chapter 3 fundamentals of organization structure
company reengineered into a horizontal structure
structure is created around cross-functional core processes rather than tasks, functions, pr geography. thus boundaries between departments are obliterated(ford has core process groups for business development, parts supply and logistics, vehicle service and programs, and technical support -self-directed teams, not individuals, are the basis of organizational design and performance. Schwa, a restaurant in chicago serves elaborate multi-course meals, is run by a team.job rotation -process owners have responsibility for each core process in its entirety (Ford's parts and supply logistics process, a number of teams may work on jobs such as parts analysis, purchasing, material flow, and distribution, but a process owner is responsible for coordinating the entire process -people on a team are given skills, tools, motivation, and authority to make decisions central to the team's performance. team members are cross-trained to perform one another's jobs, and the combined skills are sufficient to complete a major organizational task -teams have the freedom to think creatively and respond flexibly to new challenges that arise -customers drive the horizontal corporation. effectiveness is measured by end-of-process performance objectives (based on the goal of bringing value to the customer) as well as customer satisfaction, employee satisfaction, and financial contribution -the culture is one of openness, trust, and collaboration, focused on continuous improvement. the culture values employee empowerment, responsibility, and well-being
teams (horizontal information sharing and coordination)
tends to be the strongest horizontal linkage mechanism -permanent task forces and are often used in conjunction with a full-time integrator -cross functional team useful when activities among departments require strong coordination over a long period of time -special project teams used when organizations have large-scale project, a major innovation, or a new product line. ex: jet-blue using special project to handle irregular operations -ex: wizard software company develops and markets software for web, desktop, and mobile apps. uses teams to coordinate each product line across the research, programming, and marketing departments. members meet each morning to resolve problems and ask questions and any problems with product line
organizational outputs
the distinctive feature of a divisional structure is that grouping is based on _______ ex: United technologies corporation, among the 50 largest U.S. industrial firms, has numerous divisions, including carrier, otis, pratt & whitney, and sikorsku - the chinese online-commerce company taobao is divided into 3 divisions that provide three different type of services
functional matrix
the functional bosses have primary authority and the project or product managers simply coordinate product activities
full time integrators or project managers
the matrix structure form is similar to the use of _______ except product managers (horizontal) are given the same amount of authority as functional managers (vertical)
task force (horizontal information sharing and coordination)
when linkage involves several departments -temporary committee composed of representatives from each organizational unit affected by a problem -each member represents the interest of a department or division and can carry information from the meeting back to that department -effective horizontal linkage device for temporary issues -solve problems by direct horizontal coordination and reduce the information load on the vertical hierarchy and disbanded after their tasks typically ex: G-town school plan for flu-shots teachers and others got together outside supporters
relational coordination (horizontal information sharing and coordination)
-managers also create specific cross-functional roles that promote coordination across boundaries ex: southwest operations span the boundaries across various departments to coordinate the numerous functions involved with flight departures -when relational coordination is high, people share information and coordinate their activities without having to have bosses or formal mechanisms telling them to do so
multi-focused grouping (departmental grouping)
means an organization embraces two or more structural grouping alternatives simultaneously. -these structural forms are often called matrix or hybrid. -an organization may need to group by function and product division simultaneously or might need to combine characteristics of several structural options
symptoms of structural deficiency
when organization structure is out of alignment with organization needs -decision making is delayed or lacking in quality -the organization does not respond quickly -employee performance declines and goals are not being met -too much conflict is evident
decision making is delayed or lacking in quality (symptoms of structural deficiency)
-decision makers may be overloaded because the hierarchy funnels too many problems and decisions to them -delegation to lower levels insufficient -information might not reach correct people affects vertical or horizontal
the organization does not respond innovatively to a changing environment (symptoms of structural deficiency)
-departments are not coordinate horizontally -customer needs must be identified by marketing and identification of technological developments by research department -org structure must specify departmental responsibilities that include environmental scanning and innovation
virtual network grouping (departmental grouping)
