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D: Chapter 10
Designing Adaptive Organizations
Organizing
The deployment of organizational resources to achieve strategic goalsReflects deployment of resources Shows division of laborFormal lines of authority and mechanisms is developed
Organization Structure
Defines how tasks are divided, resources are deployed, and departments are coordinated
The set of formal tasks assigned Formal reporting relationships The design of systems to ensure
effective coordination of employees across department
The Organization Chart
“The Home Depot is the world's largest home improvement retailer currently operating 1,363 stores.
Visual representation
Set of formal tasks
Formal reporting relationships
Framework for vertical control
Work Specialization
Tasks are subdivided into individual jobsDivision of labor conceptEmployees perform only the tasks relevant to their specialized functionJobs tend to be small, but they can be performed efficiently
Chain of Command
Unbroken line of authority that links all persons in an organizationShows who reports to whomAssociated with two underlying principles
Unity of CommandScalar Principle
Unbroken line of authority that links all persons in an organizationShows who reports to whomAssociated with two underlying principles
Unity of CommandScalar Principle
AuthorityFormal and legitimate right of a manager to make decisions and issue ordersAllocate resources to achieve organizationally desired outcomesAuthority is distinguished by three characteristics
Authority is vested in organizational positions, not people
Authority is accepted by subordinates Authority flows down the vertical
hierarchy
Formal and legitimate right of a manager to make decisions and issue ordersAllocate resources to achieve organizationally desired outcomesAuthority is distinguished by three characteristics
Authority is vested in organizational positions, not people
Authority is accepted by subordinates Authority flows down the vertical
hierarchy
Responsibility
The duty to perform the task or activity an employee has been assignedManagers are assigned authority commensurate with responsibility
AccountabilityMechanism through which
authority and responsibility are brought into alignment
People are subject to reporting and justifying task outcomes to those above them in the chain of command
Can be built into the organization structure
Delegation
Process managers use to transfer authority and responsibility
Organization encourage managers to delegate authority to lowest possible level
1
2
Techniques for Delegation
Give thorough instructions
Maintain feedback Evaluate and reward performance
Delegate the whole task Select the right person
Delegation
Ensure that authority equals responsibility
Line and Staff Positions
Line vs. staff positionsLine vs. staff authorityAdvantages and complexities of using staff positions
President
Legal Department
Vice-President,Production
Vice-President,Marketing
Vice President,Accounting
DepartmentA
DepartmentB
DepartmentC
Line authority
Staff authority
TM 8-8
Irwin/McGraw-Hill ©The McGraw-Hill Companies, Inc., 1998
TYPES OF AUTHORITY
Span of Management
Number of employees who report to a supervisorTraditional view, about seven subordinates per managerMany lean organizations today have 30, 40, or even higher subordinatesWhen supervisors must be closely involved with subordinates, the span should be smallSupervisors need little involvement with subordinates, it can be large
Number of employees who report to a supervisorTraditional view, about seven subordinates per managerMany lean organizations today have 30, 40, or even higher subordinatesWhen supervisors must be closely involved with subordinates, the span should be smallSupervisors need little involvement with subordinates, it can be large
Factors Influencing the Span
SupervisorPreferences and skillsFew non-supervisory duties
SubordinatesCompetence and needs
JobWork similarityphysical proximityLow interaction requirements
Tall versus Flat Structure
Span of Control used in an organization determines whether the structure is tall or flatTall structure has a narrow span and more hierarchical levelsFlat structure has a wide span, is horizontally dispersed and fewer hierarchical levelsThe trend has been toward wider spans of control
Span of Control used in an organization determines whether the structure is tall or flatTall structure has a narrow span and more hierarchical levelsFlat structure has a wide span, is horizontally dispersed and fewer hierarchical levelsThe trend has been toward wider spans of control
SPAN OF MANAGEMENT
Org.Level
MEMBERS ATEACH LEVEL
1
2
3
4
5
6
7 Span of 4Operatives : 4,096Managers : 1,396
Span of 8
Operatives : 4,096Managers : 585
TM 8-6
Irwin/McGraw-Hill ©The McGraw-Hill Companies, Inc., 1998
(highest) 1
4
16
64
256
1,024
4,096
1
8
64
512
4,096
Centralization vs. Decentralization
The extend to which the power and authority is retained at the top vs. delegated to lower levels.Factors influencing…
Size of the organizationGeographic dispersionTechnological complexityEnvironmental uncertainty
CENTRALIZATION DECENTRALIZATION
Decision-m
aking Dec
isio
n-m
akin
g
smallcentralized
simplecertain
sizegeographicstechnology
environment
largedispersedcomplex
uncertain
factors
TM 8-7
Irwin/McGraw-Hill ©The McGraw-Hill Companies, Inc., 1998
Restrictivepolicies, rules,
procedures
General policies, rules,
procedures
Decentralization Tends To …
Make greater use of human resourcesReduce burdens of top managersCause decisions to be made close to the actionPermit rapid response to changes
DepartmentalizationThe basis on which individuals are grouped
into departments
Vertical functional approach. People are grouped together in departments by common skills.
