Chapter 7Chapter 7

Designing Adaptive Designing Adaptive OrganizationsOrganizations

Major Concerns in OrganizingMajor Concerns in Organizing Division of Labor (Differentiation)Division of Labor (Differentiation) Coordination (Integration)Coordination (Integration)

In Reference to the Organizational Chart, In Reference to the Organizational Chart, Organizing Involves:Organizing Involves:

VERTICAL STRUCTUREVERTICAL STRUCTURE

Coordination from Top to BottomCoordination from Top to Bottom

HORIZONTAL STRUCTUREHORIZONTAL STRUCTURE

Departmentalization (Who works together?)Departmentalization (Who works together?)

Work SpecializationWork Specialization

Degree to which tasks are subdivided Degree to which tasks are subdivided into individual jobs into individual jobs

A highly specialized job is narrow in A highly specialized job is narrow in scopescope

Increases efficiency up to a pointIncreases efficiency up to a point With extreme specialization, workers With extreme specialization, workers

tend to become bored and alienatedtend to become bored and alienated

Chain of CommandChain of Command

The line of authority, shown in the The line of authority, shown in the organization chart, that links all persons organization chart, that links all persons and shows who reports to whom.and shows who reports to whom.

CEOCEO

VP MarketingVP Marketing VP ProductionVP Production VP FinanceVP Finance

AuthorityAuthority Managers have authority because of the positions Managers have authority because of the positions

they hold (not who they are)they hold (not who they are) To be effective, it To be effective, it must be accepted must be accepted by by

subordinates.subordinates.

ResponsibilityResponsibility Duty to perform the task an employee has been Duty to perform the task an employee has been

assignedassigned Authority should be commensurate with Authority should be commensurate with

responsibility.responsibility.

DelegationDelegation

Process to transfer authority and Process to transfer authority and responsibility to positions belowresponsibility to positions below

Delegation Delegation does not does not reduce responsibilityreduce responsibility Benefits both the organization and the Benefits both the organization and the

individual employeeindividual employee

Common Practice is to:Common Practice is to:

CENTRALIZE CENTRALIZE (authority at top)(authority at top)– AccountingAccounting– FinanceFinance– Human Resources ManagementHuman Resources Management– Information SystemsInformation Systems

DECENTRALIZEDECENTRALIZE (much delegation) (much delegation)– Production Production – MarketingMarketing

Span of ManagementSpan of Management

Number of employees reporting to a Number of employees reporting to a supervisorsupervisor

Tradition has recommended a span of Tradition has recommended a span of management of four to seven management of four to seven subordinatessubordinates

What is best depends on the situationWhat is best depends on the situation

DepartmentalizationDepartmentalizationBasis for grouping job positions into departments and departments Basis for grouping job positions into departments and departments

into the total organization.into the total organization. Internal Operations OrientedInternal Operations Oriented

– FunctionalFunctional– Network (Virtual)Network (Virtual)

Output OrientedOutput Oriented– DivisionalDivisional

» ProductProduct» GeographicGeographic» CustomerCustomer

– Team (Cluster)Team (Cluster) CombinationsCombinations

– Hybrid (different types at Hybrid (different types at differentdifferent places in places in an an org.)org.)

– Matrix (different types at simultaneous at Matrix (different types at simultaneous at the the samesame places in an org.) places in an org.)

Functional ApproachFunctional ApproachDepartments based on similar activities, skills Departments based on similar activities, skills

and resource use.and resource use.Advantages:Advantages: Efficient use of Efficient use of

resources resources Economies of ScaleEconomies of Scale In-depth skill In-depth skill

specializationspecialization

Disadvantages:Disadvantages: Poor communication Poor communication

among departmentsamong departments Slow response to Slow response to

external changesexternal changes Loyalty more to function Loyalty more to function

than customer or the than customer or the whole organizationwhole organization

Divisional ApproachDivisional Approach

Departments are grouped together based Departments are grouped together based on organizational outputs (e.g., product, on organizational outputs (e.g., product, geography, customer)geography, customer)

Functions (e.g., marketing) are split Functions (e.g., marketing) are split among the divisionsamong the divisions

Its advantages and disadvantages tend to Its advantages and disadvantages tend to be the opposite of those of the functional be the opposite of those of the functional approachapproach

DivisionsDivisions

Advantages:Advantages: Quicker changes in Quicker changes in

an unstable an unstable environmentenvironment

More in touch with More in touch with customerscustomers

Disadvantages:Disadvantages: DuplicationDuplication– Competition for Competition for

resources among resources among divisionsdivisions

– More managers More managers neededneeded

Less professional Less professional specializationspecialization

Matrix ApproachMatrix Approach

Functional and divisional chains of Functional and divisional chains of command simultaneouslycommand simultaneously

Violates the unity of command concept.Violates the unity of command concept.

