bm_ch 7

Chapter 7

Designing Adaptive

Organizations

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New Manager’s Questions

Managers should give employees the choice to work on whatever they want to that motivation stays high.

1 2 3 4 5

Most Yes Mostly No



If people make mistakes on the job, they shouldn’t be punished.

1 2 3 4 5

Most Yes Mostly No



It is better for one person to be in charge of making decisions.

1 2 3 4 5

Most Yes Mostly No


Organizing

• The deployment of organizational resources to achieve strategic goals.– Division of labor– Lines of authority– Coordination

• Organizing is important because it follows from strategy


Organizing

• Strategy defines what to do• Organizing defines how to do it• Structure is a powerful tool for reaching

strategic goals• A strategy’s success often is determines by

its fit with organizational structure


Organizing the Vertical Structure

Organizing Structure Defines: The set of formal tasks assigned to individuals

and departments

Formal reporting relationships including lines of authority, decision responsibility, number of hierarchical levels & span of manager’s control

The design of the systems to ensure effective coordination of employees across departments


Organizing

• Organization chart– Visual representation of an organization’s

structure– Delineates the chain of command– Indicates departmental tasks and how they fit

together– Provides order and logic for the organization


Sample Organization Chart


Organizing Concepts

Work Specialization is the degree to which organizational tasks are subdivided into

individual jobs; also called division of labor.

• Organizations are moving away from this because it leads to being isolated and performing only a single boring job

• Too much specialization creates separation & hinders coordination

• Companies are enlarging groups and assigning teams


Organizing Concepts

Chain of Command is an unbroken line of authority that links all individuals in the

organization and specifies who reports to whom.

• Unity of command – each employee is held accountable to only 1 supervisor

• Scalar principle – clearly defined line of authority in the organization that includes all employees


Authority, Responsibility, and Delegation

Authority – formal & legitimate right of a manger to make decisions, issue orders & allocate resources

Authority is vested in organizational positions, not people.

Authority is accepted by subordinates.

Authority flows down the vertical hierarchy.


Authority, Responsibility, and DelegationResponsibility duty to perform the task or

activity assigned

Accountability is the mechanism through which authority and responsibility are aligned.

People with authority & responsibility are subject to reporting & justifying task outcomes to those above them in the chain of command

Delegation is the process managers use to transfer authority and responsibility down the chain.


Line and Staff Authority

• Line departments perform the tasks that reflect the organization’s primary goal & mission– Sales– Production

• Line authority – managers have formal authority to direct & control immediate subordinates


Line and Staff Authority

• Staff departments support line departments– Marketing– Human Resources– Accounting– Research

• Staff authority – narrower than line authority and includes the right to advise, recommend & counsel in the staff specialists area of expertise


Span of Management

• Span of management = the number of employees reporting to a supervisor– Determines how closely a supervisor can

monitor subordinates


Span of Management• Factors that determine the span of mgmt– Subordinates’ work is stable & routine– Subordinates perform similar work task– Subordinates are concentrated in a single location– Subordinates are trained and need little direction– Rules & procedures define tasks– Support systems & personnel are available for the

manager– Minimum time is required for nonsupervisory tasks– Managers' personal preferences favor a large span


Span of Management

• The average span of control used in an organization determines whether the structure is tall or flat

Tall Structure – has n overall narrow span of mgmt & more levels in the hierarch

Flat Structure – has a wide span, is horizontally dispersed, and has fewer hierarchical levels Way to facilitate delegation


Reorganization and Span of Management


Centralization and Decentralization• Centralization – decision authority is located

near the top of the organization• Decentralization – decision authority is pushed

downward to lower organization levels• Factors that influence centralization versus

decentralization:– Greater change and uncertainty are usually

associated with decentralization– Centralization or decentralization should fit the firm’s

strategy– In times of crisis or risk of company failure, authority

may be centralized at the top


Departmentalization: Functional & Divisional

• Departmentalization – basis for grouping positions into departments and departments into the total organization

• 3 traditional methods– Functional, divisional & matrix

• 2 innovative methods– Team-based & virtual networks



• Vertical Functional Approach– Grouping of positions into departments based

on skills, expertise, work activities and resource use

– People facilities, and other resources representing a common organizational resource are grouped together into a single dept.



