Chapter Two Simple Ideas, Complex Organizations

Properties of Organizations Organizations are Complex Human behavior is difficult to predict Almost anything can affect anything else in collective activity Organizations are Surprising Yesterday’s solutions creating future impediments Organizations are Deceptive Defy expectations, camouflage surprises Tendency to attribute things to personality Cultural taboos

Properties of Organizations Organizations are Ambiguous We aren’t sure what the problem is... We aren’t sure what is really happening... We aren’t sure what we want... We don’t have the resources we need... We aren’t sure who is supposed to to what... We aren’t sure how to get what we want... We aren’t sure how to determine if we’ve succeeded...

Fallacies in Organizational Diagnosis People Blaming Blame the Bureaucracy Thirst for Power

The Structural Frame Structural Imperatives Size Age Core Processes Environment Strategy and Goals Information Technology Nature of the Workforce

Structural Dilemmas Differentiation Integration Gaps and overlaps Personnel underuse vs. overload Lack of clarity versus lack of creativity Autonomy vs. interdependence

Structural Dilemmas Loose/tight Diffuse authority vs. overcentralization Goalless vs. goalbound Irresponsible/unresponsive

Organizational Design Defined The way in which the activities of an organization are arranged and coordinated so that its mission can be fulfilled and its goals achieved

Components of Organizational Design Organizational Structure Defines the primary reporting relationships that exist within an organization. Common forms of organizational structure: Functional structure Divisional structure Matrix structure Network structure

Mintzberg’s Fives Elements of Design Operating Core Middle Line Strategic Apex Technostructure Support Staff

Mintzberg’s Fives Five Basic Structures Simple Structure Machine Bureaucracy Professional Bureaucracy Divisionalized Form Adhocracy

Functional Structure Slide 1 of 3 Members of the organization are grouped according to the particular function that they perform within the organization Appropriate when an organization’s greatest source of complexity comes from the diverse tasks that must be performed rather than from its products, geographic markets or consumer groups

Functional Structure Slide 2 of 3 Advantages Facilitates specialization Cohesive work groups Improved operational efficiency Disadvantages Focus on departmental vs. organizational issues Difficult to develop generalists needed for top management Only top management held accountable for profitability

Functional Structure Slide 3 of 3 Coors Brewing Company CEO Sales Finance HRM R & D

Divisional Structure Slide 1 of 6 Members of the organization are grouped on the basis of common products, geographic markets, or customers served Types of divisional structures Product divisions Most appropriate for organizations with relatively diverse product lines that require specialized efforts to achieve high product quality.

Divisional Structure Slide 2 of 6 Types of divisional structures (cont.) Geographic divisions Most appropriate for organizations with limited product lines that either have wide geographic coverage or desire to grow through geographic expansion. Customer divisions Most appropriate for organizations that have separate customer groups with very specific and distinct needs.

Divisional Structure Slide 3 of 6 Advantages Enhanced coordination Better assessment of manager performance and responsibility Development of generalist managers Disadvantages Managers may lack expertise to operate in wide geographic areas Duplication of resources Product division

Divisional Structure Slide 4 of 6 Advantages Allows for focus on specific new markets Good structure for growth along geographic lines Adaptable to local needs Disadvantages Duplication of product or product/technology efforts Coordination and integration are difficult Geographic division

Divisional Structure Slide 5 of 6 Disadvantages May be difficult to manage diverse product lines Geographic division (cont.)

Divisional Structure Slide 6 of 6 Bowyer-Singleton and Company CEO Land Development Survey & Mapping Envir. Sciences

Matrix Structure Slide 1 of 3 A structure in which the tasks of the organization are grouped along two organizational dimensions simultaneously Examples include product/function, product/geographic region, etc.

Matrix Structure Slide 2 of 3 Advantages Can achieve simultaneous objectives. Managers focus on two organizational dimensions, resulting in more specific job skills. Disadvantages Complex, leading to difficulties in implementation. Behavioral difficulties from “two bosses.” Time consuming from a planning/coordination perspective.

Matrix Structure Slide 3 of 3 PGP, Inc. CEO VP Cosmetics VP Nail Care VP Skin Care Domestic Europe Asia

Network Structure Slide 1 of 5 A contemporary organizational structure that is founded on a set of alliances with other organizations that serve a wide variety of functions Types of network structures Internal network A network structure that relies on internally developed units to provide services to a core organizational unit.

Network Structure Slide 2 of 5 Types of network structures (cont.) Stable network A network structure that utilizes external alliances selectively as a mechanism for gaining strategic flexibility. Dynamic network A network structure that makes extensive use of outsourcing through alliances with outside organizations.

Network Structure Slide 3 of 5 Advantages Maximizes the effectiveness of the core unit Do more with less resources Flexibility Disadvantages Fragmentation makes it difficult to develop control systems Success is dependent on ability to locate sources

Network Structure Slide 4 of 5 Disadvantages (cont.) Difficult to develop employee loyalty

Network Structure Slide 5 of 5 Broker Suppliers Designers Distributors Producers

Managing Complexity Through Integration Interdependence The degree to which work groups are interrelated. Three primary levels of work group integration Pooled interdependence Sequential interdependence Reciprocal interdependence

Pooled Interdependence Occurs when organizational units have a common resource but no interrelationship with one another Head- quarters B C D A F E

Sequential Interdependence Occurs when organizational units must coordinate the flow of information, resources, and tasks from one unit to another ABC

Reciprocal Interdependence Occurs when information, resources, and tasks must be passed back and forth between work groups A C EF D B

Integrating Mechanisms Slide 1 of 2 Methods for managing the flow of information, resources, and tasks within the organization Three major categories of integrating mechanisms General management systems Methods of increasing coordination potential Methods of reducing the need for coordination

Integrating Mechanisms Slide 2 of 2 Methods of increasing coordination potential Methods of increasing coordination potential Methods of reducing the need for coordination Methods of reducing the need for coordination Integrating mechanisms General management systems General management systems

Boundary Spanning Roles Lateral relationships that help to integrate and coordinate the activities of the organization Examples include: Liaisons, committees, task forces, integrating positions, and interfunctional work teams

Locus of Decision Making Slide 1 of 2 The degree to which decision making is centralized versus decentralized Centralized decision making Advantage Gives top management maximum control. Disadvantage Limits the organization’s ability to respond quickly and effectively to changes in the environment.

Locus of Decision Making Slide 2 of 2 Centralized vs. Decentralized (cont.) Decentralized decision making Advantage Organizations can respond to environmental change more rapidly and effectively because the decision makers are the people closest to the situation. Disadvantage Top managers lose some control.

Mechanistic versus Organic Systems Mechanistic systems Highly centralized organizations in which decision-making authority rests with top management. Organic systems Decentralized organizations that push decision making to the lowest levels of the organization in an effort to respond more effectively to environmental change.

Stable versus Turbulent Environments Stable environments Environments which experience little change. Turbulent environments Environments which are characterized by rapid and significant change.

Adaptive Organizations Organizations that eliminate bureaucracy that limits employee creativity and brings the decision makers of the organization closer to the customer

Generic Issues in Restructuring Need to account for specific tensions specific to structural form

Web of Inclusion