Divisional approach. Grouped together based on a common product, program, or geographical region.
Horizontal matrix approach. Functional and divisional chains of command. Some employees report to two bosses
Team-based approach. Created to accomplish specific tasks
Virtual Network approach. An organization structure that disaggregates major functions to separate companies that are brokered by a small headquarters organizations.
Five Approaches to Structural Design
Five Approaches to Structural Design
Slide 2
Functional Structure Advantages
Efficient use of resourcesSkill specialization developmentTop management controlExcellent coordinationQuality technical problem solving
Functional Structure Disadvantages
Poor communicationsSlow response to external changesDecisions concentrated at topPin pointing responsibility is difficultLimited view of organizational goals by employees
Divisional Structure Advantages
Fast response, flexibility in an unstable environmentFosters concern for customers’ needsExcellent coordination across functional departmentsEmphasis on overall product and divisional goalsDevelopment of general management skills
Divisional Structure Disadvantages
Duplication of resources across divisionsLess technical depth and specialization in divisionsPoor coordination across divisionsLess top management controlCompetition for corporate resources
Horizontal Matrix Advantages
More efficient use of resources than divisional structureAdaptable to changing environmentDevelopment of both general and specialists management skillsExpertise available to all divisionsEnlarged tasks for employees
Dual Authority Structure in a Matrix Organization
Horizontal Matrix Disadvantages
Dual chain of commandHigh conflict between two sides of matrixMany meetings to coordinate activitiesNeed for human relations trainingPower domination by one side of matrix
Team Advantages
Same advantages as functional structureReduced barriers among departmentsQuicker response timeBetter moraleReduced administrative overhead
Team Disadvantages
Dual loyalties and conflictTime and resources spent on meetingsUnplanned decentralization
Virtual NetworkAdvantages
Can draw on expertise worldwideHighly flexible and responsiveReduced overhead costs
DisadvantagesLack of control, weak boundariesGreater demand on managersWeakened employee loyalty
Chapter OutlineThe horizontal organization
The need for coordinationTask force, teams and project management
Organizing for Horizontal Coordination
Quality of collaboration across departments
The need for coordination
Structural Design
• Task Force...A temporary team or committee formed to solve a specific short-term problem
• Team…Participants from several departments who meet to solve ongoing problems
•Project Manager…A person responsible for coordinating the activities of several departments
Evolution of Organization Structures
Traditional Vertical Structure
Teams and Project Managers for Horizontal
Coordination
Reengineering to Horizontal Processes
New Workplace Learning Organization
Factors Influencing Organizational Structure
Interdependence
Strategy
Environment
Technology
Traditional Vertical Structure
New Horizontal Structure
Company Performance
Strategy & StructureWhich Comes first—strategy or structure?
Form follows functionBut, once the form is in place, it impacts the function.
Structure Follows Strategy
Differentiation strategy, organization attempts to develop innovative productsCost leadership strategy, striving for internal efficiency
Traditional VerticalOrganization
Strategic Goals
Horizontal Teams
Relationship of Strategic Goals to Structural Approach
Strategic Goals:
Strategic Goals:
Cost leadership, efficiency, stability
Differentiation, innovations, flexibility
Three Things Happen Due To
Uncertain Environments
1. Increased differences occur among departments2. The organization needs increased coordination to
keep departments working together3. The organization must adapt to change
Structure Reflects the Environment
Organic vs. Mechanistic Structure
Woodward’s Manufacturing Technology
Small batch and unit production Large batch and mass
production Continuous process production
Manufacturing Technology and Organizational
Structure
Interdependence
The extent to which departments depend on each other for resources or materials to accomplish their tasks.
Types of Interdependence and Required Coordination