1. McGraw-Hill/Irwin© 2008 The McGraw-Hill Companies, Inc. All rights reserved. 15 Organizational Structure

2. McShane/Von Glinow OB4e© 2008 The McGraw-Hill Companies, Inc. All rights reserved. Slide 15-2 Courtesy of Nitro Group Nitro’s Structural Advantage Boutique advertising firm Nitro relies on an organizational structure that keeps it nimble and responsive to customer needs. Founded in Shanghai, Nitro is a virtual global agency in which each local office has account service staff, but a global creative swat team is parachuted in as required.

3. McShane/Von Glinow OB4e© 2008 The McGraw-Hill Companies, Inc. All rights reserved. Slide 15-3 Division of Labor  Subdivision of work into separate jobs assigned to different people  Potentially increases work efficiency  Necessary as company grows and work becomes more complex Courtesy of Nitro Group

4. McShane/Von Glinow OB4e© 2008 The McGraw-Hill Companies, Inc. All rights reserved. Slide 15-4 Forms of Work Coordination Informal communication –Sharing information –High media-richness –Important in teams –Integrator roles in larger firms Formal hierarchy –Direct supervision –Common in larger firms –Problems -- costly, slow, less popular today with workforce Standardization –Processes -- formal instructions –Outputs -- clear goals/output measures –Skills -- training, learn precise role behaviors

5. McShane/Von Glinow OB4e© 2008 The McGraw-Hill Companies, Inc. All rights reserved. Slide 15-5 OrganizationalStructureElements Span of Control Centralization Department-alization Formalization Elements of Organizational Structure

6. McShane/Von Glinow OB4e© 2008 The McGraw-Hill Companies, Inc. All rights reserved. Slide 15-6 Span of Control Number of people directly reporting to the next level –Assumes coordination through direct supervision Wider span of control possible with other coordinating mechanisms present

7. McShane/Von Glinow OB4e© 2008 The McGraw-Hill Companies, Inc. All rights reserved. Slide 15-7 Trend Toward Flatter Structures Firms moving toward flatter structures –Cuts costs –Puts decision makers closer to front-line information –Supports empowerment Problem: risk of cutting too much middle management

8. McShane/Von Glinow OB4e© 2008 The McGraw-Hill Companies, Inc. All rights reserved. Slide 15-8 Formal decision making authority is held by a few people, usually at the top Centralization Decision making authority is dispersed throughout the organization Decentralization Centralization and Decentralization

9. McShane/Von Glinow OB4e© 2008 The McGraw-Hill Companies, Inc. All rights reserved. Slide 15-9 Formalization The degree to which organizations standardize behavior through rules, procedures, formal training, and related mechanisms. Formalization increases as firms get older, larger, and more regulated Problems –Reduces organizational flexibility –Work rules can undermine productivity –Employees feel disempowered –Rules become focus of attention

10. McShane/Von Glinow OB4e© 2008 The McGraw-Hill Companies, Inc. All rights reserved. Slide 15-10 Mechanistic vs. Organic Structures Mechanistic Narrow span of control High formalization High centralization Organic Wide span of controlWide span of control Little formalizationLittle formalization Decentralized decisionsDecentralized decisions

11. McShane/Von Glinow OB4e© 2008 The McGraw-Hill Companies, Inc. All rights reserved. Slide 15-11 Effects of Departmentalization 1.Establishes chain of command (supervision structure) 2.Creates common mental models, measures of performance, etc 3.Encourages staff to coordinate through informal communication

12. McShane/Von Glinow OB4e© 2008 The McGraw-Hill Companies, Inc. All rights reserved. Slide 15-12 Features of Simple Structures Minimal hierarchy -- staff reports directly to owner Roles are fairly loosely defined for flexibility Informal communication for coordination Centralized structure -- owner makes most decisions

13. McShane/Von Glinow OB4e© 2008 The McGraw-Hill Companies, Inc. All rights reserved. Slide 15-13 Organizes employees around specific knowledge or other resources (marketing, production) CEO FinanceProduction Marketing Functional Organizational Structure

14. McShane/Von Glinow OB4e© 2008 The McGraw-Hill Companies, Inc. All rights reserved. Slide 15-14 Evaluating Functional Structures Benefits –Supports professional identity and career paths –Permits greater specialization –Easier supervision --similar issues –Creates an economy of scale --common pool of talent Limitations –More emphasis on subunit than organizational goals –Higher dysfunctional conflict –Poorer coordination -- requires more controls

15. McShane/Von Glinow OB4e© 2008 The McGraw-Hill Companies, Inc. All rights reserved. Slide 15-15 Organizes employees around outputs, clients, or geographic areas Divisional Structure CEO ConsumerProductsLightingProducts MedicalSystems

16. McShane/Von Glinow OB4e© 2008 The McGraw-Hill Companies, Inc. All rights reserved. Slide 15-16 Evaluating Divisional Structures Benefits –Building block structure -- accommodates growth –Better coordination in diverse markets Limitations –Duplication, inefficient use of resources –Specializations are dispersed, creating silos of knowledge –Difficult to determine which divisional structure should have priority

17. McShane/Von Glinow OB4e© 2008 The McGraw-Hill Companies, Inc. All rights reserved. Slide 15-17 Ed Kaiser/Edmonton Journal Bioware’s Matrix Structure Ray Muzyka (left) and Greg Zeschuk (right) adopted a matrix organizational structure for their electronic games company, Bioware, because it balances the need for teamwork and information sharing.

