BA 4017 ORGANIZATIONAL DESIGN, CHANGE AND DEVELOPMENT

UNIT 1

ORGANISATIONAL DESIGN

ORGANIZATIONAL DESIGN :

MEANING 1: Organizational design is the process by which managers select and

manage aspects of structure and culture so an organization can control the activities
necessary to achieve its goals. Organizational structure and culture are the means the
organization uses to achieve its goals; organizational design is about how and why various
means are chosen.

MEANING 2: Organizational design is the process of aligning the structure of an

organisation with its objectives, with the ultimate aim of improving its efficiency and
effectiveness.

Other points of organisational design

 Work can be triggered by the need to improve service delivery or specific business
processes or as a results of new mandate
 Undertstanding the business processes, workflows, roles and responsibilities,
volume of works, activity analysis.

ORGANIZATIONAL STRUCTURE :

The organizational structure also defines the flow of information between

different levels of an organization, clarity of job of each employee, and
its fitment in the overall system which motivates the employees to work efficiently
by keeping their morale high; hence, increasing the overall productivity of an
organization.
IMPORTANCE OF ORGANISATIONAL STRUCTURE :

 it enables members to know what their responsibilities

 it frees the manager and the individual workers to concentrate on their respective roles and
responsibilities.
 It coordinates all organisation activities so there is minimal duplication of efforts or conflict
 It Avoids overlapping of function because it pinpoints responsibilities
 Shows to whom and for whom they are responsible

IMPORTANCE OF ORGANISATIONAL DESIGN :

 Communication — The flow of information is always essential for the success of an organization. The
organizational structure should be designed in such a way to ensure that the individuals and the
departments need to coordinate their efforts and should have the lines of communication into their
structure.

 reporting Relationships — Reporting relationships should be clear so that all the members of the
organization should understand what their responsibilities are and to whom they are accountable.
These clear relationships make it easier for the managers to supervise those who are in lower
organization levels.

 Growth and Expansion - A good organizational structure ensures that the company has the right
people in the right positions. The structure may suggest some weak spots or the deficiencies in the
 company management team. As the company grows, the organizational structure must evolve with its
growth. Many a times more layers of management are created, when one department head has too
many individuals reporting to him at one time, to give each of the employee the attention and the
direction needed for the employee to succeed

 Task Completion — A well designed organizational structure confirms the completion of the projects.

 Fits company needs -Companies in different industries require different mixture of talent and
relatively greater emphasis on the certain management functions. A software company often has a
large staff for development. Companies often have to go through a re-organization phase in which
the individual positions or even the whole departments are re-positioned on the organizational
chart,

(Or)
IMPORTANCE OF ORGANISATIONAL DESIGN :
 Dealing with contingencies
 Competitive advantage
 Diversity in workforce /or / managing diversity
 Innovation and effectiveness
 Task Completion

1. Dealing with Contingencies:

Contingency means  event occur without any expectations

A contingency can be explained as an event that might occur without any expectation, and the
management should properly plan to meet such contingencies. One such contingency is the
changing business environment. The design of an organization determines how efficiently it can
control various factors in its environment.
Example1 : Economic recession , natural disaster, fraudulent activity, pandemic
Example 2: In 2020 business were hit by coronovirus pandemic , that forcing many employees to
have work remotely.many of the industries were shutdown.

2. Competitive Advantage:
 In the modern competitive age, every organisation wants to design its structure in such a way
as to have the maximum sustained competitive advantage
 By producing better products / service a company can sustain its competitive advantage
because
 Best business strategy implementation and inorder to get competitive advantages
 Management should have to take proper decision making to achieve a competitive
advantages

3. Diversity in Workforce:
 Diversity in workforce on account of differences in race, gender, and the place or
origin of workers has an important impact on organization’s effectiveness.
 The organization’s structure should be designed in such a manner so,we can utilize a
talents of diverse workforce with different culture backgrounds effectively.
 Which results in better decision making and better workforce

4. Innovation and Efficiency:

 The correct organisational design can leads to faster ionnovation and quickly get new
products to markets
 Organisational design plays a crucial role in innovation and search.
 Those organisations that produce goods and services as per the expectations of the people
are successful.
 The design and use of new and more efficient organisational structure is equally important in
producing quality goods and services.

5. Task Completion :
A well designed organizational structure confirms the completion of the projects.

Other importants of organisational design:

 Good organisational structure & design helps to improve communication,

increase productivity and creates innovation
 It creates an environment where people can work effectively
 It also helps to define the hierarchy and chain of command
Determinants / factors affecting organisational design :

There are five factors that greatly impact organizational design. These factors are:

1. Strategy. Strategy dictates the strategic priorities of an organization. This is the most

important influencing factor of organizational structure and design.

