ORGANIZATION STRUCTURE

AND DESIGN
Anindya Pattanayak
anindya@xim.edu.in
+91 8902468220/6206753687
 Organizations and
Organization Theory
 Organization Design- What is it?
• https://www.youtube.com/watch?v=ppXbtMAafik
 Micro vs meso vs macro perspectives
Micro Perspectives Meso Perspectives Macro Perspectives
(Individuals) (Groups) (The organization)

• Perception • Group Decision • Organizational

• Personality Making Culture and Climate
• Attitudes • Leadership • Organizational
• Motivation • Team Building Change
• Learning • Conflict • Organization
• Job satisfaction • Organizational politics Structure and Design
Levels of Analysis in Organization
 Organization Theory in Action
• Current Challenges
– Globalization
– Intense Competition
– Ethics and Social Responsibility
– Speed of Responsiveness
– The Digital Workplace
– Diversity

6
 Organization Theory in Action
• Current Challenges
– Globalization
– Intense Competition
– Ethics and Social Responsibility
– Speed of Responsiveness
– The Digital Workplace
– Diversity
• Organization theory helps us explain what happened in
the past, as well as what may happen in the future, so
that we can manage organizations more effectively
7
 What is an Organization?
• A structured system that brings people together in a formal
way, guiding their interactions and relationships.

• Organizations are formed when people with shared goals and

objectives come together. They establish structured
relationships where individuals have specific roles, authority,
and responsibilities. These relationships are governed by rights
and duties assigned to each person.

8
 What is an Organization?

✓Social entities that are goal-directed

✓Designed as deliberately structured and
coordinated activity systems
✓Linked to the external environment
✓Includes large multinational corporations,
family owned businesses as well as nonprofits

9
 Discuss

Are organizations open or closed systems?

ANSWER: Organizations are open systems that obtain inputs from the
external environment, add value through a transformation process, and
discharge products and services back to the environment.
Organizations: Open or Closed Systems?
 Discuss

Why are organizations important?

ANSWER: Organizations are important because they provide a framework

for achieving common goals and objectives.
 Importance of Organizations

• Organizations are a means to an end

• The corporation has played a significant role in the last 100 years
• Produce goods and services efficiently
• Facilitate innovation
• Adapt to and influence a changing environment
• Create value for owners, customers, and employees
• Accommodate ongoing challenges of diversity, ethics, and the motivation
and coordination of employees
13
 The
Importance of
Organizations
 Discuss

Beyond providing a framework for achieving goals, what

are some other reasons why organizations are important
in society?

ANSWER: The broader societal impact of organizations include:

Economic impact: Organizations create jobs, produce goods and services, and
contribute to economic growth.
Social impact: Organizations can foster innovation, address social issues, and promote
community development.
Political impact: Organizations can influence government policies and shape public
opinion.
 Dimensions of
Organization Design

Structural Dimensions Contingency Factors

– Formalization – Size
– Specialization – Organizational
– Hierarchy of Authority technology
– Centralization – Environment
– Professionalism – Goals and strategy
– Personnel Ratios
– Culture

