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Deciding how to best group organizational activities &resources
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1. Responsibility
Obligation to carry out duties & achieve goals related to a
position
2. Authority
Rights to make decisions, carryout actions & direct others inmatters related to the duties & goals of a position.
3. Accountability
Requirement to provide satisfactory reasons for significantdeviations from duties or expected results.
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4. Delegation
Assignment to provide satisfactory reasons for significant
deviations from duties or expected results.
5. Autonomy
Amount of freedom or authority allowed in determiningschedules & work methods for achieving required output.
6. Feedback
Degree to which the job provides for clear & timely informationabout performance result.
The aim is to improve the performance
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Line diagram which shows broad outlines of an organization’sstructure.
Principles of Chart
1. As few hierarchical levels as possible.2. Chart should show who has authority over who.
3. Chart should also show official lines of responsibility &communication Vishvesh Patel - MBA POM9
Organization Chart
Communicati
on Reporting
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Organization Chart
The organization chart conveys four kinds of information?
Organization chart: a diagram that illustratesthe reporting lines between units and peoplewithin the organization
Boxes represent different units
Titles in each box show the work performedby that person
Reporting relationships are shown by thelines connecting superiors and subordinates
Levels of the organization are indicated by
the number of vertical layers in the chart
Boxes represent different units
Titles in each box show the work performedby that person
Reporting relationships are shown by thelines connecting superiors and subordinates
Levels of the organization are indicated by
the number of vertical layers in the chart
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Executive
Vice President,
Chief Financial
Officer
Executive
Vice President,
Chief Financial
Officer
Executive
Vice President,
Marketing
Executive
Vice President,
Marketing
Executive
Vice President,
Legal
Executive
Vice President,
Legal
Executive
Vice President,
Human
Resources
Executive
Vice President,
Human
Resources
Executive
Vice President,
Merchandising
Executive
Vice President,
Merchandising
Executive
Vice President,
Operations
Executive
Vice President,
Operations
Executive
Vice President,
International
Technology
Executive
Vice President,
International
Technology
Vice President,
Investor Relations
Vice President,
Investor Relations
Senior
Vice President,Customer
Service
Senior
Vice President,Customer
Service
Senior
Vice President,Operations
Senior
Vice President,Operations
President,
Western
President,
WesternPresident,
Atlantic
President,
AtlanticPresident,
Mexico
President,
Mexico
Senior
Vice President,Real Estate
Senior
Vice President,Real Estate
Chairman of BoardChairman of Board
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Organization Structure
Set of building blocks that can be used to construct anorganization.
Defines the primary reporting relationships that exist withinan organization
Nature of Organizational StructureFormal pattern of interactions & coordination, designed bymanagement, to link the task of individuals & groups inachieving org. goals.
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Four Elements of Organization Structure
1. Assignment of tasks & responsibility to individuals & units.
2. Clustering these ( Units & People) to form a hierarchy.
3. Mechanisms for vertical co-ordination.
4. Mechanism for horizontal coordination.
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6 Building blocks
1. Designing Jobs (Job Specification)
2. Grouping Jobs (Departmentalization)
3. Establishing Reporting Relationship
4. Distributing Authority
5. Coordinating Activities
6. Differentiating Between Positions
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1. Job Design
1. Job Description Specification of task activities associated with a
particular job. The determination of an individual’s work related
responsibilities
1. Job Specialization Degree to which the overall task of the organization is
broken down into smaller components. Ex. Marketing – Retailing, Communicating, Strategy Ex. HR – Recruiting, Selecting, Training, Evaluating
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1. Job Design
2. Job Specialization
Advantages:1. Workers can become proficient (Skillful) at a task
2. Transfer time between task decrease
3. Specialized equipment can be developed
4. Employee replacement becomes easier
Disadvantages:1. Employee boredom & dissatisfaction
2. Anticipated benefits do not always occur (Take it for granted)
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1. Job Design
3. Job Rotation
Movement of workers from one specialized job to another. The work can learn something more
People will be motivated
3. Job Enlargement (More Jobs)
Increase the number of tasks performed by a worker.
5. Job Enrichment (Better Jobs)
Upgrading the job task.
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2. Grouping Jobs (Departmentalization)
Departmentalization
The process of grouping jobs or units according to somelogical arrangement
Rationale of Departmentalization
Because of growth you can’t control all the people
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2. Grouping Jobs (Departmentalization)
7 Basic Types
1. Functional ( U Type –Unitary )
2. Product ( H Type – Holding ) ( Conglomerate)
3. Customer
4. Location (Geographic)
5. Network
6. Matrix
7. Process
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Divisional
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1. Functional Departmentalization
Structure in which positions are grouped according to theirmain functional area.
