleconferencing to bring different functions together.

Integration and integration mechanisms

Integration mechanism (in order of increasing complexity)| Description| Hierarchy of authority| A ranking of employees integrates by specifying who reports to whom| Direct contact| Managers meet face to face to coordinate activities| Liaison...
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