Organizational Design Presented by: Esra Indra Banurea 55108120127 Nelson Sitompul 55108120125 24 October 2009

Defining Organizational Design When managers develop or change the structure they are engaged in Organisation Design A process involving decisions about six key elements: Work specialization Departmentalization Chain of command Span of control Centralization and decentralization Formalization Organizational structure can play an important role in an organization’s success. The process of organizing—the second management function—is how an organization’s structure is created. Managers seek structural designs that will best support and allow employees to effectively and efficiently do their work. A. Before we look at the elements of organizational structure and design, we need to define some important terms. 1. Organizing is the process of creating an organization’s structure. That process has several purposes 2. An organizational structure is the formal arrangement of jobs within an organization. Organizational design is the process of developing or changing an organization’s structure. It involves decisions about six key elements: work specialization, departmentalization, chain of command, span of control, centralization/decentralization, and formalization. We need to take a closer look at each of these structural elements. Kerangka kerja tersebut dinamakan sebagai Desain Organisasi. Bentuk Spesifik dari kerangka kerja organisasi dinamakan dengan Struktur Organisasi

Desain Organisasi 􀂄 Struktur organisasi berkaitan dengan desain organisasi. 􀂄 Organizational Design: management decisions and actions that result in a specific organization structure.

The Organization Goals and Strategy Environment Size Culture Technology Structure Formalization Specialization Hierarchy of Authority Centralization Professionalism Personnel Ratios South-Western College Publishing Cincinnati, Ohio Daft, Organization Theory and Design 7/e

Structural Contingency Factors Structural decisions are influenced by: Overall strategy of the organization Organizational structure follows strategy. Size of the organization Firms change from organic to mechanistic organizations as they grow in size. Technology use by the organization Firms adapt their structure to the technology they use. Degree of environmental uncertainty Dynamic environments require organic structures; mechanistic structures need stable environments. Copyright © 2005 Prentice Hall, Inc. All rights reserved.

Structural Contingency Factors (cont’d) Strategy Frameworks: Innovation Pursuing competitive advantage through meaningful and unique innovations favors an organic structuring. Cost minimization Focusing on tightly controlling costs requires a mechanistic structure for the organization. Imitation Minimizing risks and maximizing profitability by copying market leaders requires both organic and mechanistic elements in the organization’s structure Innovation: sejauh mana oranisasi memperkenalkan produk atau jasanya yang baru? Innovation strategy bukan berarti strategi yang hanya melakukan peubahan sederhana dan bersifat kosmetik saja dari penawaran-penawaran sebelumnya, tetapi merupakan inovasi yang berarti dan khas . Cost minimization: cost control strategy memperhatikan sejauh mana organisasi itu mengontrol biaya secara ketat, menjauhkan diri dari pembuatan inovasi atau biaya pemasaran yang tidak perlu dan memotong harga penjualan sebuah produk dasar. Imitation: meminimalkan resiko dan memaksimalkan keuntungan dengan mengikuti pemimpin pasar. Menurut Robbins: framework strategy ini dibagi atas 4 dimensi yaitu: inovasi, diferensiasi dalam pemasaran (mencoba menciptakan kesetiaan para pelanggan dengan cara memenuhi kebutuhan tertentu secara khusus), breath strategy merujuk pada luasnya pasar yang dilayani, variasi pelanggan, geografis dan jumlah penduduk) dan cost control. Copyright © 2005 Prentice Hall, Inc. All rights reserved.

Structural Contingency Factors (cont’d) Strategy and Structure Achievement of strategic goals is facilitated by changes in organizational structure that accommodate and support change. Size and Structure As an organization grows larger, its structure tends to change from organic to mechanistic with increased specialization, departmentalization, centralization, and rules and regulations. Copyright © 2005 Prentice Hall, Inc. All rights reserved.

Structural Contingency Factors (cont’d) Technology and Structure Organizations adapt their structures to their technology. Woodward’s classification of firms based in the complexity of the technology employed: Unit production of single units or small batches Mass production of large batches of output Process production in continuous process of outputs Routine technology = mechanistic organizations Non-routine technology = organic organizations Copyright © 2005 Prentice Hall, Inc. All rights reserved.

