Chapter 15: Organizational Design, Effectiveness, and Innovation

Decision-making Processes

1) Centralized 2) Decentralized

3 ways to learn from failure

1) Conduct postmortems 2) Share the learning with others 3) Consider your goal orientation

4 common denominators of all organizations

1) Coordination of effort 2) Aligned Goals 3) Division of labor 4) Hierarchy of authority embody the "conscious coordination" of a firm

4 perspectives of the balanced scorecard (BSC)

1) Financial 2) Customer 3) Internal business processes 4) Learning and growth; which looks at employee welfare and development

Strategy and Goals

- Organizational design must be developed in tandem with establishing strategy. - It is the cornerstone of the organization's decision about the most appropriate design. - Setting a corporate strategy requires an organization to decide how it will compete.

Internal virtual structures

- coordinate the work of geographically dispersed (far-flung) employees working for one organization - primarily relies on the use of information technology Relies on technology but also requires managers to consider: 1) Do I have the right people? 2) How often should people get together? 3) What type of technology should be used to coordinate activities?

Improvement innovations

- enhance or upgrade an existing product, service, or process - often incremental (with small returns) - focus on existing customers

Horizontal structure

- teams or work groups, either temporary or permanent - teams are created to improve collaboration and work on common projects - focus is on work processes - each process consists of every task and responsibility needed to meet the customer's needs - organized into cross-functional teams Pros include: - rapid communication and reduction in cycle time for work done - greater flexibility - faster organizational learning - improved responsiveness to customers

7 types of organizational structures

1) Functional 2) Divisional 3) Matrix 4) Horizontal 5) Hollow 6) Modular 7) Virtual

5 Organizational Sub systems

1) Goals and values 2) Technical 3) Psychosocial 4) Structural 5) Managerial They are dependent on each other

4 basic dimensions of organizational structure

1) Hierarchy of authority (who reports to whom) 2) Division of labor 3) Spans of control 4) Line and staff positions

5 Sub Processes of Organizational Learning

1) Information acquisition 2) Information distribution 3) Information interpretation 4) Knowledge integration 5) Organizational memory

2 Organization types related to decision-making processes and organization structure

1) Mechanistic organizations 2) Organic organizations

4 factors of establishing spans of control

1) Organizational size - larger orgs have narrow SOC and more org layers; smaller have wide SOC 2) Manager's skill level - complex tasks = narrow SOC; routine tasks = wider SOC 3) Organizational culture - narrow SOC = likely of hierarchical cultures; wide = those that desire flexibility and discretion; clan or adhocracy cultures 4) Managerial responsibilities - more senior-level execs have narrower SOC; middle managers have wider due to broader scope and more complex responsibilities

Internal characteristics of organizations that need to be aligned and mutually reinforcing

1) Strategy 2) Structure 3) Organizational culture 4) Internal processes 5) Human resource practices, policies, and procedures 6) Employees' human and social capital

5 key contingency factors

1) Strategy and goals 2) Market uncertainty 3) Decision-making processes 4) Technology 5) Size

3 characteristics that all organizations share

1) a form or structure that serves as a fingerprint 2) the desire to be effective (e.g. making money and satisfying employees, customers, and shareholders) 3) the idea that innovation is crucial to remain in business; a key driver of long-term organizational performance

Dashboard

A graphical user interface that organizes and summarizes information vital to the user's role and the decisions that user makes; aggregated from data pulled in real time

Innovation strategy

A plan for being more innovative - requires a company to integrate its innovation activities into its business strategies - encourages management to invest resources in innovation and generates employee commitment to innovation across the organization

Closed system organizational model

A self-sufficient entity; closed to the surrounding environment

Organization

A system of consciously coordinated activities or forces of two or more persons

Technology (of an organization)

Consists of the information technology, equipment, tools, and processes needed to transform inputs to outputs the technology a company uses is a key consideration in deciding the best way to organize in pursuit of strategic goals

Traditional Organizational Design

Defined by a traditional approach; tend to have functional, divisional, and/or matrix structures relies on a vertical hierarchy and attempts to define clear departmental boundaries and reporting relationships

Open system organizational model

Depends on constant interaction with the environment for survival Capable of self-correction, adaptation, and growth, thanks to feedback from the environment

