Chapter 7- Designing Organizational Structure

Complicated Technology

-High task variety: varied problems occur b/c harder to regulate/ control it -Low task analyzability: non-programmed decision making needed -Organic/Flexible Structure: Enhances managers' ability to respond to unexpected situations— and give them the freedom and desire to work out new solutions to the problems they encounter EX: scientists in an R&D laboratory who develop new products or discover new drugs, and they are seen in the planning exercises an organization's top management team uses to chart the organization's future strategy

Flexible Structure Advantages

1. Faster decision making/ communication 2. Easier to obtain resources 3. Empowered Employees who internalize strong professional values/ norms of behavior as part of their training

B2B marketplace

Industry-specific trading network connecting buyers and sellers -influenced by the push to reduce Supply chain costs: The idea is that high-volume, standardized transactions can help drive down costs at the industry level.

Contingency Theory

Managers design organizational structures to fit the factors or circumstances that are affecting the company the most/ causing the most uncertainty. End: There is no one best way to design an organization

Matrix and product team structure

Most flexible kind of organizational structures when information technology or customer needs are changing rapidly and the environment is uncertain, even a divisional structure may not give managers enough flexibility to respond to the environment quickly.

why managers must coordinate jobs, functions, and divisions using the hierarchy of authority and integrating mechanisms.

each function or division views problems facing the company from its own perspective and develops different views about the major goals, problems, or issues. Differences in viewpoint may make managers reluctant to cooperate and coordinate their activities to meet company goals.

Global Product Structure

each product division, not the country and regional managers, takes responsibility for deciding where to manufacture its products and how to market them in countries worldwide division managers manage their own global value chains and decide where to establish foreign subsidiaries to distribute and sell their products to customers in foreign countries.

role of divisional management layer

improves the use of org resources

Integrating mechanisms (Simple -> Complex)

organizing tools that managers can use to increase communication and coordination among functions and divisions 1. liasion roles 2. task forces 3. cross functional teams 4.integrating roles and departments

line manager

someone in the direct line or chain of command who has formal authority over people and resources at lower levels

span of control

the number of subordinates who report directly to a manager

Steps of Organizational Design

1. Job design 2. Functional Structure 3. Allocate authority and coordinate or integrate functions/ divisions

ways to keep hierarchy flat

1. minimum chain of command 2. decentralizing authority

boundaryless organization

An organization whose members are linked by computers, mobile and virtual technology, computer-aided design systems, videoconferencing, and cloud computing, and who rarely, if ever, see one another face-to-face. People are utilized when their services are needed, much as in a matrix structure, but they are not formal members of an organization; they are functional experts who form an alliance with an organization, fulfill their contractual obligations, and then move on to the next project. -use of knowledge management systems

Functional Structure

An organizational structure composed of all the departments that an organization requires to produce its goods or services. -Manufacturing, sales, and research and development are often organized into functional departments.

Strategies for Flexibility (Organic Orgs.)

Business Level- 1. Differentiation Strategy: Managers can develop new or innovative products quickly—an activity that requires extensive cooperation among functions or departments. EX: A candy company may differentiate their candy by improving the taste or using healthier ingredients. Corporate Level- 2. Diversification: Managers can design a flexible structure to provide sufficient coordination among the different business divisions EX: Entering into new businesses on its own by merging with another company or by acquiring a company operating in another field or service sector.

Product, Geographic, Market Structures (Divisional)

allows managers to respond more quickly and flexibly to the particular circumstances they con- front.

job simplification

the process of reducing the number of tasks a worker performs can increase job satisfaction by allowing workers to specialize can reduce efficiency is jobs become boring or monotonous (workers become demotivated and perform at lower levels)

decentralization disadvantages

too much decentralization- If divisions, functions, or teams are given too much decision-making authority, they may begin to pursue their own goals at the expense of organizational goals (ie. Managers in engineering design or R&D, for example, may become so focused on making the best possible product they fail to realize that the best product may be so expensive few people are willing or able to buy it) lack of communication

Organic (Flexible) Organizational Structure

"Flexible Structure with Innovative Culture" Organizing choices... 1. Decentralize authority 2. Empower lower-level employees to make important operating decisions 3. Encourage values and norms that emphasize change and innovation Determining Factors: 1. Environment: changing/ uncertain 2: Strategy: Differentiation/ Diversification 3. Tech: Advanced 4. HR: skilled labor force, high collaboration in groups and teams