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1. Functional Departmentalization
•Advantages
•Efficiencies from putting together similar specialties and people withcommon skills, knowledge, and orientations
•Coordination within functional area•In-depth specialization
•Disadvantages
•Poor communication across functional areas
•Decision making process becomes slow
•Focus on departmental rather than organizational issues and goals
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General
Counsel
General
Counsel
CEOCEO
Controller Controller ManufacturingManufacturing
Owners GroupsOwners GroupsStrategic
Planning
Strategic
PlanningEngineeringEngineering Human
Resources
Human
Resources
MerchandiseMerchandise
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Functional Departmentalization
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2. Product Departmentalization
Structure in which positions are grouped according to theirproducts.
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2. Product Departmentalization
•Advantages
•Managers specialize, but have broader experience
•Better assessment of manager performance and responsibility.
•Development of generalist managers
•Closer to customers
•Disadvantages
•Duplication of activity
•Difficult to coordinate across department
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Information
Systems &
Technology
Information
Systems &
Technology
Land
Systems
Land
Systems
Chairman & Chief
Executive Officer
Chairman & Chief
Executive Officer
Protection
Systems
Protection
SystemsWeapons
Systems
Weapons
SystemsElectric
Boat
Electric
Boat
Combat
Systems
Combat
SystemsMarine
Systems
Marine
Systems Aerospace Aerospace
Aviation
Services
Aviation
Services
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Product Departmentalization
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3. Customer Departmentalization
Grouping jobs by type of customer and needs
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3. Customer Departmentalization
•Advantages
•Encourage Focus on customer Needs
•Give customers the feeling that they have an understanding supplier(Bank).
•Develop expertness in customer area
•Disadvantages
•Duplication of Function
•Difficult to coordinate across department
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4. Geographical Departmentalization
Grouping jobs on the basis of territory or geography
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4. Geographical Departmentalization
•Advantages
•More effective and efficient handling of specific regional issues thatarise
•Serve needs of unique geographic markets better
•Disadvantages
•Duplication of Function
•Can feel isolated from other organizational areas
•Conflict between each location’s goals and the organization’s goals
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President,
International
President,
International
PresidentPresident
CEOCEO
ThailandThailand
VP,Northwest
VP,Northwest
VP,
South Central
VP,
South Central
VP,
Southwest
VP,
Southwest
President,
North America
President,
North America
President, Europe,
Middle East, Africa
President, Europe,
Middle East, Africa
President,
Japan
President,
Japan
Senior VP,
Coffee
Senior VP,
Coffee
Executive VP,
Chief Financial Officer
Executive VP,
Chief Financial Officer
Executive VP,
Partner Resources
Executive VP,
Partner Resources
Executive VP,
Supply Chain & Coffee
Executive VP,
Supply Chain & CoffeeExecutive VP,
Legal
Executive VP,
Legal
Australia Australia
United KingdomUnited Kingdom
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5. Network
Subcontracts some or many of its operations to other firms andcoordinates them to accomplish specific goals
Sometimes called virtual organizations
Connects people regardless of their locations
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Spielberg Katzenberg Geffen
(Films) (Animation) (Music)
Spielberg Katzenberg Geffen
(Films) (Animation) (Music)
Computer
Hardware/
Software
Computer
Hardware/
Software
Agents Agents
Makeup ArtistsMakeup Artists
Media
Relations
Media
RelationsTalent
Scouts
Talent
Scouts
Actors Actors
LegalLegal
Future
Games
Future
Games
MarketingMarketing
TechniciansTechnicians
Costume
Designers
Costume
Designers
5. Network
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5. Network
•Advantages
•Ability to gain special knowledge and skills of others without having
to hire employees•Allows managers the flexibility to work with a wide variety of different suppliers, customers, and other organizations
•Disadvantages
•Other organizations may fail to live up to established deadlines•Managers must constantly monitor the quality of work provided byother organizations
•Employees in the outsourced organization may not hold the samevalues and sense of time urgency to which employees in theorganization are committed
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6. Matrix
A structure in which the tasks of the organization aregrouped along two organizational dimensionssimultaneously.
