1. LJOM ConsultantsChapter 10: Creating EffectiveOrganizational Designs

2. Organizational Structure Organizational Structure: the formalized patterns ofinteractions that link a firms tasks, technologies, andpeople 4 types of organizational structure1. Simple2. Functional3. Divisional4. Matrix

3. Simple Structure Simple Structure: the oldest, and most commonstructure which the owner makes most of the decisions Advantage: highly informal and the coordination oftasks is accomplished by direct supervision Disadvantage: informality may lead to problems,unclear of responsibilities

4. Functional Structure Functional Structure: major functions of the firm aregrouped internally Advantage: able to enhance its coordination andcontrol within each of the functional areas Disadvantage: differences in values and orientationsamong functional areas may impede communication andcoordination

5. Divisional Structure Divisional Structure: a form in which products,projects, or product markets are grouped internally Advantage: by having separate divisions to manageindividual product markets, there is a separation ofstrategic and operating control Disadvantage: expensive, due to operations, andinvestment since each division must staff multiplefunctional departments

6. Matrix Structure Matrix Structure: combination of functional anddivisional structures Advantage: facilitates the use of specialized personnel,equipment, and facilities Disadvantage: dual-reporting structures can result inuncertainty and lead to intense power struggles andconflict

7. International Operations:Implications for OrganizationalStructure Three major contingencies that influence the chosenstructure: Type of strategy that is driving a firms foreignoperations Product Diversity Extent to which a firm is dependent on foreign sales

8. Primary Structures Used to manage a firms international operation: International division Geographic-area division Worldwide functional Worldwide product division Worldwide matrix

9. Multi-domestic Strategies Driven by political and cultural imperatives requiringmanagers within each country to respond to localconditions. International division structure Geographic-area division structure

10. Global Strategies Driven by economic pressures that require managers toview operations in different geographic areas to bemanaged for overall efficiency. Worldwide Functional Structure Worldwide Product Division Structure

11. How an OrganizationsStructure Can InfluenceStrategy Formulation Strategy follows structure. The strategy that a firm chooses dictates such structuralelements as the division of tasks, the need forintegration of activities, and authority relationshipswithin the organization. However, an existing structurecan influence strategy formulation. Once a firms structure is in place it is very difficult andexpensive to change.

12. Global Start Ups: A NewPhenomenon Global Start-Up Defined: a business organization that,from inception, seeks to derive significant advantagefrom the use of resources and the sale of outputs inmultiple countries. Geographical Boundaries of nation-states areirrelevant for a global start up. Being Global necessarily involves highercommunication, coordination, and transportationcosts.

13. Linking Strategic Reward andEvaluation Systems Rewards and evaluation system Key role in motivating management to conform with: Organization strategies. Achieve performance targets. Close the gap between organizational andindividual goals. Improper design Detrimental to organizational performance. Lower employee morale. Employee dissatisfaction.

14. Business-Level Strategy Overall Cost Leadership Strategy Product Lines remain stable. Innovation deals mostly with product process. Firms competing on cost. Incentives are based on meeting financial targets. Differentiation Strategy Development of innovative products or services. Requires to the use of experts to ID crucial elements. Difficult to evaluate using quantitative data Based on collaboration and info. sharing.

15. Corporate-Level Strategy Related Diversification Strategy Use core competencies and sharing across differentbusinesses. Ex. Sporting Goods Store that buys retail store tocarry other product lines. Use of promotion based on seniority and skills. Helps to ensure long-term > short-term. Unrelated Diversification Strategy Keeping acquired business as additions to the family. Rewards based on individual accountability.

16. Boundaryless OrganizationalDesign Organizations in which the boundaries, includingvertical, horizontal, external, and geographic arepermeable. These include: Barrier-Free Organization Modular Organization Virtual Organization

17. Barrier-Free Organization An organization design in which firms bridge realdifferences in culture, function, and goals. Find common ground that facilitates information sharingand other forms of cooperative behavior. Pros Leverages talent of employees, enhancescooperation, enables quicker response to marketschanges.

18. Barrier-Free Organization Cont. Cons Can be difficult to overcome political and authorityboundaries. Lacks strong leadership and common vision. Time-consuming and difficult to manage democraticprocesses.

19. Modular Organization An organization in which non-vital functions areoutsourced, uses the knowledge and expertiseof outside suppliers while retaining strategiccontrol. Ex. Nike and Reebok. Pros Able to direct firms managerial and technical talentto most critical activates. Maintains full strategic control over corecompetencies. Achieves best in class performance for each link inthe value chain.

20. Modular Organization Cont. Cons Inhibits common vision through reliance onoutsiders. Diminishes future competitive advantages if criticaltechnologies are outsourced. Increases the difficulty of bringing back into firmactivities that now add value due to market shifts.

21. Virtual Organization A continually evolving network of independentcompanies that are linked together to shareskills, costs, and access to one anothersmarket. Pros Enables the sharing of costs and skills. Enhances access to global markets. Increases market responsiveness.

22. Virtual Organization Cont. Cons Harder to determine where one company ends andanother begins, due to close interdependenciesamong players. Leads to potential loss of operational control amongplayers. Results in loss of strategic control.

23. Making BoundarylessOrganizations Work Achieving the coordination and integrationnecessary to maximize the potential of anorganizations human capital involves muchmore than creating a new structure. Some Factors to consider: Common culture and shared values. Horizontal organizational structures. Horizontal systems and Processes. Communications and information technologies (IT). Human resource Practices.

24. Ambidextrous OrganizationalDesign Manager must be able to maintain: Adaptability When changes are rapid and unpredictable Alignment Ability to exploit assets and competencies. Very difficult to accomplish Study of different organizational studies found: Were effective Launched breakthrough products and services. Improved existing business performance.

25. Thank-you for your time.