BA105: Organizational Behavior Professor Jim Lincoln Week 2: Discussion

2 Agenda Class business –Face cards & name tents –Attendance roster –Class reps –Team assignments next Thursday (2/5) Questions/comments on lecture & readings Lecture wind-up Discuss Allentown Materials case

3 CLASSICAL ADMINISTRATIVE THEORY Principles of horizontal structuring –Specialization (divide tasks) –Unity of direction (group tasks into departments) Principles of vertical structuring –Unity of command –Scalar chain “Go through channels” –Span of control Principles of authority and decision-making –Centralization: Fit authority to responsibility Delegate routine (“by the book”) decisions; manage exceptions Henry Fayol: General and Industrial Management, 1949 L. Gulick and L. Urwick: Papers on the Science of Administration, 1937 J. Mooney: The Principles of Organization, 1947

4 Which coordination solution is chosen depends on the degree of interdependence Regional HQ Aircraft Scheduling 1. Pooled Interdependence 2. Sequential Interdependence Product Development ManufacturingSales Hotel AHotel BHotel C OperationsMaintenance Need for Integration Low Medium High Coordinating Mechanism Rules/standards Hierarchy Mutual Adjustment 3. Reciprocal Interdependence

5 Strategic grouping: Functional organization, product organization, and hybrid forms

6 Strategic grouping dimensions Inputs –Functions, disciplines, or skills: engineering, finance, manufacturing, marketing, accounting, HR, PR, maintenance, quality, legal, logistics, etc. Outputs –Product: attributes, benefits to customers, underlying technology (what does it do? or how does it work?) –Customer: attributes or preferences; ways of buying or using products –Region: (Northeast, midwest; Europe; East Asia)

7 Engineer- ing Manufac- turing Market ing General Manager Human Resources Account- ing Functional organization

8 Engineer- ing Manufac- turing Market- ing General Manager Human Resources Account- ing Product A Product B Product C Functional organization

9 CEO Cars Prefab Houses Electronics HRMfgMktHRMfgMktHRMfgMkt Product division organization

10 Functional Organization Pluses Lean and simple –Good fit to small, young, focused organizations Functions are efficiently deployed Breeds strong, highly-developed functions Good fit to strategy based on functional capabilities Good fit to a stable, homogenous environment Good coordination of functions across products & markets Minuses High interdependence –Problem of hand-offs & functions becoming “silos” –Puts a heavy coordination burden on top management Poor development of GM skills Hard to monitor performance Poor fit to these strategies: –Diversification –Product, customer, or region focus Poor fit to turbulent, heterogeneous environment

11 Dilbert on intergroup relations

12 Allentown Materials Case Steps in preparation: 1.Assess Allentown’s problems in relation to its strategy and environment 2.Consider all the issues in the case but focus on the strategic design issues of grouping (differentiation) and linking (integration). 3.Analyze cause and effect relationships behind problems »Work back from immediate to root causes »Assess importance of cause-and-effect chains 4.Devise solutions that: »Impact causes »Are consistent and realistic 5.Think about an implementation plan that: »Has few negative spillovers (unintended consequences) »That minimizes alignment problems »That minimizes resistance