11-organizational structures and processes

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© 2004 by Nelson, a division of Thomson Canada Limited 1 Chapter 11 Organizational Structures and Processes

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Page 1: 11-Organizational Structures and Processes

© 2004 by Nelson, a division of Thomson Canada Limited 1

Chapter 11

Organizational Structures and Processes

Page 2: 11-Organizational Structures and Processes

© 2004 by Nelson, a division of Thomson Canada Limited 2

What Would You Do? Exide Technologies is currently

organized geographically Share prices are decreasing Debt load is increasing Which organizational structure

should Exide have?

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© 2004 by Nelson, a division of Thomson Canada Limited 3

Learning Objectives:Designing Organizational StructuresAfter reading these next three sections, you’ll have a better understanding of the importance of organizational structure because you should be able to:

1. describe the departmentalization approach to organizational structure2. explain organizational authority3. discuss the different methods for job design

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© 2004 by Nelson, a division of Thomson Canada Limited 4

Departmentalization Functional Product Customer Geographic Matrix

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© 2004 by Nelson, a division of Thomson Canada Limited 5

Functional Departmentalization

Exhibit 11.1

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© 2004 by Nelson, a division of Thomson Canada Limited 6

Functional DepartmentalizationAdvantages

creates highly skilled specialists

lowers costs through reduced duplication

communication and coordination problems are lessened

Disadvantages cross-department

coordination can be difficult

may lead to slower decision making

produces managers with narrow experiences

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© 2004 by Nelson, a division of Thomson Canada Limited 7

Product Departmentalization

Easy Food Market

Cheese Milk Ice cream

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© 2004 by Nelson, a division of Thomson Canada Limited 8

Product DepartmentalizationAdvantages

managers specialize but have broader experience

easier to assess work-unit performance

decision making is faster

Disadvantages duplication often

increases costs difficult to

coordinate across departments

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Customer Departmentalization

American Express

Cards Travel Financial Services Business Services

Adapted from Exhibit 11.3

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© 2004 by Nelson, a division of Thomson Canada Limited 10

Customer DepartmentalizationAdvantages

focuses on customer needs

products and services tailored to specific customers

Disadvantages duplication of

resources difficult to achieve

coordination across departments

decisions that please the company but may hurt the company

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© 2004 by Nelson, a division of Thomson Canada Limited 11

Geographic Departmentalization

Coca-Cola Enterprises

Central NorthAmerica

Eastern North America

Western NorthAmerica Europe

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© 2004 by Nelson, a division of Thomson Canada Limited 12

Geographic DepartmentalizationAdvantages

responsive to demand of different markets

reduce costs by locating resources close to customers

Disadvantages duplication of

resources difficult to

coordinate across departments

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© 2004 by Nelson, a division of Thomson Canada Limited 13

Matrix DepartmentalizationA hybrid structure in which two or more forms of departmentalization are used together

most common forms combine product and functional

employees report to two bosses increased cross-functional interaction significant interaction between functional

and project managers required

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Matrix DepartmentalizationAdvantages

efficiently manage large, complex tasks

effectively manage large, complex tasks

Disadvantages requires high

levels of coordination

increased conflict levels

requires high level of management skills

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© 2004 by Nelson, a division of Thomson Canada Limited 15

Organizational Authority Chain of command Line versus staff authority Delegation of authority Degree of centralization

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© 2004 by Nelson, a division of Thomson Canada Limited 16

Chain of Command The vertical line of

authority in an organization clarifies who reports to whom

Unity of command workers report to only one boss violated by matrix structure

Span of control Number of people reporting to a

specific supervisor

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© 2004 by Nelson, a division of Thomson Canada Limited 17

Line Versus Staff Authority Line authority-function

the right to command immediate subordinates in the chain of command

an activity that contributes directly to creating or selling a company’s products

Staff authority-function the right to advise but not command

others an activity that supports line activities

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Delegation of AuthorityThe assignment of direct authority and responsibility to a subordinate to complete tasks for which the manager is normally responsible Three transfers from manager to subordinate

transfer of full responsibility of assignment transfer of authority over required resources transfer of accountability

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How to Be a More Effective Delegator1. Trust your staff to do a good job2. Avoid seeking perfection3. Give effective instructions4. Know your true interests5. Follow up on progress

Adapted from Exhibit 11.7

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How to Be a More Effective Delegator6. Praise the efforts of your staff7. Don’t wait until the last minute to

delegate8. Ask questions, expect answers and

assist employees9. Provide sufficient resources10. Delegate to the lowest possible

levelAdapted from Exhibit 11.7

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Degree of Centralization Centralization of authority

most authority is held at the upper levels of the organization

Decentralization significant authority is found in lower levels

of the organization Standardization

Solving problems by applying rules, procedures, and processes

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Job Design Job specialization Job rotation Job enlargement Job enrichment

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Job Design Job specialization

breaking jobs into smaller tasks simple, easy-to-learn, and economical can lead to low job satisfaction, high

absenteeism, and turnover Job rotation

periodically moving workers from one job to another

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© 2004 by Nelson, a division of Thomson Canada Limited 24

Job Design Job enlargement

increasing the number of tasks performed by a worker

Job enrichment adding more tasks and authority to a

worker’s job

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Learning Objectives:Designing Organizational Processes

After reading these next two sections, you should be able to:

4. explain the methods that companies are using to redesign internal organizational processes (i.e., intraorganizational processes)5. describe the methods that companies are using to redesign external organizational processes (i.e., interorganizational processes)

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Intraorganizational Processes Reengineering

Empowerment

Behavioural informality

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Reengineering Fundamental rethinking of business

processes Intended to achieve dramatic

improvements in performance Changes the organization’s

orientation form vertical to horizontal Changes task interdependence

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Task Interdependence The extent to which collective

action is required to complete an entire piece of work

Three types pooled sequential reciprocal

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Empowerment

Permanently passing decision-making authority and responsibility from managers to workers workers need information and

resources to make good decisions workers should be rewarded for

taking initiative

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Behavioural InformalityBehavioural informality

spontaneity casualness interpersonal

familiarity

Behavioural formality

routine and regimen

specific rules impersonal

detachment

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Interorganizational Processes Modular organizations

Virtual organizations

Boundaryless organizations

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Modular Organization

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Virtual Organization

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Boundaryless Organization

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What Really Happened? Exide Technologies

implemented a product structure around global business units

Problems associated with product structure caused a return to a geographic structure

Exide is still searching for the proper structure