topic 7: designing adaptive organizations organizing organizing is the deployment
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Topic 7: Designing Adaptive Organizations
Organizing
Organizing 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
Organization Structure
Organization structure is the framework in which the organization defines how task are divided, resources are deployed, and departments are coordinated. Organization Structure is defined as
i) Set of formal tasks assignedii) Formal reporting relationshipsiii) The design of systems to ensure iv) effective coordination of employees across departments
The set of formal tasks and formal reporting relationships provided a framework for vertical control of the organization: Work Specialization and Division of labor.
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
Chain of Command:
Unbroken line of authority that links all persons in an organization
Shows who reports to whom
It is associated with two underlying principles
- Unity of Command: employees held accountable to only one supervisor- Scalar Principle: clearly defined line of authority
Chain of Command: Authority, Responsibility, Accountability and Delegation
a) Authority: The chain of command illustrates the authority structure of the organization. Authority is the formal and legitimate right of a manager to make decisions and issue orders, and allocate resources to achieve organizationally desired outcomes. Authority is distinguished by three characteristics: (1) Authority is vested in organizational positions, not people. (2) Authority is accepted by subordinates. (3) Authority flows down the vertical hierarchy.
b) Responsibility is the duty to perform the task or activity as assigned.c) Accountability means that the people with authority and responsibility are subject to
reporting and justifying task outcomes to those above them in the chain of command.d) Delegation is the process managers use to transfer authority and responsibility to positions
below them in the hierarchy.
Line Authority:
Line departments perform the tasks that reflect the organization’s primary goals. They work directly with customers/products.
Staff Authority:
Staff departments are those departments that provide specialized skills in support of line departments
Span of Management/Span of Control
Number of employees who report to a supervisor
Traditional view = seven subordinates per manager
Lean organizations today = 30+ subordinates
Reorganization to Increase Span of Management:
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
Factors Associated With 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
Centralization and Decentralization
Change and uncertainty are usually associated with decentralization. The amount of centralization or decentralization must fit the firm’s strategy. During crisis or risk of company failure, authority may be centralization.
Departmentalization
- Basis for grouping positions into departments- Choices regarding chain of command
Five traditional approaches:
- Functional- Divisional- Matrix- Teams- Virtual Networks
Centralization means that decision authority is located near the
top of the organization
Decentralization means decision authority is
pushed downward to lower organizational levels
Vertical Functional Structure:
Divisional Structure:
- An organisation structure in which departments are grouped based on similar organisational outputs
- An alternative for assigning divisional responsibility is to group company activities by geographic region or customer group
Three types of Divisional Structure:
a) Geographic-based structureb) Product structurec) Customer-based strcture
Functional Structure VS Divisional Structure:
The primary difference between divisional and functional structures is that the chain of command from each function converges lower in the hierarchy
The grouping of positions into departments based on similar skills, expertise, and resource use
President
FinanceManufacturingMarketing
In a divisional structure, differences of opinion among research, marketing, manufacturing and finance would be resolved at the divisional level rather than by the president
Thus, the divisional structure encourages decentralization
Decision making is pushed down at least one level in the hierarchy, freeing the president and other top managers for strategic planning
Matrix Approach:
An organisation structure that uses functional and divisional chains of command simultaneously in the same part of the organisation
The matrix structure evolved as a way to improve horizontal coordination and information sharing
Team Approach:
The vertical chain of command is a powerful means of control, but passing all decisions up the hierarchy takes too long and keeps responsibility at the top
The team approach gives managers a way to delegate authority, push responsibility to lower levels, and be more flexible and responsive in the competitive global environment
a) Cross-functional teams
The teams which consist of employees from various functional departments who are responsible to meet as a team and resolve mutual problems
Team members typically still report to their functional departments, but they also report to the team, one member of whom may be the leader
ProductManager C
ProductManager B
ProductManager A
Finance Marketing Design
President
Cross-functional teams are used to provide needed horizontal coordination to complement an existing divisional or functional structure
b) Permanent teams
It is a groups of employees who are organised in a way similar to a formal department
Each team brings together employees from all functional areas focused on a specific task or project
Emphasis is on horizontal communication and information sharing because representatives from all functions are coordinating their work and skills to complete a specific organisational task
Authority is pushed down to lower levels, and front-line employees are often given the freedom to make decisions and take action on their own
Virtual Network Approach:
An organizational structure that disaggregates major functions to separate companies that are brokered by small headquarters organization.
The organisation may be viewed as a central hub surrounded by a network of outside specialist
Rather than being housed under one roof, services such as accounting, design, manufacturing, and distribution are outsourced to separate organisations that are connected electronically to the central office
The idea behind networks is that a company can concentrate on what it does best and contract out other activities to companies with distinctive competence in those specific areas, which enables a company to do more with less
Approaches to Structural Design:
Structural Approach
Advantages Disadvantages
???? Can draw on expertise worldwide
Highly flexible and responsive
Reduced overhead costs
Lack of control
Weak boundaries
Greater demands on managers
Employee loyalty weakened
???? Efficient use of resources
Economic of scale
In depth skill specialization and development
Top manager direction and control
Poor communication across functional departments
Slow response to external changes
Lagging innovation
Decisions concentrated at top of hierarchy, creating delay
???? Fast response
Flexibility in unstable environment
Foster concern for customer needs
Excellent coordination across functional departments
Duplication of resources across divisions
Less technical depth and specialization
Poor coordination across divisions
???? More efficient use of resources than single hierarchy
Flexibility
Adaptable to changing environment
Interdisciplinary
Frustration and confusion from dual chain of command
High conflict between two sides of matrix
Many meetings, more than discussion than action
cooperation
Expertise available to all divisions
???? Reduced barriers among departments
Increase compromise
Shorter response time
Quicker decisions
Better morale, enthusiasm from employee involvement
Dual loyalties and conflict
Time and resources spent on meetings
Unplanned decentralization
Organizing for Horizontal Coordination
The Need for Coordination:
Coordination refers to the quality of collaboration across departments.
Without coordination, a company’s left hand will not act in concert with the right hand, causing problems and conflicts
Required regardless of whether the organization has a functional, divisional, or team structure
Task Forces, Teams, and Project Management
Task Force:
A task force is a temporary team or committee designed to solve a short-term problem involving several departments
Team:
In addition to creating task forces, companies also set up cross-functional teams
A cross-functional team furthers horizontal coordination because participations from several departments meet regularly to solve ongoing problems of common interest
Similar to a task force except that it works with continuing rather than temporary problems and exist for several years.
Project Manager:
A project manager is a person who is responsible for coordinating activities of several departments on a full-time basis for the completion of a specific project
Examples of Project Manager Relationships
Project manager is not a member of one of the departments being coordinated
Project managers are located outside of the departments and have responsibility for coordinating several departments to achieve desired project outcomes
Reengineering
Business process reengineering:
Radical redesign of business processes to achieve dramatic improvements in cost, quality, service, and speed
Change the way manager think about how work is done
Focus on process rather than function
Process = organized group of related tasks and activities that work together to transform inputs into outputs and create value
Reengineering at Michigan Casting Center:
Structure Follows Strategy:
The right structure is designed to fit the organization’s strategy
Recent study demonstrated that business performance is strongly influenced by how well the company structure is aligned with its strategic.
FunctionalStructure
DivisionalStructure
HorizontalTeams
Functional withInterdepartmental
Task forces,Integrators
Strategic Goals:Cost leadership, efficiency, stability
Strategic Goals:Differentiation, innovation, flexibility
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