Chapter 10 Designing Adaptive Organizations

Organizing The deployment of organizational resources to achieve strategic goals  Division of labor  Lines of authority  Coordination All organizations wrestle with structural design and reorganization Organizing is important because it follows from strategy Copyright ©2012 by South-Western, a division of Cengage Learning. All rights reserved.2

Organizing the Vertical Structure Organizing structure defines:  The set of formal tasks assigned to individuals and departments  Formal reporting relationships  The design of the systems to ensure effective coordination Copyright ©2012 by South-Western, a division of Cengage Learning. All rights reserved.3

Organizing Concepts Work Specialization is the degree to which organizational tasks are subdivided into individual jobs; also called division of labor Chain of Command is an unbroken line of authority that links all individuals in the organization and specifies who reports to whom Copyright ©2012 by South-Western, a division of Cengage Learning. All rights reserved.4

Authority, Responsibility, and Delegation Authority is vested in organizational positions, not people Authority is accepted by subordinates Authority flows down the vertical hierarchy Accountability is the mechanism through which authority and responsibility are aligned Delegation is the process managers use to transfer authority and responsibility down the chain Copyright ©2012 by South-Western, a division of Cengage Learning. All rights reserved.5

10.1 Sample Organization Chart Copyright ©2012 by South-Western, a division of Cengage Learning. All rights reserved.6

Line and Staff Authority Line departments perform primary business tasks  Sales  Production Staff departments support line departments  Marketing  Human Resources  Accounting  Research Copyright ©2012 by South-Western, a division of Cengage Learning. All rights reserved.7

Span of Management The number of employees reporting to a supervisor Tall Organizations have more levels and narrow span Flat Organizations have a wide span and fewer levels Copyright ©2012 by South-Western, a division of Cengage Learning. All rights reserved.8

Work is stable and routine Subordinates perform similar work Subordinates are in one location Highly trained/require little direction Rules and procedures are defined Few planning or nonsupervisory activities Manager’s preference Less Supervision/Larger Spans of Control Copyright ©2012 by South-Western, a division of Cengage Learning. All rights reserved.9

10.2 Reorganization and Span of Management Copyright ©2012 by South-Western, a division of Cengage Learning. All rights reserved.10

Centralization and Decentralization Centralization – decision authority is located near the top of the organization Decentralization – decision authority is pushed downward to all levels Factors that influence centralization versus decentralization: – Change and uncertainty are usually associated with decentralization – Strategic fit – Crisis requires centralization Copyright ©2012 by South-Western, a division of Cengage Learning. All rights reserved.11

Departmentalization: Functional and Divisional Vertical Functional Approach – Grouping of positions into departments based on skills, expertise, work activities, and resource use Divisional Approach – Grouping based on organizational output Product, Program, Business (self-contained unit) Geographic or Customer-Based Divisions Geographic or Customer-Based Divisions group activities by geography or customer Copyright ©2012 by South-Western, a division of Cengage Learning. All rights reserved.12

10.4 Functional versus Divisional Structures Copyright ©2012 by South-Western, a division of Cengage Learning. All rights reserved.13

10.5 Geographic-Based Global Organization Structure Copyright ©2012 by South-Western, a division of Cengage Learning. All rights reserved.14

Departmentalization: Matrix and Team Approach Matrix approach combines functional and divisional approaches – Improve coordination and information – Dual lines of authority Team approach is a very widespread trend – Allows managers to delegate authority – Flexible, responsive Copyright ©2012 by South-Western, a division of Cengage Learning. All rights reserved.15

10.6 Dual-Authority Structure in a Matrix Organization Copyright ©2012 by South-Western, a division of Cengage Learning. All rights reserved.16

10.7 Global Matrix Structure Copyright ©2012 by South-Western, a division of Cengage Learning. All rights reserved.17

Virtual Network Approach Extends idea of horizontal coordination and collaboration – Partnerships – Alliances Could be a loose interconnected group – i.e., outsourcing Virtual network structure means that the firm subcontracts most of its major functions to separate companies Copyright ©2012 by South-Western, a division of Cengage Learning. All rights reserved.18

10.8 Network Approach to Departmentalization Copyright ©2012 by South-Western, a division of Cengage Learning. All rights reserved.19

10.9 Structural Advantages and Disadvantages Copyright ©2012 by South-Western, a division of Cengage Learning. All rights reserved.20

Organizing for Horizontal Coordination Companies need more flexibility than vertical structure can offer – Meet fast-shifting environment – Break down barriers between departments – Need integration and coordination Lack of coordination and cooperation can cause information problems – Growing global challenge Copyright ©2012 by South-Western, a division of Cengage Learning. All rights reserved.21

10.10 Evolution of Organization Structures Copyright ©2012 by South-Western, a division of Cengage Learning. All rights reserved.22

Reengineering …or business process reengineering, is the radical redesign of business processes to achieve dramatic improvements in cost, quality, service, and speed Copyright ©2012 by South-Western, a division of Cengage Learning. All rights reserved.23

Task Forces, Teams, and Project Management – Project Manager – person responsible for coordinating activities of several departments for the completion of a specific project Task Force – a temporary team or committee formed to solve a specific short-term problem involving several departments Cross-functional Team – furthers horizontal coordination by including members across the organization Copyright ©2012 by South-Western, a division of Cengage Learning. All rights reserved. 24

10.11 Project Manager Relationships to Departments Copyright ©2012 by South-Western, a division of Cengage Learning. All rights reserved.25

Structure Follows Strategy Business performance is influenced by structure Strategic goals should drive structure Structure should facilitate strategic goals Business performance is influenced by structure Strategic goals should drive structure Structure should facilitate strategic goals Copyright ©2012 by South-Western, a division of Cengage Learning. All rights reserved.26

10.12 Factors Affecting Organization Structure Copyright ©2012 by South-Western, a division of Cengage Learning. All rights reserved.27

10.13 Relationship of Structural Approach to Strategy Copyright ©2012 by South-Western, a division of Cengage Learning. All rights reserved.28

Knowledge, tools, techniques, and activities should match production activities Manufacturing firms can be categorized according to: – Small-batch and unit production – Large-batch and mass production – Continuous process production The technical complexity of each type of firm differs Structure Fits the Technology Copyright ©2012 by South-Western, a division of Cengage Learning. All rights reserved.29

10.14 Manufacturing Technology and Organization Structure Copyright ©2012 by South-Western, a division of Cengage Learning. All rights reserved.30