MGMT 371 --- Principles of Management

ManagementChapter 11 & 12: Organizational Structure and Design Test Three: Notes

Design Organizational Structure Organizing: Arranging and structuring work to accomplish an organizations goals. Organization Structure: The formal arrangement of jobs within an organization. Organizational Design Departmentalization Jobs that are grouped together Work specialization How to divide task into separate jobs Chain of command The reporting structure Span of control How many employees report to managers Centralization and decentralization How much power should lower level employees have Formalization Do people have the

Functional Departmentalization- Group Jobs According to Function Plant Manager Manager, Engineering Manager, Accounting Manager, Manufacturing Manager, Human Resources Manager, Purchasing+ Efficiencies from putting together similar specialties and people with common skills, knowledge, and orientations+ Coordination within functional area+ In-depth specialization-- Poor communication across functional areas-- Limited view of organizational goals

Geographical Departmentalization Vice President for Sales Sales Director, Western Region Sales Director, Southern Region Sales Director, Midwestern Region Sales Director, Eastern Region+ More effective and efficient handling of specific regional issues that arise+ Serve needs of unique geographic markets better -- Duplication of function-- Can feel isolated from other organizational areas

Product Departmentalization Bombardier, Ltd. Mass Transit Sector Mass Transit Division Bombardier-Rotax (Vienna) Recreational and Utility Vehicles Sector Recreational Products Division Logistical Equipment Division Industrial Equipment Division Bombardier-Rotax (Gunskirchen) Rail Product Sector Rail and Diesel Products Division+ Allows specialization in particular products and services+ Managers can become experts in their industry+ Closer to customers-- Duplication of functions-- Limited view of organizational goals Plant superintendent Sewing Department Manager Planning and Milling Department Manager Assembling Department Manager Lacquering and Sanding Department Manager Finishing Department Manager Inspection and Shipping Department Manager+ More efficient flow of work activities-- Can only be used with certain types of products

Customer Departmentalization Director of Sales Manager, Retail Accounts Manager, Wholesale Accounts Manager, Government Accounts+ Specialists can meet Customers needs and problems-- Duplication of functions-- Limited view of organizational goalsIncreasingly popular

Organizational Structure Work Specialization Dividing work activities into separate job tasks Consider McDonalds Overspecialization can result in boredom, fatigue, stress, poor quality, increased absenteeism, and higher turnover Job characteristics model

Designing Jobs Job Characteristics Model (JCM) Five primary job characteristics:1. Skill Variety: How many skills and talents are needed?2. Task Identity: Does the job produce a complete work?3. Task Significance: How important is the job?4. Autonomy: How much independence does the jobholder have?5. Feedback: Do workers know how well they are doing?More on this later

Organizational Structure (cont.) Chain of Command: The continuous line of authority that extends from upper levels of an organization to the lowest levels of the organization and clarifies that reports to whom. Authority: The rights inherent in a managerial position to tell people what to do and to expect them to do it. Barnard acceptance of authority Line vs. staff authority Responsibility: The obligation or expectation to perform. Unity of Command: The concept that a person should have one boss and should report only to that person. Span of Control: The number of employees who can be effectively and efficiently supervised by a manager.

Contrasting Spans of Control

Organizational Structure (cont.) Centralization: The degree to which decision-making is concentrated at upper levels in the organization. Decentralization: Organizations in which decision-making is pushed down to the managers who are closest to the action. Employee Empowerment When is more centralization or decentralization better? Formalization: The degree to which jobs within the organization are standardized and the extent to which employee behavior is guided by rules and procedures. Highly formalized jobs little discretion Low formalization fewer constraints

Mechanistic Versus Organic Organizations Mechanistic Rigid Departmentalization High specialization Clear chain of command Narrow spans of control Centralization High formalization Organic Cross-functional teams Cross-hierarchical teams Free flow of information Wide spans of control Decentralization Low formalization

Recall Webers Bureaucracy A bureaucracy should have: Career Orientation: Managers are career professionals, not owners of units they manage Division of Labor: Jobs broken down into simple, routine, and well-defined tasks. Authority Hierarchy: Positions organized in a hierarchy with a clear chain of command. Formal Selection: People selected for job based on technical qualifications Formal Rules and Regulations: System of written rules and standard operating procedures. Impersonality: Uniform application of rules and controls, not according to personalities.

