Chapter10

Managers unable to "let go" of former realms of responsibility as their responsibilities increase are often referred to as

"micromanagers"

Disadvantages of the matrix Structure

1. Because coordination across functional areas and across projects is so important, matrix personnel spend considerable time in meetings, exchanging information, ultimately growing into bureaucracy and raising personnel costs 2. Characterized by considerable conflict both between project and functional managers over budgets and personnel and among the project managers themselves over similar recourse allocation issues 3. Reporting to two managers simultaneously violates a basic premise of manager and can create role conflict when different bosses provide conflicting instructions

key advantages of Matrix Structure

1. By combining the functional and product divisional structures a firm can enjoy many of the advantages in both forms 2. A matrix organization is flexible because employees may be transferred with ease between projects with different time frames 3. Matrix permits lower-level functional employees to become heavily involved in projects and gain valuable experience 4. Top management in a matric is freed form day-to-day involvement in the operations of the enterprise in order to focus on strategic leadership

Two key advantages to Geographic Divisional Structure

1. Products/services may be tailored more effectively to the legal, social, technical, or climate differences for specific regions 2. Producing or distributing products in different locations may give the organization a competitive advantage

Decentralization defined

An organizational decision-making approach with most strategic and operating decisions made by managers at the business unit level

Example where software developer organization among along 3 product lines: (Product Divisional Structure)

Business Productivity Educational applications

___________ have lower administrative costs than ______ organizations because fewer hierarchal levels require fewer managers and support personnel

Flat structures; taller organizations

Initial growth of an enterprise often requires that it be organized along functional areas

Functional Structure

General alterative structures that may be adopted to meet the strategic needs of the organization

Functional Structure Product Divisional Structure Geographic Divisional Structure Matrix Structure

Firm's operations are dispersed through various locations

Geographic Divisional Structure

Owner/manager and few employees perform all of the functions in a new business; with growth each function expands so that no one induvial can be involved in all of the companies functions and structure

Horizontal Growth

When firms outgrow functional structure and expand product lines and geographic, to better coordinate their activities some firms adopt

M-Form (multi divisional structure)

Because if its complexity, this structure is not as common as others;

Matrix Structure

While functional and divisional structure are viewed on opposite ends of the spectrum, top managers may attempt to position the organization between the two extremes in this structure

Matrix Structure

Organization environments

Organization in dynamic environments must be relatively Decentralized so decision can be made quickly whereas organizations in stable environments can be manage more systematically and centrally because change in relatively slow and predictable

Extent to which decision making should be Decentralized depends on a number of factors:

Organizational size Organization environments

Simple structure organizations early survival depends on an increase in demand for the company's products or services; as the organization grows to meet this demand, a more permanent division of labor tends to form

Owner/manager once involved in all functions begins to hold a more leadership roll and additional employees are assigned to more specialized functions

This structure is often adopted when a business has several distinct product lines

Product Divisional Structure

_______ structure becomes inappropriate when a firm grows beyond a certain point

Simple

______ organizations foster more effective coordination and communication of the business's mission and goals to all employees;

Tall centralized; planning and its execution are relatively easy to accomplish because all employees are centrally directed

__________is a key determinant of an organization's structure, especially in large firms with multiple business units

Top management philosophy ; the extent to which corporate managers are involved in business-level operations varies between firms

Organizations fall somewhere in between tall and flat

Vertical Growth

Corporate Restructuring defined

a change in the organization's structure to improve efficiency and firm performance, including such actives as realigning division's in the firm, reducing the amount of cash under the discretion of senior executives, and acquiring or divesting business units

Progressive firms restructure when it becomes clear that

a change is necessary -ideally before performance declines are substantial

Geographic Divisional Structure defined

a form of organizational structure in which jobs and activities are grouped on the basis of geographic location; example northeast region, Midwest region, etc.

