Centralization vs Decentralization Advantages

8/11/2019 Centralization vs Decentralization Advantages

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Managing Organizational

Structure and Culture

McGraw-Hill/IrwinContemporary Management, 5/e

Copyright 2008 The McGraw-Hill Companies, Inc. All rights reserved.

chapter ten


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Learning Objectives

Identify the factors that influencemanagers choice of an organizationalstructure.

Explain how managers group tasks intojobs that are motivating and satisfying foremployees.

Describe the types of organizationalstructures managers can design, andexplain why they choose one structureover another.


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Learning Objectives

Explain why managers must coordinate

jobs, functions, and divisions using the

hierarchy of authority and integrating

mechanisms

List the four sources of organizational

culture and differentiate between a

strong, adaptive culture and a weak,inert culture


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Organizational Structure

Organizational Architecture

The organizational structure, control

systems, culture, and human resource

management systems that togetherdetermine how

efficiently and

effectively

organizational

resources are used.


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Designing Organizational Structure

Organizing

The process by which managers establishworking relationships among employees to

achieve goals. Organizational Structure

Formal system of task and reportingrelationships showing how workers use

resources.


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Designing Organizational Structure

Organizational design

The process by which managers create a

specific type of organizational structure and

culture so that a company can operate inthe most efficient and effective way


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Factors Affecting Organizational Structure

Figure 10.1


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The Organizational Environment


The quicker the environment changes, the

more problems face managers.

Structure must be more flexible (i.e.,

decentralized authority) when environmental

change is rapid.


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Strategy

Different strategies require the use of

different structures.

A differentiation strategy needs a flexible

structure, low cost may need a more

formal structure.

Increased vertical integration ordiversification also requires a more

flexible structure.


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Technology

The combination of skills, knowledge, tools,

equipment, computers and machines used

in the organization.

More complex technology makes it harder

for managers to

regulate theorganization.


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Technology

Technology can be measured by:

Task variety: the number of new

problems a manager encounters. Task analyzability: the availability of

programmed solutions to a manager tosolve problems.


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Human Resources

Highly skilled workers whose jobs require

working in teams usually need a more

flexible structure.

Higher skilled workers (e.g., CPAs and

doctors) often have internalized professional

norms and values.


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Human Resources

Managers must take into account all four

factors (environment, strategy, technology

and human resources) when designing thestructure of the organization.


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The way an organizations structure works

depends on the choices managers

make about:

1. How to group tasks into individual jobs

2. How to group jobs into functions and

divisions

3. How to allocate authority and

coordinate functions and divisions


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Job Design

Job Design

The process by which managers decide

how to divide tasks into specific jobs.

The appropriate division of labor results in

an effective and efficient workforce.


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Question?

What is the process of reducing the tasks

each worker performs?

A. Job simplification

B. Job enlargement

C. Job enrichment

D. Job enhancement


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Job Design

Job Simplification

The process of reducing the tasks each

worker performs.

Too much simplification and boredom

results.


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Job Design

Job Enlargement

Increasing the number of different tasks in a

given job by changing the division of labor

Job Enrichment

Increasing the degree of responsibility a

worker has over a job


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Job Enrichment

1. Empowering workers to experiment to

find new or better ways of doing the job

2. Encouraging workers to develop new

skills

3. Allowing workers to decide how to do

the work

4. Allowing workers to monitor and

measure their own performance


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The Job Characteristics Model

Figure 10.2

Source: Adapted from J. R. Hackman and G. R. Oldham,

Work Redesign(Reading, MA: Addison-Wesley, 1980).


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Job Characteristics Model

Job Characteristic

Skill variety Employee uses a wide range of skills.

Task identity Worker is involved in all tasks of the jobfrom beginning to end of the production

process

Task significance Worker feels the task is meaningful toorganization.

Autonomy Employee has freedom to schedule tasks

and carry them out.

Feedback Worker gets direct information about howwell the job is done.


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Grouping Jobs into Functions

Function

Group of people, working together, who

possess similar skills or use the same kind

of knowledge, tools, or techniques toperform their jobs


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Grouping Jobs into Functions

Functional Structure

An organizational structure composed of allthe departments that an organization

requires to produce its goods or services.


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Advantages

Encourages learning from others doing

similar jobs.

Easy for managers to monitor and evaluateworkers.

Allows managers to create the set of

functions they need in order to scan andmonitor the competitive environment


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Disadvantages

Difficult for departments to communicate

with others.

Preoccupation with own department andlosing sight of organizational goals.


