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Designing effective organizational structures - BASIC CHALLENGES OF ORGANIZATIONALDESIGN

8 important questions on Designing effective organizational structures - BASIC CHALLENGES OF ORGANIZATIONALDESIGN

Balancing differentiation and integration

As a result of horizontal differentiation, the members of different functions or divisions develop a subunit orientation.
To avoid the communication problems that can arise from horizontal differentiation, organizations try to find new or better ways to integrate functions.

Managers facing the challenge of deciding how and how much to differentiate and integrate must do two things:

1. Carefully guide the process of differentiation so an organization builds the core competences that give it a competitive advantage. 2. Carefully integrate the organization by choosing appropriate coordinating mechanisms that allow subunits to cooperate and work together to strengthen its core competences.

Balancing centralization and decentralization

The issue of how much to centralize or decentralize the authority to make decision offers a basic design challenge for all organizations

Centralized: Organizational setup in which the authority to make important decisions is retained by managers at the top of the hierarchy.

The advantage of centralization is that it lets top managers coordinate organizational activities and keep the organization focused on its goals.
Centralization becomes a problem, however, when top managers become overloaded and immersed in operational decision making about day-to-day resource issues.

Decentralized: An organizational setup in which the authority to make important decisions about organizational resources and to initiate new projects is delegated to managers at all levels in the hierarchy

The advantage of decentralization is that is promotes flexibility and responsiveness by allowing lower-level managers to make on-the-spot decisions. Managers remain accountable for their actions but have the opportunity to assume greater responsibilities and take potentially successful risks. Also, when authority is decentralized managers can make important decisions that allow them to demonstrate their personal skills and competences and may be more motivated to perform well for the organization.
The downside of decentralization is that if so much authority is delegated managers at all levels can make their own decisions, planning and coordination become very difficult.

Centralization versus decentralization of authority

The ideal situation is a balance between centralization and decentralization of authority so that middle and lower managers who are at the scene of action are allowed to make important decisions and top managers’ primary responsibility becomes managing longterm strategic decision-making.

Balancing standardization and mutual adjustment

Written rules and standard operating procedures (SOP’s) and unwritten values and norms are important of behaviour control in organizations. They specify how employees are to perform their organizational roles and they set forth the tasks and responsibilities associated with each role.

Standardization versus mutual adjustment

The appropriate balance between these two variables is one that promotes creative and responsible employee behaviour as well as organizational effectiveness as focus on information technology.

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Organizational Theory & design

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Designing effective organizational structures - BASIC CHALLENGES OF ORGANIZATIONALDESIGN

8 important questions on Designing effective organizational structures - BASIC CHALLENGES OF ORGANIZATIONALDESIGN

Balancing differentiation and integration

Managers facing the challenge of deciding how and how much to differentiate and integrate must do two things:

Balancing centralization and decentralization

Centralized: Organizational setup in which the authority to make important decisions is retained by managers at the top of the hierarchy.

Decentralized: An organizational setup in which the authority to make important decisions about organizational resources and to initiate new projects is delegated to managers at all levels in the hierarchy

Centralization versus decentralization of authority

Balancing standardization and mutual adjustment

Standardization versus mutual adjustment

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