Matrix Structure

a form of organizational structure that combines the functional and product divisional structures

Functional Structure defined

a form of organizational structure whereby each subunit of the organization engages in a firm-wide activities related to a particular function such as marketing, HR, finance, or production

product divisional structure defined

a form of organizational structure whereby the organization's activities are divided into self-contained entities, each responsible for producing, distributing and selling its own products

Firms that voluntarily restructure when necessary ordinarily do not have to be concerned with

a hostile takeover bids or externally forced involuntarily restructuring

Downsizing defined

a means of organizational decision-making approach with most strategic and operating decisions made by managers at the business unit level

Multidivisional Structure defined

a structural form with two or more divisions based on products (product divisional structure) or geography (geographic divisions structure); also called an M-form

Structural changes have a downside;

actions such as closing or combining offices, eliminating positions, and modifying reporting relationships may not only increase costs for a firm but can result in other negative effects

vertical growth defined

an increase in length of the organizations hierarchal chain of command

horizonal growth defined

an increase in the breadth of an origination's structure

tall organization defined

an organization characterized by many hierarchal levels and a narrow span of control

Flat organization defined

an organization characterized by relatively few hierarchal levels and a wide span of control

Major structural change may be considered when

an organization is performing well

Centralization defined

an organizational decision-making approach with most strategic and operating decisions made by mangers at the top of the organization structure (at corporate headquarters)

Horizontal structure defined

an organizational structure with fewer hierarchies designed to improve efficiency by reducing layers in the bureaucracy

Centralizing can also be inefficient especially when a firm

attempts to tightly control the activities of a diverse array of business units; As the organization grows, larger corporate staffs are required increase the distance between corporate management and business unit

While large organizations often benefit from economies of scale and more efficient, a large firm may actually become

both less efficient and less capable of meeting the needs and expectations of its customers over time.

Like a project manager, a _________manager pulls various specialists as needed from their functional departments;

brand

Functional Structure Disadvantages

business is organized around functions rather than products or geographic regions pinpoint the responsibility for profits or losses can be difficult; Prone to interdepartmental conflict by fostering a narrow perspective of the organization among its members

The appropriate type of corporate involvement can greatly influence

business profitability; Example: some firms have diversified into unrelated business and tend to operate in a relatively decentralized structure; decentralized firm tend to employ small corporate staffs and allow the business unit managers to make the most of their own strategic and operating decision

Functional Structure Advantage

can improve specialization and productivity by grouping together people who perform similar tasks

Functional structure can serve as a relatively effective and efficient means of

controlling and coordinating activities;

Firms with multiple related businesses usually require greater _____________ than those operating only in one business

coordination of their business units activities

Matrix Structure May be inappropriate for organizations emphasizing

cost leadership

Downsizing may occur after an acquisition if there are substantial _________differences between he two firms and the acquiring firm wishes to reorient the new combined workforce

cultural

Employee layoffs often occur in order to

cut costs and eliminate some of the bureaucracy that invariably accompanies multiple organizational layers; as layers are reduced, decision making becomes more decentralized

Communication and coordination across functional areas are often difficulty because

each function tends to have its own perspective and vernacular; R&D tends to focus on long-term issues while production dept. generally emphasizes short-run

Product Divisional Structure is ideal for training and developing managers because

each product manager is running their "own business";

Disadvantage Geographic Divisional Structure is more functional personnel are required because

each region has its own functional departments; coordination of company-wide functions is often more difficult and area manager may emphasize their own geographic regions to the exclusion of a company-wide viewpoint

Centralizing can result in ___________ across all business units

efficient and consistence

As a business becomes more complex, coordination activities becomes more difficult,

especially in organizations with related businesses

t/f: All 4 structures are never combined

false; §All 4 structures are often combined to create an approach uniquely tailored to the strategic needs of the firm

Organizations seeking the benefits of centralizing often select a________ structure

functional structure; More commonality in those functional activities across the firm's business units, the greater the tendency is to coordination those actives at the corporate level

In a centralization structure, there are clear lines of responsibility and accountability however, top managers may lack the __________that mangers at the middle and lower levels have

hands-on experience ; decision making occurs slowly and lower level manager may be less committed to those decision made at higher levels

Although synergy among business units may not be minimized, decentralized corporations can often eliminate these problems because

highly decentralized firms maintain only skeletal corporate staff;

Extent to which organizational activities are appropriately grouped affects

how well strategy is implemented

After a firm matures, its structure may change very little over the years;

however the structure may be modified from time to time as the firm changes market, moves into new industries, performs poorly or gets a new CEO

When functional specialists interact frequently, ____________ for their functional areas may evolve that may not have otherwise occurred without a mass of specialists organized in the same unit

improvements and innovations

Matrix structure is designed to address multifaceted problems because

it pools together the necessary expertise required

Concept of restructuring tends to conflict with emphasis on HR as the key source of a firms competitive advantages;

job cuts are typically associated with restricting can damage morale, encourage survivors to consider leaving before they're laid off and place a greater focus on minimizing costs rather than fostering creativity and excellence

