Fundamentals of OS

8/2/2019 Fundamentals of OS

1/48

Fundamentals ofOrganization Structure


2/48

Organization Structure

Three key components

designation of formal reportingrelationships

grouping of individuals into departmentsand of departments into the totalorganization;

of systems to ensure effectivecommunication, coordination, and

integration across departments.


3/48

Organization chart

The visual representation ofunderlying activities and processes


4/48

A Sample Organization Chart

ChiefAccountant

BudgetAnalyst

Vice PresidentFinance

PlantSuperintendent

MaintenanceSuperintendent

Vice PresidentManufacturing

TrainingSpecialist

BenefitsAdministrator

DirectorHuman Resources

CEO


5/48

Information-ProcessingPerspective on Structure

The structure must fit informationrequirements of the organization

Vertical linkages are designedprimarily for control,

Horizontal linkages that are designedfor coordination and collaboration; allorganizations need a mix.


6/48

Emphasis on VL(ie., efficiency & control)specialized tasks, hierarchy of authority, rules &regulations, formal reporting systems, centralized

decision making, few teams/task forces;

Emphasis on HL- relaxed hierarchy, few rules,

face-to-face commn, many teams/task forces,informal decentralized DM, etc.;

But these two extremes have their own

disadvantages too, thus need for searching bestcombination of vertical controls and horizontalcollaboration, centralization and decentralization;


7/48

The Relationship of OrganizationDesign to Efficiency vs. Learning

OutcomesHorizontal Organization

Designed for Learning

Vertical Organization

Designed for Efficiency

Dominant

Structural

Approach

Horizontal structure is dominant

Shared tasks, empowerment

Relaxed hierarchy, few rules

Horizontal, face-to-face communication

Many teams and task forces

Decentralized decision makingVertical structure is dominant

Specialized tasks

Strict hierarchy, many rules

Vertical communication and reporting systems

Few teams, task forces or integrators

Centralized decision making


8/48

Structural Design Options for GroupingEmployees into Departments

Engineering Marketing Manufacturing

CEO

Functional

Grouping

Source: Adapted from David Nadler and Michael Tushman,

Strategic Organization Design (Glenview, Ill.: Scott Foresman, 1988), 68.


9/48

Strengths and Weaknesses ofFunctional Organization Structure

STRENGTHS:Allows economies of

scale within functional

departmentsEnables in-depth

knowledge and skilldevelopment

Enables organizationto accomplish

functional goalsIs best with only one

or a few products

WEAKNESSES:Slow response time to

environmental changes

May cause decisions to pile ontop, hierarchy overload

Leads to poor horizontalcoordination amongdepartments

Results in less innovation

Source: Adapted from Robert Duncan, What Is the Right

Organization Structure? Decision Tree Analysis Provides the Answer,

Organizational Dynamics (Winter 1979): 429.


10/48

From Functional Structure toDivisional Structure

Functional structure is appropriate ifthe organization:

Limits itself to producing a small numberof similar products

Produces those products in one or a few

locations

Sells them to only one general type ofclient or customer


11/48

Functional to Divisional

However, as organizations grow, they arelikely to produce more products, which maybe different from each other.

Organizations also increase production at anumber of location to serve many differenttypes of customers.


12/48

Firm Growth as EvolutionaryProcess

Single Business

Geographic

Diversification(Foreign Sales as %Total Sales)

Product

Diversification(Product Diversity)

Product and Geographic

Diversification


13/48

Grouping is done based on

organizational output


14/48

14

Moving to a DivisionalStructure Organizations most commonly adopt the

divisional structure to solve controlproblems with too many products,regions, or customers.

Divisional structure is dependent oncontrol problem to be solved.

Three types Product structure Geographic structure Market structure


15/48

15

Product Structure

Product structure: a divisional structurein which products (goods or services) aregrouped into separate divisionsaccording to their similarities or

differences

Organizations need to decide how tocoordinate its product activities with

support functions.

