Chapter 3: The Fundamentals of Organization Structure

Departmental Grouping Options

Part of Overall Design of Organization Structure: Departments can be grouped in a variety of ways.

Reporting Relationships

Part of Overall Design of Organization Structure: The chain of command, an unbroken line of authority, is represented by vertical lines on an organization flow chart.

Divisional Grouping

People are organized according to what the organization produces -Ex: along product lines

Organization Structure

-Designates formal reporting relationships, including the number of levels in the hierarchy and the span of control of managers and supervisors. -Identifies the grouping together of individuals into departments and of departments into the total organization. -Includes the design of systems to ensure effective communication, coordination, and integration of efforts across departments.

Functional Grouping

A grouping that places together employees who perform similar functions or work processes or who bring similar knowledge and skills to bear.

Collaboration

A joint effort between people from two or more departments to produce outcomes that meet a common goal or shared purpose and that are typically greater than what any of the individuals or departments could achieve working alone.

Functional Matrix

A matrix variation in which functional bosses have primary authority, while project or product managers simply coordinate product activities.

Product Matrix

A matrix variation that gives the project or product managers primary authority, while the functional managers simply offer advisory expertise.

Holacracy Team Grouping

A recent approach to structural grouping in which the entire organization is made up of self-managing teams that include the people needed to accomplish a specific task or activity.

Virtual Team

A team made up of organizationally or geographically dispersed members who are linked primarily through advanced information and communications technologies.

Vertical Linkages

Used to coordinate activities between the top and bottom of an organization and are designed primarily for control of the organization. -Emphasis is on efficiency and control.

Functional Weakness

Weaknesses include a slow response time to environmental changes

Virtual Network Weakness

Weaknesses include lack of hands-on control of activities and employees, more time to manage relationships and conflicts with partners, risk of a partner failing, and weak employee loyalty and corporate culture.

Divisional Weakness

Weaknesses include the elimination of economies of scale and problems with cross-unit communication

Virtual Network Grouping

With this grouping, the organization is a loosely connected cluster of separate components that are electronically connected for the sharing of information and completion of tasks.

Structural Alignment

Finding the right balance between vertical control and horizontal coordination is an important design decision. -Vertical control is best associated with goals of efficiency and stability -Horizontal coordination is associated with learning, innovation, and flexibility.

Conditions for Matrix

1. Pressure exists to share scarce resources across product lines 2. Environmental pressure for two or more critical factors such as in-depth technical knowledge and frequent new products 3. The environment is both complex and uncertain

Symptoms of Structural Deficiency

1. There is an absence of collaboration among units 2. Decision making is delayed or lacking in quality 3. The organization does not respond innovatively to a changing environment 4. Employee performance declines and goals are not being met

Outsourcing

A firms contracts out certain tasks or functions, such as manufacturing, human resources, or credit processing, to other companies.

Departmental Grouping

A grouping in which employees share a common supervisor and common resources, are jointly responsible for performance, and tend to identify and collaborate with one another.

Matrix Grouping

An organization may embrace two or more grouping alternatives simultaneously -An organization may need to group by function and product divisions simultaneously or might need to combine characteristics of several structural options.

Centralization

Decision authority is located near the top of the organization

Decentralization

Decision authority is pushed downward to lower organization levels

Holacracry Team Weakness

Drawbacks include the time-consuming process of establishing new teams and the need for strong social skills among team members. More traditional managers and others may find it challenging to adapt to a "bossless" work environment. This structure may also limit skill development among employees.

Relational Coordination

Frequent, timely, problem-solving communication carried out through relationships of shared goals, shared knowledge, and mutual respect. -Isn't a device/mechanism like the other horizonal elements, but rather a part of the fabric and culture of an organization. -In an organization with a high amount of this, employees share information freely and interact on a continuous basis.

Task Forces

Horizontal Linkage Mechanism: A temporary committee composed of representatives from each department affected by a problem. -Links several departments to solve common problems. -Is disbanded after tasks are accomplished

Liaison Roles

Horizontal Linkage Mechanism: Can be used to identify a person in one department with the responsibility for communicating and achieving coordination with another department.

Full Time Integrator

Horizontal Linkage Mechanism: Full time position outside the affected departments and is created to achieve coordination between two or more departments. -This person usually has a title such as product manager, project manager, or brand manager. -Does not have formal authority over team members (that power belongs to managers of the functional departments) but has responsibility for the entire product, project, or brand.