Organizational size;

large organizations tend to be more decentralized than small ones because it's difficult for the CEO of a large company to stay abreast of all the organization's operations. Also firms with large numbers of unrelated business tend to be relatively Decentralized

Increases in organizational size usually lead to additional organizational

layers and bureaucracy;

Short term, evaluate and consider the firm's structure and be wiling to

modify the firms structure is rarely easy or cost free

Ongoing debate over a firms strategy should follow its structure or vice versa;

most recognized that strategy and structure are independent

Long-term because a firm's strategy is a key driver is required to fit with any

necessary strategic change because a firm's strategy is a key driver of its performance

Span of Control defined

number of employees reporting directly to a given manager

Downsizing often does not achieve desired results in the long term;

on average firms enjoy a slight short term rise in stock prices after downsizing followed by significant declines over intermediate term

simple structure defined

organizational form whereby each employee often performs multiple tasks and the owner/manager is involved in all aspects of the business

Heavy involvement in ___________ may reduce internal activities therefore flatten the structure and increase decision-making speed;

outsourcing or offshoring; stifles bureaucracy enabling firms to concentrate on key strategic concerns such as shortening the cycle time for new products or new models of existing ones

Decentralization can cloud lines of accountability when

poor decisions are made and can often result in poor coordination across units in the organization

Decentralized firm seek to overcome the difficulties of centralizing by

pushing each decision to the lowest level where it can be made effectively; enables a firm to take advantage of the intellectual capital that an organization develops across managerial ranks by employer managers with direct knowledge about a situation to make rapid decisions

Restructuring efforts can include

realigning divisions in the firm, reducing the amount of cash under the discretion of senior executives, and acquiring or divesting business units

Organization's structure dictates __________ and defines ________

reporting relationships, where and how the firm's work will be done; establishes a framework for identifying the levels in the org. where decisions will be made

Most common structural change when performance is poor and a __________ strategy is pursued

retrenchment

Simple structure may remain intact for only a few months in a fast-growing organizations or for years in a

small family business such as a rural convenience or hardware store; manager/owner is able to communicate the strategic priorities directly with most members of the organization

When properly executed, minor or major corporate restricting efforts can enable a firm to execute its __________more effectively

strategies

One structure may be appropriate for on particular _________but not another

strategy

The key is to select a structure that _________________and to reassess and modify both as required

supports the execution of the strategy ; many large well-known companies changes structures frequently as their environments change

Cuts applied equally to all departments both efficient and inefficient lose employees without regard to performance level

survivors are typically less loyal to the organization and wonder if they will be cut next

Matrix Structure Most commonly used in organizations that operate in industries with a high rate of

technological change such as software development, management consulting, and telecommunication

Organizational structure defined

the formal means by which work is coordinated in an organization

Brand manager defined

the project manager in P&G's version of the matrix structure

Firms combine two or more of the structure according to

the specific needs of the firm and the philosophy of its top executives

Disadvantages of Product Divisional Structure is each product manager emphasizes

their own product area resulting in product manger competitions rather than working together for the best of the company

Disadvantages of Product Divisional Structure is coordination of activities at HQ also becomes more difficult as

top management find it harder to ensure consistency among the various departments; can become substantial in large organizations with 40 or more products

Disadvantages of Product Divisional Structure is

total personnel expense for manufacturing is likely to be higher than if only one department were necessary as multiple departments are performing the same function;

T/F: There is no single best structure and one selected for any organization will have it's own benefits and challenges

true

t/f: Managers are grouped according to their expertise and the resources they use in their jobs in functional structure

true; Can foster economies of scale by centralizing functional activities and Tends to address costs and quality concerns effectively

T/F: Rather than emphasizing functions, this structure emphasizes product lines resulting in a clear focus on each product category and a greater orientation toward customer service

true; This structure is an alternative for businesses perusing prospector and differentiation strategies

Primary reason for Geographic Divisional Structure is the existence of

two or more distinct markets that can be segmented easily along geographical lines; differentiated business or those unable to standardize product/service lines because of geographical market difference may implement this structure

This structure is a combination of both therefore, personnel within the matrix have

two or more supervisor -a functional boss and a project boss; Project boss pulls together members from across functional departments to complete the project then once completed, return to their departments

profit center defined

well-defined organizational unit headed by a manger accountable for its revenues and expenditures