Product Division structure, Multidivisionalstructure


16/48

16

Product Division Structure

Product division structure: astructure in which a centralized set ofsupport functions service the needs of

a number of different product lines

Divided into product-oriented teams of

functional specialists who focus on theneeds of one particular productdivision


17/48

17

Product Division Structure


18/48

18

Multidivisional Structure

Organizations that produce a wide range ofproducts typically use the multidivisionalstructure.

A structure in which support functions are

placed in self-contained division.

Each division has its own set of supportfunctions and controls its own value.

Most Fortune 500 companies use amultidivisional structure. Allows them to grow and expand their operations

while maintaining control over their activities


19/48

19



20/48

20



21/48

21

Divisional Structure II: GeographicStructure

When the control problems that companiesexperience are a function of geography, ageographic divisional structure isappropriate.

Allows the organization to adjust itsstructure to align its core competences withthe needs of customers in different

geographic regions

Allows some functions to be centralized andothers decentralized


22/48

Geographical Structurefor Apple Computer

CEO

Steve Jobs

Apple

Europe

Apple

Pacific

France

Apple

Products

Asia

Japan

Australia

Apple

Americas

Canada

Latin

America/Caribbean

Sales

Service and

Marketing

to Regions

Source: www.apple.com


23/48

GeographicalDepartmentalization

Indian oil

Refineries division Pipeline division

MathuraGuwahati North West East

GujaratBarauni

PanipatHaldia


24/48

24

Divisional Structure III : MarketStructure

A market structure aligns functional skillsand activities with the needs of differentcustomer groups.

Each customer group has a differentmarketing focus, and the job of eachgroup is to develop products to suit the

needs of its specific customers.

Each customer group makes use of

centralized support function.


25/48

25

Figure 6-11: Market Structure


26/48

Strengths and Weaknesses ofDivisional Organization Structure

STRENGTHS:Suited to fast change in

unstable environment

Leads to client satisfaction

because product responsibilityand contact points are clear

Involves high coordinationacross functions

Allows units to adapt todifferences in products, regions,

clientsBest in large organizations with

several products

Decentralizes decision-making

WEAKNESSES:Eliminates economies of

scale in functionaldepartments

Leads to poorcoordination acrossproduct lines

Eliminates in-depthcompetence and technicalspecialization

Makes integration andstandardization acrossproduct lines difficult

Source: Adapted from Robert Duncan, What Is the

Right Organization Structure? Decision Tree Analysis

Provides the Answer, Organizational Dynamics

(Winter 1979): 431.


27/48

Matrix Structure

The search for better and faster waysto develop products and to respond tocustomer needs has led companies toadopt a matrix structure.

Can be used when both technicalexpertise and product innovation andchange are important to meet

organizational goals

Strong form of horizontal linkage


28/48

Matrix structure

A matrix is a rectangular grid vertical flow of functional responsibility

horizontal flow of product responsibility.

The members of the team are calledtwo-boss employees


29/48

Production

group

Two-boss

manager

Engineering

group

Two-boss

manager

Personnel

group

Two-boss

manager

Accounting

group

Two-boss

manager

Matrix OrganizationalStructure

Production

group

Two-boss

manager

Engineering

group

Two-boss

manager

Personnel

group

Two-boss

manager

Accounting

group

Two-boss

manager

Accounting

Project

Manager

A

Project

Manager

B

Project

managementProduction

ChairmanCEO

Engineering PersonnelFunctional

managers


30/48

Matrix is correct structure when followingconditions are met

Pressure exist to share the scare resources

across product lines, medium sizeorganization, and moderate number ofproduct line

Environmental pressure exists for in-depthskill and frequent new products

Environment is uncertain


31/48

Strengths and Weaknesses ofMatrix Organization Structure

STRENGTHS:Achieves coordination

necessary to meet dualdemands from customers

Flexible sharing of humanresources across products

Suited to complex decisionsand frequent changes inunstable environment

Provides opportunity for bothfunctional and product skill

developmentBest in medium-sized

organizations with multipleproducts

WEAKNESSES:Causes participants to experience

dual authority, which can befrustrating and confusing

Means participants need goodinterpersonal skills and extensivetraining

Is time consuming; involves frequentmeetings and conflict resolutionsessions

Will not work unless participantsunderstand it and adopt collegialrather than vertical-typerelationships

Requires great effort to maintainpower balance

Source: Adapted from Robert Duncan, What Is the Right

Organization Structure? Decision Tree Analysis Provides theAnswer,Organizational Dynamics (Winter 1979): 429.