Examples include:
Product/function
Product/geographic region
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2. Grouping Jobs (Departmentalization)
•Advantages
•Effectively manage large, complex task
•Efficiently carry out large, complex task
•Disadvantages
•Requires high level of coordination
•Behavioral difficulties from “two bosses”
•Lines of authority and responsibility may not be clear to individualemployees.
•Possibilities of conflict are increased.
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2. Grouping Jobs (Departmentalization)
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UniversityUniversity
President
VP
Finace &
Administration
VP
Research &
Lecturing
VP
Student Matters
VP
Planning
Language
Department
Economics
Department
English
French
Marketing
Accounting
Director
MastersProgramme
Director
UndergraduateProgramme
Prof. A Prof. C
Prof. B Prof. D
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Guidelines for Making Matrix Management Effective
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1. Define the objectives of the project or task.
2. Clarify the roles, authority, and responsibilities of managersand team members.
3. Ensure that influence is based on knowledge andinformation, rather than on rank.
4. Balance the power of functional and project managers.
5. Select an experienced manager for the project who canprovide leadership.
6. Undertake organization and team development.
7. Install appropriate cost, time, and quality controls thatreport deviations from standards in a timely manner.
8. Reward project managers and team members fairly.
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7. Process Departmentalization
Grouping jobs on the basis of product or customer flow
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+ More efficient flow of work activities
– Can only be used with certain types of products
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Potential Advantages and Disadvantages of Organizational Structures
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3. Establishing Reporting Relationship
Who reports to whom?
Ex. Owner manager of small firm hire two new employees, oneto handle marketing and one to handle production, willmarketing manager report to production and production tomarketing or will each directly report to the owner manager?
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3. Establishing Reporting Relationship
Issues that we have to keep in mind while one is reporting toothers.
1. Chain of command
2. Unity of command
3. Span of control
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1. Chain of command
The continuous line of authority (Vertical line) that extendsfrom upper organizational levels to the lowest levels andclarifies who reports to whom.
One below will report to one above.
Everyone has to support each other.
Each and every department, units have to communicate,
coordinate, report and help each others.
Number of chains (Units) increase complexity increases.
In Govt. we will find maximum numbers of departments &
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1. Chain of command
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Who reports to whom?
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2. Unity of Command
The management principle that no person should report tomore than one boss.
Each person within an organization must have a clearreporting relationship to one & only one boss.
Z1 reporting to only one boss y1
Y1 reporting to only one boss x
Matrix is an exception because of x-y coordination
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3. Span of Control ( Span of Management)
The number of subordinates reporting directly to a manager.
Number of people who report to a particular manager.
(How many people do you want to control?)
Span of control will tell you how important that manager is.
Narrow vs. Wide
Operative span (Level) – up to 30 subordinates
Executive span (Level) – 3 to 9 subordinates
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3. Span of Control ( Span of Management)
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3. Span of Control ( Span of Management)
Narrow vs. Wide
Tall vs. Flat
Tall structure has an overall narrow span of managementand more levels in the hierarchy.
Flat structure has a wide span and has fewer hierarchicallevels.
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3. Span of Control ( Span of Management)
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3. Span of Control ( Span of Management)
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3. Span of Control ( Span of Management)
Flat Organizations ( 2 or 3 grades/levels)
1. Leads to higher levels of employee morale & productivity.
(Problem will immediately solved)
2. More administrative responsibility for managers because of thefewer levels.
3. Generally in Business organization the structure will be Flat. Japanese organizations also use this kind of structure.
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3. Span of Control ( Span of Management)
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4. Distributing Authority
Managers can distribute hisauthority through Delegation &Degree of centralization.
Delegation
“The process by whichmanagers assign a portion of
their total workload to others.”
(But manager will beresponsible and accountable)
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1. Delegation
Delegation Triangle
Steps in the Delegation Process
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Responsibility
Authority Accountability
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1. Delegation
Reasons for Delegation.
To allow the manager to get more work done by utilizing the skills & talentof subordinates.
You have to watch, to whom do you want to delegate? You give the responsibility so you should also give the authority But the accountability will be yours.
To promote the development of subordinates by having them participate indecision making & problem solving
Allows subordinates to learn about overall operations To improve their managerial skills.
(It will train them to be higher level)
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2. Degree of centralization Centralization of Authority
Primary authority will be held by upper management
Advantage: gives top-level management maximum control.
Disadvantage: limits the organization’s ability to respond quickly
and effectively to changes in the environment.
