Grp10 SecD ODC

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Organization design:

fashion or fit?

Submitted by:GROUP - 10

Ashish Gupta 12P191

Rahul Kumar 12P224Rajan Mishra 12P225

Naveen Babu 12P228

Satish Kumar 12P230

Shivam Singh 12P232

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Agenda

1. Why Organizational structure is important?

Internal Issues

External Issues

2. Simple Structure

Apex corporation example

3. Machine bureaucracy

Maruthi and Bajaj example

4. Professional bureaucracy Health care Industry, Lawyers and consultants

5. Divisionalised form

Good Year India example

6. Adhocracy

Sumaprojekt example

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Why Organizational design is

important?

Internal Issues

Organizational structure is thefundamental design of a company.

A company's organizational structure

can determine its success or failure

Organizational structure can have a

large influence on the culture within

the organization.

It helps to improve the decision

making process and employee

performance.

External Issues

If structure doesn't reflect the businessgoals, employees may have a hard

time working successfully for the

company.

As the size and reach of the business

increases, it is necessary to realign the

organization structure business

strategy to achieve its goals.

An effective organizational structure

helps the company to communicate,

distribute responsibility and adapt to

change.

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Five configurations of Organizational

Structure

Simple Structure Machine bureaucracy

Professional bureaucracy

Divisionalised form

Adhocracy

The organization should select one or combination (of two or three) organizational structure

based on its strategy, complexity and importance of the organization.

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Simple Structure

The simple structure, typically, has

little or no techno structure, few support staffers,

a loose division of labour, minimal differentiation among its units, and a small

managerial hierarchy.

The behaviour of simple structure is not formalised and planning, training, and

liaison devices are minimally used in such structures.

Example

New companies, one-person companies, family companies

Often many startup companies which have simple organic structure arevulnerable to sudden heart attack.

The entrepreneurial organization is fast, flexible, and lean, and it's a model that

many companies want to copy. However, as organizations grow, this structure

can be inadequate as decision-makers can become so overwhelmed that they

start making bad decisions. This is when they need to start sharing power and

decision-making. Also, when a company's success depends on one or two

individuals, there's significant risk if they sell up, move on to newentrepreneurial ventures, or retire

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Example:

The Apex corporation case discussed in class gives a example of simple structure

In the case, Initially there are a group of 25 employees with no-clear cut job

responsibilities but as the organization began to grow they found the need to form

hierarchical, functional structure to align with the business strategy.

A simple structure may fail if the size of the organization grows and hence every

organization has to transform itself into other structure as it grows.

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Machine Bureaucracy

Emphasis on the standardization of work and stability in the organization.

Mechanistic bureaucracy will be successful when the jobs are routine and repetitive.

Example 1: Manufacturing companies like Maruthi follow mechanistic structure and has been very

successful in practicing it. However the same mechanistic bureaucratic organizational

structure restricted Maruthi from creativity and innovation. It imports technology from

Japan and outsources few manufacturing parts to other vendors.

In this model, importance is given to efficiency and should be praticised low uncertainty.

Example 2: Bajaj followed mechanistic structure in producing scooters to meet high demand

efficiently in 1990s and not able to catch-up new technologies and product innovations in

early 2000s. It lost its market share to Hero Honda.

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Professional bureaucracy:

Professional bureaucracy divide the work according to the professional groups, and taskcollaboration is done by standardizing the knowledge and skills of the professions.

Example 1: Healthcare is a professional bureaucracy in the Mintzberg Model. The departments are

all organized by the professionsthe nurses are all in nursing, the pharmacists are all inthe pharmacy, and the lab technologists are all in the laboratory.

A professional bureaucracy has a tiny techno-structure. Decisions on methods are madeby the operating core, the very same people doing operations.

Professional organizations are typically staffed by well educated and qualified

individuals who deliver highly specialized and valuable services and charge accordingly.This high complexity of task leads to relatively low centralisation.

A key principle of professional organizations is the autonomy of its agents who areassumed to be sufficiently expert to make serious choices in the actions they undertake

Example:

Lawyers and consultants

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Divisional Configuration

prime coordinating mechanism:standardisation of outputs

key part: middle line main design parameters: market

grouping, performance controlsystem, limited verticaldecentralisation

situational factors: diversifiedmarkets (particularly products orservices); old, large; power needsof middle managers; fashionable

The divisions are fairlyautonomous

There is little interdependence

between divisions Divisions address separate

markets

Divisional leaders are very strong

Headquarters focus onperformance (economic result)

Divisions are driven towards

machine bureaucracy Comes as a result of

diversification or acquisitions

Split in separate organisations is arealistic alternative

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Advantages compared to machine

bureaucracy

Advantage

Better Allocation of capital

Helps training managers

Spreads risk across markets

Strategically responsive

Problems Centralisation of power

Bureaucratisation

Reliance on MIS

Outside private sector: artificialperformance standards

Pure divisionalisation may be a weakeralternative than full split

remember: no environment of its own

Controlled diversity more profitablethan conglomerate

by-product or related-product formsthe more interesting

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Goodyear Tire and Rubber CompanyFunctional to Divisional

with initially there was a Functional organization structure being followed for many

decades in India.

simple, conventional and formal organizational structure

Span of control was different at different levels.

higher at the bottom line of the organization where a sales manager has to manage a

team of 5-6 sales persons.

Moreover, this hierarchy existed in other functions as well like production, customer

service and operations etc.

lack of coordination between different functions of the organization.

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Factors which influenced Structuralchange for Goodyear India

1. Age and Size-

well established in India, (since 1962) deep and solid network of retailers acrossIndian states.

systems and procedures were well formalized in the market from top of themanagement to a retailer.

Marketing strategy was quite obvious and market knew that when and how to dealwith Goodyear. This hampered the speed at which company grew.

2. Technology, Failure to innovate-

The range of Goodyear tyres being marketed up till 2008 had become obsolete

need of new products to compliment rapid developments in automobile sector.

Despite having a wide range globally, Goodyear could not replace new productsbecause of excessive standardization of products, resistance to change fromfactory employees, sales team and retailers.

3. Environment-

common strategy for a diverse country like India was not helping.

competitors(Bridgestone Michelin) entered Indian market with more customerfocused approach in their different product segments this forced Goodyear tolaunch its new product ranges for different types of tyre customers, therebycomplicating the environment.

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Factors which influenced Structuralchange for Goodyear India

4. Strategy-

The Place, Promotion and People for different products marketed byGoodyear, became too obtuse to each other due to growth in market size and

arrival of competitors. The Four Ps of marketing forced Goodyear to change its functional structure

and move to a Product based Unit structure. One single strategy to increasebusiness was not enough to retain or gain overall market share. (Cummins2008)

5. Delays in decision making:

formalized stru