Pre-class preparation This exercise takes the entire period Keep time – bring a stop watch or timer Make copies of directions for each student (update to match these slides) Make copies of QC rules (update to match these slides) Prep the QC team: Ensure that each sentence makes sense Ensure that each word is used only once in each run Ensure that letters are not overused in new words Ensure that the same rules are applied to both teams Cut up phrases and place in envelope

BA 312 Organization Design & Environments B6702: Creating Effective Organizations Class 1, 10/25/01 BA 312 Organization Design & Environments Professor Sonali Shah

Today’s Plan Words-in-Sentences Exercise Wrap-Up

Objectives To understand the costs and benefits of functional and divisional structures To see the effect of organizational structure on work processes To get to know your fellow students

Words-in-Sentences Co. Today you will form a small organization with several other people Your organization will compete with another organization facing the same design task Your task (“product”) will be to take a phrase and use the letters in that phrase to construct new words – and then to assemble those words into coherent sentences

Raw Materials You will be given a “raw material phrase” The letters found in the phrase serve as the raw materials available to produce new words in sentences. For example, if the raw material is “I work in an organization” you could produce the words and sentences: “Nat ran to a zoo.”

Production Standards The same letter may appear only as often in a manufactured word as it appears in the raw material word or phrase For example, “I work in an organization” has three o’s and no s’s. Thus “zoo” is legitimate but “orangutan” is not (it contains the letter u). Raw material letters can be used again in different manufactured words. A new word may not be made by adding “s” to form the plural of an already-used manufactured word. All words must be in English. Names and places are acceptable. Slang is not acceptable. A manufactured word may be used only once in a sentence and in only one sentence during a production run For example. If the word “a” is used once in any sentence, it is out of stock and cannot be used again during that production run. Sentences must have a minimum of three words and a maximum of six words Nonsense words or sentences are unacceptable.

Measuring Performance The output of your WIS company is measured by the total number of acceptable words that are packaged in sentences. The sentences must be: Legible Listed on no more than two sheets of paper Handed to the Quality Control Review Board within 30 seconds of the completion of each production run. If any word in a sentence does not meet the standards set forth above, all the words in the sentence will be rejected. The Quality Control Review Board is the final arbiter of acceptability. In the event of a tie vote on the Review Board, a coin toss will determine the outcome.

This is an Exercise in Organization Design  Design your organization to be as efficient as possible during each 10-minute production run. Your ability to compete depends on two factors (1) volume (2) quality The success of your company depends on (1) your objectives (2) planning (3) coordination (4) quality control There will be two production runs. After the first production run, you will have an opportunity to reorganize your company, if you want to.

Agenda Step 1: Design your organization (15 min) Quality Review Board must decide how they will operate Step 2: Production Run #1 (10 min) Step 3: Quality Review (10 min) Step 4: Production Run #2 (10 min) Quality Review Board preps slide: good phrases, problems/mistakes plaguing each group Step 5: Quality Review + Slide Prep (10 min) Describe your structure (please include names of all group members) How did your structure change? What were the costs and benefits of your structure? Step 6: Present slides (3 min/group) & Wrap-Up (10 min)

B6702: Creating Effective Organizations Class 1, 10/25/01 Need volunteers for the Quality Review Board 8:30 am : 2 students 10:00am : 6 students Please divide into two groups 8:30 am session: 5-6 students each 10:00 am session: 16 students each One group will adopt a functional structure. The other group will adopt a divisional structure. Spring 2005 8:30 am 5 students per group Functional – rd 1: 35 Divisional – rd 1: 19 Functional – rd 2: 41 Divisional – rd 2: 32 10:00 am 16 students per group 6 checkers (worked out well – checking was quick) Functional – rd 1: around 30 Divisional – rd 1: around 30 Functional – rd 2:62

Today’s Plan Words-in-Sentences Exercise Wrap-Up

Wrap-Up: WIS What were the strengths of the functional structure? Of the divisional structure? What were the weaknesses of the functional structure? Of the divisional structure?

WIS: Divisional Structure Doomed to be less efficient? Two identical divisions: Waste resources Creates duplication problem Groups with a divisional structure generally duplicate more words and sentences than groups with the functional structure  caught in internal or external QC A divisional structure does not make sense for this task – and for many organizations What if you were given two phrases during each production run? Think about the global orange juice producer

WIS: Functional Structure B6702: Creating Effective Organizations WIS: Functional Structure Class 1, 10/25/01 Not all employees are occupied simultaneously In this case, workers can be moved around to best utilize all available (human) resources (not always true – depends on skills necessary for a particular job) Many functional groups realize that creating obscure words and odd sentences makes it easier to avoid replicating words and sentences Structure affects how the organization operates and, sometimes, even how it views and frames its goals We often think that an organization with clear goals will easily carry out it’s mission. Here we see that that the formal structure affects how workers define work tasks and this ultimately alters the strategy and direction of the firm! After 1 round, the functional groups tend to realize that creating obscure words and odd sentences makes it easier to avoid replicating words and sentences  this is because they initially have a large number of people making words and then shift to having many of those same people make sentences. As the groups are so big, they realize that making odd formations helps them to create sentences and helps the internal QC do their jobs. In the divisional structure, both divisions are small, so they can communicate and have little replication within each division and the replication only gets caught in QC – as there is little direct communication between divisions, they often do not think of this solution. Throughout the term, we will see how organizational design elements – formal structure, incentives, culture, informal structure - shape how the organization functions

Thursday Methods for Coping with Environmental Uncertainty How the external environment affects the design of the firm