Mechanistic Organizational Structure

"Formal Structure with Conservative Norms" Organizing choices... 1. Bring stability/ formality to the organizational structure 2. Establish values/ norms that emphasize obedience and being a team player. 3. Decisions are made within a clearly defined hierarchy of authority, and use detailed rules, standard operating procedures (SOPs), and restrictive norms to guide and govern employees' activities Determining Factors: 1. Environment: Stable/ certain environments with ready available resources 2. Strategy: Low-Cost, Vertical Integration 3. Tech: simple 4.HR: low-skilled labor

Routine Technology

-Low task variety problems encountered do not vary much -High task analyzability: problems are easily resolved through programmed decision making -Mechanic Structure: Tasks are simple and the steps needed to produce goods and services have been worked out in advance. EX: typical mass production or assembly operations

As a hierarchy becomes taller

-less flexible -slow managers' response to changes in the organizational environment = takes a long time for decisions and orders to travel down the heirarchy/ distortion of commands -more managers are employed, huge expenses for company!

product structure

1. Each distinct product line/ business are their own Self-contained division (B/c it has a complete set of all the functions- marketing, r&d, finance, and so on) 2. Divisional managers are responsible for devising an appropriate business-level strategy to allow the division to compete effectively in its industry or market.

Human Resources Characteristics 4 Flexible Structures (decentralized authority and empowered employees)

1. Highly skilled workforce: internalize strong professional values/ norms of behavior as part of their training, usually desire greater freedom and autonomy and dislike close supervision 2. High # of employees who work together in groups/teams: when people work in teams, they must be allowed to interact freely and develop norms to guide their own work interactions

Functional Structure Advantages

1. Increased learning & cooperation: when people who perform similar jobs are grouped together, they observe each other --> become more specialized. The associated tasks of diff jobs relate to each other (encourages cooperation within a function). 2. Easier for managers to monitor and evaluate performance 3. Increased adaptability: sets of functions have been created to scan/ monitor competitive market and obtain info

Job Design Strategies

1. Specialization - creates formal structure, people behave in predictable ways Motivational strategies (create flexible structure, division of labor and encourage job satisfaction): 2. Enlargement 3. Enrichment

What makes a technology routine or complicated?

1. Task Variety- the #of new or unexpected problems or situations that a person or function encounters in performing tasks or jobs 2. Task Analyzability- the degree to which programmed solutions are available to people or functions to solve the problems they encounter

Factors Affecting Organizational Structure

1. The nature of the organizational environment 2. The type of strategy the organization pursues 3. The technology the organization uses 4. The characteristics of the organization's human resources

product structure advantages

1. allows functional managers to specialize in only one product area/ respond quickly to changing task environments 2. division managers become experts in industry: better bus-level strategy development 3. allows corporate managers to create best c-level strategy to max future growth/ evaluate performance

Globalization+ Information Technology (IT), have brought about two innovations in organizational architecture=

1. strategic alliances 2. b2b network structure

Knowledge Management Systems

A company- specific virtual information system that systematizes the knowledge of its employees and facilitates the sharing and integration of their expertise within and between functions and divisions through real-time interconnected technology.

cross-functional team

A group of managers brought together from different departments to perform organizational tasks. Benefit: -artificial boundaries between departments disappear - a narrow focus on departmental goals is replaced with a general interest in working together to achieve organizational goals members= report only to the product team manager or to one of his or her direct subordinates. head of functions= only serve to counsel and help team members, share knowledge, and provide new tech developments that can help improve each team's performance EX: when mattress company Sealy saw its sales slipping, it pulled together a cross-functional team that was allowed to work outside the organization's hierar- chy and quickly designed a new mattress. With everyone focused on the goal, team members created a mattress that broke previous sales records

B2B network structure

A series of global strategic alliances that an organization creates with suppliers, manufacturers, and distributors to produce and market a product. the growth of strategic alliances into an IT-based network structure for businesses: growing sophistication of IT using global intranets, videoconferencing, and cloud computing makes it much easier to manage strategic alliances and encourage managers to share information and cooperate with each other across the globe

Task Forces (ad hoc committees)

A temporary committee of managers from various functions or divisions who meet to solve a specific, mutual problem. when problem is solved task force is no longer needed. EX: Representatives from marketing, research and development, and manufacturing meet to discuss launch of new product.