32/48

32

The Multidivisional MatrixStructure Multidivisional matrix structure: a

structure that provides for moreintegration between corporate and

divisional managers

Makes it easier for top executives from

divisions and corporate center tocooperate

The Relative Advantage and


33/48

The Relative Advantage andDisadvantages of Different

StructureFunctional Divisional Matrix

Resourceefficiency

Excellent Poor Moderate

Time efficiency Poor Good Moderate

Adaptability Poor Good Moderate

Environment forwhich best suited

Stable Heterogeneous Complexenvironmentmultiple demand


34/48

Horizontal Structure

The organization chart is being formally structuredalong horizontal workflow and process

A process refer to an organized group of related

tasks and activities that work together to transforminputs into outputs that create value to customer

Examplenew product development, customerservice


35/48

Davenport (1993, p.5) defines a businessprocess

as ...a structured, measured set of activities

designed to produce a specific output for aparticular customer of market.

Hammer and Champy (1993, p.35) defines

... a business process as a collection ofactivities that takes one or more kinds ofinput and creates an output that is of value tothe customer


36/48

Core process groups are the formal organizationaldepartments of the horizontal organization

They are not functions differ from traditionalvertical silos

As a result of process redesign and vesting of moreemployees with decision making authority, the CPG isflatter than a functional department

CPG typically arranges people in multidisciplinary ways-dictated by what is required to deliver the value proposition


37/48

Four types of processes. customer processes which are those processes that add

value for external customers.

Development processes such as product development,product/market innovation, technology innovation etcetera

allow the organization to work effectively on a longer timehorizon.

planning and control processes focus on particularmanagement tasks.

staff and service processes have to be recognized as well.They play a role as an enablerof all the other types ofprocesses. Frequently cited examples are ICT, humanresource management, finance and administration andmaintenance.


38/48

Xerox

To provide a horizontal view, Xerox identified fourcore customer-oriented processes:

Time to Market, which focuses on manufacturing andengineering;

Integrated Supply Chain, which deals with themovement of parts and products;

Market to Collection, which includes marketing, sales,

and billing; and

Customer Service, which provides maintenance andtechnical support to customers.


39/48

A Horizontal Structure

Team3

Team2

Team1

Top

Management

Team

Team

3

Team

2

Team

1

Customer

Customer

ProcessOwner

Process

Owner

TestingProduct

PlanningResearch

Market

Analysis

New Product Development Process

Distrib.Material

FlowPurchasingAnalysis

Procurement and Logistics Process

Sources: Based on Frank Ostroff,

The Horizontal Organization, (New York:

Oxford University Press, 1999); John A. Byrne,

The Horizontal Corporation,Business Week,

December 20, 1993, 76-81; and Thomas A. Stewart,

The Search for the Organization of Tomorrow,Fortune, May 19, 1992, 92-98.


40/48

Strengths and Weaknesses ofHorizontal Structure

STRENGTHS:Flexibility and rapid response to

changes in customer needs

Directs the attention of everyonetoward the production and delivery ofvalue to the customer

Each employee has a broader view oforganizational goals

Promotes a focus on teamwork andcollaborationcommon commitmentto meeting objectives

Improves quality of life for employees

by offering them the opportunity toshare responsibility, make decisions,and be accountable for outcomes

WEAKNESSES:Determining core processes to

organize around is difficult andtime-consuming

Requires changes in culture,job design, managementphilosophy, and informationand reward systems

Traditional managers may balkwhen they have to give uppower and authority

Requires significant training ofemployees to work effectivelyin a horizontal teamenvironment

Can limit in-depth skilldevelopment

Sources: Based on Frank Ostroff, The Horizontal Organization: What the

Organization of the Future Looks Like and How It Delivers Value to

Customers, (New York: Oxford University Press, 1999);and Richard L. Daft, Organization Theory and Design, 6th ed.,

(Cincinnati, Ohio: South-Western College Publishing, 1998) 253.