2. Environment. The environment a company operates in influences its strategy but also

dictates how it positions itself. In a rapidly-changing environment, the organization has

to design for more flexibility, or adaptability, while in a stable environment the

organization can optimize for efficiency.

3. Technology. Information technology is a key enabler for decision making. The state

of IT impacts organizational design as well. When systems are in place and decision

making is based on data, the organizational structure and design – including the potential

for hierarchical control – will be different from an organization where most of the data is

stored in unorganized Excel sheets.

4. Size & life cycle. The organizational size and life cycle also impact the organizational

structure and design. A 20-person company has very different challenges when it

comes to design compared to a 200,000-person company.

5. Culture. The organizational culture is another key element that impacts organizational

structure and design – and, vice versa, design also impacts culture.

ELEMENTS /COMPONENTS OF ORGANISATIONAL DESIGN :

 Work specialization
 Departmentalization
 Functional departmentalization
 Product departmentalization
 Geographical departmentalization
 Matrix departmentalization
 Customer departmentalization
 Chain of control
 Span of control
 Centralization Vs decentralization
 Formalization

 Work specialization :

Meaning 1: Work Specializion means  in doing part of an activity rather than entire
activity in an organisation in order to increase the work output.

Meaning 2: Work specialization, sometimes called a division of labor, refers to the

degree to which an organization divides individual tasks into separate jobs. It allows the
manager to take complex tasks and break them down into smaller,
 Points to remember :

 Division of labour
 Breaking down jobs into narrow/repetitive tasks
 Dividing work activities into separate job tasks

Advantages and disadvantages of workspecialization:

ADVANTAGES DISADVANTAGES

work can be performed more workers could replaced by

effectively machinery , less job satisfaction

employees can get skills and Employees get bored,

expertise absenteeism,stress.

facilitates the process of selecting it lacks flexibility

employees

decreasing training requirements training requires in various works

and increase training costs too

allows managers to supervise it increase administration cost

more employees
helps in increase productivity may be decrease in quality as
employee are bored of doing same
job

its saves time since repetation of It Requires more time to complete

same work the work, if multi works done by
one employee

Example:

Mc donald’s was one of the 1st companies to recognise that work specialisation
was the best way to make and sell their food in the quickest way possible

One person fill drinks alone ,

another person takes only order, division of labour

another person only makes the burger,

another cooks the fries...

 Departmentalization :

Once jobs have been specified through work specialization process, now they will be
grouped in common tasks. There will be formed departments with common activities
for effective coordination of effort. There are five common forms of
departmentalization:

1. Functional Departmentalization:

FUNCTIONAL DEPARTMENT

Production Finance Marketing HR

Department department department Department

Meaning : ( It is the most common forms of departmentalization in which

similar tasks grouped together into a common department, such as
marketing, finance, human resources, etc ).

here each department is controlled by one single person

 The efficiencies from putting together similar specialities and people with
common skills and knowledge could be beneficial
 Also the coordination with functional areas will be stronger.
 2. Product Departmentalization:

Meaning : ( It is grouped on the basis of product line.)

 Each manager will be responsible for an area within the organization

depending on his/her specialization.
 This type of departmentalization is made by large scale business unit
 A single business unit may manufacture and sell different types of products
 Then each type of products /services are allocated to a separate departments

Example :

PRODUCT DEPARTMENT

TWO WHEELER FOUR WHEELER THREE WHEELER HEAVY MOTORS

DEPARTMENT DEPARTMENT DEPARTMENT

 3. Geographical Departmentalization:

Meaning: ( Geographic departmentalization is the grouping of employees based

on their physical location. )

Local people appoint as a salesman so that they can cannot with their area
culture,connect and communicate through their local languages.

Example :

Advantages:

o Big organizations find beneficial in organizing this form of departmentalization .

o so that all activities performed in a region are managed together.
o It helps for the the managers in handling specific regional issues that arise.
o It could response and serve better to the demand of different markets.
 4. Matrix Departmentalization:

Meaning : (It is a structure where two or more forms of departmentalization are

used together; most common forms combine i.e (functional and product) in which
employee reports two bosses)

example: the functional as well as the product. It will increase cross-functional

interactions .
Advantage :

 It will be beneficial to manage effectively and efficiently large and complex

tasks.
 Better supervision and control
 Efficient employement of resources

Disadvantages:

 It will require high levels of management skills and high levels of coordination
as well.
 It will also increase the level of conflicts.
 Expensive structure
 Complex chain of command

5. Customer Departmentalization:

This form of departmentalization groups organization’s activities according to its

customers. An organization finds it beneficial to organize according to the types of
customers it serves .

It will be helpful to focus and meet the customers’ needs. But again there will be
duplication of resources and they may find difficulties to achieve coordination across
departments.
3. Chain of Command:

Another element in an organizational design is defined an order which authority and

power in an organization is used and delegated from top management to the
lower management. It also ensures clear assignment of duties and responsibilities of
every employee at every level.

