CHAPTER 10 – Designing Adaptive - When organizations face new strategic

Organizations issues, managers often create new

positions or departments to deal with
Organizing
them (e.g. Sony created a new position
- Deployment of organizational resources of chief information security officer
to achieve strategic goals (CISO), created chief diversity officer to
- Organizational resources include: create and environment where
division of labor into specific minorities and women can flourish)
departments and jobs, formal lines of - When work specialization is extensive,
authority, and mechanisms for employees specialize in a single task.
coordinating diverse organization tasks. Jobs tend to be small but they can be
- Follows strategy – defines what to do; performed efficiently (e.g. work
while organizing defines how to do it. specialization is readily visible in an
Structure is a powerful tool for reaching automobile assembly line, wherein each
strategic goals, and a strategy’s success employee performs the same task over
is often determined by its fit with and over again)
organization structure - With too much specialization,
employees are isolated and do only a
Organizing the Vertical Structure single, boring job; also creates
Organizational Structure separation and hinders the coordination
that is essential for organizations to be
- Defines how tasks are divided and effective.
resources are deployed.
- The set of formal tasks assigned
to individuals and departments
- Formal reporting relationships,
including lines of authority,
decision responsibility, number of
hierarchical levels, and span of
managers’ control
- The design of systems to ensure
effective coordination of
employees across departments.
Organizational Chart – portrays the
characteristics of the vertical structure;
visual representation of an organization’s
structure; delineates the chain of
command, indicates departmental tasks
and how they fit together, and provides
order and logic for the organization.
Work Specialization Chain of Command
- Also called division of labor; the degree - An unbroken line of authority that links
to which organizational tasks are all employees in an organization and
subdivided into separate jobs. shows who reports to whom.
 - Two underlying principles; unity of positions below them in the hierarchy;
command – the employee is held organizations encourage managers to delegate
accountable to only one supervisor; authority to the lowest possible level to provide
scalar principle – a clearly defined line of maximum flexibility to meet customer needs
authority in the organization that and adapt to shift in the environment.
includes all employees.
- Delegating decision making can be
- Authority and responsibility for different
highly motivating and improve speed,
tasks should be distinct.
flexibility, and creativity; managers find
Authority – the formal and legitimate right of a delegation difficult
manager to make decisions, issue orders, and - Managers usually delegate everyday
allocate resources to achieve organizationally tasks or routine work which does not
desired outcomes; has three characteristics: affect organizational decisions
(1) Authority is vested in organizational Line and Staff Authority
positions, not people – other people in
- Line departments perform tasks that
the same position have the same
reflect the organization’s primary goal
authority
and mission (e.g. in a water bottling
(2) Authority flows down the vertical
company, the line department would be
hierarchy – positions at the top of the
the production staff)
hierarchy are given more formal
- Line authority means that people in
authority than those at the bottom.
management positions have formal
(3) Authority is accepted by subordinates –
authority to direct and control
the acceptance theory of authority
immediate subordinates.
argues that a manager has authority
- Staff departments include all those that
only if subordinates choose to accept his
provide specialized skills in support of
or her commands
line departments; have an advisory
Responsibility – the duty to perform the task or relationship with line departments;
activity as assigned. Typically, managers are typically include marketing, labor
assigned authority commensurate with relations, research, accounting, and
responsibility. human resources
- Staff authority is narrower than line
- High responsibility but little authority –
authority and includes the right to
possible but difficult; relies on
advise, recommend, and counsel in the
persuasion and luck
staff specialists’ area of expertise
- Authority exceeding responsibility –
tyrannical; using authority to achieve Span of Management – the number of
frivolous outcomes employees reporting to a supervisor;
sometimes called the span of control;
Accountability – the people with authority and
determines how closely a supervisor can
responsibility are subject to reporting and
monitor subordinates; traditional span of
justifying task outcomes to those above them in
management is 7-10 subordinates per
the chain of command (e.g. in Apple, there is a
manager; lean organizations today have spans
DRI or directly responsible individual so that
as high as 30, 40, and higher.
everyone knows who is responsible for what)
- When supervisors must be closely
Delegation – the process managers use to
involved with subordinates, the span
transfer authority and responsibility to
 should be small. When supervisors need the correct hierarchical level at which to make
little involvement, it can be large. decisions.
- Factors associated with less supervisor
- For example, most large school systems
involvement and thus larger spans of
are high centralized. However,
control:
decentralization relieves burden on top
(1) Work performed by subordinates is
managers, make greater use of
stable and routine
employees’ skills and abilities, ensure
(2) Subordinates perform similar work tasks
that decisions are made close to the
(3) Subordinates are concentrated in a
action by well-informed people, and
single location
permit more rapid response to external
(4) Subordinates are highly trained and
changes
need little direction in performing tasks
(5) Rules and procedures defining task Factors that typically influence centralization vs
activities are available decentralization:
(6) Support systems and personal are
available for the manager  Greater change and uncertainty in the
(7) Little time is required in nonsupervisory environment are usually associated
activities, such as coordination with with decentralization. Decentralization
other departments or planning can help cope with rapid change and
(8) Managers’ personal references and uncertainty.
styles favor a larger span  The amount of centralization or
decentralization should fit the firm’s
Tall Structure – has an overall narrow span and strategy. For example, decentralization fits
more hierarchical levels. with the strategy of Disney allowing
creative units to respond quickly and
Flat Structure – has a wide span, and is innovatively to changes in the
horizontally dispersed with fewer hierarchical entertainment industry. While
levels. centralization fits JCPenney’s strategy of
product
planning and
buying
operations,
enabling the
company to get
more
fashionable
merchandise to
stores quickly
and at lower
prices.
