MGMT Ch. 7

Matrix Organizational Structure:

- Divided into product lines- A,B,C - Each line has own sales, manufacturing, R&D personnel assigned to each division - Ex) Proctor and Gamble oProduct lines: beauty care, household care, health and well being oEach line has own Market Development organizations, Global Business Services, and Corporate Functions

Organizational Flexibility

-Ambidextrous organizations -Maintain efficiency in current strategic operations while preparing for imminent changes -Create a separate team to work on future opportunities while the rest of the firm focuses on primary business -Advantage: creates a forum for innovation and creativity

Types of Decision Rights

-Centralized organization -Decentralized organization

Informal Structures

-Contribute in defining an organization -Develop over a period of time -Not listed in firm's bylaws or management practices -Are affected by organizational changes

Customer Centric Model

-Coordination and Connection -Cooperation and Capability Development

HP horizontal (related) diversification

After Wozniack/ Jobs episode, best root action: -restructure organization to better support multiple products -change corporate strategy

Organizational Design Levers

Are concerned with how decisions are made -How info should flow through organization -Who should make decisions regarding info

Benefits of Matrix

Combines positive elements from different organizational configurations to: -Cope with strong environmental pressures -Assist complex internal interrelationships -Facilitate sharing and optimization of resources To facilitate optimum performance use: -Technological expertise within functions -Horizontal coordination across functions Assigns equal authority to both divisional and functional managers

Downfalls of Matrix

Creates confusing and inefficient scenarios for managers and employees -Everyone has 2 bosses -Increase meetings and coordination mechanisms -Decrease in efficiency of managers and employees

HP Functional Form

HP wanted highly technical set of devices, selling to a few companies. HP functional form in early years supported strategy because: o HP was a small company o Processed a few products

Ex) HP executive. Your organization has functional silos based on products. Action to take to solve customer negative feedback:

Restructure the org to better support multiple products

Rule of 150

Robin Dunbar suggested a cognitive limit to the number of people with whom one can maintain stable relationships

Advantages of Bureaucratic approach

-efficient -can withstand high turnover -provides focus for diverse workforce When Appropriate: -large, complex org -measurable tasks -price-competitive and cost-sensitive industries ex) fast food restaurants, industrial companies

Advantages of Clan approach

-elicit commitment -employees are self regulating -can easily adapt to environment When appropriate: -uncertain conditions -quickly changing industry -work activities difficult to manage ex) some start up, consulting, advertising, and high tech companies

Rule of 150 applied- firm has over 150 employees

-managers no longer know what all employees do - employees no longer know what other employees do - a need for organization comes up - multiple ways to organize a company

Role of Leadership Across Life-Cycle Stages

-startup -growth -decline

Main theories of management (review):

1) Scientific MGMT 2) Human relations movement 3) contingent view

Functions of an Organization

1) define roles of labor force 2) coordinates activities between members 3) identifies the border of firms and external relationships

Network Form

Uses cross functional teams and technology to coordinate work of geographically dispersed work groups Emphasizes on informal structure of firm -Informal relationships between clusters of workers and cross-functional teams dominate the action of the firm Allows firm to quickly adapt to changes in marketplace or respond to a competitor's action

ex) You are a sales executive at P&G, Old Spice decision. Walmart invites you to live in Arkansas and manage a team that makes all decisions related to Wal-Mart's men's grooming business (you will continue as P&G employee). Best decision:

Yes, because modern companies share a lot of data and the lines between supplier/client and competitors have become fuzzy.

Silos

a functional or divisional unit that operates by its own rules and guidelines and does not openly share info with other units

Clan approach

a type of org control that includes self-supervising teams that are responsible for a set or tasks

Bureaucratic approach

an extreme form of org control in which systems are highly formalized and are characterized by extensive rules, procedures, policies, and instructions • close personal surveillance of superiors over subordinates • not useful in creative environments

Decentralized organization

an organizational structure where key decisions are made at all levels of firm, not mandated from top

Matrix structure

both divisional and functional managers have equal authority in the organization

decline stage

cost management, realignment, restructuring

growth stage

efficiency, standardization, consolidation and control, protection of status quo

Divisional structure

groups diverse functions into several divisions

vertical specialization

how much an employee creates, executes, and administers activities in a certain area of firm ex) Separation of managerial tasks, and workers underneath (a pyramid)

Network structure

knowledge workers are organized to work as individual contributors or to be a part of a work cluster that provides a certain expertise for org

A company can be organized into divisions based on:

o Products o Small, medium, and large clients o NE, SE, NW, Pacific, Midwest o USA and International

startup stage

opportunity identification, focus on innovation, access to capital

Functional structure

organizes a firm in terms of the main activities that need to be performed, such as: production, marketing, sales, and accounting

Decision Rights

rights that include initiating, improving, implementing, and controlling various types of strategic or tactical decisions -Differ based on horizontal and vertical decisions -Delegation

horizontal specialization

the breadth of activities that are performed for a certain job ex) putting cheese on the sandwich

Organizational design

the formal systems, levers, and decisions an organization adopts or employs in pursuit of its strategy

Division of Labor

the manner in which work in a firm is divided among employees; vertical and horizontal specialization of labor

Mutual Adaptation

the process by which firms impact the nature of their overarching industrial environment and adapt their organization in response to evolving contextual factors ex) Critically important in industries where change is constant, such as technology and fashion ex) HP has been adapting for 20-40 years. Still in process, no end change

Delegation

the process by which managers transfer decision rights to individual employees

Organizers (scientific MGMT)

those who believe that more control is warranted in org. design to ensure that jobs are performed satisfactorily and efficiently • greater job standardization • specific definitions of roles and responsibilities • more hierarchical leadership

Behaviorists (human relations MGMT)

those who support a more open org structure where roles and responsibilities are loosely defined

Divisional Form:

• Can be organized around products, geographies, or clients • Each division accountable for own profit and loss • Employees feel more loyal towards their division rather than function (silos) • Allows greater accountability • Promotion is based on management capabilities across divisions rather than functional expertise

Functional Organizational Structure:

• R&D • Production • Sales • Marketing • Finance

HP organizational issues

• Would have people from each division calling on same clients • Repeat calling got annoying and people complained • Decided to sell total services and solutions, not individual products • Reorganized info by customer type (large or small customers, public sector, services)

Advantages of Division of Labor

• creation of highly specialized jobs. can help develop expertise or competency in a certain skill or function • repetitive and specialized nature of jobs help in quick and effective training of new resources

Disadvantages of Division of Labor

• extreme specialization resulting in tedious repetitive work can lead to low job satisfaction • due to high levels of job specialization, firms are unable to prevent turnover *the level of division of labor related to expectation on how long employees will stay in firm

Why do companies reorganize?

•Company has grown (diversification) •Products/ markets have changed •Improve accountability of managers •Strengthen managerial incentives •Improve transparency •Allocate scarce resources more effectively •Divesture- Retrenchment *Newly appointed top managers often want to reorganize

Ex) What type of organizational structure does Modern Shed have?

•Network organization •High percent of function/work done by someone else. Lots of people involved •Only one product and 12 people work there

4 types of organizational structure:

1. Functional structure 2. Divisional structure 3. Matrix structure 4. Network structure

Coordinating mechanisms:

1. Organizers (scientific MGMT) 2. Bureaucratic approach 3. Behaviorists (human relations MGMT) 4. Clan approach

Centralized organization

an organization structure characterized by formal structures that control employee behavior by concentrating decisions in top-down, hierarchical fashion