Crowdsourcing

Innovative tactic that allows companies to obtain needed services, ideas, or content by soliciting contributions from a large group of people

Information interpretation

Making sense of the information that organizations have acquired and distributed. Affected by perpetual biases and decision-making biases

4 critical high-level internal business process perspectives

Managers are encouraged to measure and manage: 1) Innovation 2) Customer service and satisfaction 3) Operational excellence; which includes safety and quality 4) Good corporate citizenship These processes influence productivity, efficiency, quality, safety, and a host of other internal metrics

Appropriate resources

Must dedicate resources to produce innovations; people, dollars, time, energy, knowledge, and focus are examples

Human resource policies, practices, and procedures

Need to be in line with the other 6 components of an innovation system

Failure

Occurs when an activity fails to deliver its expected results or outcomes

Knowledge integration

Occurs when information is shared and accumulated across different parts of an organization

Boundaryless organization

One in which management has largely succeeded in breaking down barriers between internal levels, job functions, and departments, as well as reducing external barriers between the association (organization) and those with whom it does business This structure is fluid and flexible and relies on telecommuting between geographically dispersed people using various technological tools such as texting, e-mail, social media, and other virtual methods of communication

Staff employees

Perform background research and provide technical advice and recommendations to their line managers

Knowledge repository

Place where knowledge is gathered and stored and can be accessed and used by others

Size (of an organization)

Size of a company is measured by: - amount of assets - number of employees - volume of sales - geographical locations

Commitment from Senior Leaders

Strategic goals cannot be achieved without support from senior leaders

Organizational memory

The combined processes of encoding, storing, and retrieving the lessons learned from an organization's history, despite the turnover of personnel aka Knowledge Repository

Office designs

The office setting can produce or negate innovation; open floor plans can promote cooperative behavior

Line managers

Those who occupy formal decision-making positions within the chain of command generally have the authority to make decisions for their units

Product innovation

a change in the appearance or the performance of a product or a service or the creation of a new one

Process innovation

a change in the way a product or service is conceived, manufactured, or distributed

Innovation system

a coherent set of interdependent processes and structures that dictates how the company searches for novel problems and solutions, synthesizes ideas into a business concept and product designs, and selects which projects get funded. 7 components/resources to support innovation (core designs): 1) Innovation strategy 2) Committed leadership 3) Innovative culture and climate 4) Required structure and process 5) Necessary human capital 6) Human resource policies, practices, and procedures 7) Appropriate resources

Organization chart

a graphic representation of formal authority and division of labor relationships informally, we can think of it as a family tree

Strategy map

a visual representation of a company's critical objectives and the crucial relationships among them that drive organizational performance

Coordination of effort

achieved through formulation and enforcement of policies, rules, and regulations

Hierarchy of authority

also called the chain of command, is a control mechanism dedicated to making sure the right people do right things at the right time (who reports to whom) Historically, managers have maintained the integrity of the hierarchy of authority by adhering to the unity of command principle

Organizational processes

an organization's capabilities in management, internal processes, and technology that turns inputs into outcomes.

Matrix structure

combines a vertical structure with an equally strong horizontal overlay - complex and confusing - often fail without proper implementation by management - can provide reasonable counterbalance among stakeholders increasing used by companies expanding into international markets Cons include: - a high level of communication necessary to avoid redundancy; - low trust and coordination among widely distributed employees; - failure to promote strong employee loyalty or organizational identification

Span of control (SOC)

describes the number of people reporting directly to a given manager range from narrow to wide - Narrow tend to create "taller" or more hierarchical orgs - Wide lead to a "flat" org

Hollow structure

designed around a central core of key functions and outsources other functions to other companies or individuals who can do them cheaper or faster aka Network Structure - Hollow structures have increased the need for freelance workers. - An organization becomes more hollow the more it outsources. - It outsources functions to other companies or individuals who can do them faster and cheaper.

Divisional structure

employees are segregated into organization groups based on industries, products or services, customers or clients, or geographic regions aka Product Structure or Profit Center Approach Work is organized into separate vertical divisions

Networked virtual structures

establish a collaborative network of independent firms or individuals to create a virtual entity - They join forces because each possesses core competencies needed for a project. - They are used in the movie/entertainment industry. - They establish a collaborative network of independent firms or individuals to create a virtual entity.