16
 Structural Dimensions
• Formalization pertains to the amount of written documentation in the organization,
e.g. procedures, job descriptions, regulations, and policy manuals.
• Specialization is the degree to which organizational tasks are subdivided into
separate jobs.
• Hierarchy of Authority describes who reports to whom and the span of control for
each manager.
• Centralization refers to the hierarchical level that has authority to make a decision.
• Professionalism is the level of formal education and training of employees.
• Personnel Ratios refer to the deployment of people to various functions and
departments. A personnel ratio is measured by dividing the number of employees
in a classification by the total number of organizational employees.
17
 Contingency/Contextual Factors
• Size can be measured for the organization as a whole or for specific components,
such as a plant or division. Size is typically measured by the number of employees.
• Organizational technology refers to the tools, techniques, and actions used to
transform inputs into outputs.
• Environment includes all elements outside the boundary of the organization, e.g.
the industry, government, customers, suppliers, and the financial community.
• Goals and strategy define the purpose and competitive techniques that set it apart
from other organizations
– Goals are enduring statements of company’s intents
– Strategies are plan of actions for using resources and managing environment to achieve a
goal
• Culture is the underlying set of key values, beliefs, understandings, and norms of
the organizations shared by employees. 18
 Span of control vs (De)centralization
Aspect Span of Control Centralization
The degree to which decision-making
The number of subordinates directly
Definition authority is concentrated at the top
managed by a supervisor.
levels of management.
Focuses on the manager-subordinate Focuses on the locus of decision-
Focus relationship and the number of making authority within the
direct reports. organization.
Refers to the structural aspect of Refers to the distribution of authority
Scope
supervision and control. across the organization.
Affects operational efficiency,
Impact on Affects decision speed, autonomy, and
communication, and workload
Organization flexibility.
distribution.
Can be wide (many subordinates per Can be centralized (decisions made by
Types manager) or narrow (few top management) or decentralized
subordinates per manager). (authority distributed to lower levels).
How Span of control impacts (De)centralization
1. Wide Span of Control (Fewer Managers):
1. Managers supervise a large number of subordinates.
2. Requires subordinates to have greater autonomy due to limited managerial
oversight.
3. Promotes decentralization, as decisions need to be made at lower levels to avoid
bottlenecks.
2. Narrow Span of Control (More Managers):
1. Managers oversee fewer subordinates.
2. Enables closer supervision and more direct control over subordinates' activities.
3. Supports centralization, as managers can focus on enforcing top-level decisions
and policies.
 Discuss

How do "structural dimensions" and "contingency

factors" interact to influence the design of an
organization?

ANSWER: Structural dimensions, such as formalization or specialization,

provide the internal framework of an organization. Contingency factors,
like the organization's size, technology, and environment, are external
forces that influence how these structural dimensions are shaped.
 Interacting
Structural
Dimensions of
Design and
Contingency
Factors

22
 Discuss

An organization can be understood primarily by

understanding the people who make it up.

ANSWER: Disagree. An organization has distinct characteristics that are

independent of the nature of the people who make it up. All the people
could be replaced over time while an organization’s structural and
contextual dimensions would remain similar.
Organization Chart

24
 Discuss

Can you think of examples where the characteristics of an

organization might change significantly even if its structural
dimensions and contingency factors remain relatively stable?

ANSWER: Significant internal changes, such as a major shift in leadership

or a company-wide transformation initiative, can impact an
organization's characteristics.
 Performance and
Effectiveness Outcomes
• Efficiency vs Effectiveness?

27
 Performance and
Effectiveness Outcomes
• Efficiency – amount of resources used to
achieve the organization’s goals
• Effectiveness – the degree to which an
organization achieves its goals
• Stakeholder Approach – balancing the needs
of groups in and outside of the organization
that has a stake in the organization’s
performance
28
 Discuss

The primary role of managers in business organizations is

to achieve maximum efficiency.

ANSWER: Disagree. Efficiency is important, but organizations must respond to

a variety of stakeholders, who may want different things from the organization.
Managers strive for both efficiency and effectiveness in trying to meet the
needs and interests of stakeholders. Effectiveness is often considered more
important than efficiency.
 Efficiency vs effectiveness

Effectiveness is
doing the right
things, efficiency
is doing things
right.
Efficiency vs effectiveness
Major Stakeholder Groups and What They Expect

• Employees
• Customers
• Creditors
• Management Expectations?
• Government
• Union
• Community
• Suppliers
• Owners and Stockholders
32
Major Stakeholder Groups and What They Expect

33
 Discuss

In case of any potentially conflicting expectations, how would an

organization attempt to balance those competing interests.