 In times of
crisis or risk of company failure,
Centralization – decision authority is located authority may be centralized at the
near the top of the organization. top. E.g. when Honda couldn’t get an
Decentralization - decision authority is pushed agreement among divisions about new
downward to lower organizational levels. car models, president Nobuhiko
Organizations may have to experiment to find Kawamoto made the decision himself.
Departmentalization – the basis for grouping - Occurs when departments are grouped
positions into departments and departments together based on similar organizational
into the total organization; how to use the outputs.
chain of command to group people together to - Also called an M-form (multi-divisional)
perform their work. or a decentralized form; responsibility
for individual products, services,
- 3 traditional approaches to structural
product groups, major projects or
design: the functional, divisional, and
programs, divisions, businesses, or
matrix. They rely on the chain of
profit centers.
command to define departmental
- Also sometimes called a product
groupings and reporting relationships
structure, program structure, or self-
along the hierarchy.
contained unit structure.
- 2 innovative approaches: use of teams
- Diverse departments are brought
and virtual networks which have
together to produce a single
emerged to meet changing
organizational output
organizational needs in a turbulent
- Most large corporations have separate
global environment
divisions that perform different tasks,
- The basic difference among the
use different technologies, or serve
structures is the way in which
different customers.
employees are departmentalized and to
- Divisional structure encourages
whom they report.
decentralization. Decision making is
FUNCTIONAL STRUCTURE
- Also called a U-form (unitary
structure), activities are
grouped together by
common function from the
bottom to the top of the
organization based on
similar skills, expertise, work
activities, and resource use.
- Can be thought of as
departmentalization by
organizational resources. pushed down at least one level in the
- A strong vertical design; information hierarchy
flows up and down the hierarchy, and
the chain of command converges at the GEOGRAPHIC OR CUSTOMER-BASED DIVISION
top.
- All functions in a specific country or
- People within a department
region report to the same division
communicate primarily with people
manager
others in the same department;
managers and employees are
compatible because of similar training
and expertise.
DIVISIONAL STRUCTURE
 - The structure focuses company Two boss employees – those who report to
activities on local market conditions. two supervisors simultaneously, must resolve
conflicting demands from the matrix bosses;
need excellent human relations skills with
which to confront managers and resolve
conflicts.
Matrix Boss - product or functional boss, who is
MATRIX APPROACH responsible for one side of the matrix
- Combines aspects of both functional
and divisional structures
simultaneously, in the same part of the Top leader – oversees both the product and
organization. functional chains of command; to maintain a
- Evolved to improve horizontal power balance between the two sides of the
coordination and information sharing. matrix. If disputes arise between them, the
- It has dual lines of authority; supports a problem will be pushed to the top leader.
formal chain of command for both
TEAM APPROACH
functional (vertical) and divisional
(horizontal) relationships. - Most widespread trend in
departmentalization in recent years has
been the implementation of team
concepts.
- Gives managers a way to delegate
authority, push responsibility to lower
levels, and be more flexible and
responsive in a complex and
competitive global environment.
Cross-functional teams – consists of
employees from various functional
departments who are responsible to meet
as a team and resolve mutual problems.
Permanent teams – groups of employees
who are organized in a way similar to a formal
department. Each team brings together
Global Matrix Structure employees from all functional areas focused on
a specific task or project, such as
parts supple and logistics for an
automobile plant; emphasized on
horizontal communication and
information sharing; authority is
pushed down to lower levels; team
members may share or rotate their
leadership
Team-based structure - Extends the idea of horizontal
coordination and collaboration beyond
the boundaries of the organization.
- Loosely interconnected groups of
companies with permeable boundaries.
- Outsourcing – farming out certain
activities, such as manufacturing or
credit processing has become a
significant trend; allows people to shift
only certain tedious and time-
consuming tasks to be handled by the
outsourcing partner while they focus on
- The entire organization is made up of higher-value work.
horizontal teams that coordinate their - Virtual network structure means that
work and work directly with customers the firm subcontracts most of its major
to accomplish the organization’s goals functions to separate companies and
coordinates their activities from small
VIRTUAL NETWORK APPROACH headquarters organization.
- The organization may be viewed as a
central hub surrounded by a network of
outside specialists, sometimes spread all
over the world
- Networked computer systems,
collaborative software, and the Internet
enable the organizations to exchange
data and information so rapidly and
smoothly that a loosely connected
network of suppliers, manufacturers,
 assemblers, and distributors can look horizontal coordination; the vertical hierarchy is
and act like one seamless company. flattened.
