Management 3600 Chapter 13 Designing Organizational Structures

Benefits of Divisional Structures

Building block structure - accommodates growth. Focuses employee attention on products or customers rather than tasks

Team-Based Structure

Built around self-directed work teams. Teams organized around work processes. Typically organic structure - wide span of control because teams operate with minimal supervision; highly decentralized with day-to-day decisions made by team members; low formalization i.e. relatively few rules.

Formalization

Degree to which organizations standardize behavior through rules, procedures, formal training, and related mechanisms. Formalization increases as firms get older, larger, and more regulated

Coordinating Work Activities - . Informal communication in Large Firms (Organizational Structure ) - Concurrent engineering

cross functional project team of people from various functional departments

Decentralization

decision authority and power dispersed throughout the organization. Firms decentralize as they get larger and older

Coordinating Work Activities - . Informal communication in Large Firms (Organizational Structure ) - Liaison roles

employees who are expected to communicate and share information with co-workers in other work units

Centralization

formal decision making authority held by a small group of people, typically at the top of the hierarchy

Divisional Structure Forms - Client divisional structure

organizes employees around specific customer groups. Best form depends on primary source of environmental diversity or uncertainty.

Four basic elements of organizational structure

1. Span of control 2. Centralization 3. Formalization 4. Departmentalization

Network Organizational Structure

Alliance of firms creating a product/service Supporting firms beehived around a "hub" or "core" firm. Emphasis on core competencies. More likely to form network structures when technology is changing quickly and production processes are complex - outsource to specialists

Effects of Organizational Size

As organizations grow, they have: 1. More division of labor (job specialization) 2. More elaborate coordinating mechanisms (e.g. standardization) 3. More hierarchy and formalization 4. More decentralization - decision making pushed down

External Environment & Structure - Complex vs. simple

Complex environment - more elements to consider. Simple environments - few things to monitor. Decentralized structures better for complex environments because decisions are pushed down to people with the necessary information to make informed choices

Coordinating Work Activities - Formal hierarchy (Organizational Structure )

Direct supervision i.e. the chain of command. Assigns formal (legitimate) power to manage others. Necessary in most firms, but has problems e.g. conflicts with employee autonomy and involvement

External Environment & Structure -Diverse vs. integrated

Diverse environment - greater variety of products/services,clients, regions. Integrated environment - only one client, product, and geographic area. The more diversified the environment, the more the firm needs to use a divisional structure aligned with that diversity

Organizational Structure Defined

Division of labor and patterns of coordination, communication, workflow, and formal power that direct organizational activities. Important part of organizational behavior - more than just an organizational chart. Relates to job design, information flow, work standards and rules, team dynamics, and power relationships.

Limitations of Divisional Structures

Duplicates resources (e.g. production equipment, expertise); inefficient use of resources because resources are not pooled/ Specializations are dispersed, creating silos of knowledge. Politics/conflict among executives as organizations revise their structures to align with primary source of environmental diversity and uncertainty

External Environment & Structure - Dynamic vs. Stable

Dynamic environments: (high rate of change, novel situations) - organic structures are best e.g. team-based, network. Stable environments: (regular cycles of activity) - mechanistic structures are best (when environment is predictable)

Benefits of Functional Structures

Economies of scale - specialized pools of talent. Supports employee identity with the specialization or profession. Direct supervision is easier - employees have common issues/expertise

Features of Simple Structures

Employ only a few people and typically offer only one distinct product or service. Minimal hierarchy - employees usually report to the owners. Roles are broadly defined - to maintain flexibility. Informal communication for coordination - minimizes walls between employees. Centralized structure - owners provide direct supervision to coordinate tasks

Matrix Structure (Project-based)

Employees are temporarily assigned to a specificproject team and have a permanent functional unit. Employees are assigned to a cross-functional team responsible for a specific game project, yet also belong to a permanent functional unit from which they are reassigned.

Coordinating Work Activities - . Informal communication in Large Firms (Organizational Structure ) - Integrator roles

Employees responsible for coordinating a work process by encouraging others to share information

Limitations of Network Structures

Exposed to market forces - risk of higher costs. Less control over subcontractors than in-house

Coordinating Work Activities - . Informal communication in Small Firms (Organizational Structure )

Good in nonroutine and ambiguous situations - allows exchange of information through face-to-face and other media rich channels. Easiest in small firms - information technologies have leveraged this coordinating mechanism in large firms.

Limitations of Team-Based Structures

Ongoing need for costly interpersonal skill training. Teamwork may take more time during early stages of team development. Role ambiguity increases employee stress. Problems with supervisor role changes e.g. loss of functional power; unclear career progression. Duplication of resources across teams

Benefits of Network Structures

Highly flexible - easy to change alliances. Potentially better use of skills and technology. Not saddled with nonessential facilities and resources

External Environment & Structure -Hostile vs. munificent

Hostile environment - face resource scarcity and more competition; dynamic. Munificent environment - plenty of resources and product demand. Organic structures most appropriate in hostile environments - if environments are extremely hostile, organization may need to temporarily centralize so that decisions can be made more quickly and executives can feel in control

Globally Integrated Enterprise have fewer geographic divisions because

Less need for local representation - clients can purchase online and communicate with businesses from anywhere. Reduced geographic variation - consumer preferences are converging around the world. More global clients who demand one global point of purchase

Matrix Structure (Project-based) firms

Many large global firms use matrix structure that has geographic divisions on one axis and products/services or client divisions on the other.

