Manage-wise

Contemporary organisation design

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

These approaches often make use of total quality management, employee emp-owerment, 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 organisational situation before making any major organisational design shifts.

In this section we describe two currently popular approaches—reengineering and rethinking the organisation—as well as global organisation structure and design issues.

Reengineering the organisation

Reengineering is the radical redesign of organisational processes to achieve major gains in cost, time and provision of services. It forces the organisation 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 organisation as it should be for future success. The process starts with determining what customers actually want from the organisation 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 organisational system to achieve the strategy. Reengineering is the process of designing the organisation that does not necessarily result in any particular organisational form.

Rethinking the organisation

Also currently popular is the concept of rethinking the organisation. Rethinking the organisation 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 organisational forms for the future. He suggests that the traditional pyramid shape of organisations 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 organisations might entail thinking of the organisation 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 organisation design.

Global organisation 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 organisations.

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 specialisation, more “formal” centralisation (but less “real” centralisation), 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 organisation structure not unlike the approaches used in this country during the days of classical organisation 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 decentralisation 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 organisational level as other major functional divisions.

For an organisation that has become more deeply involved in international activities, a logical form of organisation 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 organisation.

Technology and the environment are changing so fast, and in so many unpredictable ways, that no organisation 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 energised by Thomas Peters and Robert Waterman Junior in the 1980s continues in almost every aspect of contemporary organisation design. In addition, Peters and Austin further emphasised the importance of staying in touch with customers at the initial stage in organisation 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 organisation and design the organisation structure accordingly.

Design issues

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

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

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

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

Organisation 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 organisation is an open system structured to integrate two important subsystems: the technical (task) subsystem and the social subsystem. According to this approach, organisations 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 organisation design were derived from a framework of coordinating mechanisms. The five types are simple structure, divisionalised form, machine and professional bureaucracy, and adhocracy. Most organisations have some characteristics of each type, but one is more likely to predominate.

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

Excerpt from 'Organisational Behaviour: Managing People and Organisations' by Gregory Moorhead and Ricky W Griffin. Published by Wiley Dreamtech India.