Employees vs. Owners/Stockholders: Employees may prioritize job

security and fair wages, while owners/stockholders might focus on
maximizing profits and shareholder value. The organization can attempt
to balance these interests by offering competitive compensation
packages, investing in employee development, and promoting
transparency in financial performance.
 Discuss

In case of any potentially conflicting expectations, how would an

organization attempt to balance those competing interests.

Customers vs. Community: Customers might demand lower prices, while

the community might expect the organization to prioritize environmental
sustainability. The organization can address these competing interests by
adopting sustainable practices while also offering affordable products or
services
 The Evolution of Organization
Theory and Design

Historical perspectives provide insight into

how organization design and management
practices have varied over time in response
to changes in society.

36
Historical Perspectives
 Historical Perspectives
• Efficiency is Everything
– Scientific Management: Pioneered by Frederick Winslow Taylor
• How to Get Organized
– Administrative Principles
• Contribution to Bureaucratic Organizations by Max Weber
• What about People?
– Hawthorne Studies by Elton Mayo
• Can Bureaucracies Be Flexible?
– Flexible and lean; focused on service, quality, and engaged employees (1908s)
• It All Depends: Key Contingencies
– Contingency: there is no “one best way”
38
 Mintzberg’s 5 basic parts of an organization
• Mintzberg
proposed that the
five parts could fit
together in any
type of
organization
• In real-life
organizations, the
five parts are
interrelated and
often serve more
than one function
39
 Mintzberg’s 5 basic parts of an organization
• Technical Core: The technical core includes people who do the basic work
of the organization. This part actually produces the product and service
outputs of the organization. e.g. Production department in manufacturing
firm

• Technical Support: The technical support function helps the organization

adapt to the environment. e.g. engineers, IT professionals

• Administrative Support: The administrative support function is

responsible for the smooth operation and upkeep of the organization,
including its physical and human elements. e.g. human resource activities
 Mintzberg’s 5 basic parts of an organization
• Management: Management is a distinct function, responsible for
directing and coordinating other parts of the organization.
– Top management provides direction, planning, strategy, goals, and
policies for the entire organization or major divisions.
– Middle management is responsible for implementation and
coordination at the departmental level.
 Discuss

A CEO’s top priority is to make sure the organization is

designed correctly.

ANSWER: Agree. Top managers have many responsibilities, but one of the most
important is making sure the organization is designed correctly. Organization design
organizes and focuses people’s work and shapes their response to customers and
other stakeholders. Managers consider both structural and contextual dimensions as
well as make sure the various parts of the organization work together to achieve
important goals.
 Mintzberg’s Five Organization Types

The organization with an

entrepreneurial structure
is typically a new, small
start-up company. It
consists mainly of a top
manager and workers in
the technical core.
 Mintzberg’s Five Organization Types

The machine bureaucracy

is very large, typically
mature, and the technical
core is often oriented to
mass production. It has
fully elaborated technical
and administrative
departments.
 Mintzberg’s Five Organization Types

The distinguishing feature of

the professional bureaucracy
is the size and power of the
technical core, which is made
up of highly skilled
professionals, such as in
hospitals, universities, law
firms, and consulting firms.
The technical support staff is
small or nonexistent.
 Mintzberg’s Five Organization Types

Organizations with a
diversified form are
mature firms that are
extremely large and are
subdivided into product or
market groups. There is a
relatively small top
management and a small
technical support group
for the top level. There is a
larger administrative
support staff.
 Mintzberg’s Five Organization Types

The adhocracy develops in a

complex, rapidly changing
environment. The design goal is
frequent innovation and meeting
continually changing needs, as in the
aerospace and defense industries.
 Discuss (in groups)
Think of a real-world company and identify which of Mintzberg's five
organization types it most closely resembles. Explain your reasoning, using
specific examples from the company's structure and operations.