Heirarchy of authority

An organization's chain of command, specifying the relative authority of each manager. Every manager, at every level of the hierarchy, supervises one or more subordinates. Managers at each level of the hierarchy confer on managers at the next level down the authority to decide how to use organizational resources. Accepting this authority, those lower-level managers are accountable for how well they make those decisions. Managers who make the right decisions are typically promoted, and organizations motivate managers with the prospects of promotion and increased responsibility within the chain of command.

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. Goal: to create smaller, more manageable units within the organization. Forms: 1. Product 2. Geographic 3. Market

market structure ("customer structure")

An organizational structure in which each kind of customer is served by a self- contained division -satisfies needs of diverse customers -increases responsiveness to customer needs and flexible decision making

Geographic Structure

An organizational structure in which each region of a country or area of the world is served by a self-contained division. a geographic structure gives regional managers the flexibility they need to choose the range of products that best meets the needs of regional customers

product team structure

An organizational structure in which employees are permanently assigned to a cross-functional team and report only to the product team manager or to one of his or her direct subordinates

Strategy for Mechanistic Organization

Business Level- 1. Low-Cost Strategy: gives managers greater control over the activities of an organization's various departments. EX:a low-cost strategy that is aimed at driving down costs in all functions Corporate Level- 2. Vertical Integration Strategy: benefits companies by allowing them to control the process, reduce costs and improve efficiencies EX: Netflix executives realized they could improve their margins by producing their own original content. Today, Netflix uses its distribution model to promote its original content alongside programming licensed from studios

Job Characteristics Model

Every job has 5 characteristics: 1. Skill Variety 2.Task Identity 3. Task Significance 4. Autonomy 5. Feedback ...That determine: 1. motivation levels 2. personal outcomes (how employees react to their work) 3. organizational outcomes (high performance/ satisfaction & low absenteeism/ turnover): ...That affect three critical psychological states: "The more employees feel that their work is 1. meaningful and that they are 2. responsible for work outcomes and 3. responsible for knowing how those outcomes affect others, the more motivating work becomes and the more likely employees are to be satisfied and to perform at a high level." ...Which concludes that: Flexible structures -where authority is decentralized/ where employees commonly work with others/ must learn new skills to complete the range of tasks for which their group is responsible- are most motivating

global geographic structure

Managers locate different divisions in each of the world regions where the organization operates. Most likely to do this when pursuing a multi-domestic strategy b/c customer needs vary widely by country/ world region

Functional Structures become ineffective when

Organizational growth (product/service range widens) occurs 1. managers in different functions may find it more difficult to coordinate w/ 1 another when they are responsible for several different kinds of products 2. Functional managers may become so preoccupied with supervising their own specific departments and achieving their departmental goals that they lose sight of organizational goals.

Autonomy

The degree to which a job gives an employee the freedom and discretion needed to schedule different tasks and decide how to carry them out. EX: Salespeople who have to plan their schedules and decide how to allocate their time among different customers have relatively high autonomy compared to assembly-line workers, whose actions are determined by the speed of the production line.

task significance

The degree to which a worker feels his or her job is meaningful because of its effect on people inside the organization, such as coworkers, or on people outside the organization, such as customers. EX: A teacher who sees the effect of his or her efforts in a well-educated and well-adjusted student enjoys high task significance compared to a dishwasher who monotonously washes dishes as they come to the kitchen.

Task identity

The extent to which a job requires that a worker perform all the tasks necessary to complete the job, from the beginning to the end of the production process. EX: A craftsworker who takes a piece of wood and transforms it into a custom-made desk has higher task identity than does a worker who per- forms only one of the numerous operations required to assemble a flat-screen TV.

Feedback

The extent to which actually doing a job provides a worker with clear and direct information about how well he or she has performed the job. EX: An air traffic controller whose mistakes may result in a midair collision receives immediate feedback on job performance; a person who compiles statistics for a business magazine often has little idea of when he or she makes a mistake or does a particularly good job.