Structural Contingency Factors (cont’d) Environmental Uncertainty and Structure Mechanistic organizational structures tend to be most effective in stable and simple environments. The flexibility of organic organizational structures is better suited for dynamic and complex environments. Copyright © 2005 Prentice Hall, Inc. All rights reserved.

Desain Organisasi Desain organisasi yg umum dijumpai : i. Struktur sederhana : dicirikan oleh derajat rendah departmentalisasi, luasnya rentang kendali, otoritas terpusat pada satu orang dan sedikit formalisasi. ii. Birokrasi : struktur dgn tugas-tugas yg sangat rutin yg dicapai lewat spesialisasi, aturan dan pengaturan yg sangat formal, tugas-tugas dikelompokkan ke dalam departemendepartemen fungsional,wewenang terpusat, rentang kendali sempit, dan pengambilan keputusan yg mengikuti rantai komando.

Desain Organisasi iii. Struktur Matriks : Struktur yg menciptakan dua garis wewenang; gabungan departementalisasi produk dan fungsional – Departementalisasi produk : pola yg memudahkan koordinasi antara para spesialis u/ mencapai penyelesaian tepat waktu & memnuhi target anggaran – Departementalisasi fungsional : penempatan spesialis secara bersamaan iv. Struktur tim : penggunaan tim – tim sebagai perangkat utama koordinasi aktivitas pekerjaan iv. Organisasi virtual : organisasi inti kecil yg melakukan outsourcing fungsi – fungsi bisnis besar v. Organisasi tanpa tapal batas: organisasi yg menghapuskan rantai perintah, mempunyai rentang kendali yang tidak berbatas, dan mengganti departemen dengan tim yang diberdayakan.

vi. Organisasi virtual : 􀃆organisasi inti kecil yg melakukan outsourcing fungsi – fungsi bisnis besar iv. Organisasi tanpa tapal batas: organisasi yg menghapuskan rantai perintah, mempunyai rentang kendali yg tak berbatas, dan mengganti departemen dengan tim yg diberdayakan

ORGANIZATION DIFFERENTIATION Horizontal Differentiation - The degree of differentiation among units based on orientation of members the nature of the tasks they perform and their education and training Vertical Differentiation - The number of hierarchical levels between management and operatives. Spatial Differentiation - The degree to which location of an organization’s and facilities and personnel are dispersed geographically. VD: sometimes referred to as layers of management Diferensiasi horisontal adalah jumlah jenis pekerjaan satu departemen yang ada pada organisasi. Semakin banyak jumlah pekerjaan yang ada pada suatu organisasi yang membutuhkan pengetahuan dan keahlian khusus, semakin tinggi kompleksitas horisontal pada organisasi tersebut. Differensiasi horizontal mempertimbangkan tingkat pemisahan horizontal diantara unit-unit. Diferensiasi vertikal. Semakin banyak tingkatan yang ada antara manajemen puncak dengan bagian operasional, organisasi tersebut semakin kompleks. Diferensiasi vertikal merujuk pada kedalaman hierarki organisasi Diferensiasi spasial adalah jumlah daerah dari keberadaan organisasi secara fisik. Diferensiasi spasial meliputi tingkat sejauh mana lokasi fasilitas dan para pegawai organisasi tersebar secara geografis

Organizational Design Span of Control The number of employees who can be effectively and efficiently supervised by a manager Width of span is affected by: Skills and abilities of the manager and the employees Characteristics of the work being done Similarity of tasks Complexity of tasks Physical proximity of subordinates Standardization of tasks Sophistication of the organization’s information system Strength of the organization’s culture Preferred style of the manager The concept of span of control refers to the number of subordinates a manager can supervise effectively and efficiently. 1. The span of control concept is important because it determines how many levels and managers an organization will have 2. What determines the “ideal” span of control? Contingency factors such as the skills and abilities of the manager and the employees, the characteristics of the work being done, similarity of employee tasks, the complexity of those tasks, the physical proximity of subordinates, the degree to which standardized procedures are in place, the sophistication of the organization’s information system, the strength of the organization’s culture, and the preferred style of the manager will influence the ideal number of subordinates. The trend in recent years has been toward larger spans of control. Span of management control terkait dengan jumlah orang atau bagian di bawah suatu departemen yang akan bertanggung jawab kepada departemen atau bagian tertentu

