This document discusses organizational design and different types of organizational structures. It explains that organizational design defines the organizational structure, integration mechanisms, and locus of decision making. Functional, divisional, matrix, and network structures are described. Functional structure groups by function, while divisional structure groups by product, geography, or customer. Matrix structure focuses on two dimensions. Network structure relies on external partners. The construction industry likely requires integration due to interdependent work groups and complex operations.

1. Organizational Design:
Organizational Structure and
Culture
(Part 1)
QSB2413 Management Science

2. Organizational Design
• The way in which the activities of an
organization are arranged and coordinated so
that its mission can be achieved.

3. Organizational Design
Design defines:-
• The configuration of organizational members –
organizational structure
• The types of mechanisms (system / software)
used to integrate and coordinate the flow of
information, resources and tasks
• The locus (path / course) of decision making – the
level of the organizational hierarchy (who makes
the decision – Strategic, Tactical, Operational)

4. Organizational Design
• These components enable an organization’s
members to fulfill their mission and work
toward their goals.
• Each component will vary (differ) with an
organization’s overall strategy.
Organization
Structure
Locus of Decision
Making
Integration
Mechanism

5. Organizational Structure
• Organizational structure refers to the primary
reporting relationships within an organization.
• The chain of command and hierarchy of
responsibility, authority and accountability are
established through organizational structure.
• These relationships are often illustrated in an
organizational chart.
*Think about the organizational structure in
your family.

6. Organizational Structure
• The structuring process involves creating
departments by grouping tasks on the basis
of some common characteristics such as
function (e.g. marketing, finance), product
(e.g. SUV, budget car) or geographic (e.g.
Northeast, Southeast) market.

7. Organizational Structure
• An organization’s strategy has significant
implications for its structure.
• When an organization changes its overall
strategy, it needs to change its structure to fit
the new strategy.
• E.g. IBM – sold the PC department (product)
and focus on providing technology services,
business consulting services (services).

8. Design an organizational structure for
a construction firm.
What type of structure will be more
appropriate / suitable ?
Function? Product? Geographic?
More complex or small organization
(size) that produces a single product
with small workforce?

9. Types of Organizational Structure
1. Functional Structure: Specialization and
Efficiency (Focus on one dimension)
2. Divisional Structures: Providing focus (Focus
on one dimension)
3. Matrix Structure: A dual focus (Focus on two
or more dimensions)
4. Network Structures: Flexibility

10. (1) Functional Structure
• Functional Structure groups organizational
members according to the particular function
that they perform.
• It is based on specialization.
• Employees only focus on a particular job.
• Departments are formed such as Marketing,
Production, Finance, Human Resource and
Information Technology.
• Most commonly used organizational form.

11. (1) Functional Structure

12. (1) Functional Structure
What are the advantages and disadvantages if
an organization is operating according to
functional structure?
What about construction firm?

13. (2) Divisional Structures
• A divisional structure is designed so that
members of the organization are grouped on
the basis of common products or services,
geographic markets or customers served
(fresh-graduated students, housewife, staff
employed, businessman, salary range,
position, business usage, own usage).

14. (2) Divisional Structures
Product Divisions (Product and service)
• Product managers assume responsibility for the
production and distribution of a specific product
to all the organization’s geographic and customer
markets.
E.g. YTL – cement, Banks – investment / loan,
Lafarge – cement, concrete , Property agent – types
of houses – prices, car dealer – types of cars

16. (2) Divisional Structures
• These managers coordinate all functional
tasks (finance, marketing, production) related
to their product line (e.g. Toyota Car – Vios,
Altis, Camry, Hilux, Estima, Alphard).
• Product divisional structures are considered
most appropriate for organizations with
relatively diverse product lines that require
specialized efforts to achieve high product
quality (defined by markets – different
targeted groups of customers).

17. (2) Divisional Structures
• Think about the different products produced
in construction industry which targeted
different groups of buyers.
• Example, high-rise buildings, green buildings,
landed property (areas), commercial buildings,
private schools, hospitals and etc.

18. (2) Divisional Structures
Geographic Divisions
• Groups the organization’s activities along
geographic lines.
• Each geographic division is responsible for
distributing products and services within a
specific geographic region.
• This structure permits organizations to
concentrate their efforts and allocate their
resources towards penetrating multiple
markets (meet local needs and preferences).

19. (2) Divisional Structures
• Example, the needs / requirements of types of
houses of those people staying in Australia / New
Zealand might be different from people staying in
Singapore / Malaysia.
• Smaller size of the houses (landed) and bigger
space of garden might be required in Australia
and New Zealand.
• High-rises building houses might be required in
Singapore and Hong Kong.
• What about people staying in Malaysia?

20. (2) Divisional Structures
• A geographic divisional structure is appropriate
for organizations of varying strategic conditions.
• This structure is most appropriate for
organizations with limited product lines that
either have wide geographic coverage or desire
to grow through geographic expansion.
• Example, YTL is the main producer / supplier of
cement to different places / countries.
• MRT/LRT systems (Singapore, Malaysia, China,
Japan, Thailand, Australia, HK, etc).

21. (2) Divisional Structures
Customer Divisions
• Groups tasks in a way that will help meet the
demands of different customer groups.
• Customer divisional structure is appropriate
when groups of customers want different
things and each group is large enough.
• Suitable for organizations that wish to grow by
targeting new and distinct customer groups.
(E.g. SOHO concept)

22. (2) Divisional Structures
• Think of a “construction product” which is
considered new and distinct to grow in
construction industry to meet their demands.

