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Grp10 SecD ODC

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    Organization design:

    fashion or fit?

    Submitted by:GROUP - 10

    Ashish Gupta 12P191

    Rahul Kumar 12P224Rajan Mishra 12P225

    Naveen Babu 12P228

    Satish Kumar 12P230

    Shivam Singh 12P232

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    Agenda

    1. Why Organizational structure is important?

    Internal Issues

    External Issues

    2. Simple Structure

    Apex corporation example

    3. Machine bureaucracy

    Maruthi and Bajaj example

    4. Professional bureaucracy Health care Industry, Lawyers and consultants

    5. Divisionalised form

    Good Year India example

    6. Adhocracy

    Sumaprojekt example

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    Why Organizational design is

    important?

    Internal Issues

    Organizational structure is thefundamental design of a company.

    A company's organizational structure

    can determine its success or failure

    Organizational structure can have a

    large influence on the culture within

    the organization.

    It helps to improve the decision

    making process and employee

    performance.

    External Issues

    If structure doesn't reflect the businessgoals, employees may have a hard

    time working successfully for the

    company.

    As the size and reach of the business

    increases, it is necessary to realign the

    organization structure business

    strategy to achieve its goals.

    An effective organizational structure

    helps the company to communicate,

    distribute responsibility and adapt to

    change.

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    Five configurations of Organizational

    Structure

    Simple Structure Machine bureaucracy

    Professional bureaucracy

    Divisionalised form

    Adhocracy

    The organization should select one or combination (of two or three) organizational structure

    based on its strategy, complexity and importance of the organization.

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    Simple Structure

    The simple structure, typically, has

    little or no techno structure, few support staffers,

    a loose division of labour, minimal differentiation among its units, and a small

    managerial hierarchy.

    The behaviour of simple structure is not formalised and planning, training, and

    liaison devices are minimally used in such structures.

    Example

    New companies, one-person companies, family companies

    Often many startup companies which have simple organic structure arevulnerable to sudden heart attack.

    The entrepreneurial organization is fast, flexible, and lean, and it's a model that

    many companies want to copy. However, as organizations grow, this structure

    can be inadequate as decision-makers can become so overwhelmed that they

    start making bad decisions. This is when they need to start sharing power and

    decision-making. Also, when a company's success depends on one or two

    individuals, there's significant risk if they sell up, move on to newentrepreneurial ventures, or retire

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    Example:

    The Apex corporation case discussed in class gives a example of simple structure

    In the case, Initially there are a group of 25 employees with no-clear cut job

    responsibilities but as the organization began to grow they found the need to form

    hierarchical, functional structure to align with the business strategy.

    A simple structure may fail if the size of the organization grows and hence every

    organization has to transform itself into other structure as it grows.

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    Machine Bureaucracy

    Emphasis on the standardization of work and stability in the organization.

    Mechanistic bureaucracy will be successful when the jobs are routine and repetitive.

    Example 1: Manufacturing companies like Maruthi follow mechanistic structure and has been very

    successful in practicing it. However the same mechanistic bureaucratic organizational

    structure restricted Maruthi from creativity and innovation. It imports technology from

    Japan and outsources few manufacturing parts to other vendors.

    In this model, importance is given to efficiency and should be praticised low uncertainty.

    Example 2: Bajaj followed mechanistic structure in producing scooters to meet high demand

    efficiently in 1990s and not able to catch-up new technologies and product innovations in

    early 2000s. It lost its market share to Hero Honda.

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    Professional bureaucracy:

    Professional bureaucracy divide the work according to the professional groups, and taskcollaboration is done by standardizing the knowledge and skills of the professions.

    Example 1: Healthcare is a professional bureaucracy in the Mintzberg Model. The departments are

    all organized by the professionsthe nurses are all in nursing, the pharmacists are all inthe pharmacy, and the lab technologists are all in the laboratory.

    A professional bureaucracy has a tiny techno-structure. Decisions on methods are madeby the operating core, the very same people doing operations.

    Professional organizations are typically staffed by well educated and qualified

    individuals who deliver highly specialized and valuable services and charge accordingly.This high complexity of task leads to relatively low centralisation.

