Management, by Williams South-Western College Publishing Copyright © 2000 Chapter 11 Designing Adaptive Organizations

Management, by Williams South-Western College Publishing Copyright © What Would You Do? Reengineering at American Express 4Many recent “missteps” at American Express 4How should the company be organized? 4Who should make decisions?

Management, by Williams South-Western College Publishing Copyright © After discussing this section, you should be able to: Learning Objectives Designing Organizational Structure ¬describe the departmentalization approach to organizational structure. ­explain organizational authority. ®discuss the different methods for job design.

Management, by Williams South-Western College Publishing Copyright © Departmentalization Functional Product Customer Geographic Matrix

Management, by Williams South-Western College Publishing Copyright © Functional Departmentalization Advertising Agency Sales Accounting Information Systems Human Resources Print Advertising Art Department Adapted from Figure 11.3

Management, by Williams South-Western College Publishing Copyright © Functional (cont’d) Advantages 4Creates highly skilled specialists 4Lowers costs through reduced duplication 4Communication and coordination problems are lessened Disadvantages 4Cross-department coordination can be difficult 4May lead to slower decision making 4Produces managers with narrow experiences

Management, by Williams South-Western College Publishing Copyright © Product Departmentalization General Electric Aircraft Engines Capital Services Appliances Lighting NBC TelevisionMedical Systems Adapted from Figure 11.4

Management, by Williams South-Western College Publishing Copyright © Product (cont’d) Advantages 4Managers specialize but have broader experiences 4Easier to assess work-unit performance 4Decision-making is faster Disadvantages 4Duplication of activities 4Difficult to coordinate across departments

Management, by Williams South-Western College Publishing Copyright © Customer Departmentalization Adapted from Figure 11.5 American Express Corporation CardsTravelShopping Business Services Financial Services

Management, by Williams South-Western College Publishing Copyright © Customer (cont’d) Advantages 4Focuses on customer needs 4Products and services tailored to specific customers Disadvantages 4Duplication of activities 4Difficult to coordinate across departments 4Efforts to please customers may hurt the company

Management, by Williams South-Western College Publishing Copyright © Been There, Done That 4Business was slow to develop 4Began to focus on the customer T“orbit” around their customers 4Egalitarian culture and open communication are key igus and the Solar System

Management, by Williams South-Western College Publishing Copyright © Geographic Departmentalization Adapted from Figure 11.6 Coca-Cola Enterprises Central North America Group Eastern North America Group European Group Western North America Group

Management, by Williams South-Western College Publishing Copyright © Geographic (cont’d) Advantages 4Responsive to the demands of different market areas 4Unique resources located close to the customer Disadvantages 4Duplication of resources 4Difficult to coordinate across departments

Management, by Williams South-Western College Publishing Copyright © Matrix Departmentalization Adapted from Figure 11.7 Pharmacia & Upjohn Headquarters Thrombosis Women’s Health Opthamology Metabolic Diseases Critical Care Urology United States Research Marketing ManufacturingEurope Research Marketing ManufacturingJapan Research Marketing Manufacturing United States Urology Research Marketing Manufacturing Europe Critical Care Research Marketing Manufacturing

Management, by Williams South-Western College Publishing Copyright © Matrix (cont’d) Advantages 4Efficiently manage large, complex tasks 4Effectively complete large, complex tasks Disadvantages 4Requires high levels of coordination 4Conflict between bosses 4Requires high levels of management skills

Management, by Williams South-Western College Publishing Copyright © Organizational Authority Chain of Command Line Versus Staff Authority Delegation of Authority Degree of Centralization

Management, by Williams South-Western College Publishing Copyright © Chain of Command 4The vertical line of authority in an organization 4Clarifies who reports to whom 4Unity of command Tworkers report to only one boss T“violated” by the matrix structure

Management, by Williams South-Western College Publishing Copyright © Line v. Staff Authority 4Line authority - function Tthe right to command immediate subordinates in the chain of command Tan activity that contributes directly to profit generation 4Staff authority - function Tthe right to advise but not command others Tan activity that supports profit generation

Management, by Williams South-Western College Publishing Copyright © Delegation of Authority 4The assignment of direct authority and responsibility to a subordinate Manager Subordinate Responsibility Authority Accountability

Management, by Williams South-Western College Publishing Copyright © Degree of Centralization 4Centralization of authority Tprimary authority is held by upper management 4Decentralization Tsignificant authority is found in lower levels of the organization 4Standardization Tsolving problems by applying rules, procedures, and processes

Management, by Williams South-Western College Publishing Copyright © Job Design Job Specialization Job rotation, Enlargement, & Enrichment Job Characteristics Model

Management, by Williams South-Western College Publishing Copyright © Job Specialization 4Breaking jobs into small tasks 4Jobs are simple, easy to learn, and economical 4Can lead to boredom, low satisfaction, high absenteeism, and employee turnover

