Management Second Canadian Edition Chuck Williams Alex Z. Kondra Conor Vibert Slides Prepared by: Kerry Rempel, Okanagan College © 2008 by Nelson, a division of Thomson Canada Limited

Organizational Structures and Processes Chapter 11 Organizational Structures and Processes © 2008 by Nelson, a division of Thomson Canada Limited

What Would You Do? Alex MacBeath of Grant Thornton credits their growth and success to the following factors: They are first and foremost a professional services firm Strict attention to client service and evolving client needs A focus on people © 2008 by Nelson, a division of Thomson Canada Limited

Learning Objectives: Designing Organizational Structures After reading the next three sections, you should be able to: 1. describe the departmentalization approach to organizational structure 2. explain organizational authority 3. discuss the different methods for job design © 2008 by Nelson, a division of Thomson Canada Limited

Departmentalization Functional Product Customer Geographic Matrix Functional – organizes work and workers into separate units responsible for particular business function or areas of expertise Product – organizes work and workers into separate units responsible for producing particular products or services Customer – organizes work and workers into separate units responsible for particular kinds of customers Geographic – organizes work and workers into separate units responsible for doing business in particular geographical areas Matrix – is a hybrid structure in which two or more forms of departmentalization are used together © 2008 by Nelson, a division of Thomson Canada Limited

Functional Departmentalization © 2008 by Nelson, a division of Thomson Canada Limited Exhibit 11.1

Functional Departmentalization Advantages 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 © 2008 by Nelson, a division of Thomson Canada Limited

Product Departmentalization © 2008 by Nelson, a division of Thomson Canada Limited

Product Departmentalization Advantages 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 © 2008 by Nelson, a division of Thomson Canada Limited

Customer Departmentalization © 2008 by Nelson, a division of Thomson Canada Limited Adapted from Exhibit 11.3

Customer Departmentalization Advantages 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 © 2008 by Nelson, a division of Thomson Canada Limited

Geographic Departmentalization © 2008 by Nelson, a division of Thomson Canada Limited

Geographic Departmentalization Advantages responsive to demand of different markets reduce costs by locating resources close to customers Disadvantages duplication of resources difficult to coordinate across departments © 2008 by Nelson, a division of Thomson Canada Limited

Matrix Departmentalization A 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 © 2008 by Nelson, a division of Thomson Canada Limited

Matrix Departmentalization Advantages 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 © 2008 by Nelson, a division of Thomson Canada Limited

Organizational Authority Chain of command Line versus staff authority Delegation of authority Degree of centralization Authority is the right to give commands, take action, and make decisions to achieve organizational objectives. © 2008 by Nelson, a division of Thomson Canada Limited

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 © 2008 by Nelson, a division of Thomson Canada Limited

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 © 2008 by Nelson, a division of Thomson Canada Limited

Delegation of Authority The 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 © 2008 by Nelson, a division of Thomson Canada Limited

How to Be a More Effective Delegator 1. Trust your staff to do a good job 2. Avoid seeking perfection 3. Give effective instructions 4. Know your true interests 5. Follow up on progress © 2008 by Nelson, a division of Thomson Canada Limited Adapted from Exhibit 11.9

How to Be a More Effective Delegator 6. Praise the efforts of your staff 7. Don’t wait until the last minute to delegate 8. Ask questions, expect answers, and assist employees 9. Provide sufficient resources 10. Delegate to the lowest possible level © 2008 by Nelson, a division of Thomson Canada Limited Adapted from Exhibit 11.9

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 © 2008 by Nelson, a division of Thomson Canada Limited

Job Design Job specialization Job rotation Job enlargement Job enrichment Job design – the number, kind, and variety of tasks that individual workers perform in doing their jobs. © 2008 by Nelson, a division of Thomson Canada Limited

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 © 2008 by Nelson, a division of Thomson Canada Limited

Job Design Job rotation Job enlargement Job enrichment periodically moving workers from one job to another Job enlargement increasing the number of tasks performed by a worker Job enrichment adding more tasks and authority to a worker’s job © 2008 by Nelson, a division of Thomson Canada Limited

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) © 2008 by Nelson, a division of Thomson Canada Limited

Types of Organizations Mechanistic Mechanistic Organizations – are characterized by specialized jobs and responsibilities; precisely defined, unchanging roles; and a rigid chain of command based on centralized authority and vertical communication. Organic Organizations – are characterized by broadly defined jobs and responsibility; loosely defined, frequently changing roles; and decentralized authority and horizontal communication based on task knowledge. Organic © 2008 by Nelson, a division of Thomson Canada Limited

Intraorganizational Processes Reengineering Empowerment Behavioural informality An Intraorganizational process is the collection of activities that take place within an organization to transform inputs into outputs that customers value. © 2008 by Nelson, a division of Thomson Canada Limited

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 © 2008 by Nelson, a division of Thomson Canada Limited

Task Interdependence The extent to which collective action is required to complete an entire piece of work Three types pooled sequential reciprocal © 2008 by Nelson, a division of Thomson Canada Limited

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 © 2008 by Nelson, a division of Thomson Canada Limited

Behavioural Informality spontaneity casualness interpersonal familiarity Behavioural formality routine and regimen specific rules impersonal detachment © 2008 by Nelson, a division of Thomson Canada Limited

Interorganizational Processes Modular organizations Virtual organizations Boundaryless organizations An Interorganizational process is a collection of activities that occur among companies to transform inputs into outputs that customers value. © 2008 by Nelson, a division of Thomson Canada Limited

Modular Organization Except for the core business activities that they can perform better, faster, and cheaper than others, modular organizations outsource all remaining business activities to outside companies. These outsourced activities can be added or dropped as needed, much like adding pieces to a three-dimensional puzzle. © 2008 by Nelson, a division of Thomson Canada Limited Exhibit 11.12

Modular Organizations Advantages Can cost significantly less to run Allows the company to focus on the core activities they do best Disadvantages Loss of control when outsourcing key business activities May end up outsourcing a competitive advantage © 2008 by Nelson, a division of Thomson Canada Limited

Virtual Organization A Virtual organization is part of a network in which many companies share skills, costs, capabilities, markets, and customers with each other. Virtual organization work with some companies in the network alliance, but not all. © 2008 by Nelson, a division of Thomson Canada Limited Exhibit 11.13

Virtual Organizations Advantages Allow companies to share costs Fast and flexible Should provide better products and services because each is “best” at what they do Disadvantages Loss of control when outsourcing key business activities Requires tremendous managerial skills to make a network of independent organizations work well together © 2008 by Nelson, a division of Thomson Canada Limited

Boundaryless Organization A Boundaryless organization break down the vertical, horizontal and geographic boundaries in organizations. © 2008 by Nelson, a division of Thomson Canada Limited Exhibit 11.14

Boundaryless Organizations Advantages A focus on results instead of reporting makes much better use of employee skills, knowledge, and abilities Lead to much closer relationships with the external environment Disadvantages Transition can be threatening to managers and employees There is no clear way to achieve a boundaryless organization © 2008 by Nelson, a division of Thomson Canada Limited

What Really Happened? Grant Thornton maintains it’s differences through: Leaders managing through influence, not position A collaborative culture that facilitates knowledge sharing Shared workspaces © 2008 by Nelson, a division of Thomson Canada Limited