    A key principle of professional organizations is the autonomy of its agents who areassumed to be sufficiently expert to make serious choices in the actions they undertake

    Example:

    Lawyers and consultants

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    Divisional Configuration

    prime coordinating mechanism:standardisation of outputs

    key part: middle line main design parameters: market

    grouping, performance controlsystem, limited verticaldecentralisation

    situational factors: diversifiedmarkets (particularly products orservices); old, large; power needsof middle managers; fashionable

    The divisions are fairlyautonomous

    There is little interdependence

    between divisions Divisions address separate

    markets

    Divisional leaders are very strong

    Headquarters focus onperformance (economic result)

    Divisions are driven towards

    machine bureaucracy Comes as a result of

    diversification or acquisitions

    Split in separate organisations is arealistic alternative

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    Advantages compared to machine

    bureaucracy

    Advantage

    Better Allocation of capital

    Helps training managers

    Spreads risk across markets

    Strategically responsive

    Problems Centralisation of power

    Bureaucratisation

    Reliance on MIS

    Outside private sector: artificialperformance standards

    Pure divisionalisation may be a weakeralternative than full split

    remember: no environment of its own

    Controlled diversity more profitablethan conglomerate

    by-product or related-product formsthe more interesting

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    Goodyear Tire and Rubber CompanyFunctional to Divisional

    with initially there was a Functional organization structure being followed for many

    decades in India.

    simple, conventional and formal organizational structure

    Span of control was different at different levels.

    higher at the bottom line of the organization where a sales manager has to manage a

    team of 5-6 sales persons.

    Moreover, this hierarchy existed in other functions as well like production, customer

    service and operations etc.

    lack of coordination between different functions of the organization.

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    Factors which influenced Structuralchange for Goodyear India

    1. Age and Size-

    well established in India, (since 1962) deep and solid network of retailers acrossIndian states.

    systems and procedures were well formalized in the market from top of themanagement to a retailer.

    Marketing strategy was quite obvious and market knew that when and how to dealwith Goodyear. This hampered the speed at which company grew.

    2. Technology, Failure to innovate-

    The range of Goodyear tyres being marketed up till 2008 had become obsolete

    need of new products to compliment rapid developments in automobile sector.

    Despite having a wide range globally, Goodyear could not replace new productsbecause of excessive standardization of products, resistance to change fromfactory employees, sales team and retailers.

    3. Environment-

    common strategy for a diverse country like India was not helping.

    competitors(Bridgestone Michelin) entered Indian market with more customerfocused approach in their different product segments this forced Goodyear tolaunch its new product ranges for different types of tyre customers, therebycomplicating the environment.

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    Factors which influenced Structuralchange for Goodyear India

    4. Strategy-

    The Place, Promotion and People for different products marketed byGoodyear, became too obtuse to each other due to growth in market size and

    arrival of competitors. The Four Ps of marketing forced Goodyear to change its functional structure

    and move to a Product based Unit structure. One single strategy to increasebusiness was not enough to retain or gain overall market share. (Cummins2008)

    5. Delays in decision making:

    formalized structure resulted in slow decision making process and whichresulted in dissatisfaction and reduced effect and success ratio of a decision.

    Disagreement and the inability to resolve issues effectively slowed thecompany response and turned the focus inward rather than on customers.(Dyck 2010)

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    Transformation from Functional to Divisional FormProduct Based Unit (PBU) in 2008

    all the departments divided in two different product categories

    Passenger Business UnitCar tyre and

    Commercial Business UnitTruck and Farm tyres.

    Both the PBUs had separate set of professionals in different functions from Top

    management to bottom line workers.

    Two production facilities were also reorganized: one to produce tyres passenger

    cars and other to produce tyres for commercial vehicles.

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    Results of Product based Unit structure

    Direct control vs. Autonomy:

    low degree of centralization which meant that there was more power or autonomy at

    lower level of organization, however holding the core objectives and purposes of a PBU

    intact.

    Speed of Response:

    Response time improved significantly as employees at each level were given more

    authorities. There was significant improvement in After-sales service which provided

    higher level of customer satisfaction.

    Flexibility:

    Sensitive to external factors, companys pricing, logistics and supply (production)

    became more flexible and started adjusting swiftly to different markets or marketsegments and also in the event of a change in any of its competitors strategy (pricing,

    distribution etc)

    Innovation and Predictability:

    Resultant of PBU structure, a dedicated R&D for both the PBUs was able to introduce

    new technologies for different market segments. This enabled company to gain

    significant market share and acquiring more market out of a growing economy in India.