23. (3) Matrix Structure
• When do the organizations use this structure
in their operation?

24. (3) Matrix Structure
• Functional and Divisional structures have
grouped their activities along a specific, single
dimension of the organization’s operation.
• In some cases, there is a need to focus on two
or more dimensions at the same time.

25. (3) Matrix Structure
• Assume that a company has a functional
structure but also needs to be sure that each
product or product group meets certain
requirements.
• An organization might have a product-based
structure, but it also must tune into the
requirements of different geographic markets.

26. (3) Matrix Structure
• The matrix structure was developed to deal with
these situations.
• Matrix structure defines work groups on the
basis of two dimensions simultaneously.
• Such as product – function, product – geographic
region and so on.

27. Product – Function Matrix Structure

28. (3) Matrix Structure
• Do you think construction’s projects are
recommended to use matrix structure in their
organization’s operation?
• What are the potential advantages of a matrix
structure?

29. (4) Network Structures
• An organization that has a core coordinating
with other organizations or organizational
units.
• Example, Contractor XYZ project’s in KL, all
piling works are done by Company A (sub-
contractor) and excavation works are done by
Company B (sub-contractor).

31. (4) Network Structures
• Some organizations work in situations, or
prepare and deliver products or services, that
require very high flexibility.
• One situation, or customer, might require a
certain type of specialty and equipment (e.g.
Ikea – super flat floor).
• In construction, contractors need crane for
construction, piling, excavator, and etc.

32. (4) Network Structures
For example, a building contractor might
construct a building made primarily of masonry
for one customer and a building made of mostly
wood for another.
For the first project, the contractor needs
people with masonry skills, whereas for the
other, skills in wood-working are required.

33. (4) Network Structures
In this type of situation, the contractor might
find it much better to rely on network of other
companies or tradespeople and put together a
team for each specific job or project.
Each member of the network performs some
portion of the activities necessary to deliver the
products or services of the network as a whole.

34. Managing Complexity
Through Integration

35. Integration
• Integrating the activities of an organization
involves controlling and coordinating the flow
of information, resources and tasks among the
organizational members and work groups.

36. Integration
• Whereas structure serves to segregate
organizational members into different work units.
• The goal of the integration component of
organizational design is to coordinate these
distinct groups’ work.
• Coordinating is keeping organization units that
interact with or influence each other in contact
with each other to share information and other
things to enhance task accomplishment.

37. Integration
• An organization’s operational complexity will
affect its need for integration.
• Normally, the more complex an organization’s
operations, the more sophisticated its
coordinating mechanism must be.
• An organization’s integration needs will vary
with the level of interdependence that exists
among work groups.

38. Integration
• In organizations where work groups must
closely coordinate their activities to achieve
organizational goals, integration needs will be
high.
• What do you think the level of complexity in
construction industry’s operational activities?
Complex? What about the level of
interdependence among work groups?

39. Integrating Mechanisms

40. Integrating Mechanisms
• At the foundation of an organization’s ability to
coordinate its subunits’ activities is its
information-processing capacity.
• Effective coordination depends on the
information flow between the organization’s
individual units so that work can be scheduled,
resources shared and transferred.

41. Integrating Mechanisms
• Organizations develop integration mechanisms
to enhance their information – processing
capacity and support their need for
coordination.
• Integration mechanisms are methods for
managing the flow of information, resources and
tasks throughout the organization.

42. Integrating Mechanisms
• Many different mechanisms can be used to
process information and coordinate
interdependent work units’ activities.
• General Management Systems – Some work unit
coordination may be achieved by developing
general managerial systems such as managerial
hierarchy, basic rules and procedures and plans
and goals (form the foundation of an
organizational integration system).

43. Integrating Mechanisms
• Information Systems facilitate the flow of
information up and down the traditional chain
of command and across organizational units.
• The computerized transfer of important
information and data provides a powerful tool
for coordinating diverse departments or
operating units.
• Examples, Clouds software / system.

44. Locus of decision making
• Refers to the level in the organization at
which authority resides for making major
decisions.

45. Locus of decision making
• If the primary decision-making authority is
rests with corporate headquarters or top
management levels of an operating facility, its
organizational structure is centralized.
• An organization that maintains its locus on
decision making at lower levels, such as at the
department or employee level, is
decentralized.

46. Summary
• Organizational design is crucial in developing
an overall organizational structure that will
help us achieve the organization’s overall
strategy and mission.

47. Discussion
• Define fragmented industry.
An industry in which no single enterprise has
large enough share of the market to be able to
influence the industry's direction.
• Cloud communication used in construction
industry to share information.
• Are construction industry’s work groups
interdependence?

48. Discussion
• Do you think construction industry is
complex? If yes, do you think integration is
required in their operation?
• Communication is very important in
construction industry. That’s why the size of
the organization is prefer to stay small and
lesser reporting level in the organization.
Need fast respond in action and flexible.
Integration is needed.

49. Discussion
• Chain of command
• Span of control
• Virtual team
• Difference Between Centralization and
Decentralization
• http://keydifferences.com/difference-
between-centralization-and-
decentralization.html

50. The End