Job Design & the result

The process by which managers decide how to divide tasks into specific jobs Result: Division of labor or job simplification

Division

a collection of functions or departments that work together to produce the product

strategic alliance

a formal agreement that commits two or more companies to exchange or share their resources in order to produce and market a product. -share similar interests and believe they can benefit from cooperating with each other

integrating roles

a role whose only function is to increase coordination and integration among functions or divisions to achieve performance gains from synergies -experienced senior managers who can envision how to use the resources of the functions or divisions to obtain new synergies. EX: Senior managers provide members of cross-functional team with relevant information from other teams and from other divisions.

network structure

allow an organization to: - manage its global value chain - find new ways to reduce costs while increasing the quality of products—without incurring the high costs of operating a complex organizational structure (such as the costs of employing many managers). - gain access to low-cost foreign sources of inputs

decentralizing authority

giving lower-level managers and non-managerial employees the right to make important decisions about how to use organizational resources allows an organization and its employees to behave in a flexible way even as the organization grows and becomes taller -manage by exception technique -empowering employees, creating self-managed work teams, establishing cross-functional teams, and product team structure: help keep the organizational architecture flexible and responsive to complex task and general environments, complex technologies, and complex strategies

job enrichment

increasing the degree of responsibility a worker has over his or her job increased involvement in job, thus increased interest in quality of the goods they make or the services they provide EX: 1. empower workers to experiment to find new or better ways of doing the job 2. encourage workers to develop new skills 3. allow workers to decide how to do the work and give them responsibility for deciding how to respond to unexpected situations 4. allowing workers to monitor and measure their own performance

job enlargement

increasing the number of different tasks in a given job by changing the division of labor -reduces boredom and fatigue/ may increase motivation to perform at a higher level EX: Subway food servers make the food as well as serve it, their jobs are "larger" than the jobs of McDonald's food servers

Manage by exception

managers at higher levels give lower-level employees the responsibility of making important decision -problems of slow/ distorted communication keep to a minimum -fewer managers are needed b/c role is to act as a coach and facilitator/ help other employees make the best decisions

staff managers

managers who supervise the functions that provide advice and assistance to the line departments

matrix structure

people/ resources grouped in two ways simultaneously: 1. by function- allows them to learn from one another and become more skilled/ productive & 2. by product (product teams)- members of different functions work together to develop a specific product. result= complex network of reporting relationships among product teams/ functions that makes the matrix structure very flexible EX: High-tech companies that operate in environments where new product development takes place monthly or yearly have used matrix structures successfully for many years

matrix team structure

report to two managers: (1) a functional boss- assigns individuals to a team/ evaluates their performance from a functional perspective (2) the boss of the product team- evaluates their performance on the team. Team members= "two-boss employees" -empowered and responsible for important decisions involved in product development Team manager ="facilitator" , controls financial resources and tries to keep project on time and within budget The functional employees assigned to product teams change over time as the specific skills that the team needs change. As specific jobs are completed, team members leave and are reassigned to new teams. In this way the matrix structure makes the most use of human resources.

tall vs flat organization

tall- has many levels of authority relative to company size flat-has fewer levels relative to company size

cross-functional team

teams assume long-term responsibility for all aspects of development and making the product. -a great deal of integration among functions for successful product launch used for re-occuring problems (develop new products/ find new kinds of customers) EX:A cross-functional team composed of all functions is formed to manage product to its launch in the market.

Skill Variety

the extent to which a job requires that an employee use a wide range of different skills, abilities, or knowledge. EX: The skill variety required by the job of a research scientist is higher than that called for by the job of a McDonald's food server.

Organizing Structure

the formal system of task and job reporting relationships that determines how employees use resources to achieve organizational goal

liasion role

the interpersonal role managers play when they deal with people outside their units. may meet daily, weekly, monthly, or as needed -provide a way of transmitting info across an org (important for large corp) occurs when the volume of contacts between two functions increases. EX: Marketing manager and research and development manager meet to brainstorm new product ideas.

Organizational Design

the process by which managers create a specific type of organizational structure and culture so a company can operate in the most efficient and effective way

Organizing

the process by which managers establish the structure of working relationships among employees to allow them to achieve organizational goals efficiently and effectively

division of labor

the type of arrangement in which each worker specializes in a particular task or job managers must analyze the range of tasks and then create jobs that best allow the org. to give customers the goods/services they want. high divisions= efficient for complex production systems low divisions= efficient for simple production systems

outsource

to use outside suppliers and manufacturers to produce goods and services -low-cost advantage: wages in other countries are a fraction of what they are in the United States

minimum chain of command

top managers should always construct a hierarchy with the fewest levels of authority necessary to efficiently and effectively use organizational resources Effective managers constantly scrutinize their hierarchies to see whether the number of levels can be reduced- by eliminating one level and giving the responsibilities of managers at that level to managers above and by empowering employees below.

organizations are making empowered cross-functional teams an essential part of their organizational architecture to help them gain a competitive advantage in fast-changing organizational environments.

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