Source:

Cummings, Thomas G., & Worley,

Christopher G. Organization Development
and Change. 9th Edition. South Western.
Cengange Learning. USA
Chapter Outline
Structural Design
Functional Structure
Divisional Structure
The Matrix Organization
Process Structure
Costumer-Centric Structure
The Network Structure
Downsizing
Reengineering
Structural Design
Structural design describes how the overall work of the
organization is divided into subunits and how this subunits
are coordinated for task completion.
Organizations traditionally structured into one of three forms:
Functional department that are task specialized
Self-contained divisional units that are oriented to specific
product, costumer or regions
 Matrix structure that combine both functional specialization
& self containment
Accelerated changes in competitive environment and
technology, makes organization have to redesign their
structures into more integrative and flexible forms
Structural Design
More recent innovation on Organizational Structure includes:
Process Structure that design subunit around the organization
core work process
Customer Centric Structure that focus attention and resources
around specific costumer or costumer segment
Network Base Structure that link the organization to other,
create interdependent organization
Organization Structure should be design to fit with at least for
factors (1) the environment, (2) organization size, (3)
technology, (4) organization strategy.
Organization effectiveness depends on the extent to which its
structure are responsive to these contingency
Contingencies Influencing Structural Design

Environment

Organization
Structural Organization
Size
Design Strategy

Technology
The Functional Structure
Organization divided into functional units (marketing,
operation, research & development , human resources &
finance
Based on specialization, line & staff relation, span of
control, authority, & responsibility
Major functional units are staffed by specialists from such
discipline
Functional Organization

President

VP
VP VP VP VP
Human
Manufacturing Engineering Marketing Finance
Resources
The Functional Structure
Advantages
Promotes skill specialization
Reduces duplication of scarce resources & use resources
full time
Enhances career development for specialist within large
department
Facilitate communication & performance because superiors
shares expertise with subordinate
Expose specialist to others within the same specialty
Disadvantages
Emphasize routine task, which encourage shirt time
horizons
The Functional Structure
Disadvantages
Emphasize routine task, which encourage short time
horizons
Fosters parochial perspectives by managers, which limit
their capabilities for top management positions
Reduce communication and cooperation between
departments
Multiplies the interdepartmental dependencies, which
makes coordination and scheduling difficult
Obscures accountability for overall outcomes
The Functional Structure
Contingencies
Stable and certain environment
Small to medium size
Routine technology, interdependence
with function
Goals of efficiency and technical
quality
The Divisional Structure
Also known as product or self-contained-unit structure
Groups organizational activities base on products,
services, costumers or geography
All or most of the resources and functions necessary to
accomplish specific objective are set up as a division
headed by a manager
The formal structure within a self-contained-unit often is
functional in nature
The Divisional Organization

President

VP VP VP
Product A Product B Product C

Manager Manager
Manager HR
Sales Manufacturing
The Divisional Structure
Advantages
Recognizes sources of interdepartmental dependencies
Fosters an orientation toward overall outcomes and clients
Allows diversification and expansions of skills and training
Ensures accountability by departmental managers and so
promotes delegation of authority and responsibilities
Heightens departmental cohesion and involvement in work
Disadvantages
May use skills and resource inefficiently
Limits career advancement by specialist to movements out
of departments
The Divisional Structure
Disadvantages
Impedes specialists’ exposures to others within the same
specialties
Puts multiple-roles demands on people and so creates stress
May promote departmental objectives, as opposed to overall
organizational objectives
Contingencies
Unstable and uncertain environment
Large size
Technological interdependence across function
Goals of product specialization and innovation
The Matrix Structure
Matrix structure often use by OD practitioner to maximize
the strength and minimize the weakness of both functional
and divisional structures
Impose lateral structure that focuses on product or project
coordination on a vertical functional structure
Contents three unique and critical roles :
(1) top manager, who heads and balances the dual chains of
commands
(2) matrix bosses (functional, product or area), who share
subordinates
(3) “two boss” managers, who report to two different
matrix’s leader
The Matrix Structure
Matrix organization need to be reinforced by “matrix
process (performance management system that get input
from both functional and project bosses)”, “matrix
leadership behavior (comfortable with lateral decision
making)” and “matrix culture (foster open conflict
management and decision making)”
The Matrix Organization
President