• Divisional Approach– Grouping based on organizational output• Product, Program, Business (self-contained unit)• Geographic or Customer-Based Divisions

– Most large corporations have separate divisions that perform different tasks, use different technologies or serve different customers


Functional Versus Divisional Structures


Departmentalization: Matrix & Team Approach• Matrix combines functional and divisional

approaches– Improve coordination and information– Dual lines of authority• Runs vertically – providing traditional control within

functional depts.• Runs horizontally – providing coordination across

depts.


Departmentalization: Matrix & Team Approach• 3 key Matrix roles– Two-boss employees – report to 2 supervisors

simultaneously– Matrix boss – product or functional boss

responsible for one side of the matrix– Top leader – responsible for the entire matrix &

oversees both the product and functional chains of command• Must maintain a power balance between the 2 sides


Matrix Structure


Global Matrix Structure


Departmentalization: Matrix & Team Approach• Team approach is very widespread trend– Allows managers to delegate authority– Push responsibility to lower levels– Flexible, responsive in the competitive global

environment– 3 approaches• Cross-functional teams – employees from various

functional depts. who are responsible to meet as a team & resolve mutual problems– Used to provide needed horizontal coordination to

complement an existing divisional or functional structure


Departmentalization: Matrix & Team Approach• 3 approaches (cont’d)– Permanent teams – groups of employees who

are organized in a way similar to a formal dept.• Emphasis is on horizontal communication and

information sharing because representatives from all functions are coordinating their work and skills to complete a specific organizational task

– Team-based Structure – the entire organization is made up of horizontal teams that coordinate activities and work with customers to accomplish the organization’s goals


Virtual Network Approach• Extends idea of horizontal coordination and

collaboration– Partnerships– Alliances

• Could be a loose interconnected group– i.e. outsourcing

Virtual network structure means that the firm subcontracts most of its major functions to separate companies so that it can concentrate on what it does best


Network Approach to Departmentalization


Advantages and Disadvantages of Each Structure


Organizing for Horizontal Coordination

• Companies need more flexibility than vertical structure can offer– Meet fast-shifting environment– Break down barriers between departments– Need integration and coordination

• Coordination – quality of collaboration across depts. – Required whether its functional, divisional or

team


Organizing for Horizontal Coordination

• Coordination problems are greater in the global arena because units differ by distance, time, culture & language

• Coordination results from information & cooperation– Managers can design structures to promote

horizontal coordination


Evolution of Organization Structures


Task Forces, Teams, And Project Management

Project Manager – a person responsible for

coordinating the activities of several

departments on a full-time basis for the completion of a specific project.

Project Manager – a person responsible for

coordinating the activities of several

departments on a full-time basis for the completion of a specific project.

Task Force – a temporary team or committee formed to solve a specific short-term problem

involving several departments.

Cross-functional Team – furthers horizontal coordination by

including members across the organization.


Project Manager Relationships to Departments


Reengineering

…or business process reengineering, is the radical redesign of business

processes to achieve dramatic improvements in cost, quality,

service, and speed.


Reengineering & Process

• Leads away from a strong vertical structure• Uses horizontal team-based structure• Best suited for companies that are facing

serious competitive threats

• Process – organized group of related tasks & activities that work together to transform inputs into outputs & create value– Ex: new product development, order

fulfillment, customer service


Reengineering Examples


Structure Follows Strategy

• Business performance is influenced by the company’s structure– In today’s environment, organizations with

stronger horizontal designs typically perform better

• Strategic goals should drive structure• Structure should be used to facilitate

strategic goals


Relationship to Structural Approach to Strategy