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Designing Adaptive Organizations
Cha
pter
10
Copyright © 2005 by South-Western, a division of Thomson Learning. All rights reserved.
2
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
tasks
Manager’s Challenge: Nissan
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3
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
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4
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
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5
The Organization Chart
“The Home Depot is the world's largest home improvement retailer currently operating 1,363 stores.
• Visual representation of an organization’s structure
• Important Features of Vertical Structure:
1. Work Specialization
2. Chain of Command
3. Authority, Responsibility and Delegation
4. Span of Management or Span of Control
5. Centralization/Decentralization
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6
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
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7
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
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8
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
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9
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
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10
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
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11
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
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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
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13
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
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14
Span of Management (also called 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
large
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
large
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15
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
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16
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
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Centralization versus Decentralization
Centralization – the location of decision authority near top organization levels
Decentralization – the location of decision authority near lower organization levels
17
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18
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
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19
Departmentalization
The basis on which individuals are grouped into departments and departments into the total organization
• Five Approaches to Structural Design1. Vertical Functional Structure2. Divisional Structure3. Matrix Structure4. Team-Based Structure5. Virtual Network Structure
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CEOCEO
FinanceFinance ProductionProduction MarketingMarketing
Vertical Functional Organizational Structure
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21
Vertical Functional Structure
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
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Divisional Structure
CEOCEO
ConsumerConsumerProductsProducts
LightingLightingProductsProducts
MedicalMedicalSystemsSystems
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23
Divisional Structure
Departments are grouped based on similar organizational outputs● Each division is autonomous of the others in a
huge corporation or organization
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Divisional Structure Advantages
Efficient use of resources
Skill specialization development
Top management control
Excellent coordination
Quality technical problem solving
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25
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
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Project CProject CManagerManager
Project BProject BManagerManager
Project AProject AManagerManager
EngineeringEngineering MarketingMarketing DesignDesign
Matrix Structure (Project-based)
CEOCEO
Employees ( ) are temporrily assigned to a specificproject team and have a permanent functional unit
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General Motors’ IT Matrix Structure
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Matrix Structure
Utilizes functional and divisional chains of command simultaneously in the same part of the organization
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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
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30
Dual-Authority Structure in a Matrix Organization
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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
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Team Structure
Organization is made up of horizontal teams that coordinate their activities and work directly with customers to achieve the organization’s goalsCross-functional teams – a group of employees from various functional departments that meet as a team to resolve problemsPermanent teams – a group of participants from several functions who are permanently assigned to solve ongoing problems of common interest
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Team Advantages
Same advantages as functional structure
Reduced barriers among departments
Quicker response time
Better morale
Reduced administrative overhead
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34
Team Disadvantages
Dual loyalties and conflict
Time and resources spent on meetings
Unplanned decentralization
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CoreFirm
ProductProductdevelopment development
partnerpartner(U.S.A.)(U.S.A.)
Call centerCall centerpartnerpartner(India)(India)
Accounting Accounting partnerpartner
(Canada)(Canada)
Package Package design design partnerpartner
(UK)(UK)
Assembly Assembly partnerpartner
(Mexico)(Mexico)
Virtual Network Structure
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Virtual Network Structure
Disaggregates major functions to separate companies that are brokered by a small headquarters organization
OUTSOURCING
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37
Virtual Network Advantages
Global competitiveness
Work force flexibility
Reduced administrative overhead
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38
Virtual Network Disadvantages
No hands-on control
Loss of part of the organization severely impacts remainder of organization
Employee loyalty weakened
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39
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
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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
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41
Factors Shaping Structure
Structure Follows StrategyStructure Reflects the EnvironmentStructure Fits the Technology
Service Technology – technology characterized by intangible outputs and direct contact between employees and customers
Digital Technology – technology characterized by use of the internet and other digital processes to conduct or support business operations