org struc basic ideas-l11

8/12/2019 Org Struc Basic Ideas-L11

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Organizational StructureChapter 9

Ref. Contemporary Management, 3rded

Gareth R. Jones

Jennifer M. George

McGraw-hill


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Six Learning Objectives

Identify the factors that influencemanagers choice

of an organizational structure.

Explain how managers group tasks into jobsthat aremotivating and satisfying for employees.

Describe the types of organizational structures

managers can design, and explain why they choose onestructure over another.


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Learning objectives

Explain why there is a need to both centralize anddecentralize authority.

Explain why managers must coordinate and integratebetween jobs, functions, and divisions as an organizationgrows.

Explain why managers who seek new ways to increaseefficiency and effectiveness are using strategic alliancesand network structures.


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Case study: Lucent Technologies

Economic recession in early 2000

Falling sales

Managers of many companies examined whether

they should change their way of organizing

Different companies have identified different

solutions:


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For some companies, a simpler and moreefficient way of organizing was appropriate.

For some other companies, restructure wasnecessary to differentiate products

For still other companies, solving problems ofcommunication and coordination at globallevel.


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Lucent Technologies makes internet routers and

other communication equipment.

Lucent was severely affected by all of the threeproblems mentioned.

Stock plunged to less than $7 a share from more

than $70

What is the reason?


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Wrong kind of router was backedone based

on capacityrather than speed

But speedturned out to be what customerswanted.

Nortel networks, one competitor, had

developed fast optical or light based routers,

having 45% market

Lucent had only 15% market


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Richard McGinn, former CEO, was forced toresign.

Due to poor decision making

11 different business divisions were set up.

Each division was for a particular product andmarket.


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Lapses identified are:

Highly complex way of organizing

Communications and coordination problems were

enormous.

Managers of one division did not know what others

were doing.

Incompatible products were being developed.


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New technology was not being shared across divisions

Trying to sell the range of products globally became a

nightmare as all the 11 business units were handlingtheir own global sales.

In October, 2000 McGinn was forced to leave.


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His successor, Henry Schacht

focused on efficiency and effectiveness

reorganized 11 different units into just 5

Expected/anticipated outcome

Managers would be

more accountable

better able to communicate

able to avoid the problems noted earlier.


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Hundreds of millions of dollars were spent to

restructure

Over 15,000 employees were laid off.

In 2001, keeping even 5 divisions appeared

to be luxurious because of mounting losses.

Only option remaining is further reduction

of costs


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The CEO decided to

Focus on its resources to

speed up the new product development process

lay off another 20,000 employees

Thus a total of about half of the total employees

were laid off as a result of restructuring.

Steps taken are Combine the 5 units into 2 divisions


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First, an Integrated Network Solutions Division

which

would handle all its land-line products such as routers,

switches, and data software

Second, a Mobility Solutions Divisionwhich

would handle the companys wireless products.


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Managers hope:

New structure would

perform more flexibly and organically

allow to respond faster and more efficiently to rapidly

changing IT environment

save billions of dollars

be a much more efficient method of organizing

be easier to coordinate and manage global sales


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Managing global sales was vital for the

company to achieve a turnaround.

In 2001, it began to

reorganize activities and

Move towards its new product division structure


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Suspicion still remains whether

these changes would be enough to turnaround its

fortunes and

Lucent would survive in its battle with Nortel

and Cisco


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Organizational architecture

To create high performing organizations

human and other resources must be properly

organized and controlled. To organize and control managers must

Design an organizational architecture that makes

the best use of resources to produce the goods and

services customers want.


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Organizational architecture

What is organizational architecture?

The combination of

Organizational structure

Control systems

Culture

Human resource management system

Organizational architecture determines howefficiently and effectively resources are used.


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Org structure an element of org

architecture


is a formalsystem of task and job reporting

relationships,

coordinates and motivates organizational members so

that they work together to achieve organizational

goals.