Matrix Structure - Why?Matrix Structure - Why?

To get the advantages of both Functional To get the advantages of both Functional and Divisional Structuresand Divisional Structures

Sophisticated technology, fast-changing Sophisticated technology, fast-changing environmentenvironment

DiverseDiverse productsproducts and and geographicalgeographical areas areas

Disadvantages of MatrixDisadvantages of Matrix

Many meetings to coordinate activities Many meetings to coordinate activities High conflict between two sides of matrixHigh conflict between two sides of matrix Need for extensive human relations Need for extensive human relations

trainingtraining

Team ApproachTeam Approach

Cross-functional teams Cross-functional teams (Clusters)(Clusters) consist consist of employees from various functional of employees from various functional departments departments

Teams typically have more decision Teams typically have more decision making power than previously held by making power than previously held by workers at their levels.workers at their levels.

Team ApproachTeam Approach

AdvantagesAdvantages– Quicker response timeQuicker response time– Better moraleBetter morale– Reduced administrative overheadReduced administrative overhead

DisadvantagesDisadvantages– ConflictConflict– Time and resources spent on meetingsTime and resources spent on meetings

Network (Virtual) ApproachNetwork (Virtual) Approach

Organization divides major functions Organization divides major functions among separate companies brokered by among separate companies brokered by a small headquarters organizationa small headquarters organization

Somewhat like a Somewhat like a functional functional organization.organization.

Network ApproachNetwork Approach

AdvantagesAdvantages– Increases competitiveness, especially of Increases competitiveness, especially of

small firmssmall firms– FlexibilityFlexibility– Reduced CostsReduced Costs

DisadvantagesDisadvantages– No hands-on controlNo hands-on control– Loyalty weakened.Loyalty weakened.

Mechanistic vs. Organic Mechanistic vs. Organic OrganizationsOrganizations

Vertical vs. Horizontal Structural DominanceVertical vs. Horizontal Structural Dominance Rigid vs. FlexibleRigid vs. Flexible Specialized Jobs vs. UnspecializedSpecialized Jobs vs. Unspecialized Boss Control vs. Self-ControlBoss Control vs. Self-Control Centralized Decisions vs. DecentralizedCentralized Decisions vs. Decentralized Bureaucratic vs. Non-bureaucraticBureaucratic vs. Non-bureaucratic

Departmentalization TypesDepartmentalization Types

(From most Mechanistic to most Organic)(From most Mechanistic to most Organic) FunctionalFunctional Functional with integrators, cross-Functional with integrators, cross-

functional committees, etc.functional committees, etc. MatrixMatrix DivisionalDivisional TeamTeam

When the Mechanistic (Vertical) When the Mechanistic (Vertical) Approach is most Appropriate:Approach is most Appropriate:

External EnvironmentExternal Environment is: Stable is: Stable

Growth and Innovation GoalsGrowth and Innovation Goals are: are:

Few or Nonexistent (Internal Stability)Few or Nonexistent (Internal Stability)

The Organization’s The Organization’s SizeSize is: Large is: Large

The The TechnologyTechnology is: Mass Production (or is: Mass Production (or involving low-level skills)involving low-level skills)

When the OrganicApproach is When the OrganicApproach is most Appropriate:most Appropriate:

External EnvironmentExternal Environment is: Unstable is: Unstable

Growth and Innovation GoalsGrowth and Innovation Goals are: Numerous are: Numerous

TechnologyTechnology is: is:

Small BatchSmall Batch

Continuous ProcessContinuous Process

Flexible Manufacturing (Computer Assisted)Flexible Manufacturing (Computer Assisted)

Service, especially professional service jobs.Service, especially professional service jobs.

Service TechnologyService Technology

Tends to be more Organic (Horizontal) Tends to be more Organic (Horizontal) than manufacturingthan manufacturing

Employees have direct contact with Employees have direct contact with customerscustomers

Output of the firm is intangibleOutput of the firm is intangible Production and consumption are Production and consumption are

simultaneoussimultaneous