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Organizational Design The process by which managers select and manage various dimensions and components of organizational structure and culture so that an organization can achieve its goals. Copyright © 1999 Addison Wesley Longman

Organizational Structure The formal system of task and reporting relationships that controls, coordinates, and motivates employees so that they cooperate and work together to achieve an organization’s goals. Copyright © 1999 Addison Wesley Longman

Organizational Culture The informal set of values and norms that controls the way people and groups in an organization interact with each other and with people outside the organization. Copyright © 1999 Addison Wesley Longman

Copyright © 1999 Addison Wesley Longman FIGURE 15.1 The Nature of Organizational Design Copyright © 1999 Addison Wesley Longman

Copyright © 1999 Addison Wesley Longman Differentiation The grouping of people and tasks into functions and divisions to produce goods and services. Copyright © 1999 Addison Wesley Longman

Copyright © 1999 Addison Wesley Longman Function A set of people who perform the same types of tasks or hold similar positions in an organization. Copyright © 1999 Addison Wesley Longman

Copyright © 1999 Addison Wesley Longman Division A group of functions created to allow an organization to produce and dispose of its goods and services to customers. Copyright © 1999 Addison Wesley Longman

Copyright © 1999 Addison Wesley Longman FIGURE 15.2 PepsiCo's Organizational Chart Copyright © 1999 Addison Wesley Longman

Copyright © 1999 Addison Wesley Longman Functional Structure An organizational structure that groups together people who hold similar positions, perform a similar set of tasks, or use the same kinds of skills. Copyright © 1999 Addison Wesley Longman

Copyright © 1999 Addison Wesley Longman FIGURE 15.3 Dell's Functional Structure Copyright © 1999 Addison Wesley Longman

Advantages of a Functional Structure Coordination Advantages Motivational Advantages Copyright © 1999 Addison Wesley Longman

Disadvantages of a Functional Structure When a range of products or services that a company produces increases, the various functions can have difficulty efficiently servicing the needs of a wide range of products. Coordination problems may arise. As companies grow, they often expand their operations nationally, and servicing needs becomes difficult. Copyright © 1999 Addison Wesley Longman

Divisional Structures Product Structure - groups functions by types of products so that each division contains the functions it needs to service the products it produces. Copyright © 1999 Addison Wesley Longman

Copyright © 1999 Addison Wesley Longman FIGURE 15.4 Three Types of Divisional Structure Copyright © 1999 Addison Wesley Longman

Divisional Structures Market Structure - groups functions by types of customers so that each division contains the functions it needs to service a specific segment of the market. Copyright © 1999 Addison Wesley Longman

Copyright © 1999 Addison Wesley Longman Figure 15.4 (Continued) Copyright © 1999 Addison Wesley Longman

Copyright © 1999 Addison Wesley Longman Divisional Structure Geographic Structure - groups functions by region so that each division contains the functions it needs to service customers in a specific geographic area. Copyright © 1999 Addison Wesley Longman

Copyright © 1999 Addison Wesley Longman Figure 15.4 (Continued) Copyright © 1999 Addison Wesley Longman

Advantages of Divisional Structures Coordination Advantages Motivation Advantages Copyright © 1999 Addison Wesley Longman

Disadvantages of Divisional Structures Operating costs Communication may suffer Divisions may start to compete for organizational resources Divisions may pursue own goals at the expense of organizational goals Copyright © 1999 Addison Wesley Longman

Copyright © 1999 Addison Wesley Longman Matrix Structure An organizational structure that simultaneously groups people by function and by product team. Copyright © 1999 Addison Wesley Longman

FIGURE 15.5 A Matrix Structure Copyright © 1999 Addison Wesley Longman Copyright © 1999 Addison Wesley Longman

Copyright © 1999 Addison Wesley Longman Advice to Managers Examine the way your organization groups its activities by function, and determine whether this grouping meets the organization’s current product or customer needs. If the number of goods and services you are producing has increased, examine whether you should change to a product structure. Copyright © 1999 Addison Wesley Longman

Copyright © 1999 Addison Wesley Longman Advice to Managers If you are currently servicing the needs of a number of different groups of customers, examine whether you should change to a market structure. If you are expanding nationally, examine whether you should change to a geographic structure. Copyright © 1999 Addison Wesley Longman

Copyright © 1999 Addison Wesley Longman Advice to Managers If your current need is to speed the development of new products, examine whether you should choose a matrix structure. Copyright © 1999 Addison Wesley Longman

Organizational Structure - Key Terms Integration - coordinating the activities of different functions and divisions. Authority - the power that enables one person to hold another person accountable for his or her actions. Copyright © 1999 Addison Wesley Longman