most recent approach to departmental grouping. -the organization is a loosely connected cluster of separate components. -departments are separate organizations that are electronically connected for the sharing of information and completion of tasks. -departments can be spread all over the world instead of one geographic location
centralized
problems and decisions are funneled to top levels of the hierarchy for resolution (top down approach)
vertical information system
strategy for increasing vertical information capacity -include the periodic reports, written information, and computer-based communications distributed to managers -information systems make communication up and down the hierarchy more efficient -managers want to straighten to avoid scandals and ethical concerns
Information systems, liaison roles, task forces, full-time integrator, and teams, relational coordination (isn't a device or mechanism but rather is a part of the very fabric and culture of the organization
structural alternatives that can improve horizontal coordination and information flow
product matrix (matrix structure)
the project or product managers (horizontal) have primary authority and functional managers simply assign technical personnel to projects and provide advisory expertise as needed
hybrid structure
used by most large organizations, combines characteristics of various approaches tailored to specific strategic needs -most companies combine characteristics of functional, divisional, geographic, horizontal, or network structures to take advantage of the strengths of various structures and avoid some of the weaknesses -tend to be used in rapidly changing environment because they offer the organization greater flexibility
vertical linkages
used to coordinate activities between the top and bottom of an organization and are designed primarily for control of the organization -employees at lower levels should carry out activities consistent with top-level goals, and top executives must be informed of activities and accomplishments at the lower levels.
weaknesses of the functional structure
-*main weakness; slow response to environmental changes that require coordination across departments - may cause decisions to pile on top; hierarchy overload -leads to poor horizontal coordination among departments -results in less innovation -involves restricted view of organizational goals
strengths of horizontal structure
-*most significant-enhanced coordination, which can drastically increase the company's flexibility and response to customer changes in customer needs -promotes flexibility and rapid response to changes in customer needs -directs the attention of everyone toward the production and delivery of value to the customer -each employee has a broader view of organizational goals -promotes a focus on teamwork and collaboration -improves quality of life for employees by offering them the opportunity to share responsibility, make decisions, and be accountable for outcomes
too much conflict is evident (symptoms of structural deficiency)
-allow conflicting departmental goals to combine into a single set of goals for the entire organization -departments act at cross-purposes or are under pressure to achieve departmental goals at the expense of organizational goals, the structure is often at fault -horizontal linkage mechanisms are not adequate
strengths of the functional structure
-allows economies of scale within functional departments (results when all employees are located in the same place and share facilities. producing all products in a single plant, for example, enables the plant to acquire the latest machinery) -enables in-depth knowledge and skill development (employees exposed to range of functional activities within their own department -enables organization to accomplish functional goals -is the best with only one or a few products
weaknesses of horizontal structure
-can harm organizational performance unless managers carefully determine which core processes are critical for bringing value to customers. (simply defining them can be difficult) -determining core processes is difficult and time consuming -requires changes in culture, job design, management philosophy, and information and reward systems -traditional managers may balk when they have to give up power and authority -requires significant training of employees to work effectively in a horizontal team environment -can limit in-depth skill development
two hybrid structures
-combine characteristics of the functional and divisional structures ex: starbucks has number of geographic divisions, but function such as marketing, legal, and supply chain operations are centralized ex: Sun Petroleum broke down into three divisions; fuels, lubricants, and chemicals to serve a different market requiring different strategy and management style. Activities such as HR, legal, tech, and finance were centralized as functional departments at headquarters in order to achieve economies of scale -combine characteristics of functional, divisional, and horizontal structures ex: ford launched ford 2000 to be leader in 21st century. wanted to use horizontal model to gain a faster, more efficient, integrated approach to customer.several horizontal groups and divisions (parts, vehicle service, technical support) retained functional structure for its finance, strategy, and communications, and hr departments which services for the entire division
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 -pertain to both vertical and horizontal aspects of organizing -first two are structural framework (vertical hierarchy) -last one about interactions among organizational employees. -organizational charts helpful to show how company flows
weaknesses of divisional organizational structure