4. Span of Control:

The span of control in an organization is defined as the number of employees

reporting directly to one supervisor/manager. It is said, the wider the span, the more
efficient the organization. It determines the number of employees that a manager can
effectively and efficiently manage.

5. Centralization Vs Decentralization:

Robbins and Coulter describe this very well, “If top managers make the
organization’s key decisions with little or no input from below, then the organization
is centralized.”

Decentralization can be defined as “the spread of power away from the centre to
local branches or governments.”

The environment is stable in centralization and complex, uncertain in decentralization.

Also, the lower-level managers are not as capable or experienced at making decisions
as upper-level managers in centralization and on the other side in decentralization,
they are very capable and experienced at making decisions. In centralization, the
company is large and in decentralization, companies are geographically dispersed.

6. Formalization:

 Formalization is the extent to which employee behaviour is guided by rules

and procedures.
 The organizations with high formalization have strict rules and regulations.
 The low formalization organizations have very few written rules and
procedures and are less stable.

BASIC CHALLENGES OF ORGANISATIONAL DESIGN:

 What are the challenges for designing an organisation
 When we design the structure
st of an organisation , we may able to face different
types of challenges come , so , how to overcome those challenges here we discussed

 Differentiation

 Integration

 Centralisation

 Decentralisation

 Standardization

 Mutual adjustment
DIFFERENTIATION:  means ( Allocating a people & resources to
organisational tasks).

Meaning : Differentation is the process by which an organisation allocates

people and resources to organisational tasks and establishes the task and
authority relationship that allows the organisational to achieve its goals

There are two types of differentiation

differentiatio

 Vertical differentiation
 Horizontal differentiation
Vertical differentiation:

 It refers to the way an organisation designs its hierarchy of authority and

creates reporting relationship to link organisational roles and subunits.
 Why differentiation  to control and to develop core competencies

Subunits  (functions & divisions): the most organisational people with similar
and related roles are grouped into one called subunits. Eg: 5 to 10 people related
roles  that is subunits

Function  it is a subunit composed of a group of people working together

who possess similar skills & knowledge or use same kind of tools, techniques to
performe their jobs.

Division  it is a subunit that consists of collection of functions or department

that share responsibility for producing a particular goods/ services
Horizontal differentiation :

 The way an organisation groups organisational tasks into roles and roles
into subunits.
 It enables people to specialize and become more productive

. For instance, employees in the accounting department will focus on maintaining financial data and
examining tax laws, while those in the sales department put their efforts toward bringing in new clients
and higher revenues.

INTEGRATION:

The process of coordinating

ting various tasks, functions and divisions so that they
ey together and not at
cross purposes.

There are 5 integrating mechanisms or techniques that managers can use their organisation’s level of
differentiation increases.

5 integrating mechanisms

 Hierarchy of authority
 Direct contact
 Liaison roles
 Task forces
 Team
Hierarchy of authority : the hierarchy dictates who reports to whom
whom.

Direct contact : direct contact managers creates a context within which managers from
different functions or divisions can work together to solve mutual problems.

Liaison roles: an employee who builds and maintains relationship ,facilities

communications and coordinates activities among two or more people , agencies or
organisation.

Task forces : a temporary committee setup to handle a specific problem

Team:: A team is a permanent task force / committee.

DIFFERENTIATES CENTRALIZATION AND DECENTRALIZATION :

 CENTRALISATION refers to the concentration of authority at the top level of the

organisation.
 It is the systematic and consistent reservation of authority at the central points within an
organisation.
 In a centralised organisation, managers at the lower level have a limited role in
decision making. They just have to execute the orders
orders and decisions of the top level.

 DECENTRALISATION means the dispersal of authority throughout the organisation.

organisation
 It refers to a systematic effort to delegate to the lowest levels all authority except which
can be exercised at central points.
 It is the distribution of authority throughout the organisation.
 In a decentralised organisation, the authority of major decisions is vested with the top
management and balance authority is delegated to the middle and lower levels.

BASIS CENTRALISATION DECENTRALISATION

Meaning The concentration of The evenly and systematic distribution of

authority at the top level is authority at all levels is known as
known as Centralisation. Decentralisation.
Delegation There is no delegation of There is a systematic delegation of
of authority as all the authority at all levels.
authority authority for taking
decisions is vested in the
hands of top-level
top
management.
Suitablity It is suitable for small It is suitable for large organisations.
organisations.

Freedom There is no freedom of There is freedom of decision making at

of decision decision making at the all levels of management.
making middle and lower level.
Advantage Proper coordination and Sharing of burdens and responsiblities
leadership
STANDARDIZATION And MUTUAL ADJUSTMENT :

STANDARDIZATION: means  following rules & norms to make decisions so, work
activities are predictable .

