Chapter 15.2: Organizational design by differentiation and integration

Question 1

What is meant by differentiation? [3]

Answer 1

Organization structures typically develop through a combination of planned and evolutionary responses to ongoing problems. To deal with certain classes of situations and problems, organizations create specialized subdivisions and groupings, each with the necessary expertise and resources. Subdividing an organization into specialized areas is called differentiation.

Question 2

What is integration?

Answer 2

The degree to which the subdivisions of an organization interact and coordinate their actions to fulfil organizational goals.

Question 3

What are the six ways that organizations differentiate into subunits?

Answer 3

Functional
Geographic
Product
Customer
Process
Project

Question 4

Describe functional differentiation.

Answer 4

Organization is divided into functional subunits.
Most of the integration between subunits is handled by rules, procedures, coordinated plans, and budgets.
Works well in repetitive, stable environments.

Question 5

Describe geographic differentiation.

Answer 5

Organization is subdivided into legions that oversee different locations.
Subdivide this way to adapt themselves to unique requirements of local customers, markets etc.
Within each geographic subunit, functional differentiation is often retained.
May be integrated through standardized financial and reporting rules and procedures.

Question 6

Describe product differentiation.

Answer 6

Used in firms with a variety of product lines.
Each subdivision designs, manufactures, and markets its own production line.
Within each subdivision is a functional, geographic or other form of breakdown.
May be integrated through standardized financial and reporting rules and procedures.

Question 7

Describe customer differentiation.

Answer 7

Differentiate by customer type.
Example: companies with both military and commercial sales (federal requirements differ from those for commercial customers).
Level of integration depends on interdependency of product lines (typically little integration).

Question 8

Describe process differentiation.

Answer 8

Differentiate according to process or sequence of steps.
Sub-units require high-level integration because they are sequentially interrelated; problems in one sub-unit affect the others).
Integrated through coordinated plans, schedules, and task forces and teams.

Question 9

What are the drawbacks of traditional forms of organization?

Answer 9

Limited Problem Handling:
Traditional organizations are only effective for predictable, classifiable problems. New or unique problems often don’t fit into existing structures.

Increased Bureaucracy:
As new problems arise, more rules, procedures, and management levels are added, increasing complexity and reducing flexibility.

Integration Difficulties:
Problems in one subunit can affect others, but the segmented nature of traditional structures makes integration challenging.

Slow and Costly Redesign:
Adapting the organization to handle new problems usually involves creating new subunits, which is slow and expensive.

Chain of Command Overload:
Escalating problems up the hierarchy to find solutions can overwhelm managers and lead to inefficiency.