Post on 20-Dec-2015
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BA105-1: BA105-1: Organizational BehaviorOrganizational Behavior
Professor Jim LincolnProfessor Jim Lincoln
Week 3: LectureWeek 3: Lecture
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Organization design II:Session objectives
• Discuss the pros and cons of product division organization
• View functional and product division organization as ends of an evolutionary continuum along which a series of designs, including matrix, can be arrayed
• Introduce process and network organization designs as the main forms of modern “flat” or “horizontal” organization
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CEO
CarsPrefabHouses Electronics
HR Mnfg Mktg HR Mnfg Mktg HR Mnfg Mktg
Organizing around outputs:Product division organization
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CEO
North America
Europe Asia Pacific
HR Mnfg Mktg HR Mnfg Mktg HR Mnfg Mktg
Organizing around outputs:Regional division organization
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CEO
Home market
Education market
Corporatemarket
HR Mnfg Mktg HR Mnfg Mktg HR Mnfg Mktg
Organizing around outputs:Customer-type divisions
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Product organization pros & consAlfred Chandler: Strategy and Structure, 1962
Oliver Williamson: Markets and Hierarchies, 1975
Pluses• Low interdependence
– Easy monitoring of division performance
– Coordination by accounting standards– Easy absorption of acquisitions– Top execs freed for strategy
• Responsiveness to product, customer, & regional concerns
• Breeds GM skills • Good fit to turbulent, heterogeneous
environment• Good fit to these strategies:
– Diversification– Product/customer/region focus
Minuses• Poor within-function coordination• Breeds weak functions • Breeds inbred division cultures
– Loss of corporate identity• High redundancy and cost • Excessive management by the numbers
– Headquarters out of touch– Rigid, short-term expectations
• Excessive scale & sprawl
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Hybrid forms
• Most large firms are functional/product hybrids: some functions are centralized others are decentralized to the division level
• The trend in recent years has been to consolidate divisions & centralize functions
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Lou Gerstner, CEO of IBM on strategic organizational design
Gerstner has been designing ways to decentralize what he calls, “the things that matter in running a business” but reinforce the things that benefit from size. That means decentralizing some things and centralizing others.
“So, while unit managers can expect to define their customers, design their own products, manage most of their costs, and set prices, they’ll be expected to cooperate more on such issues as technology and product announcements, such as the power PC”
Hybrid form at Levi Strauss:
Divisional organization with some functions centralized
Haas CEO
Product Group A
Product Group A
Product Group B
Product Group B
Product Group C
Product Group C LegalLegal FinanceFinance R&DR&D Acctg.Acctg.
Mktg
Distribution
Sales
Manufact.
Mktg
Distribution
Sales
Manufact.
Mktg
Distribution
Sales
Manufact.
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CEO
R&DProduct
Division Z Product
Division Y
Z R&D
Z Engineering
Hybrid form: dotted-line relationship
between corporate and divisional R&D
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Product Z
manager
Engineer-ing
Manufac-turing
Marketing
General Manager
Z Eng
Z Mnfg
Z Mktg
Matrix
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Matrix organization pros & consPluses
• Balances functional and product priorities – Product focus with stronger, less redundant,
& better deployed functions than in divisional form
• Forces consensus resolution of disputes • Forces a corporate-wide perspective on
product/market divisions • Good fit where technical & production
requirements are high but speed and cost are secondary
• Good fit to large firms that can afford the infrastructure costs– Small firms can achieve similar results
with less structure
Minuses
• Costly in time and management overhead
• Bureaucratic, cumbersome
• Slow, requires consensus decision-making
• Unstable– power tends to shift to one side or the other
• Causes stress & frustration
• Complex, nonlinear career paths
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Matrix as the (unstable) midpoint of an evolutionary continuum
1 Pure functional organization2 Functional org with product-centered culture3 Liaison roles (employee transfers)4 Cross-functional task forces & teams
5 Integrating roles (product, brand, & account mgrs)
6 Matrix
7 Heavyweight product manager form
8 Fully self-contained product division organization
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Engineer-ing
Manufac-turing
Marketing
General Manager
Human Resources
Account-ing
Functional organization
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Engineer-ing
Manu-facturing
Marketing
General Manager
Z Eng
Z Mnfg
Z Mktg
Product Z culture
Product-specific culture coordinates functions around product Z