Cross Functional Teams

Horizontal Linkage Mechanism: Permanent task forces made up of members from different functional areas and often used in conjunction with a full-time integrator. -Can be the strongest horizontal linkage mechanism -Since modern companies have employees all over the place, this mechanism can be in a virtual format - virtual team.

Information Systems

Horizontal Linkage Mechanism: These are usually computerized and allow employees to routinely exchange information.

Matrix Structure

Organizational Structure: Can be used when both technical expertise and product innovation and change are important. When the structure needs to be multi focused for simultaneous emphasis on both product and function or product and geography, this can be considered. This gives dual lines of authority to both the functional and product chains simultaneously. -Two variations have evolved that may shift emphasis either toward the traditional vertical hierarchy or toward the horizontal teams.

Functional Structure

Organizational Structure: Consolidates human knowledge and skills with respect to specific activities in order to provide depth of expertise. This structure can be effective if there is low need for horizontal coordination between functional departments. -Sometimes called U Form -May combine with horizontal linkages to reflect a shift toward flatter and more horizontal structures.

Divisional Structure

Organizational Structure: Departments are grouped into strategic business units based on organizational outputs. -Sometimes called M Form -Decision making is decentralized

Geographic Structure

Organizational Structure: Often groups the organization's users or customers together by geographical area. -Strengths and weaknesses are similar to divisional structure. -The organization can adapt to specific needs of its own region, and employees identify with regional goals. Horizontal coordination within a region is emphasized rather than linkages across regions.

Virtual Network Structure

Organizational Structure: The firm subcontracts most of its major functions or processes to separate companies and coordinates their activities from a small headquarters organization. It is essentially outsourcing it's major functions. -The structure works by having a central hub surrounded by a network of outside specialists connected electronically. Organizational partners located in different parts of the world use networked computers or the Internet to exchange data and information rapidly.

Holacracy Team Structure

Organizational Structure: The most recent approach to organization design. reflects a fundamental mind-shift in the way human organizations and management are viewed. Employees work in self-managed teams, taking full responsibility for planning their own work, coordinating their actions with others, developing relationships, acquiring resources, and resolving issues. Best for small to medium-sized organizations, self-managed teams generally start with a written guideline but then team members jointly negotiate the functioning of the team. -teams (or circles) are the building blocks of the organization's structure. These teams form, evolve, and disband as needed. They govern themselves, and individual roles within the team are defined collectively. Leadership responsibility shifts as teams evolve

Horizontal Communication

Overcomes barriers between departments and provides opportunities for coordination and collaboration among employees to achieve unity of effort and organizational objectives.

Required Work Activities

Part of Overall Design of Organization Structure: Departments are created to perform strategically important tasks.

Horizontal Linkage

Refers to communication and coordination horizontally across organizational departments

Divisional Strength

Strengths include a design suited to fast change in an unstable environment.

Holacracy Team Strength

Strengths include a greater focus on teamwork and collaboration, more insightful decision-making, and more rapid and innovative responses to changes in the environment. Employees have a broader perspective on the organization's purpose, which stimulates employee growth and accountability.

Functional Strength

Strengths include economies of scale within functional departments

Virtual Network Strength

Strengths include the ability to obtain talent and resources worldwide, achieving scale and reach without huge investments, being highly flexible and response to changing needs, and reducing administrative overhead costs.

Hierarchical Referral

The first vertical device is this, otherwise known as the chain of command. The lines of the organization chart act both up and down the chain as the communication channel. -If a problem arises that employees don't know how to solve, they can refer up to the next level.

Rules and Plans

The second vertical device. For repetitious problems and decisions, a rule or procedure can be established so employees know how to respond without communicating on each separate issue. -The most widely used type is the budget. If the budget is designed well, employees at lower levels can be left on their own to perform duties.

Vertical Information Systems

The third strategy/device increases vertical information capacity through such methods as periodic reports, written information, and computer-based communications distributed to managers.

Matrix Weakness

The weaknesses of this structure include the fact that dual authority, particularly in the balanced variation, can be frustrating and confusing to employees.

Matrix Strength

This structure is best when environmental change is high and when goals reflect a dual requirement for both product and functional goals.