Rentang Kendali (Span of Control) 􀂄 Jumlah bawahan yg dapat diatur manajer secara efektif dan efisien 􀂄 Number of indivduals who report to a specific manager 􀂄 Rentang terlalu lebar kendali jadi sulit dikendalikan. 􀂄 Rentang terlalu sempit: 􀂄 Memakan biaya yang mahal 􀂄 Komunikasi menjadi lebih rumit 􀂄 Otonomi karyawan berkurang

Contrasting Spans of Control Members at Each Level (Highest) Assuming Span of 4 Assuming Span of 8 1 1 1 2 4 8 if one organization has a uniform span of four and the other a span of eight, the wider span will have two fewer levels and approximately 800 fewer managers. If the average manager made $42 000 a year, the organization with the wider span would save over $33 million a year in management salaries alone! 3 16 64 Organizational Level 4 64 512 5 256 4096 6 1024 7 4096 (Lowest) Span of 4: Span of 8: Employees: = 4096 Employees: = 4096 = 585 Managers (level 1–6) = 1365 Managers (level 1–4)

Pertimbangan lain Rantai komando: 􀃆 Garis wewenang yang tidak putus-putus yang terentang dari puncak organisasi ke eselon terbawah yang memperjelas siapa melapor ke siapa

Organizational Design (cont’d) Centralization The degree to which decision making is concentrated at a single point in the organization Organizations in which top managers make all the decisions and lower-level employees simply carry out those orders Decentralization The degree to which lower-level employees provide input or actually make decisions Employee Empowerment Increasing the decision-making discretion of employees The concepts of centralization and decentralization address who, where, and how decisions are made in organizations. 1. Centralization is the degree to which decision making is concentrated at a single point in the organization, usually in the upper levels of the organization. 2. Decentralization is the handing down of decision-making authority to lower levels in an organization. 3. The trend is toward decentralizing decision making in order to make organizations more flexible and responsive. 4. Employee empowerment is another term for increased decentralization and is the increasing of the decision-making discretion of employees. A number of factors will influence the amount of centralization or decentralization an organization uses (see Exhibit 9.4). Desentralisasi dan Sentralisasi Desentralisasi merupakan proses pendelegasian wewenang dan tanggung jawab secara sistematis ke tingkat organisasi yang lebih rendah. Sentralisasi merupakan proses menahan wewenang dan tanggung jawab di tangan manajemen puncak. Lingkungan Lingkungan dengan persaingan ketat, berubah dinamis akan lebih sesuai dengan desentralisasi

Delegasi Kewenangan (delegation of authority) 􀂄 Tingkat dimana pengambilan keputusan diputuskan pada titik tunggal dalam organisasi. 􀂄 Process of distributing authority downward in an organization. 􀂄 Alasan desentralisasi organisasi : melatih manajer untuk mengambil keputusan, memunculkan iklim kompetisi antar manajer, kepuasan kerja dari manajer. 􀂄 Alasan sentralisasi organisasi : mengurangi biaya pelatihan, mengurangi biaya duplikasi, mengurangi biaya administrasi, manajer saat ini lebih suka sentralisasi.

Factors that Influence the Amount of Centralization More Centralization Environment is stable Lower-level managers are not as capable or experienced at making decisions as upper-level managers Lower-level managers do not want to have a say in decisions Decisions are significant Organization is facing a crisis or the risk of company failure Company is large Effective implementation of company strategies depends on managers retaining say over what happens

Factors that Influence the Amount of Decentralization More Decentralization Environment is complex, uncertain Lower-level managers are capable and experienced at making decisions Lower-level managers want a voice in decisions Decisions are relatively minor Corporate culture is open to allowing managers to have a say in what happens Company is geographically dispersed Effective implementation of company strategies depends on managers having involvement and flexibility to make decisions Ukuran Semakin besar ukuran organisasi, desentralisasi semakin diperlukan. Faktor Lain Jika keputusan berisiko tinggi maka sentralisasi lebih sesuai. Bawahan yang mempunyai kemampuan tinggi sesuai dengan desentralisasi.

