Chapter 07

Designing Organizational Structure : Designing Organizational Structure


Learning Objectives : Learning Objectives After studying the chapter, you should be able to: Identify the factors that influence managers’ choice of an organizational structure Explain how managers group tasks into jobs that are motivating and satisfying for employees Describe the types of organizational structures managers can design, and explain why they choose one structure over another Explain why there is a need to both centralize and decentralized authority © 2007 The McGraw-Hill Companies, Inc. All rights reserved.


Learning Objectives : Learning Objectives Explain why managers must coordinate and integrate between jobs, functions, and divisions as an organization grows. Explain why managers who seek new ways to increase efficiency and effectiveness are using strategic alliances and network structures. © 2007 The McGraw-Hill Companies, Inc. All rights reserved.


Organizational Structure : Organizational Structure Organizational Architecture The organizational structure, control systems, culture, and human resource management systems that together determine how efficiently and effectively organizational resources are used.


Question? : Question? What is the process managers use to establish the structure of working relationships among employees to achieve goals? Leading Organizing Controlling Planning


Designing Organizational Structure : Designing Organizational Structure Organizing The process by which managers establish the structure of working relationships among employees to achieve goals.


Designing Organizational Structure : Designing Organizational Structure Organizational Structure Formal system of task and reporting relationships that coordinates and motivates organizational members so that they work together to achieve organizational goals


Designing Organizational Structure : Designing Organizational Structure Organizational design The process by which managers make specific choices that result in a particular kind of organizational structure.


Factors Affecting Organizational Structure : Factors Affecting Organizational Structure Figure 7.1


The Organizational Environment : The Organizational Environment 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.


The Organizational Environment : The Organizational Environment 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 or diversification also requires a more flexible structure.


The Organizational Environment : The Organizational Environment 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 the organization.


Technology : Technology Small Batch Technology Used to produce small quantities of customized products Based on the skills of people who work in small groups Mass Production Technology Automated machines that are programmed to make high volumes of standard products. Formal structure is the best choice for workers who must perform repetitive tasks.


Technology : Technology Mass Production Technology Based on the use of automated machines that are programmed to perform the same operations over and over


Technology : Technology Continuous Process Technology Totally mechanized Based on the use of automated machines working in sequence and controlled through computers


Technology : Technology Knowledge management The sharing and integrating of expertise within and between functions and divisions through realtime, interconnected IT


The Organizational Environment : The Organizational Environment Human Resources Managers must take into account all four factors (environment, strategy, technology and human resources) when designing the structure of the organization.


Question? : Question? What is increasing the degree of responsibility a worker has over a job? Job Design Job Simplification Job Enlargement Job Enrichment


Job Design : Job Design Job Design The process by which managers decide how to divide tasks into specific jobs. Job Simplification The process of reducing the number of tasks that each worker performs.


Job Design : 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


The Job Characteristics Model : The Job Characteristics Model Figure 7.2 Source: Adapted from J. R. Hackman and G. R. Oldham, Work Redesign (Reading, MA: Addison-Wesley, 1980).


Job Characteristics Model : Job Characteristics Model


Grouping Jobs into Functions : Grouping Jobs into Functions Functional Structure An organizational structure composed of all the departments that an organization requires to produce its goods or services Advantages Encourages learning from others doing similar jobs Easy for managers to monitor and evaluate workers Disadvantages Difficult for departments to communicate with others Preoccupation with own department and losing sight of organizational goals


Slide25 : Figure 7.3 The Functional Structure of Pier 1 Imports


Divisional Structures : Divisional Structures Divisional Structure An organizational structure composed of separate business units within which are the functions that work together to produce a specific product for a specific customer Divisions create smaller, manageable parts of a firm Divisions develop a business-level strategy to compete Divisions have marketing, finance, and other functions Functional managers report to divisional managers who then report to corporate management


Types of Divisional Structures : Types of Divisional Structures Product Structure Each product line is handled by a self-contained division 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


Slide28 : Figure 7.4 Product, Market, and Geographic Structures


Types of Divisional Structures : Types of Divisional Structures Geographic Structure Each region of a country or area of the world is served by a self-contained division


Types of Divisional Structures : Types of Divisional Structures 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


Types of Divisional Structures : Types of Divisional Structures Global Product Structure Each product division, not the country or regional managers, takes responsibility for deciding where to manufacture its products and how to market them in foreign countries


Global Geographic and Global Product Structures : Global Geographic and Global Product Structures Figure 7.6


Types of Divisional Structures : Types of Divisional Structures Market Structure Each kind of customer is served by a self-contained division Also called customer structure


Matrix Design Structure : Matrix Design Structure Matrix Structure An organizational structure that simultaneously groups people and resources by function and product The structure is very flexible and can respond rapidly to the need for change Each employee has two bosses (functional manager and product manager) and possibly cannot satisfy both


Matrix Structure : Matrix Structure Figure 7.7


Product Team Design Structure : Product Team Design Structure Product Team Structure Members are permanently assigned to a cross-functional team and report only to the product team manager or to one of his subordinates Cross-functional team – group of managers brought together from different departments to perform organizational tasks


Product Team Structure : Product Team Structure Figure 7.7


Hybrid Structures : Hybrid Structures Hybrid Structure The structure of a large organization that has many divisions an simultaneously uses many different organizational structures


Target’s Hybrid Structure : Target’s Hybrid Structure Figure 7.8


Coordinating Functions:Allocating Authority : Coordinating Functions: Allocating Authority Authority The power to hold people accountable for their actions and to make decisions concerning the use of organizational resources Hierarchy of Authority An organization’s chain of command, specifying the relative authority of each manager


Allocating Authority : Allocating Authority Span of Control The number of subordinates that report directly to a manager Line Manager Managers in the direct chain of command who have authority over people and resources lower down. Staff Manager Managers who are functional-area specialists


Tall and Flat Organizations : Tall and Flat Organizations Tall structures have many levels of authority and narrow spans of control Flat structures have fewer levels and wide spans of control


Flat Organizations : Flat Organizations Figure 7.10


Tall Organizations : Tall Organizations Figure 7.10


Integrating Mechanisms : Integrating Mechanisms Organizing tools that managers can use to increase communication and coordination among functions and divisions


Discussion Question? : Discussion Question? Which of these is an example of an integrating mechanism? Direct Contact Liaison roles Task Forces Cross-functional Teams All of the above


Integrating Mechanisms : Integrating Mechanisms Figure 7.11


Forms of Integrating Mechanisms : Forms of Integrating Mechanisms Figure 7.12


Strategic Alliances : Strategic Alliances Strategic Alliance An agreement in which managers pool or share firm’s resources and know-how with a foreign company and the two firms share in the rewards and risks of starting a new venture.


Strategic Alliances : Strategic Alliances Network Structure: A series of strategic alliances that an organization creates with suppliers, manufacturers, and distributors to produce and market a product. Network structures allow firms to bring resources together in a boundary-less organization.


Outsource : Outsource To use outside suppliers and manufacturers to produce goods and services


B2B Network Structures and IT : B2B Network Structures and IT Boundaryless Organization An organization whose members are linked by computers, faxes, computer-aided design systems, and video-conferencing and who, rarely, if ever, see one another face-to-face. Knowledge Management System A company-specific virtual information system that allows workers to share their knowledge and expertise and find others to help solve problems. Source:


B2B Network Structures and IT : B2B Network Structures and IT Business to Business (B2B ) network A group of organizations that join together and use IT to link themselves to potential global suppliers to increase efficiency and effectiveness.


Movie Example: Apollo 13 : Movie Example: Apollo 13 What organizational structure does NASA use to handle a moon launch?