VP
Manufacturing VP
Finace

Coordinator Product A Research Staff on

Product A
Coordinator Product B

Coordinator Product C
The Matrix Structure
Advantages
Makes specialized, functional knowledge available to all
projects
Uses resources flexibly, because departments maintain
reservoirs of specialists
Maintains consistency between different departments and
projects by forcing communications between managers
Recognizes and provides mechanism for dealing with
legitimate, multiple sources of power in the organization
Can adapt to environmental changes by shifting emphasis
between project and functional aspect
The Matrix Structure
Disadvantages
Can be very difficult to introduce without a preexisting
supportive management climate
Increase role ambiguity, stress, and anxiety by assigning
people to more than one department
Without power balancing between product and functional
forms, lowers overall performance
Makes inconsistent demands, which may result in
unproductive conflicts and short-term crisis management
May reward political skills as opposed to technical skills
The Matrix Structure
Contingencies
Dual focus on unique product demands and technical
specializations
Pressure for high information processing capacity
Pressure for share resources
The Process Structure
Organization forms multidisciplinary teams around core
processes such as product development, order fulfillment,
sales generation and costumer support
Emphasize lateral rather than vertical relationship
All function necessary to produce a product or service are
placed in a common unit usually manage by a role named
“process owner”
There are view hierarchical levels, and the senior executive
team is relatively small
Eliminates many hierarchical and departmental boundaries,
reduce cost and helps the organization to focus most of their
resources on serving costumer 9inside and outside)
The Process Structure
Referred to as “horizontal”, “boundaryless”, or “team-based”
organization
Used to enhance customer service
Several characteristics of process-based structure organization
:
 Process drive structure  process define the structure
 Works adds value  simplify and enrich work process
 Teams are fundamental  the key organizing feature, usually self-manage
 Customer define performance  the primary goals are customer satisfaction
 Teams are rewarded for performance  team based reward based on goal
achievement and customer satisfaction
 Team are tightly linked to suppliers and customers  teams have direct
relationship with customer and vendors
 Team member are well informed and trained
The Process Structure
Advantages
Focus resources on costumer satisfaction
Improve speed and efficiency
Adapts to environmental changes rapidly
Reduces boundaries between department
Increases ability to see total work flow
Enhances employee involvement
Lower costs because of less overhead structure
Disadvantages
Can take threaten middle managers and staff specialists
Requires changes in command-and-control mindsets
May take longer to make decisions in teams
Duplicate scares resources
The Process Structure
Disadvantages
May take longer to make decision in teams
Can be ineffective if wrong process are define
Contingencies
Uncertain and changing environment
Moderate to large size
Non-routine and highly independent technologies
Customer-oriented goals
The Process-Based Structure
The Customer-Centric Structure
Focus sub-unites on the creation of solutions and the
satisfaction of key customers or customer groups
The customer/market-facing units are supported by other
units that develop new product unit, manufacture
components and products, and manage supply chain
Globalization, e-commerce and desire for solution has
greatly enhance the power of the customer to demand
organizational structure that service their needs
 CEO

HR Finance R&D
Support Market Facing
Group

Product 1 Customer
Segment
Team
Product 2
Customer
Segment
Service 1
Team

Service 2 Customer
Segment
Manufacturing Team
Service
 ORGANIZATIONAL CUSTOMER
PRODUCT CENTRIC
FEATUREi CENTRIC

Goal Best product for Best solution for

customer customer
Source of Value New Product, New Customized bundled of
Feature products, , education,
and services, support
and consulting
Core Structure Product Team, Product Customer Teams and
Review, Product Profit Segment, Customer
Center P&Ls
Core Processes New Product Process Customer Relationship
Management Process
and
Integration/Solution
The Costumer-Centric Structure
Advantages
Present one integrated face to the customer
Generates deep understanding on customer requirements
Enables Organization to customize and tailor solution for
customer
Builds a robust customer response capabilities
Disadvantages
Customer team can be to inwardly focused
Sharing learning and developing functional skills can be
difficult
The Costumer-Centric Structure
Disadvantages
Managing lateral relation between customer-facing and
back-office units is difficult
Developing common process in the front and back is
problematic
Clarifying the marketing function is problematic
Contingencies
 Highly complex and uncertain environment
 Large organization