Organizational Design (cont’d) Formalization The degree to which jobs within the organization are standardized and the extent to which employee behaviour is guided by rules and procedures/Tingkat di mana pekerjaan dalam organisasi dibakukan. Highly formalized jobs offer little discretion over what is to be done Low formalization means fewer constraints on how employees do their work Formalization refers to the degree to which jobs within an organization are standardized and the extent to which employee behaviour is guided by rules and procedures. 1. In a highly formalized organization, employees have little discretion, and there’s a high level of consistent and uniform output. Formalized organizations have explicit job descriptions, lots of organizational rules, and clearly defined procedures. 2. In a less-formalized organization, employees have a lot of freedom and can exercise discretion in the way they do their work. 3. Standardization not only eliminates the possibility that employees will engage in alternative behaviours, it even removes the need for employees to consider alternatives. 4. The degree of formalization can vary widely between organizations and even within organizations.

Koordinasi Semakin terspesialiasasi kerja, koordinasi semakin penting. Kebutuhan koordinasi semakin tinggi apabila ketergantungan semakin tinggi. Pooled Interdependence (misal: konglomerasi) Sequencial Interdependence (misal: lini perakitan) Reciprocal Interdependence (setiap bagian saling mempengaruhi)

Organizational Structure Work Specialization The degree to which tasks in the organization are divided into separate jobs with each step completed by a different person Overspecialization can result in human diseconomies from boredom, fatigue, stress, poor quality, increased absenteeism, and higher turnover Work specialization is the degree to which tasks in an organization are divided into separate jobs. Most managers today see work specialization as an important organizing mechanism but not as a source of ever-increasing productivity.

Desain Organisasi Dasar-dasar untuk menyusun desain organisasi Pembagian pekerjaan (division of labor) 􀂄 istilah lain: spesialisasi pekerjaan 􀂄 Sampai tingkat mana tugas dalam organisasi dipecah-pecah menjadi pekerjaan terpisah-pisah 􀂄 Process of dividing work into relatively specialized jobs to achieve advantages of specialization

Departmentalization by Type Functional Grouping jobs by functions performed Product Grouping jobs by product line Geographical Grouping jobs on the basis of territory or geography Process Grouping jobs on the basis of product or customer flow Customer Grouping jobs by type of customer and needs Departmentalization. Once work tasks have been defined, they must be grouped together in some way through a process called departmentalization—the basis on which jobs are grouped in order to accomplish organizational goals. There are five major ways to departmentalize (Exhibit 9.2): 1. Functional departmentalization is grouping jobs by functions performed. 2. Product departmentalization is grouping jobs by product line. 3. Geographical departmentalization is grouping jobs on the basis of territory or geography. 4. Process departmentalization is grouping jobs on the basis of product or customer flow. 5. Customer departmentalization is grouping jobs on the basis of common customers. 6. Two popular trends in departmentalization include: a. Customer departmentalization continues to be a highly popular approach because it allows better monitoring of customers’ needs and responding to those changes in needs. Cross-functional teams, a hybrid grouping of individuals who are experts in various specialties (or functions) and who work together, are being used along with traditional departmental arrangements. Pengelompokan Kerja (Departementalisasi) Mengelompokkan pekerjaan yang sama atau mirip satu sama lain, berdasarkan kreteria tertentu, ke dalam satu atap tertentu. Bedasarkan fungsi, produk, lokasi, dan pelanggan.