- Modular approach – the manufacturing
Task Force – a temporary team or committee
company uses outside suppliers to
designed to solve a problem involving several
provide entire chunks of a product,
departments; represent their departments and
which are them assembled into a final
share information that enables coordination;
product by a handful of workers; hand
temporary problems
off responsibility for engineering and
production of entire sections of a Cross-functional teams – furthers horizontal
product, such as a Boeing airplane to coordination because participants from several
outside suppliers. departments meet regularly to solve ongoing
problems of common interest; works with
Organizing for Horizontal Coordination
continuing rather than temporary problems
As organizations grow and evolve, two
Project manager – a person who is responsible
things happen: (1) new positions and
for coordinating the activities of several
departments are added to deal with factors in
departments for the completion of a specific
the external environment or with new strategic
project; may also have titles such as product
needs; (2) senior managers have to find a way
manager, integrator, program manager, or
to tie all these departments together.
process owner; this person is not a member of
Coordination - the managerial task of adjusting the departments being coordinated; located
and synchronizing the diverse activities among outside the departments and have
different individuals and departments. responsibility for coordinating several
departments to achieve desired project
Collaboration – a joint effort between people
outcomes; help set budget goals, marketing
from two or more departments to produce
targets, and strategies and obtain the
outcomes that meet a common goal or shared
cooperation from advertising, production, and
purpose and that are typically greater than
what any of the individuals or departments
could achieve working alone.
Without coordination, a company’s left
hand will not act in concert with the right
causing problems and conflicts.
Coordination is required regardless of
whether the organization has a functional,
divisional, or team structure. It is the outcome
of information and cooperation. There is a
growing emphasis on horizontal coordination
Reengineering – the radical redesign of
business processes to achieve dramatic
improvements in cost, quality service, and
speed.; its focus is on horizontal workflows sales personnel needed for implementing
rather than functions, reengineering generally product strategy.
leads to a shift away from a strong vertical
structure to one emphasizing stronger The dashed lines indicate responsibility for
coordination and communication with assigned
team members, but department managers THREE BASIC TYPES OF PRODUCTION
retain line authority over functional employees. TECHNOLOGY
Relational Coordination  Small-batch and unit production. Small-
batch production produce goods in
- Frequent, timely, problem-solving
batches of one or a few products
communication carried out through
designed to customer specification. Also
employee relationships of shared goals,
close to traditional skilled-craft work,
shared knowledge, and mutual respect.
because human beings are a large part
- Organizations with high level of
of the process. E.g. custom clothing,
relational coordination share
special-order machine tools, space
information freely across departmental
capsules, satellites, and submarines
boundaries, and people interact on a
 Large-batch and mass production. Mass
continuous basis to share knowledge
production is distinguished by
and solve problems.
standardized production runs. Standard
- Coordination is carried out through a
products go into inventory for sale;
web of ongoing positive relationships
makes greater use of machines than
rather than because of formal
small-batch. E.g. automobile assembly
coordination roles and mechanisms.
lines and tobacco products and textiles
- Ensures that all the departments
 Continuous process production.
involved in a specific task are tightly
Continuous process production
coordinated.
mechanizes the entire workflow in a
FACTORS SHAPING STRUCTURE sophisticated and complex form of
production technology. Human
Forces affecting organization structure
operators are not part of actual
come from both outside and inside the
production because machinery does all
organization. Business performance is strongly
the work. E.g. chemical plants,
influenced by how well the company’s structure
distilleries, petroleum refineries, and
is aligned with its strategic intent and the needs
nuclear power plants.
of the environment so managers strive to pick
strategies and structures that are congruent. The difference among the three
manufacturing technologies is called
Two strategies were proposed by
technical complexity. This is the degree to
Michael E. Porter for business firms to adopt:
which machinery is involved in the
Differentiation – the organization attempts to production to the exclusion of people.
develop innovative products unique to the
market; needs an organic, horizontal approach
when the organization needs flexibility to cope
with an uncertain environment.
Cost Leadership – the organization strives for
internal efficiency; appropriate for mechanistic,
horizontal organizational structures with a
stable environment
Service Technology
Examples of service organizations
include consulting companies, law firms,
brokerage houses, airlines, hotels,
advertising companies, amusement parks,
and educational organizations.
Characterizes many departments in
large corporations, even manufacturing
firms. It can be defined as follows:
 Intangible output – services are
perishable and cannot be stored in
inventory. Either consumed or lost
forever.
 Direct contact with customers –
employees and customers interact
directly to provide and purchase the
service. Production and consumption
are simultaneous. They have direct
contact with customers.
One distinct feature of service technology
that directly influences structure is the need
for employees to be close to the customer.
Service firms tend to be flexible,
informal, and decentralized. Horizontal
communication is high because employees
must share information and resources to
serve customers and solve problems.
Services are also dispersed; hence each
unit is often small and located
geographically close to customers. Banks,
hotels, fast-food franchises, and doctors’
offices disperse their facilities into regional
and local offices to provide faster and better
service to customers.
When services can be standardized, a
tight centralized structure can be effective,
but service firms in general tend to be more
organic, flexible, and decentralized.