-eliminates economies of scale in functional departments -leads to poor coordination across product lines (Sony losing walkman battle with Apple, incompatible products sold in another division) -eliminates in-depth competence and technical specialization (employees identify with the product line rather than with a functional specialty, R&D for instance applied research for product line opposed to overall organization) -makes integration and standardization across product lines difficult
virtual network structure
-may be viewed as a central hub surrounded by a network of outside specialists ex: Phil Rosedale LoveMachine. runs from his home and make software that lets employees send thank you or great job twitter like messages that builds morale for everyone in the company, basic software is free to companies that want to use it. no full time employees but works with freelancers. rosedale contracts out payroll and other administrative tasks -with network structure, rather than being house in one hose services can be outsourced to separate companies that are connected electronically to a central office -hub maintains control over processes in which it has world-class or difficult-to-imitate capabilities and then transfers other activities-along with the decision making and control over them- to other organizations
matrix structure
-sometimes an organization's structure needs to be multi-focused in that both product and function or product and geography are emphasized at the same time -matrix can be used when both technical expertise and product innovation and change are important for meeting organizational goals -often answer when organizations find that the functional, divisional, and geographic structures combined with horizontal linkage mechanisms will not work -product division and functional structures (horizontal and vertical) are implemented simultaneously -product and functional managers have equal authority and employees report to both
employee performance declines and goals are not being met (symptoms of structural deficiency)
-structure doesnt provide clear goals, responsibility, and mechanisms for coordination -reflect complexity of market environment yet be straightforward enough for employees to effectively work within
strengths of divisional organizational structure
-suited to fast change in unstable environment -leads to customer satisfaction because product responsibility and contact points are clear -involves high coordination across functional departments -allows units to adapt to differences in products, regions, customers -best in large organizations with several products -decentralizes decision making
examples of vertical linkages
1.hierarchical referral (problems referred to the next level of authority after employees unsure, answer is solved passed back down to lower levels) 2. rules and plans (lets employees know how to respond without communicating directly with their manager allow coordination without communication. plans like a budget provide standing information for employees. carefully design budget plans can let employees at lower levels be left alone to perform with their resource allotment 3. vertical information systems
virtual network structure
a few organizations carry outsourcing to the extreme to create ______ -sometimes called a modular structure, the firm subcontracts most of its major functions or processes to separate companies and coordinates their activities from a small headquarters organization
departmental grouping
affects employees because they share a common supervisor and common resources, are jointly responsible for performance, and tend to identify and collaborate with one another
functional structure
also called a U-form (unitary), activities are grouped together by common function from the bottom to the top of the organization -all engineers are located in the engineering department, and the vice president of engineering is responsible for all engineering activites -all human knowledge and skills with respect to specific activities are consolidated, providing a valuable depth of knowledge for the organization -most effective when in-depth expertise is critical to meeting organizational goals, when the organization needs to be controlled and coordinated through the vertical hierarchy, and when efficiency is important -can be quite effective when there is little need for horizontal coordination
divisional structure
also called an M-form (multi-divisional) or a decentralized form, separate divisions can be organized with responsibility for individual products, services, product groups, major projects or programs, divisions, business, or profit centers - sometimes also called a product structure or strategic business unit structure ex: johnson and johnson broken into three divisions- consumer products, medical devices and diagnostics, and pharmaceuticals, yet within those three major divisions are 250 operating units in 57 countries. disadvantage with approach, J&J sometimes forgets they work with each other in same corporation
personal outsourcing
approach allows people to shift only certain tedious and time-consuming tasks to be handled by the outsourcing partner while they focus on higher-value work
relational coordination (horizontal information sharing and coordination)
building it into the fabric of the organization requires the active role of managers -mangers invest in training people in the skills needed to interact with one another and resolve cross-functional conflicts, build trust and credibility by showing they care about employees, and intentionally foster relationships based on shared goals rather than emphasizing goals of the separate departments -people are free from strict work rules have flexibility, and get rewarded on team efforts, front line supervisors have small spans of control to develop close working relationships.