* Departmentalisasi 􀂄 Dasar yang dipakai untuk pengelompokkan 􀂄 Process in which an organization is structurally divided by combining jobs in departments according to some shared characteristics or basis. 􀂄 Dapat dibagi berdasarkan fungsi, letak geografis, proses, maupun pelanggan

Functional Departmentalization Plant Manager Manager, Manager, Manager, Manager, Manager, Functional departmentalization is grouping jobs by functions performed. Engineering Accounting Manufacturing Human Resources Purchasing + Efficiencies from putting together similar specialties and people with common skills, knowledge, and orientations + Coordination within functional area + In-depth specialization – Poor communication across functional areas – Limited view of organizational goals

Geographical Departmentalization Vice President for Sales Sales Director, Sales Director, Sales Director, Sales Director, Geographical departmentalization is grouping jobs on the basis of territory or geography. Western Region Prairies Region Central Region Eastern Region + More effective and efficient handling of specific regional issues that arise + Serve needs of unique geographic markets better – Duplication of functions – Can feel isolated from other organizational areas

Product Departmentalization Bombardier, Ltd. Mass Transit Sector Recreational and Utility Vehicles Sector Rail Products Sector Product departmentalization is grouping jobs by product line. Mass Transit Division Bombardier–Rotax (Vienna) Rail and Diesel Products Division Recreational Products Division Logistic Equipment Division Industrial Equipment Division Bombardier–Rotax (Gunskirchen) + Allows specialization in particular products and services + Managers can become experts in their industry + Closer to customers – Duplication of functions – Limited view of organizational goals Source: Bombardier Annual Report.

Process Departmentalization Plant Superintendent Process departmentalization is grouping jobs on the basis of product or customer flow. Sawing Department Manager Lacquering and Sanding Department Manager Inspection and Shipping Department Manager Planing and Milling Department Manager Assembling Department Manager Finishing Department Manager + More efficient flow of work activities – Can only be used with certain types of products

Customer Departmentalization Director of Sales Customer departmentalization is grouping jobs on the basis of common customers. Manager, Manager, Manager, Retail Accounts Wholesale Accounts Government Accounts + Customers’ needs and problems can be met by specialists – Duplication of functions – Limited view of organizational goals

Standardization* the process of developing and agreeing upon technical standards. A standard is a document that establishes uniform engineering or technical specifications, criteria, methods, processes, or practices Standards can be: de facto standards which means they are followed by informal convention or dominant usage. de jure standards which are part of legally binding contracts, laws or regulations. Voluntary standards which are published and available for people to consider for use Cakupan variasi yang dapat di toleransi dalam lingkup peraturan yang menetapkan sifat pekerjaan. http://en.wikipedia.org/wiki/Standardization

Organizational Design Decisions Mechanistic Organization A rigid and tightly controlled structure High specialization Rigid departmentalization Narrow spans of control High formalization Limited information network (mostly downward communication) Low decision participation by lower-level employees Organic Organization Highly flexible and adaptable structure Nonstandardized jobs Fluid team-based structure Little direct supervision Minimal formal rules Open communication network Empowered employees Organizations don’t have the same structures. Even companies of similar size do not necessarily have similar structures. A. Mechanistic and Organic organizational forms 1) A mechanistic organization is an organizational structure that’s characterized by high specialization, rigid departmentalization, narrow spans of control, high formalization, a limited information network, and little participation in decision making by low-level employees. 2) An organic organization is a structure that’s highly adaptive and flexible with little work specialization, minimal formalization, and little direct supervision of employees. 3) When is each design favoured? It “depends” on the contingency variables.

Mechanistic Versus Organic Organization Mechanistic and Organic organizational forms • High Specialization • Cross-Functional Teams • Rigid Departmentalization • Cross-Hierarchical Teams • Clear Chain of Command • Free Flow of Information • Narrow Spans of Control • Wide Spans of Control • Centralization • Decentralization • High Formalization • Low Formalization

References http://choo.fis.utoronto.ca/FIS/courses/lis1230/lis1230sharma/od1.htm Robbins and Coulter Book http://www.managementhelp.org/org_thry/dimensns.htm http://www.centerod.com/three-stages-of-orgnaizational-development.html http://www.see.ed.ac.uk/~gerard/MENG/MEAB/lo_index.html Robbins, Stephen P Organization Theory: concepts and cases, 4th ed