Chapter 7Chapter 7
Designing Adaptive Designing Adaptive OrganizationsOrganizations
Major Concerns in OrganizingMajor Concerns in Organizing Division of Labor (Differentiation)Division of Labor (Differentiation) Coordination (Integration)Coordination (Integration)
In Reference to the Organizational Chart, In Reference to the Organizational Chart, Organizing Involves:Organizing Involves:
VERTICAL STRUCTUREVERTICAL STRUCTURE
Coordination from Top to BottomCoordination from Top to Bottom
HORIZONTAL STRUCTUREHORIZONTAL STRUCTURE
Departmentalization (Who works together?)Departmentalization (Who works together?)
Work SpecializationWork Specialization
Degree to which tasks are subdivided Degree to which tasks are subdivided into individual jobs into individual jobs
A highly specialized job is narrow in A highly specialized job is narrow in scopescope
Increases efficiency up to a pointIncreases efficiency up to a point With extreme specialization, workers With extreme specialization, workers
tend to become bored and alienatedtend to become bored and alienated
Chain of CommandChain of Command
The line of authority, shown in the The line of authority, shown in the organization chart, that links all persons organization chart, that links all persons and shows who reports to whom.and shows who reports to whom.
CEOCEO
VP MarketingVP Marketing VP ProductionVP Production VP FinanceVP Finance
AuthorityAuthority Managers have authority because of the positions Managers have authority because of the positions
they hold (not who they are)they hold (not who they are) To be effective, it To be effective, it must be accepted must be accepted by by
subordinates.subordinates.
ResponsibilityResponsibility Duty to perform the task an employee has been Duty to perform the task an employee has been
assignedassigned Authority should be commensurate with Authority should be commensurate with
responsibility.responsibility.
DelegationDelegation
Process to transfer authority and Process to transfer authority and responsibility to positions belowresponsibility to positions below
Delegation Delegation does not does not reduce responsibilityreduce responsibility Benefits both the organization and the Benefits both the organization and the
individual employeeindividual employee
Common Practice is to:Common Practice is to:
CENTRALIZE CENTRALIZE (authority at top)(authority at top)– AccountingAccounting– FinanceFinance– Human Resources ManagementHuman Resources Management– Information SystemsInformation Systems
DECENTRALIZEDECENTRALIZE (much delegation) (much delegation)– Production Production – MarketingMarketing
Span of ManagementSpan of Management
Number of employees reporting to a Number of employees reporting to a supervisorsupervisor
Tradition has recommended a span of Tradition has recommended a span of management of four to seven management of four to seven subordinatessubordinates
What is best depends on the situationWhat is best depends on the situation
DepartmentalizationDepartmentalizationBasis for grouping job positions into departments and departments Basis for grouping job positions into departments and departments
into the total organization.into the total organization. Internal Operations OrientedInternal Operations Oriented
– FunctionalFunctional– Network (Virtual)Network (Virtual)
Output OrientedOutput Oriented– DivisionalDivisional
» ProductProduct» GeographicGeographic» CustomerCustomer
– Team (Cluster)Team (Cluster) CombinationsCombinations
– Hybrid (different types at Hybrid (different types at differentdifferent places in places in an an org.)org.)
– Matrix (different types at simultaneous at Matrix (different types at simultaneous at the the samesame places in an org.) places in an org.)
Functional ApproachFunctional ApproachDepartments based on similar activities, skills Departments based on similar activities, skills
and resource use.and resource use.Advantages:Advantages: Efficient use of Efficient use of
resources resources Economies of ScaleEconomies of Scale In-depth skill In-depth skill
specializationspecialization
Disadvantages:Disadvantages: Poor communication Poor communication
among departmentsamong departments Slow response to Slow response to
external changesexternal changes Loyalty more to function Loyalty more to function
than customer or the than customer or the whole organizationwhole organization
Divisional ApproachDivisional Approach
Departments are grouped together based Departments are grouped together based on organizational outputs (e.g., product, on organizational outputs (e.g., product, geography, customer)geography, customer)
Functions (e.g., marketing) are split Functions (e.g., marketing) are split among the divisionsamong the divisions
Its advantages and disadvantages tend to Its advantages and disadvantages tend to be the opposite of those of the functional be the opposite of those of the functional approachapproach
DivisionsDivisions
Advantages:Advantages: Quicker changes in Quicker changes in
an unstable an unstable environmentenvironment
More in touch with More in touch with customerscustomers
Disadvantages:Disadvantages: DuplicationDuplication– Competition for Competition for
resources among resources among divisionsdivisions
– More managers More managers neededneeded
Less professional Less professional specializationspecialization
Matrix ApproachMatrix Approach
Functional and divisional chains of Functional and divisional chains of command simultaneouslycommand simultaneously
Violates the unity of command concept.Violates the unity of command concept.