functional structure
can be redesigned into separate product groups and each group contains the functional departments of R&D, manufacturing,m accounting, and marketing -coordination is maximized across functional departments within each product group -centralized because it forces decisions all the way to the top before a problem affecting several functions can be resolved
decentralized
decision-making authority is pushed down to lower organizational levels
functional, divisional, multi-focused, horizontal, and virtual network grouping
departmental grouping options include
liaison role (horizontal information sharing and coordination)
direct contact between managers or employees affected by a problem usually link two departments -person is located in one department but has the responsibility of communicating and achieving coordination with another department -often exist between engineering and manufacturing departments because engineering has to develop and test products to fit the limitations of manufacturing facilities -an engineers office might be located in manufacturing area so engineer is available for discussions with manu. supervisors about engineering problems with manufacturing products -research and development person might sit in on sales meeting to coordinate new product development with what sales people think customers are wanting
process (horizontal structure)
ex: claims handling at progressive casualty insurance company. today adjusters are organized into teams that handle the entire process from beginnning to end and assitant now can fix problems over phone if problem can contact another team member in the field and appointment can be scheduled
hybrid structure
favored over pure functional, divisional, horizontal, or virtual network structure because it can provide some of the advantages of each and overcome some of the disadvantages
integrator (horizontal information sharing and coordination)
frequently has a title, such as product manager, project manager, program manager, or brand manager -does not report to one of the fundamental departments being coordinated -located outside the departments and has the responsibility for coordinating several departments ex: planters brand manager coordinates the sales, distribution, and advertising for that product -responsible for innovation or change project, such as coordinating the design, financing, and marketing of a new product -project managers do not have formal authority over team members with respect to pay, hiring, firing, that goes to managers of the functional departments
relational coordination (horizontal information sharing and coordination)
highest level of horizontal coordination -refers to "frequent, timely, problem-solving communication carried out through relationships of shared goals, shared knowledge, and mutual respect." -isnt a device or mechanism but is part of the very fabric and culture of the organization -high level; people share information freely across departmental boundaries, and people interact on a continuous basis to share knowledge and solve problems -coordination carries out through a web of ongoing positive relationships and across units rather than because of formal coordination roles of mechanisms
vertical hierarchy and old departmental boundaries
horizontal structure virtually eliminates both the______. largely response to change in business environment past 15 to 20 years
strengths of virtual network structure
major*-enables even small organizations to obtain talent and resources worldwide -gives a company immediate scale and reach without huge investments in factories, equipment, or distribution facilities (can help new or small companies) -enables the organization to be highly flexible and responsive to changing needs (arranging and rearranging resources, new technologies) -reduces administrative overhead costs (larger teams of specialists and admin not needed. managerial and technical talent can be focused on key activities that provide competitive advantage while other activities are outsourced
the functional matrix and product matrix
many companies have found a balanced matrix hard to implement and maintain because one side of the authority structure often dominates. As a consequence, two variations of matrix structure have evolved--
horizontal grouping (departmental groping option)
means employees are organized around core work processes, the end-to-end work, information, and material flows that provide value directly to customers. -all the people who work on a core process are brought together in a group rather than being separated into functional departments -ex: OSHA- teams of workers representing various functions respond to complaints from American workers regarding health and safety issues, rather than having the work divided up among specialized employees
divisional grouping
means people are organized according to what the organization produces -ceo oversees product division 1, 2, and 3 - ex: all the people require to produce toothpaste are grouped together under one executive -ex: times warner some product or service lines may represent independent businesses (warner brothers entertainment; music and videos), time inc. (sports illustrated, turner broadcasting (cable television networks)
outsourcing