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Organizational structure an

element of org architecture

Manager adopts a process of organizational design

by which they make specific organizing choices

about tasks and job relationships that result in a

particular kind of organizational structure.

However, there is no best way to design an

organization.


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Organizational structure an

element of org architecture

In some situations,

stable, mechanistic structures may be most appropriate

while in others

flexible, organic structures might be the most effective.


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Control System an element of org

architecture

Control system of an organization provides a

process by which managers monitor and regulate

how efficiently and effectively an organization isperforming the activities necessary to achieve

organizational goals.

Through control system manager keeps anorganization on track and anticipates events that

might occur.


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Control System an element of org

architecture

Thus control is concerned with

keeping employees motivated, focused on the important

problems confronting the organization, and working together to take the advantage of opportunities

that will help an organization perform more highly over

time.


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Culture an element of org

architecture

Organizational culture is the set of shared

values, norms, standards for behavior and

expectations that influence the ways inwhich individuals, groups, and teams

interact with each other and cooperate to

achieve organizational goals.


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Human resource management (HRM)

system an element of org architecture

HRM system

includes the activities managers engage in to attract and

retain employees,

ensures that they perform at a high level and contributeto the accomplishment of organizational goals,

has five major components: recruitment and selection,

training and development,performance appraisal and

feedback,pay and benefits, and labor relations.


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Organizing is the process by which

managers

establish the structure of working relationshipsamong employees

allow them to achieve organizational goals

efficiently and effectively.


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Designing Organizational

structure


A formal system of task and job reporting

relationships

It coordinates and motivates organizational

members so that they work together to achieve

organizational goals.


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structure

Organizational design is the process by

which

managers make specific organizing choicesabout tasks and job relationships

that result in a particular kind of organizational

structure

However, there is no best way to design anorganization.


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structure

As already mentioned, for some situations,

stable, mechanistic structures may be most

appropriate while for others flexible, organic

structures might be the most effective.

There are four important factors that

determine the type of organizational

structure


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structure

The four factors are

The nature of organizational environment

The type of strategythe organization pursues

The technology(including IT) the organization

uses and

The characteristics of the organizations human

resources


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structure

Figure below shows the factors affecting

organizational structure


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Organizational environmentas a

factor

The external environment can change more

quickly and there can be greater uncertainty

within it.

Under such conditions,

the problems faced by managers to gain scare

resourcesbecome greater and

managers typically make organizing choices that

bring flexibility to the organizational structure to

speed up decision making and communication.


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factor

This results in an organic organizational structure

for which

Authority is likely to be decentralized and

Lower level employees are empowered to make importantdecisions.

In contrast, if the environment is stable,

resources are readily available,

uncertainty is low and Less coordination and communication among people and

functions are needed to obtain resources.


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factor

Thus in stable condition, managers can make

organizing choices that bring more stability or

formality to the organizational structure.

They prefer to make decisions within a clearlydefined hierarchy of authority and use extensive

rules and standard operating procedures to govern

activities

This results in a more mechanistic structure.


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factor

What about todays marketplace?

There is increasing competition both at home and

abroad.

Managers are under pressure to

attract customers

increase efficiency and effectiveness

Consequently, organizational structure embraces empowerment and self-managed teams and

allows to behave flexibly.


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Strategy as a factor

Different strategies often call for the use of

different organizational structures

For a differentiationstrategy,

flexible structure is suitable to increase the value the

customers perceive in organizations goods and

services

managers can develop new and innovative products

quickly as it requires extensive cooperation amongfunctions or departments.


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Strategy as a factor

In contrast, for a low-cost strategy, a more formal

structure is necessary

This structure gives managers greater control over

the expenditures and

actions of the organizations various departments.

For an expansion of the scope of organizational

activities (response strategy) by vertical

integration or diversification, flexible structure issuitable.


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Technology as a factor

What is technology? Combination of skills, knowledge, tools, machines,

computers, and equipment that are used in the design,

production, and distribution of goods and services.

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