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Designing Adaptive OrganizationsDesigning Adaptive Organizations
CHAPTER 10CHAPTER 10
2 Copyright © 2008 by South-Western, a division of Thomson Learning. All rights reserved.
Learning ObjectivesLearning Objectives
Discuss the fundamental characteristics of organizing, including such concepts as work specialization, chain of command, span of management, and centralization versus decentralization.
Describe functional and divisional approaches to structure.
Explain the matrix approach to structure and its application to both domestic and international organizations.
Describe the contemporary team and virtual network structures and why they are being adopted by organizations.
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Learning Objectives (contd.)Learning Objectives (contd.)
Explain why organizations need coordination across departments and hierarchical levels, and describe mechanisms for achieving coordination.
Identify how structure can be used to achieve an organization’s strategic goals.
Illustrate how organization structure can be designed to fit environmental uncertainty.
Define production technology (manufacturing, service, and digital) and explain how it influences organizational structure.
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OrganizingOrganizing
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
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Organization StructureOrganization StructureDefines 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 departments
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The Organization ChartThe Organization Chart
Visual representation
Set of formal tasks
Formal reporting relationships
Framework for vertical control
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Work SpecializationWork 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
Degree to which
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Chain of CommandChain 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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AuthorityAuthority 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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ResponsibilityResponsibility
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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AccountabilityAccountability
● 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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DelegationDelegation
●Process managers use to transfer authority and responsibility
●Organizations encourage managers to delegate authority to lowest possible level
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Line and Staff AuthorityLine 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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Span of Management/Span of Control
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
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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Factors Associated With Less Supervisor Involvement
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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Tall versus Flat Structure 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 DecentralizationCentralization versus Decentralization
Centralization means that decision authority is located near the top of the organization.
Decentralization means decision authority is pushed downward to lower organizational levels.
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DepartmentalizationThe basis on which individuals are grouped into departments
DepartmentalizationThe basis on which individuals are grouped into departments
Vertical functional structure. People are grouped together in departments by common skills.
Divisional structure. Grouped together based on a common product, program, or geographical region.
Matrix structure. Functional and divisional chains of command. Some employees report to two bosses.
Team-based structure. Created to accomplish specific tasks.
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Virtual Network StructureVirtual Network Structure
An organizational structure that disaggregates major functions to separate companies that are brokered by a small headquarters organization.
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Five Approaches to Structural DesignFive Approaches to Structural DesignExhibit 10.3
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Five Approaches to Structural DesignSlide 2
Five Approaches to Structural DesignSlide 2
daft ch10 insert1.CLP
Exhibit 10.3
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Vertical Functional ApproachVertical 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
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Divisional Structure AdvantagesDivisional Structure Advantages
Efficient use of resources
Skill specialization development
Top management control
Excellent coordination
Quality technical problem solving
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Divisional Structure DisadvantagesDivisional 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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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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Dual Authority Structure in a Matrix OrganizationDual Authority Structure in a Matrix Organization
Exhibit 10.6
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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 Advantages
Same advantages as functional structure
Reduced barriers among departments
Quicker response time
Better morale
Reduced administrative overhead
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Team Disadvantages
Dual loyalties and conflict
Time and resources spent on meetings
Unplanned decentralization
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Virtual Network Approach Advantages
Can draw on expertise worldwide
Work force flexibility
Reduced administrative overhead
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Network Approach Disadvantages
Lack of control, weak boundaries
Greater demands on managers
Employee loyalty weakened
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Task Forces, Teams, Project Management
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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ReengineeringReengineering
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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Factors Shaping StructureFactors Shaping Structure
Exhibit 10.13