Contingency Factors Overall strategy of the organization Structure follows strategy. Innovation organic Cost control mechanistic Size of the organization Firms change from organic to mechanistic organizations as they grow. Degree of environmental uncertainty Dynamic organic Stable mechanistic Technology and Structure Organizations adapt their structures to their technology. Unit production of single units or small batches Mass production of large batches of output Process production in continuous process of outputs Routine technology = mechanistic organizations Non-routine technology = organic organizations

Core Technology and Organization Design Woodwards Basic Forms of Technology Unit or Small-batch (Organic) Large-batch/mass-production (Mechanists) Continuous-process (Organic)

Traditional Organizational Designs Simple Structure Owner-Manager Workers Functional Structure Top Management Manufacturing Sales Finance Personnel Divisional Structure Product Division A Manufacturing Finance Sales Personnel Product Division B Manufacturing Sales Finance Personnel* Strategic Business Units and the conglomerate structure are variants of the divisional structure.

Conglomerate (H-form) Design at Samsung CEO Semiconductors Telecommunication Appliances Media

Multidivisional (M-form) Design at Hilton Hotels CEO Conrad Hotels & Resorts Doubletree Hotels Embassy Suites Hotels Hampton Inn & Suites Hilton Garden Inn Hilton Grand Vacations Club Homewood Suites by Hilton

Strengths and Weaknesses of Traditional Organizational Designs Simple Structure Strengths: Fast, flexible; Inexpensive to maintain Cleat Accountability Weaknesses: Not appropriate as organization grows Reliance on one person is risky. Functional Structure Strengths: Cost-saving advantages from specialization (economies of scale, minimal duplication of people and equipment) Employees are grouped with others who have similar tasks. Weaknesses: Pursuit of functional goals can cause managers to lose sight of whats best for overall organization; Functional specialists become insulated and have little understanding of what other units are doing. Divisional Structure Strengths: Focus on results division managers are responsible for what happens to their products and services. Weaknesses: Duplication of activities and resources increases costs and reduces efficiency.

Contemporary Organizational Designs Team Structure What it is: A structure in which the entire organization is made up of work teams. Advantages: Employees are more involved and empowered. Reduced barriers among functional areas. Disadvantages: No clear chain of command Pressure on teams to perform. Matrix-Project Structure What it is: Matrix structure assigns specialists from different functional areas to work on projects but who return to their areas when the project is completed. Project structure has employees continuously work on projects. Advantages: Fluid and flexible design that can respond to environmental changes. Faster decision making Disadvantages: Complexity of assigning people to projects. Task and Personality conflicts. Boundaryless Structure What it is: A structure not defined by or limited to artificial horizontal, vertical, or external boundaries; includes virtual and network types of government. Advantages: Highly flexible and responsive. Draws on talent wherever its found. Disadvantages: Lack of Control Communication difficulties Learning Structure What it is: A structure in which employees continually acquire and share new knowledge and apply that knowledge. Advantages: Sharing of knowledge throughout organization. Sustainable source of competitive advantage. Disadvantages: Reluctance on part of employees to share knowledge for fear of losing their power. Large numbers of experienced employees in the verge of retiring.

Removing External Boundaries Virtual Organization: Consists of a small core of full-time employees, and temporarily hires specialists to work on opportunities that arise. Network Organization: Outsources its major business functions (e.g., manufacturing) in order to concentrate on what it does best.

Matrix and Network (Virtual) Structures

Common Organization Designs for International OrganizationsA. Separate International Division CEO Production Marketing Finance International DivisionB. Location Departmentalization CEO North American Operations European Operations Asian OperationsC. Product Departmentalization CEO Product Manager A Product Manager B North America Europe Asia Product Manager CD. Multidivisional Structure CEO Subsidiary A (Germany) Subsidiary B (U.S.) Subsidiary C (France) Subsidiary D (Japan) Subsidiary E (China)

Learning Organizations An organization that has developed the capacity to continuously learn, adapt, and change through the practice of knowledge management by employees. An open team-based organization design that empowers employees Extensive and open information sharing

Collaboration Cross-functional teams Task forces / ad hoc committees Communities of practice Open innovation Strategic partnerships

Flexible Work Arrangements Telecommuting Flextime, compressed workweeks, job sharing Contingent workers More on these in HR

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