 Goals of customer focus and solution orientation

 Highly uncertain technologies

The Network Structure
Network Structure manages the diverse, complex, and
dynamic relationships among multiple organizations or
units, each specializing in a particular business function or
task
4 Basic types of network organization:
1. An internal market network  single organization
establishes each sub-unit as an independent profit center
that is allowed to trade in service and resources with each
other as well as with the external market
2. A vertical market network  multiple organizations linked
to a focal organization that coordinates the movement of
resources from raw materials to end consumer
The Network Structure
4 Basic types of network organization:
3. An Intermarket Network  Alliances among variety of
organization in different market and is exemplified by the
Japanese “Keiretsu”, Korean “Chaebaol” and Mexican “Grupos”
4. An Opportunity Network  temporary constellation of
organization brought together to pursue a single purpose
The essence of networks is the relationships among
organizations that performed different aspect of work
Organization do the things that they do well
They use “strategic alliances, joint venture, research &
development consortia, licensing agreement, and wholly owned
subsidiaries”
The Network Structure
3 Basic characteristics of network organization:
1. Vertical disaggregation  The breaking up of
organization’s business functions
2. Brokers  Networks often managed by “broker
organization” or process orchestrator” that locate and
assemble member organizations
3. Coordinating Mechanism  Coordinating mechanism
falls into 3 categories; (1)informal relationship,
(2)contracts, (3) market mechanism rather than
hierarchical arrangements or plans
The Network Organization
Designer Producer
Organization Organization

Broker
Organization

Supplier Distributor
Organization Organization
The Network Structure
Advantages:
Enables highly flexible and adaptive response to dynamic
environment
Creates a “best of the best” organization to focus resources
on customer and market needs
Enables each organization to leverage a distinctive
competency
Permits rapid global expansion
Can produce synergistic results
Disadvantages
Managing lateral relation across autonomous organization
is difficult
The Network Structure
Disadvantages
Motivating member to relinquish autonomy to join the
network is troublesome
Sustaining membership and benefits can be problematic
 May give partners access to proprietary
knowledge/technology
Contingencies
Highly complex and uncertain environments
Organizations of all size
Goals of organizational specialization and innovation
Highly uncertain technologies
Downsizing
Downsizing refers to interventions aimed at reducing the
size of organization
Accomplished by decreasing the number of employees
trough layoffs, attrition, redeployment, or early retirement or
by reducing the number of organizational units or
managerial levels trough divestiture, outsourcing,
reorganization or delayering
The important consequences  the rise of contingent worker
Generally a response to at least for condition ; (1) merger &
acquisition (2) organizational decline (3) implementation of
one of the new organization’s structure (3) social pressure
“smaller is better”
Downsizing
APLICATION STAGE
1. Clarify the organization’s strategy and how downsizing
relate to it
2. Assess downsizing options and make relevant choices
(workforce reduction, organization redesign, systemic
redesign)
3. Implement the changes (top down control, targeted at
specific area that inefficient and high cost, link to
organization strategy)
4. Address the needs of survivor and those who leave
5. Follow through with growth plans
Downsizing
DOWNSIZING CHARACTERISTIC EXAMPLES
TACTIC
Workforce Reduction Aimed at headcount Attrition
reduction Transfer & Outplacement
Short-term Retirement Incentive
implementation Buyout Package
Fosters a transition Layoffs
Organization Redesign Aimed at organization Eliminate function
change Merge units
Moderate term Eliminate layers
implementation Eliminate products
Foster transition & Redesign tasks
potentially transformation
Systemic Redesign Aimed at cultural change Change responsibility
Long-term Involve all constituents
implementation Foster continuous
Fosters transformation improvement and
innovation
Simplification
Downsizing = a way of life
Reengineering
 Reengineering is the fundamental rethinking and radical
redesign of business process to achieve dramatic
improvements in performance  transform hoe
organization produce and deliver products and services
 Successful reengineering requires almost revolutionary
change in how organization design their structures and
their work (work process, work methods)
 Transformation from specialized work, task and
structure to integrated process that deliver value to
customers

Reengineering
 The change differ from incremental approach to
performance improvement (ex. “Continuous
improvement” & “Total Quality Management”) to
implementation of IT in business process
 Reengineering can also be associated with downsizing,
the shift from functional to process-based structure, and
work design
Reengineering
APLICATION STAGE
1. Prepare the organization  clarification and assessment of
the organization’s context
2. Fundamentally rethink the way work gets done 
identifying and analyzing core business processes, defining
their key performance objectives, and designing new
process
3. Restructure the organization around the new business
process with characteristics;
(1) work units change from functional department to
process team member
(2) jobs change from simple task to multidimensional work
Reengineering
APLICATION STAGE
3. (3) people’s role changes from controlled to empowered
(4) the focus of performance measures and
compensation shift from activities to results
(5) organization structure change from hierarchical to
flat
(6) managers change from supervisor to coaches;
executives change from scorekeeper to leader