1. Managing Organizational Structure

2. Today’s Operative Word
Don’t -- as in…
No!
Nyet!
No way!
Go away!

3. Overview How to group tasks into motivational jobs
The need to centralize and decentralize authority
Choosing the right structure

4. Overview
How to coordinate, integrate and evolve jobs and structure as an organization grows
Using strategic alliances and networks to increase efficiency and effectiveness without adding structure
Why structure -- like bread dough – wants to rise and expand making today’s operative word vital

5. Why Study Structure?
In order to empower your people to achieve goals efficiently and effectively, you must use SWOT to pick the structure best suited to your internal resources and the external environment

6. Organizational Structure
Structure, control systems, culture and human resource management systems combine to determine how efficiently and effectively an organization uses resources

7. Designing Organizational Structure
The system of responsibilities and reporting relationships that enables workers to use resources to achieve goals efficiently and effectively.

8. The Organizational Environment
Organizational Strategy
Different environments require different strategies and structures
A differentiation strategy needs flexible structure to foster innovation
A low-cost strategy may need more rigid structure to drive cost-control
Increased vertical integration or diversification also requires a more flexible structure because it requires reacting quickly to multiple, complex environments tracked by a small “corporate” staff using KPIs

9. Forces Affecting Structure
Technology
The combination of skills, knowledge, tools,
equipment and computers used to run the
organization frequently forces the structure
into new shapes that require new and
different management methods

10. Forces… Human Resources
Highly skilled workers whose jobs require teamwork that usually needs flexible structure
Professionals (e.g., CPA’s, doctors, lawyers, etc.) often have internalized professional norms that affect structure

11. The Organizational Environment
Managers must take into account environment, strategy,
technology, and human
resources when
designing the
organization’s structure

12. Job Design
Job design: dividing tasks into specific jobs to create an effective and efficient workforce
Job simplification: reducing the number of tasks each worker performs
Warning: too much simplification can cause boredom

13. Job Design
Job enlargement: increasing the number of tasks in a job to reduce boredom
Job enrichment: expanding the depth or breadth of responsibility to increase worker involvement

14. Grouping Jobs into Functions
Functional Structure
An organizational structure including all departments an
organization requires to produce its goods or services
Advantages
Encourages learning from others doing similar jobs.
Easy for managers to monitor and evaluate workers.
Disadvantages
Difficult for departments to communicate with others (silo effect)
Preoccupation with department goals obscures organizational goals
Requires unified corporate plan and cross-departmental teams to breach silo walls

15. Divisional Structures
An organizational structure composed of separate business units each of which houses all the functions necessary to produce a specific product for a specific customer
Divisions create smaller, manageable parts of a firm
Divisions develop a business-level strategy to compete
Functional managers report to divisional managers who report to corporate management
GE (a diversified conglomerate) is an example of this sort of corporation; this approach requires KPIs to be effective

16. Types of Divisional Structures
Product Structure
Customers are served by self-contained divisions that handle a specific type of product or service (such as jet engines or luxury cars).
Allows functional managers to specialize in one product area
Division managers become experts in their area
Removes need for direct supervision of division by corporate managers (corporate just tracks KPIs such as customer satisfaction index or ROI)
Divisional management improves the use of resources

17. Types of Divisional Structures
Geographic Structure
Each region, country or area containing customers with differing needs is served by a local, self-contained division locally producing or importing products to meet those needs.

18. Types of Divisional Structures
Global geographic structure
Different divisions serve each world region when managers find different problems or demands across the globe.
Generally occurs when managers pursue a multi-
domestic strategy

19. Types of Divisional Structures
Market (Customer) Structure
Each kind of customer is served by a self-contained division (e.g., Toyota, Lexus, Scion)
Global market (customer) structure
Customers in different regions buy similar products so firms can locate manufacturing facilities and product distribution networks where they decide is best. Also achieves economy of scale. Firms pursuing a global strategy will use this type of structure.

20. Product Team Design Structure
Product Team Structure
Members permanently assigned to the team and empowered to bring a product to market.
Avoids problems of two-way communication and the conflicting demands of functional and product team bosses.
Cross-functional team is composed of a group of managers from different departments working together to perform organizational tasks. Each team member has a channel back to his-her department.
Breaks down silo walls to focus silo power on satisfying customers
Toyota product development

21. Hybrid Structures Hybrid Structure
The structure of a large organization with many divisions that simultaneously uses many different organizational structures
Managers can select the best structure for a particular division—one division may use a functional structure, another division may have a geographic structure.
The ability to break a large organization into smaller units makes it easier to manage.
Customized, complex and confusing, but can be made to work if central management uses KPIs to track results.

22. Coordinating Functions: Allocating Authority
Authority: the power to hold people accountable for their actions and to make decisions concerning the use of organizational resources
Hierarchy of Authority: an organization’s chain of command, specifying the relative authority of each manager – the power spine

23. Allocating Authority Span of Control
The number of subordinates reporting directly to a manager (How many departments do you oversee?)
Line Manager
Managers in the direct chain of command who have authority over people and resources lower down
Primarily responsible for the production of goods or services (e.g., a plant manager)
Staff Manager
Functional-area specialists who give advice and support to line managers (e.g., a human resources specialist)

24. Tall and Flat Organizations
Tall structures have many levels of authority and narrow spans of control.
Can slow decision-making and implementation
Can hinder coordination
Can garble communications as they are repeated down the line
Can separate decision-making from execution.
Flat structures have fewer levels and wider spans of control.
Creates quicker decision-making and communication but can overwork managers
Requires good line-of-sight control

25. Downside of Decentralization
Decentralization diffuses control by distributing leadership; can cause loss of unified purpose, direction and focus
Rule of thumb: extremely decentralized organizations need a strong corporate culture so everyone has an embedded compass – all pointing in the same direction; replace external (management) control with internal (corporate DNA) control
Toyota faces this problem as it tries to evolve into a more decentralized, global organization

26. Strategic Alliances Strategic Alliance Network Structure:
Managers pool or share firm’s resources and know-how with another company and the two firms share the risks and rewards of starting a new venture (Ford and Toyota on hybrids)
Network Structure:
A series of strategic alliances an organization creates with suppliers, manufacturers, and distributors to produce and market products.

27. Basic Rules of Structure
Silos (vertical); demand (horizontal)
Badly designed structure can garble communication, divide decision from execution, and slow reaction time
Can frustrate initiative and leadership
No bread dough; just say “NO!”
In-source, outsource or leave empty

28. Summary
Look in, look out. Base structure on your resources and the external environment.
Keep it small, simple, flexible, flat, and fast.
Continually re-assess structure to see if it can be improved to better match the changing environment, avoid waste, and provide more value to customers.
As you decentralize and empower, reinforce corporate DNA to assure shared direction, shared focus, and consistent decision-making.
Make certain managers have the right incentives and KPIs to motivate and measure performance; never get FDH (Fat Dumb Happy).