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    Adhocracy

    prime coordinating mechanism: mutualadjustment

    key part: support staff (together with theoperating core in the operatingadhocracy)

    main design parameters: liaison devices,organic structure, selectivedecentralisation, horizontal jobspecialisation, training, functional andmarket grouping concurrently

    situational factors: complex, dynamic(sometimes disparate) environment;

    young (especially operating adhocracy);sophisticated and often automatedtechnical system (in the administrativeadhocracy); fashionable

    Focus on innovation, cannot rely onstandardisation

    Goes away from the principle of unity ofcommand

    Gives power to experts, but cannot relyon their standardised skills to achievecoordination

    Mutual adjustment in and betweenproject teams project coordinators, meetings, etc

    Matrix structure common experts formally in functional units

    project teams based on (market) needs

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    Adhocracy

    Features A lot of coordination needed

    Managers participate in project teams

    Ensuring proper management andanchoring of projects often demanding

    Need to monitor and redirect projects

    Distinction between line and staffbecomes unclear

    Hard to split strategy formulation and

    strategy implementation Strategy tends to evolve

    formed implicitly by decisionsmade

    strategy formation, emergentstrategy, strategising

    Conditions Dynamic andcomplex environment

    Interdependencies that need to behandled

    Frequent product changes

    Often young (esp. operatingadhocracies)

    Sophisticated and sometimesautomated technical system

    An element of fashion all the right words: dynamic,

    expertise, projects, etc.

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    Types of Adhocracy

    operating adhocracy

    Solves problems on behalf ofits clients think-tanks

    applied R&D institutes

    creative advertising companies

    manufacturer of prototypes

    experimenting theatre company

    May easily turn into a

    professional bureaucracy if morefocused and with standardisedmethods e.g. from NR to Accenture

    administrative adhocracy

    Solves problems, runs projects, on behalf

    of itself Typically a company where the operating

    core is truncated done in a separate organisation

    contracted out (outsourcing)

    by full automation (c.f. discussion ofmachine bureaucracy)

    Tricky issue of combining efficientproduction with high degree ofinnovation machine bureaucracy with a venture team

    is not an adhocracy

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    SumaprojektFunctional to operational Adhocracy

    Sumaprojekt is a stock company for projecting and engineering in wood processing

    industry offering consultancy services.

    Treating business problems in an innovative way helped company to cope its own

    business reality successfully.

    It is about the operative form of the adhocrative organizational configuration, because

    jobs in Sumaprojekt are carried out exclusively for the clients needs.

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    Problems with functional

    privatization process just finished (2001)

    Functional organizational design was not able to find an answer to emerged changes in

    the environment.

    All of this led to decrease of activities of the organization that was followed by

    decrease of performances and results of business. At the same time business

    environment wasradically changed.

    The B&H wood processing industry became more sophisticated industry with more

    demanding companiesSumaprojekts potential customers.

    Some big B&H wood processing companies, the most importantSumaprojekts

    customer before the war (Sipad, Sarajevo; Sana, Sanski Most; ...), were disappeared.

    On the other side a lot of new companies were bornmostly SMEs companies which

    were focused on more sophisticated customer, with higher degree of wood processing.

    Their requirements addressed to Sumaprojekt as a consultant company in wood-

    processing industry were very demanding.

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    Sumaprojekt : Functional Structure

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    Sumaprojekt: shift to operational

    adhocracy

    New organizational structure incorporates project organization in the existing functional

    structure creating so-called matrix structure.

    all Sumaprojects business activities were being undertaken through ac-hoc projects.

    All the business activities of Sumaprojekt were carried out in the form of the project task

    for which Project Manager is appointed.

    Further on, Project Manager appoints members of the project team.

    Board for project is lateral link (meeting) that, due to parallel and simultaneous realization of

    numerous projects, manage those projects.

    At the same time, parallel existence of the functional organization (static aspect) and project

    organization (project managements) promotes the matrix organization as the basic

    organizational form.

    Multidisciplinary ad-hoc teams are basic element ofSumaprojects organizational structure.

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    Sumaprojekt : Operational adhoc

    Structure

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    THANK YOU


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