D: Chapter 10

Designing Adaptive Organizations

Organizing

The deployment of organizational resources to achieve strategic goalsReflects deployment of resources Shows division of laborFormal lines of authority and mechanisms is developed

Organization Structure

Defines how tasks are divided, resources are deployed, and departments are coordinated

The set of formal tasks assigned Formal reporting relationships The design of systems to ensure

effective coordination of employees across department

The Organization Chart

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

Visual representation

Set of formal tasks

Formal reporting relationships

Framework for vertical control

Work Specialization

Tasks are subdivided into individual jobsDivision of labor conceptEmployees perform only the tasks relevant to their specialized functionJobs tend to be small, but they can be performed efficiently

Chain of Command

Unbroken line of authority that links all persons in an organizationShows who reports to whomAssociated with two underlying principles

Unity of CommandScalar Principle

Unbroken line of authority that links all persons in an organizationShows who reports to whomAssociated with two underlying principles

Unity of CommandScalar Principle

AuthorityFormal and legitimate right of a manager to make decisions and issue ordersAllocate resources to achieve organizationally desired outcomesAuthority 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 ordersAllocate resources to achieve organizationally desired outcomesAuthority is distinguished by three characteristics

Authority is vested in organizational positions, not people

Authority is accepted by subordinates Authority flows down the vertical

hierarchy

Responsibility

The duty to perform the task or activity an employee has been assignedManagers are assigned authority commensurate with responsibility

AccountabilityMechanism 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

Delegation

Process managers use to transfer authority and responsibility

Organization encourage managers to delegate authority to lowest possible level

1

2

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

Line and Staff Positions

Line vs. staff positionsLine vs. staff authorityAdvantages and complexities of using staff positions

President

Legal Department

Vice-President,Production

Vice-President,Marketing

Vice President,Accounting

DepartmentA

DepartmentB

DepartmentC

Line authority

Staff authority

TM 8-8

Irwin/McGraw-Hill ©The McGraw-Hill Companies, Inc., 1998

TYPES OF AUTHORITY

Span of Management

Number of employees who report to a supervisorTraditional view, about seven subordinates per managerMany lean organizations today have 30, 40, or even higher subordinatesWhen supervisors must be closely involved with subordinates, the span should be smallSupervisors need little involvement with subordinates, it can be large

Number of employees who report to a supervisorTraditional view, about seven subordinates per managerMany lean organizations today have 30, 40, or even higher subordinatesWhen supervisors must be closely involved with subordinates, the span should be smallSupervisors need little involvement with subordinates, it can be large

Factors Influencing the Span

SupervisorPreferences and skillsFew non-supervisory duties

SubordinatesCompetence and needs

JobWork similarityphysical proximityLow interaction requirements

Tall versus Flat Structure

Span of Control used in an organization determines whether the structure is tall or flatTall structure has a narrow span and more hierarchical levelsFlat structure has a wide span, is horizontally dispersed and fewer hierarchical levelsThe trend has been toward wider spans of control

Span of Control used in an organization determines whether the structure is tall or flatTall structure has a narrow span and more hierarchical levelsFlat structure has a wide span, is horizontally dispersed and fewer hierarchical levelsThe trend has been toward wider spans of control

SPAN OF MANAGEMENT

Org.Level

MEMBERS ATEACH LEVEL

1

2

3

4

5

6

7 Span of 4Operatives : 4,096Managers : 1,396

Span of 8

Operatives : 4,096Managers : 585

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Irwin/McGraw-Hill ©The McGraw-Hill Companies, Inc., 1998

(highest) 1

4

16

64

256

1,024

4,096

1

8

64

512

4,096

Centralization vs. Decentralization

The extend to which the power and authority is retained at the top vs. delegated to lower levels.Factors influencing…

Size of the organizationGeographic dispersionTechnological complexityEnvironmental uncertainty

CENTRALIZATION DECENTRALIZATION

Decision-m

aking Dec

isio

n-m

akin

g

smallcentralized

simplecertain

sizegeographicstechnology

environment

largedispersedcomplex

uncertain

factors

TM 8-7

Irwin/McGraw-Hill ©The McGraw-Hill Companies, Inc., 1998

Restrictivepolicies, rules,

procedures

General policies, rules,

procedures

Decentralization Tends To …

Make greater use of human resourcesReduce burdens of top managersCause decisions to be made close to the actionPermit rapid response to changes

DepartmentalizationThe basis on which individuals are grouped

into departments

Vertical functional approach. People are grouped together in departments by common skills.