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Engineer-ing
Manufac-turing
Marketing
General Manager
Z Mnfg
Z Mktg
Liaison roles: Cross-functional employee rotations coordinate
functions around product Z
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Engineer-ing
Manufac-turing
Marketing
General Manager
Z Mnfg
Z Mktg
ProductZ cross-functional team
Cross-functional teams coordinate functions around product Z
Z Eng
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Z brand manager
Engineer-ing
Manufac-turing
Marketing
General Manager
Z Eng
ZMnfg
Z Mktg
Integrating roles: Brand, account, & project managers coordinate functions around product Z
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Product Z
manager
Engineer-ing
Manufac-turing
Marketing
General Manager
Z Eng
Z Mnfg
Z Mktg
Matrix: Formal reporting lines to a product division manager
coordinate functions around Product Z
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Product Z
manager
Engineer-ing
Manufac-turing
Marketing
General Manager
Z Eng
Z Mnfg
Z Mktg
“Heavyweight product manager” form
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CEO
Product W Product X Product Z
Eng Mnfg Mktg Eng Mnfg Mktg Eng Mnfg Mktg
Fully self-contained product divisions
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Matrix as culture, not structure
Strongly shared commitments to product quality, customer service, and functional expertise (as in Total Quality Mangement)
Bartlett and Ghoshal: “Matrix management-- not a structure, a frame of mind.”
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Process (“horizontal”) & network organization designs
• Abandonment of the “Manager as engineer” model (despite “reengineering” termninology)– Less hierarchical command & control– Fewer rules, standards, and procedures– Less detailed and rigid division of labor – No more vertical career
• “Manager as leader” model. Strategies and capabilities are:– Teamwork (coordination through mutual adjustment) – Networking and political – Leadership and cultural– Entrepreneurial
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The problem with the previous designs is that many business processes cut across functions & products
General Manager
Marketing Manufacturing Engineering
Product
Manager
Prod. B
Prod. A
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Process organization: Grouping by interdependence, not similarity
Hammer and Champy: Reengineering the Corporation, 1993 – Identify core business processes
• Chains of interdependent tasks delivering a product or service to a customer
– Create multi-functional teams to run processes– Appoint manager or team as “owner” of each process – Empower teams with authority & information
• Move decision-making to point of action; customer contact
– Revamp accounting and reward systems to orient new structure to customer satisfaction
– Shrink functional departments but preserve specialist expertise– Eliminate activities that add no value
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Top Management
TeamTeamProcessCoordinators
TeamTeamProcessCoordinators
TeamTeamProcessCoordinators
New product development process
Order fulfillment process
Procurement, logistics process
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Keep functional skills but dispense with functional groups
“Create a house Yellow Pages so functional expertise is easy to find even though dispersed. Link experts in a real or electronic network where they can keep each other up to date and can get training and career development help…The engineers can have a club. But they can’t work in the same room, and they can’t sit at the same table at the company banquet.”
Thomas A. Stewart: “The search for the organization of tomorrow” Fortune, 5/18/92.
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Network Organization
• Small, lean, specialized firms • The “organization” is a network• Absence of authority and structure to control and
coordinate division of labor – Examples:
• Japanese keiretsu• Silicon valley• New York fashion industry• Germany’s mittelstand • Northern Italy’s furniture industry• Ethnic enclaves
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Designers
Core FirmProducers
DistributorsSuppliers
Managers
Suppliers Distributors
ITServices
Producers
Producers
Designers
Distributors
Suppliers
Brokers
Full Vertical Integration
Full Network Organization
Networked Firm
HR Services
IT Services
HR Services
Designers Marketers
HR Services
IT Services
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Physical proximity facilitates teamwork and networking
(e.g., New York, Silicon Valley)
Advertising
Manu-facturing
Finance
Legal
Designers
Suppliers
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EmailTeleconferencing
GroupwareKnowledge management
ERP
Information technology facilitates teamwork and networking
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Thursday
• Loose ends in lecture & reading
• Prepare the Appex case– Evaluate the cause & effect chains leading to
problems– Critique Ghosh’s design solutions
• Why so many unintended consequences?
– Propose alternatives • Consider nonstructural solutions
• Assignment to project teams