Organizational Strategy - Cost leadership strategy

Maximize productivity to offer competitive pricing - mechanistic structure is preferred

Limitations of Functional Structures

More emphasis on skills/professional needs than on the company's product, service, or client needs. Higher dysfunctional conflict across units. Poorer coordination - requires more controls

Mechanistic Structures

Narrow span of control - large hierarchies of people in specialized roles. High degree of task formalization - many rules and procedures rigidly defined, vertical communication. High degree of centralization - limited decision making at lower levels. Operate better in stable environments because they rely on efficiency and routine behaviors

Span of Control

Number of people directly reporting to the next level. Related to coordination through direct supervision. Narrow span of control - few people report directly to a manager

Divisional Structure Forms - Product divisional structure

Organizes employees around distinct outputs. Best form if company sells several types of products and customer preferences and government regulations are similar.

Divisional Structure Forms - Geographic divisional structure

Organizes employees around distinct regions of the country or world. Best if geographic structure if customers have different needs across regions and government regulations differ.

Divisional Structure Organization

Organizes employees around geographic areas, outputs(products or services), or clients

Functional Organizational Structure

Organizes employees around specific knowledge or resources (marketing, production) Typically centralized - to coordinate diverse activities. Most firms have functional structure at some level of the hierarchy or at some time in their history

Division of Labor can (Organizational Structure)

Potentially increases work efficiency - tasks mastered quickly, reduce training costs, easier to match people with jobs. Necessary as company grows and work becomes more complex

Organizational Strategy - Innovation strategy

Providing unique products or attracting clients who want customization - more organic structure is preferred

Problems with Formalization

Reduces organizational flexibility - employees follow prescribed behaviors even when the situation calls for a customized response. Discourages organizational learning and creativity. Reduces work efficiency - work rules sometimes become so convoluted they reduce efficiency. Increases job dissatisfaction and work stress. Rules become the focus of attention

Organizational Strategy - Structure follows strategy

Represents the decisions and actions applied to achieve the organization's goals Structure follows strategy. Strategy points to the environments in which the organization will operate. Leaders decide which structure to apply - results from conscious human decisions

Benefits of Team-Based Structures

Responsive, flexible in turbulent environments. Lower administrative costs - less formal hierarchy. Quicker and informed decision making

Coordinating Work Activities - . Informal communication (Organizational Structure )

Sharing information on mutual tasks and forming common mental models to synchronize work activities.

Tall vs Flat Structures

Span of control is interconnected with organizational size (number of employees) and number of layers in the hierarchy As companies grow, they: • Build a taller hierarchy • Widen span of control, or both

Effects of Departmentalization

Specifies how employees and their activities are grouped together - reflected in organizational chart Three functions of departmentalization: 1. Establishes chain of command (supervision structure) 2. Creates common mental models, measures of performance 3. Encourages staff to coordinate through informal communication - members typically work near each other

Coordinating Work Activities - Standardization (Organizational Structure )

Standardized processes e.g. job descriptions and procedures. Standardized outputs e.g. clearly defined goals and output measures (such as sales targets). Standardized skills e.g. extensive training so people acquire precise role behaviors

Division of Labor (Organizational Structure)

Subdivision of work into separate jobs assigned to different people - leads to job specialization. Division of labor is limited by the feasibility of coordinating that work.

Technology and Structure

Technology refers to mechanisms or processes by which an organization turns out its product or service

Globally Integrated Enterprise

Work processes and executive functions are distributed around the world through global centers, rather than developed in a home country and replicated in satellite countries or regions. Functional heads are geographically distributed - sensitive to cultural and market differences. Firm's "home" country is no longer focus of business - divisional

Technology and Structure - Variability

The number of exceptions to standard procedure that tend to occur

Organizational Structure in better words

The skeleton and framework used to ensure people understand what and how to be done. Who reports to who, the glue and the base to build all other parts of the organization. Its your organizational chart, who has what subordinates.

Organic Structures

Wide span of control. Low formalization - fluid tasks, free-flowing communication, values knowledge. Highly decentralized decision making. Work better in rapidly changing environments because they are more flexible and responsive to these changes Note: Liability of newness - newness makes start-up firms more organic, however, employees may lack sufficient experience for effectiveness

Benefits of Matrix Structures

Uses resources and expertise effectively - good for fluctuating workloads. Improves communication, project flexibility, innovation when managed properly. Focuses employees on serving clients or creating products. Supports knowledge sharing within specialty across groups. Solution when two divisions deserve equal importance

Team-Based Structure are

Usually found within divisionalized structure, however, some firms apply team-based structure throughout the organization e.g. W.L. Gore & Associates

degrees of centralization

Varying degrees of centralization can occur simultaneously in different parts of the organization e.g. decentralized marketing decisions to remain responsive to local markets; centralized production to improve cost efficiencies

Wide Span of Control

possible when: 1. Other coordinating mechanisms are present e.g. self-directed teams coordinate through informal communication and specialized knowledge 2. Tasks are routine - less frequent need for direction from supervisors 3. Low employee interdependence - supervisors will not have to spend as much time resolving conflicts, coaching and providing feedback

Technology and Structure - Analyzability

the predictability or difficulty of the work Example: when employees perform tasks with high variety and low analyzability an organic structure should be used e.g. research

Problems with tall hierarchies

• Higher overhead costs - more managers • Lower quality and less timely information from the external environment - information is transmitted slowly (or not at all) up the hierarchy • Focus power around managers rather than employees - undermines employee empowerment and engagement

Limitations of Matrix Structures

• Increases goal conflict (among managers who equally share power) and ambiguity related to priorities • Two bosses dilutes accountability • More dysfunctional conflict and stress