Designing Adaptive Organizations Chapter 10. Copyright © 2005 by South-Western, a division of...

Designing Adaptive Organizations

Organizing

Organization is the deployment of resources to achieve strategic goals.

It is reflected in– Division of labor into specific departments & jobs– Formal lines of authority– Mechanisms for coordinating diverse organizational

Manager’s Challenge: Nissan

Designing Adaptive Organizations

Organizing Principles and Concepts

Organizing the Vertical Structure

Using Mechanisms for Horizontal Coordination

Tailoring Various Elements of Structural Design to Organizational Situations

Topics

Chapter 10

Organization Structure

Defines how tasks are divided, resources are deployed, and departments are coordinated●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 jobs Employees perform only the tasks relevant

to their specialized function Jobs tend to be small, but they can be

performed efficiently

Division of labor concept

Chain of Command

Unbroken line of authority that links all persons in an organization

Shows who reports to whom

Associated with two underlying principles Unity of Command Scalar Principle

Unbroken line of authority that links all persons in an organization

Shows who reports to whom

Associated with two underlying principles Unity of Command Scalar Principle

Authority

Formal and legitimate right of a manager to make decisions and issue orders

Allocate resources to achieve organizationally desired outcomes

Authority 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 orders

Allocate resources to achieve organizationally desired outcomes

Authority 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 assigned

Managers are assigned authority commensurate with responsibility

Flip side of the authority coin

Accountability

● Mechanism 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

●Organizations encourage managers to delegate authority to lowest possible level

Ethical Dilemma: A Matter of Delegation

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 Authority

Line Authority = individuals in management positions have the formal power to direct and control immediate subordinates

Staff Authority = granted to staff specialists in their area of expertise

Span of Management/Span of Control

Number of employees who report to a supervisor– Traditional view = seven subordinates per manager– Lean organizations today = 30+ subordinates

Supervisor Involvement– must be closely involved with subordinates, the span

should be small– need little involvement with subordinates, it can be

Number of employees who report to a supervisor– Traditional view = seven subordinates per manager– Lean organizations today = 30+ subordinates

Supervisor Involvement– must be closely involved with subordinates, the span

should be small– need little involvement with subordinates, it can be

Factors Associated With Less Supervisor Involvement

Work is stable and routine Subordinates perform similar work tasks Subordinates are concentrated in a single location Subordinates are highly trained Rules and procedure defining task activities are available Support systems and personnel are available for the

manager Little time is required in nonsupervisory activities Managers’ preferences and styles favor a large span

Work is stable and routine Subordinates perform similar work tasks Subordinates are concentrated in a single location Subordinates are highly trained Rules and procedure defining task activities are available Support systems and personnel are available for the

manager Little time is required in nonsupervisory activities Managers’ preferences and styles favor a large span

Tall versus Flat Structure

Span of Control used in an organization determines whether the structure is tall or flat

Tall structure has a narrow span and more hierarchical levels

Flat structure has a wide span, is horizontally dispersed and fewer hierarchical levels

The trend has been toward wider spans of control

Span of Control used in an organization determines whether the structure is tall or flat

Tall structure has a narrow span and more hierarchical levels

Flat structure has a wide span, is horizontally dispersed and fewer hierarchical levels

The trend has been toward wider spans of control

Centralization versus Decentralization

Greater change and uncertainty in the environment are usually associated with decentralization

The amount of centralization or decentralization should fit the firm’s strategy

In times of crisis or risk of company failure, authority may be centralized at the top

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

DepartmentalizationThe basis on which individuals are grouped into departments

Network approach. Small, central hub electronically connected to their other organizations that perform vital functions. Departments are independent, and can be located anywhere.

Virtual approach. Brings people together temporarily to exploit specific opportunities then disbands

Five Approaches to Structural Design

Five Approaches to Structural DesignSlide 2

Vertical Functional Approach

Grouping of positions into departments based on similar skills, expertise, and resource use● Information flows up and down● Chain of command converges at the top● Managers and employees are compatible

because of similar training and expertise● Rules and procedures governing duties and

responsibilities

Divisional Structure Advantages

Efficient use of resources

Skill specialization development

Top management control

Excellent coordination

Quality technical problem solving

Divisional Structure Disadvantages

Poor communications

Slow response to external changes

Decisions concentrated at top

Pin pointing responsibility is difficult

Limited view of organizational goals by employees

Horizontal Matrix Advantages

More efficient use of resources than single hierarchy

Adaptable to changing environment

Development of both general and specialists management skills

Expertise available to all divisions Enlarged tasks for employees

Dual Authority Structure in a Matrix Organization

Horizontal Matrix Disadvantages

Dual chain of command High conflict between two sides of matrix Many meetings to coordinate activities Need for human relations training Power domination by one side of matrix

Team Advantages

Same advantages as functional structure

Reduced barriers among departments

Quicker response time

Better morale

Reduced administrative overhead

Team Disadvantages

Dual loyalties and conflict

Time and resources spent on meetings

Unplanned decentralization

Network Approach Advantages

Global competitiveness

Work force flexibility

Reduced administrative overhead

Network Approach Disadvantages

No hands-on control

Loss of part of the organization severely impacts remainder of organization

Employee loyalty weakened

Task Forces, Teams, Project Management

Task Force = temporary team/committee designed to solve a short-term problem involving several departments

Project Manager = responsible for coordinating activities of several departments on a full-time basis for the completion of a specific project

Reengineering

Radical redesign of business processes to achieve dramatic improvements in cost, quality, service, and speed

Process = organized group of related tasks and activities that work together to transform inputs into outputs and create value

Factors Shaping Structure

Structure Follows StrategyReflects the EnvironmentFits the Technology

Service TechnologyDigital Technology

Experiential Exercixe: Organic versus Mechanistic Organization Structure

Designing Adaptive Organizations Chapter 10. Copyright © 2005 by South-Western, a division of...

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