M A N A G E M E N T M A N A G E M E N T 1 st E D I T I O N 1 st E D I T I O N Gulati | Mayo | Nohria Gulati | Mayo | Nohria Chapter 7 Chapter 7 Organizational Design Organizational Design ORGANIZATIONAL PERSPECTIVE ©South-Western, a part of Cengage Learning PowerPoint Presentation by Charlie Cook

Learning Objectives Understand the role that organizations play in helping a firm achieve its strategic objectivesUnderstand the role that organizations play in helping a firm achieve its strategic objectives Define the various organizational design decisions that are central to creating an organization that is aligned with a firm’s strategic objectivesDefine the various organizational design decisions that are central to creating an organization that is aligned with a firm’s strategic objectives Explain the different forms of organizational structure including functional, divisional, matrix, network, and hybrid and outline the advantages and disadvantages of each formExplain the different forms of organizational structure including functional, divisional, matrix, network, and hybrid and outline the advantages and disadvantages of each form © South-Western, a part of Cengage Learning7-2

Learning Objectives Determine what organizational choices and leadership approaches correspond to specific life-cycle stages of a businessDetermine what organizational choices and leadership approaches correspond to specific life-cycle stages of a business Describe how firms are redefining their organizations to better meet the demands of customers and improve their operational efficiencyDescribe how firms are redefining their organizations to better meet the demands of customers and improve their operational efficiency © South-Western, a part of Cengage Learning7-3

Organizational Design © South-Western, a part of Cengage Learning7-4 The formal systems, levers, and decisions an organization adopts or employs in pursuit of its strategy

Division of Labor © South-Western, a part of Cengage Learning7-5 Horizontal specialization - The breadth of activities that are performed in a certain job The manner in which work in a firm is divided among employees Vertical specialization - How much an employee creates, executes, and administers activities in a certain area of the firm

Coordinating Mechanisms © South-Western, a part of Cengage Learning7-6 Those who believe that more control is warranted in organizational design to ensure that jobs are performed satisfactorily and efficiently Organizers An extreme form of organizational control in which systems are highly formalized and are characterized by extensive rules, procedures, policies, and instructions. Bureaucratic approach Behaviorists Those who support a more open organizational structure where roles and responsibilities are loosely defined Clan approach A type of organizational control that includes self- supervising teams that are responsible for a set of tasks

Organizational Structure © South-Western, a part of Cengage Learning7-7 Organizes a firm in terms of the main activities that need to be performed, such as production, marketing, sales, and accounting Functional structure Groups diverse functions into separate divisions Divisional structure The pattern of organizational roles, relationships, and procedures that enable coordinated action among employees

Organizational Structure © South-Western, a part of Cengage Learning7-8 Both divisional and functional managers have equal authority in the organization Matrix structure Knowledge workers are organized to work as individual contributors or to be a part of a work cluster that provides a certain expertise for the organization Knowledge workers are organized to work as individual contributors or to be a part of a work cluster that provides a certain expertise for the organization Network structure Network structure

© South-Western, a part of Cengage Learning7-9 Figure Three Functions of an Organization

© South-Western, a part of Cengage Learning7-10 Figure Functional Organizational Structure

© South-Western, a part of Cengage Learning7-11 Figure Divisional Organizational Structure

© South-Western, a part of Cengage Learning7-12 Figure Matrix Organizational Structure

© South-Western, a part of Cengage Learning7-13 Figure Network Organizational Structure

© South-Western, a part of Cengage Learning7-14 Table7.1 - Advantages and Disadvantages of Different Organizational Structures

Decision Rights © South-Western, a part of Cengage Learning7-15 Rights that include initiating, approving, implementing, and controlling various types of strategic or tactical decisions Differ based on vertical and horizontal dimensions Delegation: The process by which managers transfer decision rights to individual employees

Decision Rights © South-Western, a part of Cengage Learning7–16 An organizational structure characterized by formal structures that control employee behavior by concentrating decisions in a top-down, hierarchical fashion Centralized organization An organizational structure where key decisions are made at all levels of the firm, not mandated from the top Decentralized organization

Mutual Adaptation © South-Western, a part of Cengage Learning7-17 The process by which firms impact the nature of their overarching industrial environment and adapt their organization in response to evolving contextual factors Critically important in industries where change is a constant, such as technology and fashion

© South-Western, a part of Cengage Learning7-18 Figure Role Of Leadership Across Life-Cycle Stages Source: Adapted from Anthony J. Mayo, Nitin Nohria, and Mark Rennella, Entrepreneurs, Managers, and Leaders: What the Airline Industry Can Teach Us About Leadership (New York: Palgrave MacMillan, 2009), pp. 1–20.

Organizational Flexibility © South-Western, a part of Cengage Learning7-19 Cooperation Capability development Customer- centric model Coordination Connection

Organizational Flexibility © South-Western, a part of Cengage Learning7-20 Silos: A functional or divisional unit that operates by its own rules and guidelines and does not openly share information with other units

Key Terms © South-Western, a part of Cengage Learning7-21 Behaviorists Bureaucratic approach Centralized organization Clan approach Decentralized organization Decision rights Behaviorists Bureaucratic approach Centralized organization Clan approach Decentralized organization Decision rights Functional structure Matrix structure Mutual adaptation Network structure Organizational design Organizational structure OrganizersSilos