Divisional approach. Grouped together based on a common product, program, or geographical region.

Horizontal matrix approach. Functional and divisional chains of command. Some employees report to two bosses

Team-based approach. Created to accomplish specific tasks

Virtual Network approach. An organization structure that disaggregates major functions to separate companies that are brokered by a small headquarters organizations.

Five Approaches to Structural Design

Five Approaches to Structural Design

Slide 2

Functional Structure Advantages

Efficient use of resourcesSkill specialization developmentTop management controlExcellent coordinationQuality technical problem solving

Functional Structure Disadvantages

Poor communicationsSlow response to external changesDecisions concentrated at topPin pointing responsibility is difficultLimited view of organizational goals by employees

Divisional Structure Advantages

Fast response, flexibility in an unstable environmentFosters concern for customers’ needsExcellent coordination across functional departmentsEmphasis on overall product and divisional goalsDevelopment of general management skills

Divisional Structure Disadvantages

Duplication of resources across divisionsLess technical depth and specialization in divisionsPoor coordination across divisionsLess top management controlCompetition for corporate resources

Horizontal Matrix Advantages

More efficient use of resources than divisional structureAdaptable to changing environmentDevelopment of both general and specialists management skillsExpertise available to all divisionsEnlarged tasks for employees

Dual Authority Structure in a Matrix Organization

Horizontal Matrix Disadvantages

Dual chain of commandHigh conflict between two sides of matrixMany meetings to coordinate activitiesNeed for human relations trainingPower domination by one side of matrix

Team Advantages

Same advantages as functional structureReduced barriers among departmentsQuicker response timeBetter moraleReduced administrative overhead

Team Disadvantages

Dual loyalties and conflictTime and resources spent on meetingsUnplanned decentralization

Virtual NetworkAdvantages

Can draw on expertise worldwideHighly flexible and responsiveReduced overhead costs

DisadvantagesLack of control, weak boundariesGreater demand on managersWeakened employee loyalty

Chapter OutlineThe horizontal organization

The need for coordinationTask force, teams and project management

Organizing for Horizontal Coordination

Quality of collaboration across departments

The need for coordination

Structural Design

• Task Force...A temporary team or committee formed to solve a specific short-term problem

• Team…Participants from several departments who meet to solve ongoing problems

•Project Manager…A person responsible for coordinating the activities of several departments

Evolution of Organization Structures

Traditional Vertical Structure

Teams and Project Managers for Horizontal

Coordination

Reengineering to Horizontal Processes

New Workplace Learning Organization

Factors Influencing Organizational Structure

Interdependence

Strategy

Environment

Technology

Traditional Vertical Structure

New Horizontal Structure

Company Performance

Strategy & StructureWhich Comes first—strategy or structure?

Form follows functionBut, once the form is in place, it impacts the function.

Structure Follows Strategy

Differentiation strategy, organization attempts to develop innovative productsCost leadership strategy, striving for internal efficiency

Traditional VerticalOrganization

Strategic Goals

Horizontal Teams

Relationship of Strategic Goals to Structural Approach

Strategic Goals:

Strategic Goals:

Cost leadership, efficiency, stability

Differentiation, innovations, flexibility

Three Things Happen Due To

Uncertain Environments

1. Increased differences occur among departments2. The organization needs increased coordination to

keep departments working together3. The organization must adapt to change

Structure Reflects the Environment

Organic vs. Mechanistic Structure

Woodward’s Manufacturing Technology

Small batch and unit production Large batch and mass

production Continuous process production

Manufacturing Technology and Organizational

Structure

Interdependence

The extent to which departments depend on each other for resources or materials to accomplish their tasks.

Types of Interdependence and Required Coordination