most widespread design trend in recent years. -means to contract out certain tasks or functions, such as manufacturing, human resources, or credit processing, to other companies ex: city of manwood, cali outsourced everything from parking enforcement to street maintenance to policing and public safety. now pays have off budget to LAPD and service improved
integrator(horizontal information sharing and coordination)
need excellent personal skills -have a lot of responsibility but little authority -has to use expertise and persuasion to achieve coordination -spans the boundary between departments and must be able to get people together, maintain their trust, confront problems, and resolve conflicts and disputes in the interest of the organization
virtual team
one that is made up of organizationally or geographically dispersed members who are linked primarily through advanced information and communications technologies -members frequently use the internet and collaboration software to work together rather than meet face to face -IBM's virtual teams, collab via internal websites using wiki technology
functional structure with horizontal linkages
organizations compensate for the vertical functional hierarchy by installing horizontal linkages -use information systems, liaison roles, full-time integrators, or project managers, tasks forces, or teams, and by creating the conditions that encourage relational coordination ex: Karolinska Hospital had 47 functional departments, cut down to 11 coordination was still inadequate. top management reorganized workflow at hospital around patient care around admissions, x-ray, surgery, and so forth. new position, nurse coordinator, serve as full-time integrators, troubleshooting transitions within or between departments. this horizontal structure has overcome functional structure and the move has improved productivity and patient care
centralization or decentralization
organizations may have to experiment to find the correct degree of ________ to meet their needs may need each other
reengineering (horizontal engineering)
organizations typically shift toward a horizontal structure during a procedure called_______ -or business process, basically means the redesign of a vertical organization along its horizontal workflows and processes -changes the way managers think about how work is done rather than focusing on narrow jobs structured into distinct functional departments, they emphasize core processes that cut horizontally across the organization and involve teams of employees working together to serve customers -when a company is ______ to a horizontal structure all employees throughout the organization who work on a particular process have easy access to one another so they can communicate and coordinate thier efforts.
horizontal structure
organizes employees around core processes -organization typically shift toward a horizontal structure during a procedure called reengineering -process refers to an organized group related tasks and activities that work together to transform inputs into outputs that create value for customers -virtually eliminates both the vertical hierarchy and old departmental boundaries -onset by technology and customers wanting faster reponse
functional grouping
places together employees who perform similar functions or work processes or who bring similar knowledge and skills to bear ex: marketing people who work together under the same supervisor, as do all manufacturing employees, all human resources people, and all engineers ex: for an internet company, all the people associated with maintaining the website might be grouped together in one department ex: in science all the chemists may be grouped together separate from biologists
weaknesses of virtual network structure
primary* lack of control -managers do not have hands-on control over many activities and employees (decentralization -requires a great deal of time to manage relationships and potential conflicts with contract partners (contracts, negotiation) -there is a risk of organizational failure if a partner fails to deliver or goes out of business -employee loyalty and corporate culture might be weak because employees feel they can be replaced by contract services (turnover might be higher because emotional commitment between the organization and employees is low)
divisional structure
promotes flexibility and change because each unit is smaller and can adapt to the needs of its environment -decentralizes decision making because the lines of authority converge at a lower level in the hierarchy -works best when goals are oriented toward adaptation and change
process (horizontal structure)
refers to an organized group of related tasks and activities that work together to transform inputs into outputs that create value for customers ex: order fulfillment, new product development, and customer service -emphasize core processes that cut horizontally across the organization and involve teams of employees working together to serve customers
horizontal linkage
refers to communication and coordination horizontally across organizational departments -not often drawn on the organization chart but are vital -small companies usually have a high level of interaction among all employees, but in a large organization, providing mechanisms to ensure horizontal information sharing is critical to effective coordination, knowledge-sharing, and decision making ex: poor coordination and lack of info sharing has hurt Toyota in ability to response time and safety issues