18. McShane/Von Glinow OB4e© 2008 The McGraw-Hill Companies, Inc. All rights reserved. Slide 15-18 Project C Manager Project B Manager Project A Manager EngineeringMarketingDesign Matrix Structure (Project-based) CEO Employees ( ) are temporarily assigned to a specific project team and have a permanent functional unit

19. McShane/Von Glinow OB4e© 2008 The McGraw-Hill Companies, Inc. All rights reserved. Slide 15-19 Evaluating Matrix Structures Benefits –Uses resources and expertise effectively –Improves communication,flexibility, innovation –Focuses specialists on clients and products –Supports knowledge sharing within specialty across groups –Solution when two divisions have equal importance Limitations –Increases goal conflict and ambiguity –Two bosses dilutes accountability –More conflict, organizational politics, and stress

20. McShane/Von Glinow OB4e© 2008 The McGraw-Hill Companies, Inc. All rights reserved. Slide 15-20 W. L. Gore’s Team-Based Structure W. L. Gore & Associates Inc. has an extreme team-based organizational structure that eliminates the traditional hierarchy. Associates are organized around self-directed teams at dozens of manufacturing and sales offices around the world. © Bill Kramer/ Bill Kramer Photography Inc.

21. McShane/Von Glinow OB4e© 2008 The McGraw-Hill Companies, Inc. All rights reserved. Slide 15-21 Team-Based Structure Features Self-directed work teams Teams organized around work processes Very flat hierarchy, few management levels Very little formalization Usually found within divisionalized structure © Bill Kramer/ Bill Kramer Photography Inc.

22. McShane/Von Glinow OB4e© 2008 The McGraw-Hill Companies, Inc. All rights reserved. Slide 15-22 Evaluating Team-Based Structures Benefits –Responsive, flexible –Lower admin costs –More informed decisions Limitations –Interpersonal training costs –Slower during team development –Stress due to ambiguous roles –Problems with supervisor role changes © Bill Kramer/ Bill Kramer Photography Inc.

23. McShane/Von Glinow OB4e© 2008 The McGraw-Hill Companies, Inc. All rights reserved. Slide 15-23 Core Firm Product developmen t partner (U.S.A.) Call center partner (India) Accounting partner (Canada) Package design partner (UK) Assembly partner (Mexico) Network Organizational Structure

24. McShane/Von Glinow OB4e© 2008 The McGraw-Hill Companies, Inc. All rights reserved. Slide 15-24 Network Structure v. Virtual Corp. Network structure –An alliance of several organizations for the purpose of creating a product or serving a client Virtual corporation –Several independent companies that form unique partnership teams to provide customized products or services, usually to specific clients, for a limited time

25. McShane/Von Glinow OB4e© 2008 The McGraw-Hill Companies, Inc. All rights reserved. Slide 15-25 Evaluating Network Structures Benefits –Highly organic -- flexible design –Efficiencies from acquiring and discarding resources as needed from partnerships Limitations –Exposes core firm to market forces -- shortages of facilities and talent –Less control over non-core work processes

26. McShane/Von Glinow OB4e© 2008 The McGraw-Hill Companies, Inc. All rights reserved. Slide 15-26 External Environment & Structure Dynamic High rate of change Use team-based, network, or other organic structure Stable Steady conditions, predictable change Use mechanistic structure Complex Many elements (such as stakeholders) Decentralize Simple Few environmental elements Less need to decentralize

27. McShane/Von Glinow OB4e© 2008 The McGraw-Hill Companies, Inc. All rights reserved. Slide 15-27 Diverse Several products, clients, regions Use divisional form aligned with the diversity Hostile Competition and resource scarcity Use organic structure for responsiveness Integrated Single product, client, place Use functional structure, or geographic division if global Munificent Plenty of resources and product demand Less need for organic structure External Environment & Structure (con’t)

28. McShane/Von Glinow OB4e© 2008 The McGraw-Hill Companies, Inc. All rights reserved. Slide 15-28 Effects of Organizational Size As organizations grow, they have: –More division of labor (job specialization) –Greater use of standardization –More hierarchy and formalization –More decentralization

29. McShane/Von Glinow OB4e© 2008 The McGraw-Hill Companies, Inc. All rights reserved. Slide 15-29 Technology and Structure Technology –Mechanisms or processes by which an organization turns out its product or service Variability –The number of exceptions to standard procedure that tend to occur. Analyzability –The predictability or difficulty of the required work

30. McShane/Von Glinow OB4e© 2008 The McGraw-Hill Companies, Inc. All rights reserved. Slide 15-30 High Analyzability Low Analyzability High Variety Low Variety Scientific Research Assembly Line Skilled Trades Engineering Projects Technology and Structure

31. McShane/Von Glinow OB4e© 2008 The McGraw-Hill Companies, Inc. All rights reserved. Slide 15-31 Organizational Strategy Structure follows strategy Differentiation strategy –Providing unique products or attracting clients who want customization Cost leadership strategy –Maximize productivity in order to offer competitive pricing

32. McGraw-Hill/Irwin© 2008 The McGraw-Hill Companies, Inc. All rights reserved. 15 Organizational Structure

33. McGraw-Hill/Irwin© 2008 The McGraw-Hill Companies, Inc. All rights reserved. 15 Chapter 15 Extras

34. McShane/Von Glinow OB4e© 2008 The McGraw-Hill Companies, Inc. All rights reserved. Slide 15-34 General Motors’ IT Matrix Structure