1. Consider the specific industry, goals, and environment

2. Discuss the size and expertise needed in the technical core, the necessary support
functions in technical and administrative support, and how they would distribute
decision-making authority across management levels.
 Discuss (in groups)
Think of a real-world company and identify which of Mintzberg's five
organization types it most closely resembles. Explain your reasoning, using
specific examples from the company's structure and operations.

ANSWER:
Entrepreneurial Structure: Small, new companies with a simple structure. The top
manager, often the owner, makes most decisions. For example, a small bakery where
the owner manages everything.
Machine Bureaucracy: Large, mature organizations with standardized processes and a
clear hierarchy. They are efficient but can be inflexible. Like McDonald's with its
standardized procedures and strict quality control.
 Discuss (in groups)
Think of a real-world company and identify which of Mintzberg's five
organization types it most closely resembles. Explain your reasoning, using
specific examples from the company's structure and operations.

ANSWER:
Professional Bureaucracy: Dominated by highly skilled professionals in the technical
core, like hospitals and universities. They have a high degree of autonomy and
decision-making power. An example is a large law firm where experienced lawyers
drive the work.
Diversified Form: Large, mature firms divided into product or market groups, each
operating relatively independently. General Electric (GE), with its diverse range of
businesses, exemplifies this.
 Discuss (in groups)
Think of a real-world company and identify which of Mintzberg's five
organization types it most closely resembles. Explain your reasoning, using
specific examples from the company's structure and operations.

ANSWER:
Adhocracy: Organizations designed for innovation and adaptability, common in
complex and rapidly changing environments. They have flexible structures,
decentralized decision-making, and a focus on collaboration. Google's flat hierarchy
and focus on innovation are characteristic of this type.
 Organic vs. Mechanistic
• Mechanistic – characterized by machine-like standard rules
and procedures with clear authority
• Organic – design of organization is looser, free-flowing, and
adaptive
Depends upon:
–Structure
–Tasks/Roles
–System Formality (Rules)
–Communication
–Hierarchy versus Collaboration
Organic and Mechanistic Designs

53
Organic vs. Mechanistic
 Discuss

Which is better- organic or mechanistic?

ANSWER: It depends
 Caselet: NextEra Tech
Company Overview:
NextEra Tech is a mid-sized technology company specializing in innovative
consumer electronics. The company is navigating three distinct phases of
growth and challenges, requiring its board to choose a leader who can guide
it through each situation effectively.
Leadership Profiles:
• Leader A: Focuses on structured hierarchies, precise planning, routine
processes, and strict performance metrics. Prefers top-down decision-
making and prioritizes efficiency and control.
• Leader B: Advocates for adaptive cultures, open communication,
empowerment, and cross-functional collaboration. Thrives in dynamic and
innovative environments, valuing creativity and flexibility.
 Caselet: NextEra Tech
Company Overview:
NextEra Tech is a mid-sized technology company specializing in innovative
consumer electronics. The company is navigating three distinct phases of
growth and challenges, requiring its board to choose a leader who can guide
it through each situation effectively.
Leadership Profiles:
• Leader A: Focuses on structured hierarchies, precise planning, routine
processes, and strict performance metrics. Prefers top-down decision-
making and prioritizes efficiency and control. (mechanistic)
• Leader B: Advocates for adaptive cultures, open communication,
empowerment, and cross-functional collaboration. Thrives in dynamic and
innovative environments, valuing creativity and flexibility. (organic)
 Caselet: NextEra Tech
Situation: Scaling Production
NextEra Tech has developed a revolutionary smart home device,
and demand is skyrocketing. The company needs to scale
production rapidly to meet customer expectations while ensuring
consistent quality. Stability, streamlined processes, and
minimizing errors are critical for success.
Discussion Question:
Which leader should NextEra Tech choose to manage this phase
effectively and why?
 Caselet: NextEra Tech
Situation: Innovating the Product Line
After securing its market position, NextEra Tech plans to expand
its product portfolio. The company needs to foster creativity,
embrace experimentation, and encourage cross-departmental
collaboration to develop groundbreaking new features and
products. Agility and adaptability are key in this phase.
Discussion Question:
Which leader should NextEra Tech choose to manage this phase
effectively and why?
 Caselet: NextEra Tech
Situation: Entering Global Markets
NextEra Tech is preparing for international expansion. Initially, the
company must adhere to strict regulatory standards and ensure
consistent product quality in diverse regions (requiring structure and
efficiency). Simultaneously, it must build local partnerships, adapt to
cultural nuances, and encourage teams to innovate based on regional
feedback (requiring flexibility and collaboration).
Discussion Question:
Which leader should NextEra Tech choose to balance these dual
demands and why?
 Discuss

