Organizational Design: The Right Way

ORGANIZATIONAL DESIGN

(THE RIGHT WAY)

A Paper Presented in Partial Fulfillment

Of the Requirements of

[OD-501 Organization and Group Dynamics]

December 2002

Abstract

A research of organizational theories to develop a usable, verifiable approach for creating and maintaining the right design for any company. Companies seem to not be prepared or poised, to deal with the challenges of a dynamic and constantly changing business environment.

Theories of organizational design were examined, a good design structure based on solid principles was formulated, and the design tested and re-tested. Collectively, an effective approach to design the right organization was presented. When the right approach is used, the right organizational fit is possible. The approach requires leaders to consider all the theories, principles of organization design, and position the organization for change.

Table of Contents

Table of Contents ii

List of Tables iii

Introduction 1

Organization Theories 2

Frederick Taylor - Scientific Management 2

Henri Fayol - Classical Management 4

Max Weber - Bureaucracy 6

B. F. Skinner - Operant Behavior 9

Douglas McGregor - Theory Y 11

Abraham Maslow - Theory Z 12

Frederick Herzberg - Motivation Hygiene Theory 14

Chris Argyris - Goal Congruence Theory 14

Rensis Likert - Participative Management Theory 15

David McClelland - Motivational Research-Achievement Theory 17

Elton Mayo - The Hawthrone Studies 18

Fred Luthans - Contingency Theory 18

Organizational Design 20

Organization Design: Is it Working? 22

The Fit Tests 23

The Good Design Tests 27

The Iterative Process 32

Conclusion 32

List of Tables

TABLE 1. PRINCIPLES OF ORGANIZATIONAL DESIGN 21

TABLE 2. ORGANIZATIONAL STRUCTURES 21

TABLE 3. ORGANIZATIONAL CHANGE 22

Introduction

What does it take to get the right organizational design for any business? In today's constantly evolving environment, developing an organization that fits seems to be elusive. Companies are faced with a plethora of internal and external forces threatening their very survival. Yet, they seem to have the inability to design and structure their organization to deal with these challenges.

This document will provide an effective approach to achieving the most valuable design for any organization. The most valuable design means interjecting the appropriate organizational remedy to respond to challenges posed by external and internal forces. To accomplish this, various theories and management styles are explored; effective organizational design discussing the principles, structures, and the change processes are presented; nine tests to analyze organizational design to determine if changes are needed were examined; and, re-evaluating the design through an iterative process is discussed.

Through a synthesis of all the facets of organizational development, a feasible, and thoroughly outlined approach to organizational design will emerge. Keep in mind a perfect design may not be achieved, but this is where being close does count. When many segments of an organization are functioning well, the better the company's bottom line, and chance of survival.

Organization Theories

Organizations are groups of people striving to accomplish common goals. To have the best chance of achieving organizational goals, it makes sense to design the organization in a way most suited for achieving the goals. Goals of organizations vary and so do the theories with which organizations are designed. Morgan (1997), states,

It is based on a very simple premise: that all theories of organization and management are based on implicit images or metaphors that lead us to see, understand, and manage organizations in distinctive, yet partial ways.

When referring to an organization "running like a well-oiled machine", a paradox is created. Organizations are made up of people, and people are not machines. From this, a conclusion can be drawn that no one organizational theory will suffice for all organizations. If organizations are designed to run like machines, the humanistic aspect is neglected; if organizations are designed totally for the people, then the importance of policies, processes, and meeting goals are ignored. Therefore, it makes sense to use a varied approach for organizational design. Using points of view from various organization theories to design or redesign the perfect organization to meet the challenges of a dynamic and constantly changing environment. Drucker, (1999), states,

Organization theory assumes that institutions are homogeneous and that, therefore, the entire enterprise should be organized the same way. But in any one enterprise, there is need for a number of different organization structures coexisting side by side.

Frederick Taylor - Scientific Management

Major theories of organization begin with the "scientific management" theory, mostly pioneered by Frederick Taylor. Taylor's principles of scientific management provided the cornerstone for work designed throughout the first half of the twentieth century (Morgan, 1997). Taylor used time and motion studies to analyze and standardize work activities.