chapter 10 designing adaptive organizations(1)

Designing Adaptive Organizations

Cha

pter

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Copyright © 2005 by South-Western, a division of Thomson Learning. All rights reserved.

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Organizing

Organization is the deployment of resources to achieve strategic goals.

It is reflected in– Division of labor into specific departments & jobs– Formal lines of authority– Mechanisms for coordinating diverse organizational

tasks

Manager’s Challenge: Nissan


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Designing Adaptive Organizations

Organizing Principles and Concepts

Organizing the Vertical Structure

Using Mechanisms for Horizontal Coordination

Tailoring Various Elements of Structural Design to Organizational Situations

Topics

Chapter 10


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Organization Structure

Defines how tasks are divided, resources are deployed, and departments are coordinated● Set of formal tasks assigned● Formal reporting relationships● The design of systems to ensure effective coordination of employees across department


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The Organization Chart

“The Home Depot is the world's largest home improvement retailer currently operating 1,363 stores.

• Visual representation of an organization’s structure

• Important Features of Vertical Structure:

1. Work Specialization

2. Chain of Command

3. Authority, Responsibility and Delegation

4. Span of Management or Span of Control

5. Centralization/Decentralization


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Work Specialization

Tasks are subdivided into individual jobs Employees perform only the tasks relevant

to their specialized function Jobs tend to be small, but they can be

performed efficiently

Division of Labor concept


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Chain of Command

Unbroken line of authority that links all persons in an organization

Shows who reports to whom

Associated with two underlying principles Unity of Command Scalar Principle

Unbroken line of authority that links all persons in an organization

Shows who reports to whom

Associated with two underlying principles Unity of Command Scalar Principle


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Authority

Formal and legitimate right of a manager to make decisions and issue orders

Allocate resources to achieve organizationally desired outcomes

Authority is distinguished by three characteristics Authority is vested in organizational positions, not

people Authority is accepted by subordinates Authority flows down the vertical hierarchy

Formal and legitimate right of a manager to make decisions and issue orders

Allocate resources to achieve organizationally desired outcomes

Authority is distinguished by three characteristics Authority is vested in organizational positions, not

people Authority is accepted by subordinates Authority flows down the vertical hierarchy


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Responsibility

The duty to perform the task or activity an employee has been assigned

Managers are assigned authority commensurate with responsibility

Flip Side of the Authority coin


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Accountability

● Mechanism through which authority and responsibility are brought into alignment

● People are subject to reporting and justifying task outcomes to those above them in the chain of command

● Can be built into the organization structure


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Delegation

●Process managers use to transfer authority and responsibility

●Organizations encourage managers to delegate authority to lowest possible level

Ethical Dilemma: A Matter of Delegation


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Techniques for Delegation

Give thorough instructions

Maintain feedback

Evaluate and reward performance

Delegate the whole task

Select the right person

Delegation

Ensure that authority equals responsibility


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Line and Staff Authority

Line Authority = individuals in management positions have the formal power to direct and control immediate subordinates

Staff Authority = granted to staff specialists in their area of expertise


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Span of Management (also called Span of Control)

Number of employees who report to a supervisor– Traditional view = seven subordinates per manager– Lean organizations today = 30+ subordinates

Supervisor Involvement– must be closely involved with subordinates, the span

should be small– need little involvement with subordinates, it can be

large

Number of employees who report to a supervisor– Traditional view = seven subordinates per manager– Lean organizations today = 30+ subordinates

Supervisor Involvement– must be closely involved with subordinates, the span

should be small– need little involvement with subordinates, it can be

large


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Factors Associated With Less Supervisor Involvement

Work is stable and routine Subordinates perform similar work tasks Subordinates are concentrated in a single location Subordinates are highly trained Rules and procedure defining task activities are available Support systems and personnel are available for the

manager Little time is required in nonsupervisory activities Managers’ preferences and styles favor a large span

Work is stable and routine Subordinates perform similar work tasks Subordinates are concentrated in a single location Subordinates are highly trained Rules and procedure defining task activities are available Support systems and personnel are available for the

manager Little time is required in nonsupervisory activities Managers’ preferences and styles favor a large span


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Tall versus Flat Structure

Span of Control used in an organization determines whether the structure is tall or flat

Tall structure has a narrow span and more hierarchical levels

Flat structure has a wide span, is horizontally dispersed and fewer hierarchical levels

The trend has been toward wider spans of control

Span of Control used in an organization determines whether the structure is tall or flat

Tall structure has a narrow span and more hierarchical levels

Flat structure has a wide span, is horizontally dispersed and fewer hierarchical levels