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10-27Figure10.3

The

FunctionalStructure of

Pier 1

Imports


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Divisional Structures

Divisional Structure

Managers create a series of business units

to produce a specific kind of product for a

specific kind of customer


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10-29Figure 10.4

Product,

Market, andGeographic

Structures


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Types of Divisional Structures

Product Structure

Managers place each distinct product line or

business in its own self-contained division

Divisional managers have the responsibilityfor devising an appropriate business-level

strategy to allow the division to compete

effectively in its industry


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Product Structure

Allows functional managers to specialize

in one product area

Division managers become experts in

their area

Removes need for direct supervision of

division by corporate managers

Divisional management improves the

use of resources


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Geographic Structure

Divisions are broken down by geographic

location

Global geographic structure

Managers locate different divisions in each of

the world regions where the organization

operates. Generally, occurs when managers are

pursuing a multi-domestic strategy


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Global Product Structure

Each product division takes responsibility

for deciding where to manufacture its

products and how to market them in foreigncountries worldwide

Gl b l G hi d


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Global Geographic and

Global Product Structures

Figure 10.5


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Market Structure

Groups divisions according to the particularkinds of customers they serve

Allows managers to be responsive to theneeds of their customers and act flexibly inmaking decisions in response to customerschanging needs


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Matrix Design Structure

Matrix Structure

An organizational structure thatsimultaneously groups people and

resources by function and product. Results in a complex network of superior-subordinate reporting relationships.

The structure is very flexible and can respondrapidly to the need for change.

Each employee has two bosses (functionalmanager and product manager) and possiblycannot satisfy both.


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Matrix Structure

Figure 10.6


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Discussion Question?

Which is the most effective and efficient

organizational structure?

A. Matrix structure

B. Divisional structure

C. Market structure

D. Geographic structure


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Product Team Design Structure

Product Team Structure Does away with dual reporting relationships

and two-boss managers

Functional employees are permanently

assigned to a cross-functional team that is

empowered to bring a new or redesigned

product to work


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Product Team Design Structure

Product Team Structure Cross-functional team is composed of a

group of managers from different

departments working together to performorganizational tasks.


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Product Team Structure

Figure 10.6


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Hybrid Structures

Hybrid Structure

The structure of a large organization thathas many divisions and simultaneously

uses many different organizationalstructures


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Federateds Hybrid Structure

Figure 10.7


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Question?

What is the power vested in a manager to

make decisions?

A. Power

B. Influence

C. Authority

D. Control

Coordinating Functions:


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Allocating Authority

Authority

The power vested in a manager to make

decisions and use resources to achieve

organizational goals by virtue of his positionin an organization



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Hierarchy of Authority

An organizations chain of command,

specifying the relative authority of each

manager. Span of Control: the number of

subordinates who report directly to a

manager


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Line Manager

Someone in the direct line or chain of

command who has formal authority over

people and resources

Staff Manager

Managers who are functional-area

specialists that give advice to linemanagers.


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10-48Figure 10.8

TheHierarchy

of Authority

and Span

of Control

at

McDonalds

Corporation


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Tall and Flat Organizations

Tall structures have many levels of

authority and narrow spans of control.

As hierarchy levels increase,

communication gets difficult creating delaysin the time being taken to implement

decisions.

Communications can also become distortedas it is repeated through the firm.

Can become expensive


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Tall and Flat Organizations

Flat structures have fewer levels and

wide spans of control.

Structure results in quick communications

but can lead to overworked managers.


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Flat Organizations

Figure 10.9


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Minimum Chain of Command

Minimum Chain of Command

Top managers should always construct a

hierarchy with the fewest levels of authority

necessary to efficiently and effectively useorganizational resources

Centralization and Decentralization of


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Centralization and Decentralization of

Authority

Decentralizing authority

giving lower-level managers and non-

managerial employees the right to make

important decisions about how to useorganizational resources


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Decentralizing Authority

Disadvantages

Teams may begin to pursue their own goals

at the expense of organizational goals

Can result in a lack of communicationamong divisions


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Integrating Mechanisms

Figure 10.10


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Organizational Culture

Organizational culture

shared set of beliefs, expectations, values,

and norms that influence how members of

an organization relate to one another andcooperate to achieve organizational goals


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Sources of an Organizations Culture

Figure 10.11


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E l t R l ti hi


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Employment Relationship

Human resource policies:

Can influence how hard employees will

work to achieve the organizations goals,

How attached they will be to it

Whether or not they will buy into its values

and norms

O i ti l St t


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In a centralized organization:

people have little autonomy

norms that focus on being cautious, obeying

authority, and respecting traditions emerge

predictability and stability are desired goals

O i ti l St t


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In a flat, decentralized structure:

people have more freedom to choose and

control their own activities

norms that focus on being creative andcourageous and taking risks appear

gives rise to a culture in which innovation

and flexibility are desired goals.

Strong, Adaptive Cultures Versus


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Weak, Inert Cultures

Adaptive cultures

values and norms help an organization to

build momentum and to grow and change

as needed to achieveits goals and be

effective



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Weak, Inert Cultures

Inert cultures

Those that lead to values and norms that

fail to motivate or inspire employees

Lead to stagnation and often failure overtime

M i E l A ll 13


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Movie Example: Apollo 13

What organizational

structure does

NASA use

to handle a moonlaunch?

Documents

Centralization vs Decentralization Advantages