Management, by Williams South-Western College Publishing Copyright © Blast From The Past From Farms to Factories to Telecommuting 4Early work was farm based or in “cottage industries” 4Industrial revolution led to factories and mobility 4Technology allows people to again “work” at home

Management, by Williams South-Western College Publishing Copyright © Job Rotation, Enlargement, & Enrichment 4Rotation Tperiodically moving workers from one specialized job to another 4Enlargement Tincreasing the number of tasks performed by a worker 4Enrichment Tadding more tasks and authority to an employee’s job

Management, by Williams South-Western College Publishing Copyright © Job Characteristics Model (JCM) 4A job redesign approach that seeks to increase employee motivation 4Emphasizes internal motivation 4Redesign work to make it more “interesting”

Management, by Williams South-Western College Publishing Copyright © JCM (cont’d) Core Job Dimensions Personal & Work Outcomes Critical Psychological States Skill Variety Task Identity Task Significance Autonomy Feedback ExperiencedMeaningfulness of Work Experienced Responsibility for Outcomes of Work Knowledge of Actual Results of Work Activities High Internal Work Motivation High-quality Work Performance High Satisfaction with Work Low Absenteeism & Turnover Adapted From Figure 11.9

Management, by Williams South-Western College Publishing Copyright © Job Redesign Techniques Combing Tasks Natural Work Units Establishing Client Relationships Establishing Client Relationships Vertical Loading Opening Feedback Channels Opening Feedback Channels

Management, by Williams South-Western College Publishing Copyright © What Really Works? Making Jobs More Interesting & Motivating Task Identity 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Probability of success66% Probability of success69% Task Significance Job Satisfaction

Management, by Williams South-Western College Publishing Copyright © What Really Works? (cont’d) Making Jobs More Interesting & Motivating Skill Variety 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Probability of success70% Probability of success73% Autonomy Job Satisfaction

Management, by Williams South-Western College Publishing Copyright © What Really Works? (cont’d) Making Jobs More Interesting & Motivating Feedback 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Probability of success70% Probability of success84% High Growth Need Strength Job Satisfaction

Management, by Williams South-Western College Publishing Copyright © What Really Works? (cont’d) Making Jobs More Interesting & Motivating 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Probability of success69% Low Growth Need Strength Job Satisfaction

Management, by Williams South-Western College Publishing Copyright © What Really Works? (cont’d) Making Jobs More Interesting & Motivating Task Identity 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Probability of success63% Probability of success68% Task Significance Workplace Absenteeism

Management, by Williams South-Western College Publishing Copyright © What Really Works? (cont’d) Making Jobs More Interesting & Motivating Skill Variety 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Probability of success72% Probability of success74% Autonomy Workplace Absenteeism

Management, by Williams South-Western College Publishing Copyright © What Really Works? (cont’d) Making Jobs More Interesting & Motivating Feedback 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Probability of success72% 84% Workplace Absenteeism

Management, by Williams South-Western College Publishing Copyright © After discussing this section, you should be able to: Learning Objectives Designing Organizational Processes ¯explain the methods that companies are using to redesign internal organizational processes (i.e., intraorganizational processes). °describe the methods that companies are using to redesign external organizational processes (i.e., interorganizational processes).

Management, by Williams South-Western College Publishing Copyright © Intraorganizational Processes Reengineering Empowerment Behavioral Informality

Management, by Williams South-Western College Publishing Copyright © Back to the Future Designing Tomorrow’s Organizations 4In the past organizations were defined in vertical and horizontal dimensions 4Five centers of modern organizations Tknowledge/learning center Trecovery/development center Tworld service/spiritual center Tworld class operations center Tleadership institute

Management, by Williams South-Western College Publishing Copyright © Reengineering 4The fundamental rethinking and radical redesign of business processes 4Intended to achieve dramatic improvements in performance 4Change the orientation from vertical to horizontal 4Changes task interdependence

Management, by Williams South-Western College Publishing Copyright © Pooled Interdependence

Management, by Williams South-Western College Publishing Copyright © Sequential Interdependence

Management, by Williams South-Western College Publishing Copyright © Reciprocal Interdependence

Management, by Williams South-Western College Publishing Copyright © Empowerment 4A feeling of intrinsic motivation 4Workers perceive meaning in their work 4Employees are capable of self- determination 4Employees are active rather than passive

Management, by Williams South-Western College Publishing Copyright © Behavioral Informality 4Spontaneity 4Casualness 4Interpersonal familiarity Behavioral Formality 4Routine & regimen 4Specific rules 4Impersonal attachment

Management, by Williams South-Western College Publishing Copyright © Interorganizational Process ModularOrganizations VirtualOrganizations BoundarylessOrganizations

Management, by Williams South-Western College Publishing Copyright © What Really Happened? Reengineering at American Express 4Used customer departmentalization 4Decentralization, except “back offices” were centralized 4Now a modular organization