41/48

41

Network Structure

A cluster of different organizations whoseactions are coordinated by contracts andagreements rather than through a formalhierarchy of authority

Very complex as companies form agreementswith many suppliers, manufacturers, anddistributors

Such agreements are necessary as theorganization outsources many of the valuecreation activities involved in production andmarketing goods and services

Ad f N k


42/48

42

Advantages of NetworkStructures

To the degree that a network partner canperform a specific functional activity reliably,and at a lower cost, production costs arereduced.

Avoids the high bureaucratic costs ofoperating a complex organizationalstructure

Allows an organization to act in an organicway

-

Di d f N k


43/48

43

Disadvantages of NetworkStructures

A considerable level of mutualadjustment is needed to allow thegroups to interact so that they can

learn from one another.

Difficult to obtain the ongoing learning

that builds competences ascompanies have no incentive to do so


44/48

FunctionalStructure

Hybrid StructureSun Petrochemical Products

President

TechnologyVice

President

FinancialServices

Vice Pres.

HumanResources

Director

ChiefCounsel

Chemicals

VicePresident

Lubricants

VicePresident

Fuels

VicePresident

Product

Structure

Sources: Based on Linda S. Ackerman, Transition Management:

An In-Depth Look at Managing Complex Change,

Organizational Dynamics (Summer 1982): 46-66;and Frank Ostroff, The Horizontal Organization,

(New York: Oxford University Press, 1999), Fig. 2.1, 34.

H b id St t


45/48

Hybrid StructureFord Customer Service Division

Director and

Process Owner

Director and

Process Owner

Sources: Based on Linda S. Ackerman, Transition Management:

An In-Depth Look at Managing Complex Change, Organizational Dynamics(Summer 1982): 46-66; and Frank Ostroff, The Horizontal Organization,

(New York: Oxford University Press, 1999), Fig. 2.1, 34.

Human

Resources

Strategy and

CommunicationFinance

Vice President and

General Manager

Teams

Teams

Director and

Process Owner Teams

Technical Support Group

Vehicle Service Group

Parts Supply / Logistics Group

Functional

Structure

Horizonta

lStructure

Teams

Teams


46/48

Organization Contextual Variablesthat Influence Structure

Structure

(learning vs.

efficiency)

Environment

Chapters 4, 6

Culture

Chapter 10

Size

Chapter 9

Strategy,

Goals

Chapter 2

Technology

Chapters 7,8

Sources: Adapted from Jay R. Galbraith,

Competing with Flexible Lateral Organizations, 2nd ed.

(Reading, Mass.: Addison-Wesley, 1994), Ch.1;

Jay R. Galbraith, Organization Design (Reading, Mass.:

Addison-Wesley, 1977), Ch. 1 .

The Relationship of Structure to


47/48

The Relationship of Structure toOrganizations Need for Efficiency vs.

Learning

Horizontal

Structure

Dominant

Structural

Approach

Horizontal:

Coordination

Learning

Innovation

FlexibilityVertical:

Control

Efficiency

Stability

Reliability

Matrix

StructureDivisional

Structure

Functional with

cross-functional

teams, integrators

Functional

Structure

Modular

Structure

S f


48/48

Symptoms ofStructural Deficiency

Decision making is delayed or lackingin quality

The organization does not respond

innovatively to a changingenvironment

Too much conflict is evident

Date post:	06-Apr-2018
Category:	Documents
Upload:	ansh-gupta
View:	217 times
Download:	0 times

Fundamentals of OS

Documents