Organizational Structure - Key Terms Span of Control - the number of employees who report to a manager. Copyright © 1999 Addison Wesley Longman

Copyright © 1999 Addison Wesley Longman FIGURE 15.6 Using the Hierarchy to Manage Intergroup Relations Copyright © 1999 Addison Wesley Longman

Copyright © 1999 Addison Wesley Longman Figure 15.6 (Continued) Copyright © 1999 Addison Wesley Longman

Organizational Structure - Key Terms Decentralization - the distribution of authority and responsibility for decision making to managers at all levels of an organization’s hierarchy. Centralization - the concentration of authority and responsibility for decision making in the hands of managers at the top of an organization’s hierarchy. Copyright © 1999 Addison Wesley Longman

FIGURE 15.7 Examples of Flat and Tall Hierarchies Copyright © 1999 Addison Wesley Longman Copyright © 1999 Addison Wesley Longman

Organizational Structure - Key Terms Mutual Adjustment - the ongoing informal communication among different people and functions that is necessary for an organization to achieve its goals. Copyright © 1999 Addison Wesley Longman

Organizational Structure - Key Terms Teams - a permanent group made up of representatives from two or more functions that meets regularly to discuss important on-going problems facing the organizations. Copyright © 1999 Addison Wesley Longman

Copyright © 1999 Addison Wesley Longman FIGURE 15.8 Using a Team to Increase Coordination Between Functions Copyright © 1999 Addison Wesley Longman

Organizational Structure - Key Terms Cross-Functional Teams - are composed of people from different functions who are permanently assigned to work full-time on a team to bring a new good or service to the market. Copyright © 1999 Addison Wesley Longman

FIGURE 15.9 A Cross-Functional Team Structure Copyright © 1999 Addison Wesley Longman Copyright © 1999 Addison Wesley Longman

Organizational Structure - Key Terms Integrating Role - a permanent managerial position in which the manager’s only role is to coordinate the activities of different divisions. Copyright © 1999 Addison Wesley Longman

Copyright © 1999 Addison Wesley Longman FIGURE 15.10 Using Integrating Roles in a Product Structure to Increase Integration Copyright © 1999 Addison Wesley Longman

Organizational Structure - Key Terms Standardization - the development of routine responses to recurring problems or opportunities. Formalization - the use of rules and standard operating procedures to control an organization’s activities. Copyright © 1999 Addison Wesley Longman

Organizational Culture - Key Terms Terminal Value - a desired goal that an organization seeks to achieve. Instrumental Value - a desired mode of behavior that an organization wants its members to observe. Copyright © 1999 Addison Wesley Longman

Organizational Culture - Key Term Ethical Values - the moral values and norms that establish the appropriate way for an organization and its members to deal with each other and with those outside the organization. Copyright © 1999 Addison Wesley Longman

Copyright © 1999 Addison Wesley Longman Organizational Rites Rites of Passage Rites of Integration Rites of Enhancement Rites of Degradation Copyright © 1999 Addison Wesley Longman

Copyright © 1999 Addison Wesley Longman Rites of Passage Purpose is to learn and internalize the norms and values of the organization. An example is induction and basic training. Copyright © 1999 Addison Wesley Longman

Copyright © 1999 Addison Wesley Longman Rites of Integration Purpose is to build common norms and values. An example is an annual office party. Copyright © 1999 Addison Wesley Longman

Copyright © 1999 Addison Wesley Longman Rites of Enhancement Purpose is to motivate commitment to norms and values. An example is the presentation of an annual award. Copyright © 1999 Addison Wesley Longman

Copyright © 1999 Addison Wesley Longman Rites of Degradation Purpose is to change or reaffirm norms and values. An example is firing a top executive. Copyright © 1999 Addison Wesley Longman

Copyright © 1999 Addison Wesley Longman Advice to Managers Always study the culture of your organization, and identify the terminal and instrumental values on which it is based in order to assess how it affects organizational behavior. Assess whether organizational norms are effectively transmitting the values of your organization’s culture to organizational members. Copyright © 1999 Addison Wesley Longman

Copyright © 1999 Addison Wesley Longman Advice to Managers Examine how your organization socializes new members. Assess whether socialization practices are effective in helping newcomers to learn the organization’s culture, and look for ways to improve the process. Copyright © 1999 Addison Wesley Longman

Copyright © 1999 Addison Wesley Longman Advice to Managers Try to identify ceremonies or rites that your organization can use to help employees to learn cultural values, enhance employee commitment, and bond employees to the organization. Copyright © 1999 Addison Wesley Longman