Under what circumstances might a company benefit from shifting

from a mechanistic to a more organic design, or vice versa?

EXAMPLE: A company facing rapid technological advancements or intense

competition might benefit from becoming more organic to enhance its agility and
responsiveness.
An organization struggling with inefficiency or a lack of standardization might need
to adopt a more mechanistic approach to improve control and predictability.
Two organization design approaches
 Contemporary Ideas
• Today’s organizations are still imprinted with
hierarchical, formalized mechanistic approach
• Open Systems are adaptive and interact with the
environment
• Chaos theory states that relationships in complex
systems are nonlinear
– Chaos operates with some predictability which is the
challenge of today’s managers

63
 Examining our understanding
• Examine specific characteristics of organizations

• Examine the nature of and relationships among groups and departments

• Organizational behavior is the micro approach

• Organization theory is the macro examination

• Organization theory is concerned with the big picture of the organization

and its major departments

64
 Finally
• https://www.youtube.com/watch?v=xcTtQ0hiHbE
Case- General Electric: A glorious heritage
GE in 2019, and after…
 GE in 2019 and after…
Impact of COVID-19 (2020)
• GE's share price fell to a 28-year low of $43.92 in May 2020.
• Aviation unit, the most profitable segment in 2019 ($32.9B in
revenue, 34% of total), was severely impacted.
• Aviation unit laid off 10% of its U.S. workforce due to reduced
demand.
• Revenue by segment hit hard, reflecting pandemic-induced
challenges.
 GE in 2019 and after…
Post-COVID Restructuring (2021-2023)
• GE shares rose ~10% in 2021 with global recovery.
• Significant transactions:
• Merged GE Capital Aviation Services with AerCap, netting $23B in
cash.
• Acquired BK Medical for $1.45B in December 2021.
• Investments and growth:
• $450M investment in U.S. manufacturing facilities (2023).
• GE Aerospace achieved 20% revenue growth in 2022.
 GE in 2019 and after…
2024: GE Splits into Three Independent Companies
• GE Aerospace
• Focus: Jet engines and services for Boeing & Airbus.
• Positioned to benefit from aftermarket services amid delivery delays.
• Market value: Over $168B.
• GE Vernova (Energy)
• Focus: Renewable energy, power generation, and digital energy solutions.
• Product offerings include turbines, energy storage, and grid technologies.
• GE HealthCare
• Specialized in medical equipment and technologies.
 Case- General Electric: A glorious heritage
Questions for Discussion
1. Identify, compare, and contrast the structural dimensions and
contingency factors for GE under the leadership of Jack Welch
and Jeff Immelt.
a. Consider GE’s industry, organizational goals, and the
environmental factors during each era in your analysis.
b. Evaluate the effectiveness of the structural adjustments made
by each leader in addressing their respective challenges.
2. What kind of organization is GE according to Mintzberg's five
organization types (Simple Structure, Machine Bureaucracy,
Professional Bureaucracy, Diversified Form, Adhocracy)? If GE
were to shift to a modern organization to address its challenges, what
structural changes would it need to make to its organizational parts
(e.g., strategic apex, middle line, operating core, technostructure,
support staff)? Which Mintzberg organizational type would best
represent this new structure?