Matrix Structure - Why?Matrix Structure - Why?
To get the advantages of both Functional To get the advantages of both Functional and Divisional Structuresand Divisional Structures
Sophisticated technology, fast-changing Sophisticated technology, fast-changing environmentenvironment
DiverseDiverse productsproducts and and geographicalgeographical areas areas
Disadvantages of MatrixDisadvantages of Matrix
Many meetings to coordinate activities Many meetings to coordinate activities High conflict between two sides of matrixHigh conflict between two sides of matrix Need for extensive human relations Need for extensive human relations
trainingtraining
Team ApproachTeam Approach
Cross-functional teams Cross-functional teams (Clusters)(Clusters) consist consist of employees from various functional of employees from various functional departments departments
Teams typically have more decision Teams typically have more decision making power than previously held by making power than previously held by workers at their levels.workers at their levels.
Team ApproachTeam Approach
AdvantagesAdvantages– Quicker response timeQuicker response time– Better moraleBetter morale– Reduced administrative overheadReduced administrative overhead
DisadvantagesDisadvantages– ConflictConflict– Time and resources spent on meetingsTime and resources spent on meetings
Network (Virtual) ApproachNetwork (Virtual) Approach
Organization divides major functions Organization divides major functions among separate companies brokered by among separate companies brokered by a small headquarters organizationa small headquarters organization
Somewhat like a Somewhat like a functional functional organization.organization.
Network ApproachNetwork Approach
AdvantagesAdvantages– Increases competitiveness, especially of Increases competitiveness, especially of
small firmssmall firms– FlexibilityFlexibility– Reduced CostsReduced Costs
DisadvantagesDisadvantages– No hands-on controlNo hands-on control– Loyalty weakened.Loyalty weakened.
Mechanistic vs. Organic Mechanistic vs. Organic OrganizationsOrganizations
Vertical vs. Horizontal Structural DominanceVertical vs. Horizontal Structural Dominance Rigid vs. FlexibleRigid vs. Flexible Specialized Jobs vs. UnspecializedSpecialized Jobs vs. Unspecialized Boss Control vs. Self-ControlBoss Control vs. Self-Control Centralized Decisions vs. DecentralizedCentralized Decisions vs. Decentralized Bureaucratic vs. Non-bureaucraticBureaucratic vs. Non-bureaucratic
Departmentalization TypesDepartmentalization Types
(From most Mechanistic to most Organic)(From most Mechanistic to most Organic) FunctionalFunctional Functional with integrators, cross-Functional with integrators, cross-
functional committees, etc.functional committees, etc. MatrixMatrix DivisionalDivisional TeamTeam
When the Mechanistic (Vertical) When the Mechanistic (Vertical) Approach is most Appropriate:Approach is most Appropriate:
External EnvironmentExternal Environment is: Stable is: Stable
Growth and Innovation GoalsGrowth and Innovation Goals are: are:
Few or Nonexistent (Internal Stability)Few or Nonexistent (Internal Stability)
The Organization’s The Organization’s SizeSize is: Large is: Large
The The TechnologyTechnology is: Mass Production (or is: Mass Production (or involving low-level skills)involving low-level skills)
When the OrganicApproach is When the OrganicApproach is most Appropriate:most Appropriate:
External EnvironmentExternal Environment is: Unstable is: Unstable
Growth and Innovation GoalsGrowth and Innovation Goals are: Numerous are: Numerous
TechnologyTechnology is: is:
Small BatchSmall Batch
Continuous ProcessContinuous Process
Flexible Manufacturing (Computer Assisted)Flexible Manufacturing (Computer Assisted)
Service, especially professional service jobs.Service, especially professional service jobs.
Service TechnologyService Technology
Tends to be more Organic (Horizontal) Tends to be more Organic (Horizontal) than manufacturingthan manufacturing
Employees have direct contact with Employees have direct contact with customerscustomers
Output of the firm is intangibleOutput of the firm is intangible Production and consumption are Production and consumption are
simultaneoussimultaneous