The trend has been toward wider spans of control


Centralization versus Decentralization

Centralization – the location of decision authority near top organization levels

Decentralization – the location of decision authority near lower organization levels

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Centralization versus Decentralization

Greater change and uncertainty in the environment are usually associated with decentralization

The amount of centralization or decentralization should fit the firm’s strategy

In times of crisis or risk of company failure, authority may be centralized at the top


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Departmentalization

The basis on which individuals are grouped into departments and departments into the total organization

• Five Approaches to Structural Design1. Vertical Functional Structure2. Divisional Structure3. Matrix Structure4. Team-Based Structure5. Virtual Network Structure


CEOCEO

FinanceFinance ProductionProduction MarketingMarketing

Vertical Functional Organizational Structure


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Vertical Functional Structure

Grouping of positions into departments based on similar skills, expertise, and resource use● Information flows up and down● Chain of command converges at the top● Managers and employees are compatible

because of similar training and expertise● Rules and procedures governing duties and

responsibilities


Divisional Structure

CEOCEO

ConsumerConsumerProductsProducts

LightingLightingProductsProducts

MedicalMedicalSystemsSystems


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Divisional Structure

Departments are grouped based on similar organizational outputs● Each division is autonomous of the others in a

huge corporation or organization


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Divisional Structure Advantages

Efficient use of resources

Skill specialization development

Top management control

Excellent coordination

Quality technical problem solving


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Divisional Structure Disadvantages

Poor communications

Slow response to external changes

Decisions concentrated at top

Pin pointing responsibility is difficult

Limited view of organizational goals by employees


Project CProject CManagerManager

Project BProject BManagerManager

Project AProject AManagerManager

EngineeringEngineering MarketingMarketing DesignDesign

Matrix Structure (Project-based)

CEOCEO

Employees ( ) are temporrily assigned to a specificproject team and have a permanent functional unit


General Motors’ IT Matrix Structure


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Matrix Structure

Utilizes functional and divisional chains of command simultaneously in the same part of the organization


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Matrix Advantages

More efficient use of resources than single hierarchy

Adaptable to changing environment

Development of both general and specialists management skills

Expertise available to all divisions Enlarged tasks for employees


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Dual-Authority Structure in a Matrix Organization


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Matrix Disadvantages

Dual chain of command High conflict between two sides of matrix Many meetings to coordinate activities Need for human relations training Power domination by one side of matrix


Team Structure

Organization is made up of horizontal teams that coordinate their activities and work directly with customers to achieve the organization’s goalsCross-functional teams – a group of employees from various functional departments that meet as a team to resolve problemsPermanent teams – a group of participants from several functions who are permanently assigned to solve ongoing problems of common interest

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Team Advantages

Same advantages as functional structure

Reduced barriers among departments

Quicker response time

Better morale

Reduced administrative overhead


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Team Disadvantages

Dual loyalties and conflict

Time and resources spent on meetings

Unplanned decentralization


CoreFirm

ProductProductdevelopment development

partnerpartner(U.S.A.)(U.S.A.)

Call centerCall centerpartnerpartner(India)(India)

Accounting Accounting partnerpartner

(Canada)(Canada)

Package Package design design partnerpartner

(UK)(UK)

Assembly Assembly partnerpartner

(Mexico)(Mexico)

Virtual Network Structure


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Virtual Network Structure

Disaggregates major functions to separate companies that are brokered by a small headquarters organization

OUTSOURCING


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Virtual Network Advantages

Global competitiveness

Work force flexibility

Reduced administrative overhead


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Virtual Network Disadvantages

No hands-on control

Loss of part of the organization severely impacts remainder of organization

Employee loyalty weakened


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Task Forces, Teams, Project Management

Task Force = temporary team/committee designed to solve a short-term problem involving several departments

Project Manager = responsible for coordinating activities of several departments on a full-time basis for the completion of a specific project


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Reengineering

Radical redesign of business processes to achieve dramatic improvements in cost, quality, service, and speed

Process = organized group of related tasks and activities that work together to transform inputs into outputs and create value


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Factors Shaping Structure

Structure Follows StrategyStructure Reflects the EnvironmentStructure Fits the Technology

Service Technology – technology characterized by intangible outputs and direct contact between employees and customers

Digital Technology – technology characterized by use of the internet and other digital processes to conduct or support business operations

chapter 10 designing adaptive organizations(1)

Business

subordinates authority

division of thomson

authority formal

staff authority line

characteristics authority

authority equals

notpeoplepeople authority

vertical hierarchy authority