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?
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
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 Design Job Design
The process by which managers decide how to divide tasks into specific jobs.
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
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
Encourages learning from others doing similar jobs
Easy for managers to monitor and evaluate workers
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
Managers in the direct chain of command who have authority over people and resources lower down.
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?
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?