Decentralization of Authority
Significant authority will be found in lower levels of theorganization
Specially in flat organizations Others can make decisions on behalf of others (Shipment is ready, you can
sign on behalf of me) Trust element involves here
Advantage: rapid and effective response to environmental changebecause the decision makers are the people closest to thesituation.
Disadvantage: top-level managers lose some control.Organizing
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2. Degree of centralization
Factors that Influence the Amount of 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
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2. Degree of centralization
Factors that Influence the Amount of 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 makedecisions
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DELEGATION DECENTRALISATION
1. Delegation refers to thegranting of authority andcreation responsibility asbetween one individual
and another.2. Delegation is a process.
3. Here, the superiorcontinues to be
responsible for the workdelegated to hissubordinates.
4. Delegation is compulsory
for every unit.
1. Decentralization is thesituation which exists asa result of the systematicdelegation of authority.
2. Decentralization is theend result of delegation.
3. Here, the superior isrelieved from hisresponsibility for the
work decentralised andthe subordinate becomesliable for that.
4. It is optional.
5. In Decentralization thepersonnel is free to workwithin the code of
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5. Coordinating Activities
Different numbers of people
Using different types of technology
Serving different types of market & customers
But the objective will be the same.
“We want to achieve organizational goal”.
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5. Coordinating Activities
The process of linking the activities of various departmentsof organization.
Example:
Tata Nano’s customer complaints regarding to safety will befulfill through coordinating activities.
Better coordination – Lesser complaints
Higher coordination – Higher level of performance & Higher productivity
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Levels of Work Group Interdependence
Pooled Interdependence
Occurs whenorganizational units have acommon resource but nointerrelationship with oneanother.
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BB
CC
DD
AA
FF
EE
Head-Head-
quartersquarters
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Levels of Work Group Interdependence
Sequential Interdependence
Occurs when organizational units must coordinate the flowof information, resources, and tasks from one unit toanother.
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AA BB CC
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Levels of Work Group Interdependence
Reciprocal Interdependence
Occurs when information, resources, and tasks must bepassed back and forward between work groups.
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A
C
E F
D
B
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6. Differentiating between Line & Staff Positions
A Line position has authority and responsibility forachieving organizations major goal.
Positions in the direct chain of command that areresponsible for the achievement of an organizationsgoals/profit.
If there is any complaint or loss, we will ask them.
Example:
Manufacturing department, marketing department etc.
(Directly related to major goal)
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6. Differentiating between Line & Staff Positions
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President
Marketing Mfg AcctMarket
Research
Com-
puting
Legal
Office
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6. Differentiating between Line & Staff Positions
Organizational objective determine the line and the staff function.
What is considered as staff function in one organization canbe line function in another.
Example
recruitment in manufacturing company and placementagency.
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Formal organization Formal organization belongs to the intentional structure of roles
in a formally-organized enterprise.
It is a system of well defined jobs, each bearing a definitemeasure of authority, responsibility and accountability.
informal organization The informal organization is a network of interpersonal
relationships that arise when people associate with each other.
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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
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Strategy Frameworks:
Innovation
Pursuing competitive advantage through meaningful and uniqueinnovations 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’sstructure
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Woodward’s Findings on Technology, Structure, and Effectiveness
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Traditional Designs:
Simple Structure
Low departmentalization, wide spans of control, centralized authority,little formalization
Functional Structure Departmentalization by function
Operations, finance, human resources, and product research anddevelopment
Divisional Structure Composed of separate business units or divisions with limited autonomy
under the coordination and control of the parent corporation
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Contemporary Organizational Designs:
Team Structures The entire organization is made up of work groups or self-managed
teams of empowered employees. Ex. Superstore
Matrix Structures Specialists for different functional departments are assigned to work on
projects led by project managers Matrix participants have two managers
Project Structures Employees work continuously on projects, moving on to another project
as each project is completed.
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Contemporary Organizational Designs:
Boundary less Organization
Virtual Organization An organization that consists of a small core of full-time employees and
that temporarily hires specialists to work on opportunities that arise. Ex. Amazon.com
Network Organization A small core organization that outsources its major business functions
(e.g., manufacturing) in order to concentrate on what it does best.
Modular Organization A manufacturing organization that uses outside suppliers to provide
product components for its final assembly operations. Ex. Car Manufacturing Industry
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Contemporary Organizational Designs:
Learning Organization
• An organization that has developed the capacity to continuouslylearn, adapt, and change through the practice of knowledgemanagement by employees.
• Ex. Microsoft
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Contemporary Organizational Designs
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