Fundamentals of Organiza3on Structure

Fundamentals of Organiza3on Structure

Organiza(on Theory and Design Twel8h Edi3on Richard L. Da8

Organiza3on Structure

•  Formal Repor3ng Rela3onships – Number of levels – Span of control

•  Grouping of Individuals – Crea3on of departments

•  Design of Systems – Communica3on, coordina3on, and integra3on of efforts

•  Horizontal informa-on and coordina-on reflected in organiza-on chart

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A Sample Organiza3on Chart

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Informa3on-Sharing Perspec3ve on Structure

Ver-cal and horizontal informa-on flow – Tradi&onal organiza&on designed for efficiency?

•  Centralized authority focused on top level decision- making

– Learning organiza&on which emphasizes communica&on and collabora&on

•  Decentralized authority focused on shared tasks and decisions

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Efficiency versus Learning Outcomes

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Ver3cal Informa3on Sharing

•  Ver-cal linkages coordinate ac3vi3es between the top and the boRom of the organiza3on

•  Hierarchical referral are the ver3cal lines which iden3fy the chain of command

•  Rules and Plans create ver3cal links •  Reports, computer systems, and wriRen informa3on are ver-cal informa-on systems

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Horizontal Informa3on Sharing

Horizontal linkage coordinates ac3vi3es across organiza3onal departments – not tradi(onally drawn on the organiza(onal chart

ü  Informa3on Systems ü  Liaison Roles ü  Task Forces ü  Full-Time Integrator ü  Teams

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Ladder of Mechanisms for Horizontal Linkages

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Teams and Horizontal Coordina3on

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Rela3onal Coordina3on

•  High level of horizontal coordina3on

•  Frequent, 3mely, problem-solving communica3on

•  Rela3onships of shared goals, shared knowledge, and mutual respect

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Horizontal Coordina3on and Linkages

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Organiza3on Design Alterna3ves

Required Work Ac3vi3es

Repor3ng Rela3onships

Departmental Grouping Op3ons

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Departmental Grouping Op3ons

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Func3onal Structure

ü Ac3vi3es grouped by common func3on ü All specific skills and knowledge are consolidated

ü Promotes economies of scale ü Slow response to environmental changes ü Prevalent approach but few companies can respond in today’s environment without horizontal linkages

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Func3onal: Strengths & Weaknesses

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Divisional Structure ü Product structure or strategic business units ü Divisions organized according to products, services, product groups

ü Good for achieving coordina3on across func3onal departments

ü Suited for fast change ü Loses economies of scale ü Lacks technical specializa3on

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Reorganiza3on from Func3onal to Divisional

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Divisional: Strengths & Weaknesses

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Geographic Structure ü Organizing to meet needs of users/customers by geography

ü Many mul3na3onal corpora3ons are organized by country

ü Focuses managers and employees on specific geographic regions

ü Strengths and weaknesses similar to divisional organiza3on

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Sample Geographic Structure

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Matrix Structure

ü  Mul3focused with strong horizontal linkage ü  Condi3ons for Matrix:

•  Share resources across the organiza3on •  Two or more cri3cal outputs required: products and technical knowledge

•  Environment is complex and uncertain ü  Allows organiza3on to meet dual demands ü  Largest weakness is that employees have two

bosses and conflic3ng demands ©2017 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

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Sample Matrix Organiza3on

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Condi3ons for Matrix Structure

•  Need for shared and flexible use of people across products

•  Two or more cri3cal outputs like new products and technical knowledge

•  The environment is complex and uncertain

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Matrix: Strengths & Weaknesses

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Horizontal Structure

ü Organiza3on around core processes Processes refers to tasks and ac(vi(es

ü Shi8 towards horizontal structure during reengineering

ü Eliminates ver3cal hierarchy and departmental boundaries

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Sample Horizontal Structure

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Characteris3cs of Horizontal Structure

ü Structure is created around cross-func3onal processes

ü Self-directed teams, not individuals, are dominant players

ü Process owners are responsible for en3re process

ü People on the team are given authority for decisions

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Characteris3cs of Horizontal Structure

ü Can increase organiza3on’s flexibility ü Customers drive the organiza3on, measured by customer sa3sfac3on, employee sa3sfac3on, and financial contribu3on

ü Culture is one of openness, trust, and collabora3on; focus on con3nuous improvement

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Horizontal: Strengths & Weaknesses

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Virtual Networks and Outsourcing

ü Extend horizontal coordina3on beyond the boundaries of the organiza3on

ü Most common strategy is outsourcing • Contract out certain tasks/func3ons

ü Virtual or modular structures subcontract most of its major func3ons to separate companies

ü The virtual network organiza3on serves as a central hub with contracted experts

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Virtual Network Example

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Virtual Network Strengths and Weaknesses

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Hybrid Structure

ü Combina3on of various structure approaches

ü Tailored to specific needs

ü O8en used in rapidly changing environments

ü Greater flexibility

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Two Hybrid Structures

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Applica3on of Structural Design •  Each structure meets different needs and is a tool that can help managers be more effec3ve

•  Structural alignment aligns structure with organiza3onal goals

•  Symptoms of Structural Deficiency: – Decision making is delayed or lacking quality – Organiza3on cannot meet changing needs – Employee performance declines, needs are not meet

– Too much conflict

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Structure to Organiza3on’s Need for Efficiency vs. Learning

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Design Essen3als

v Structure must provide a framework, linking organiza3on into whole

v Provide ver3cal and horizontal linkages v Variety of alterna3ves for grouping v  Virtual network extends horizontal coordina3on

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Design Essen3als

v Matrix structure aRempts to achieve balance v Managers must find right balance v The purpose of the organiza3on chart is to encourage and direct ac3vi3es

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