Organic organizations

flexible networks of multitalented individuals who perform a variety of tasks more likely to open boundaries between organizations, decentralized decision making, or use a horizontal design tend to be more successful in unstable and uncertain environments

Functional structure

groups people according to the business functions they perform, for example, manufacturing, marketing, and finance Work is organized into separate vertical functions

Foster an innovative culture and climate

innovation requires experimentation, failure, and risk taking, and these are all aspects of an organizations culture innovative culture and climate are associated with the creation of new ideas and products

Decentralized decision making

occurs when important decisions are made by middle and lower level managers

Centralized decision making

occurs when key decisions are made by top management

Division of labor

occurs when the common goals are pursued by individuals performing separate but related tasks As specialties are divided, jobs become more specialized

Virtual structure

one whose members are geographically apart, usually working with e-mail and other forms of information technology, yet which generally appears to customers as a single, unified organization with a real physical location Two types: 1) Internal 2) Networked

Required structure and processes

organizational structure and internal processes can promote innovation if they foster collaboration, cross-functional communication, and agility.

Contingency approach to organization design

organizations tend to be more effective when they are structured to fit the demands of the situation, and when the structure is aligned with internal activities and actions of the organization

Learning organization

proactively creates, acquires, and transfers knowledge, and changes its behavior on the basis of new knowledge and insights organizational learning is positively associated with performance and innovation Peter Senge describes this as "a group of people working together to collectively enhance their capacities to create results that they truly care about"

Mechanistic organizations

rigid bureaucracies with strict rules, narrowly defined tasks, and top-down communication, and centralized decision making would have one of the traditional organizational designs and a hierarchical culture the orderliness of this structure is expected to produce reliability and consistency in internal process, resulting in higher efficiency, quality, and timeliness tend to be more successful in relatively stable and certain environments

Organizational design

sets the structures of accountability and responsibility used to develop and implement strategies, and the human resource practices and information and business processes that activate those structures organizations are more effective or successful when their structure supports the execution of corporate strategies

Unity of command principle

specifies that each employee should report to only one manager

Aligned goals

start from the development of a companywide strategic plan. These strategic goals are then cascaded down through the organization so the employees are aligned in their pursuit of common goals.

New-direction innovations

take a totally new or different approach to a product, service, process, or industry these innovations focus on creating new markets and customers and rely on developing breakthroughs and inventing things that didn't already exist

Open Organizational Design

tend to have a hollow, modular, or virtual structures each rely on leveraging technology and structural flexibility to maximize potential value through outsourcing and external collaboration

Modular structure

the company assembles product parts, components, or modules provided by external contractors uses outsourcing (like a hollow org) this structure is also responsible for ensuring that the parts meet quality requirements, arrive in a timely fashion, and that the organization is capable of efficiently combining the parts this structure makes it easy to bring in and remove vendors as needed

Innovation

the creation of something new that makes money by connecting to the customer it finds a pathway to the consumer must be novel and useful Factors, which are all aspects of a company's culture, are required for innovation to occur: - failure - risk taking - experimentation

Market uncertainty

the level of uncertainty the organization faces helps determine the level of formalization it needs organizations may need to change their structure due to marketplace changes such as new competitors, alternate products, or customer preferences

Information acquisition

the process through which an organization obtains information from internal and external sources aka Scanning because this is the first step of learning, the organizations should cast a wide net in their acquisition of information affected by perceptual and decision-making biases

Information distribution

the processes or systems that people, groups, or organizational units use to share information among themselves

Human capital

the productive potential of an individual's knowledge and actions: a person factor in the Organizing Framework

Postmortems

the term that organizations use when they review and discuss past successes and failures to acquire more information

Balance Scorecard (BSC)

translates a company's strategy and vision into a comprehensive set of performance measures that provides the framework for a strategic measurement and management system A goal-setting and reward system that translates the organization's vision and mission into specific, measurable performance goals related to financial, customer, internal, and learning/growth (i.e., human capital) processes.

Horizontal Organizational Design

work hard to flatten hierarchy and organize people around specific segments of the work flow relies on a horizontal work flow and attempts to dissolve departmental boundaries and reporting relationships as much as possible aka Team Structure or Process Structure