Two important points in standardization->

1. Formalization : using written policies, procedures to standardize operations

2. Socialization: promoting a culture (norms & standards for behaviour to guide contact)

 Standardization it refers to conformity to specific models or examples that are

considered proper in a given situation defined by rules and norms.
 It is often said that standardization turns the duties and responsibilities of a particular
organisation task into a routine
 It can be easily measured and continuously repeated over and over again

 Standardization of skills and knowledge  which improves  employees coordination.

 Standardization of norms  which builds cooperation & teamwork by insisting common
values & beliefs

MUTUAL ADJUSTMENT  means (thinking, using judgement , creativity to

solve problems)

Meaning : The process through which people use their judgement rather than standardized
rules to address problems , guide decision making , promote coordination.

Example :When organizations are simple, individual organization members can coordinate directly among
themselves, without supervision. Direct coordination between two nurses is an example of mutual
adjustment.
Differentiate Mechanistic structure & organic structure:

Mechanistic structure Organic structure

Meaning: these are structure that are Meaning: these are structure that
designed
igned to induce people to behave
behav in promote flexibility so people initiate
predictable , accountable ways change and can adapt quickly to
changing conditions

These structure occurs when individual These structure occurs when join
specialization . specialization ..

(i.e) employees work separately (i.e) employees were work

and specialize in one clearly defined together and coordinate their actions
tasks to find the best way of performing
task

Task 1 Task 2 Task 3

Task 1 task 2 task 3 task 4

(one employee  one task is assigned) ( one employee may works two or more
tasks )
 Simple integrating mechanisms: Complex integrating mechanisms:

Hierarchy of authority is clearly Tasks forces and teams are the major
defined and is the major integrating integrating mechanisms
mechanism

Manager 1 Manager 2 MANAGER 1 MANAGER 2

TEAM 1 TEAM 2

T1 T2 T3 T1 T2 T3

CENTRALIZATION: DECENTRALIZATION;

Authority to control tasks is kept at the Authority to control task is developed

top of the organisation. to people at all levels in the
organisation.
most communication is vertical most communication is lateral
Communication is top down Problem solving by way of mutual
adjustment

Merits and demerits of mechanistic structure :

Advantages disadvantages
 clearly defined paths/ tasks  high specialization of
employees
 high specialization of
employees  if someone has a bad
solution for a task, it is
 usually good results (due hard to correct it or do
to high specialization) better due to the high level
of specialization
 tasks are usually delivered
within the provided time  in a case of an illness, the
tasks just do not get done
 it ensures that rules and
since nobody is able to
regulations are followed
finish them

 demoralizes employees as
 promotion processes may they're not included in the
be easy (it is clearly visible decision making process
who is suited and does
 a stiff structure that doesn't
good work)
allow employees to learn
new tasks
Merits and demerits of organic structure :

Advantages disadvantages

 promotes cohesion and  due to the lack of

relationship specialization, it is sometimes
hard to get high-quality
quality results
 working together towards a
common goal  decision making process is
slow since everyone is
 high motivation of employees included
due to their inclusion in the
decision making process  in the case of a bad final
(which increases productivity) solution to a task, it is often
hardd to determine who is at
 employees can learn new skills fault
since they're working in teams
 promotion can get difficult
 when there's a bad solution to a since it is not always clear who
task it is easy to help them is best suited or does the best
since they're not the only one work
with that skillset

 in case of an illness, the task

still gets finished since that
employee is not the only one
working on that task

TECHNOLOGICAL AND ENVIRONMENTAL IMPACTS ON DESIGN :

TECHNOLOGY impact  HUMAN WORKS ARE REPLACED BY MACHINES ,Business

can make use of technological tools to boost productivity and to intitate new and make the
design more efficient.
 Technological change will have an impact on all organizations.
 There will be a need for new types of managerial, diplomatic, and social skills and a
concomitant need for a new type of decision making process that will not be
accommodated by existing organizational structures.
 Three particular aspects of the organizational environment will be affected by

technological change:
1. the amount of market competition and uncertainty will increase;
2.there will be requirements for more diversity and higher quality in the organization's
products or services;
3. external politics and legislative reform will increase in compl
complexity.
exity.
.
 Technological change will force changes in basic managerial functions.
 There will be increased responsibility on management for organization outcomes leading
to added emphasis on planning, decision making, control, and coordination.
 Technologicall change can positively affect individual values leading to increased time for

consideration of both the heart and the brain in decision making.

ENVIRONMENAL IMPACTS ON ORGANISATIONAL DESIGN :
SUCCESS AND FAILURES IN DESIGN :
FAILURES IN DESIGN :