1. Designing Adaptive Organizations
D: Chapter 10
Designing Adaptive Organizations

2. Organizing
The deployment of organizational resources to achieve strategic goals
Reflects deployment of resources
Shows division of labor
Formal lines of authority and mechanisms is developed

3. Organization Structure
Defines how tasks are divided, resources are deployed, and departments are coordinated
The set of formal tasks assigned
Formal reporting relationships
The design of systems to ensure effective coordination of employees across department

4. The Organization Chart
Visual representation
Set of formal tasks
“The Home Depot is the world's largest home improvement retailer currently operating 1,363 stores.
Framework for vertical control
Formal reporting relationships

5. Work Specialization Tasks are subdivided into individual jobs
Division of labor concept
Employees perform only the tasks relevant to their specialized function
Jobs tend to be small, but they can be performed efficiently

6. Chain of Command
Unbroken line of authority that links all persons in an organization
Shows who reports to whom
Associated with two underlying principles
Unity of Command
Scalar Principle

7. Authority
Formal and legitimate right of a manager to make decisions and issue orders
Allocate resources to achieve organizationally desired outcomes
Authority is distinguished by three characteristics
Authority is vested in organizational positions, not people
Authority is accepted by subordinates
Authority flows down the vertical hierarchy

8. Responsibility
The duty to perform the task or activity an employee has been assigned
Managers are assigned authority commensurate with responsibility

9. Accountability
Mechanism through which authority and responsibility are brought into alignment
People are subject to reporting and justifying task outcomes to those above them in the chain of command
Can be built into the organization structure

10. Process managers use to transfer authority and responsibility
Delegation 1
Process managers use to transfer authority and responsibility 2
Organization encourage managers to delegate authority to lowest possible level

11. Techniques for Delegation
Give thorough instructions
Maintain feedback
Evaluate and reward performance
Techniques for Delegation
Delegate the whole task
Ensure that authority equals responsibility
Select the right person

12. Line and Staff Positions
Line vs. staff positions
Line vs. staff authority
Advantages and complexities of using staff positions

13. TYPES OF AUTHORITY President Legal Department Vice-President,
Production
Marketing
Vice President,
Accounting A B C
Line authority
Staff authority
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14. Span of Management Number of employees who report to a supervisor
Traditional view, about seven subordinates per manager
Many lean organizations today have 30, 40, or even higher subordinates
When supervisors must be closely involved with subordinates, the span should be small
Supervisors need little involvement with subordinates, it can be large

15. Factors Influencing the Span
Supervisor
Preferences and skills
Few non-supervisory duties
Subordinates
Competence and needs
Job
Work similarity
physical proximity
Low interaction requirements

16. Tall versus Flat Structure
Span of Control used in an organization determines whether the structure is tall or flat
Tall structure has a narrow span and more hierarchical levels
Flat structure has a wide span, is horizontally dispersed and fewer hierarchical levels
The trend has been toward wider spans of control

17. SPAN OF MANAGEMENT 1 2 3 4 5 6 7 Org. Level MEMBERS AT EACH LEVEL 1
TM 8-6
SPAN OF MANAGEMENT
Org.
Level
MEMBERS AT
EACH LEVEL 1
(highest) 1 1 8 4 2 64 16 3
512 64 4
256
4,096 5
Span of 8
1,024 6
Operatives : 4,096
Managers : 585
4,096 7
Span of 4
Operatives : 4,096
Managers : 1,396
Irwin/McGraw-Hill
©The McGraw-Hill Companies, Inc., 1998 6 6 6

18. Centralization vs. Decentralization
The extend to which the power and authority is retained at the top vs. delegated to lower levels.
Factors influencing…
Size of the organization
Geographic dispersion
Technological complexity
Environmental uncertainty

19. DECENTRALIZATION CENTRALIZATION Decision-making Decision-making small
TM 8-7
DECENTRALIZATION
CENTRALIZATION
Decision-making
Decision-making
Restrictive
policies, rules,
procedures
General
policies, rules,
procedures
small
centralized
simple
certain
size
geographics
technology
environment
large
dispersed
complex
uncertain
factors
Irwin/McGraw-Hill
©The McGraw-Hill Companies, Inc., 1998 7 7 7

20. Decentralization Tends To …
Make greater use of human resources
Reduce burdens of top managers
Cause decisions to be made close to the action
Permit rapid response to changes

21. Departmentalization The basis on which individuals are grouped into departments
Vertical functional approach. People are grouped together in departments by common skills.
Divisional approach. Grouped together based on a common product, program, or geographical region.
Horizontal matrix approach. Functional and divisional chains of command. Some employees report to two bosses
Team-based approach. Created to accomplish specific tasks
Virtual Network approach. An organization structure that disaggregates major functions to separate companies that are brokered by a small headquarters organizations.

22. Five Approaches to Structural Design

23. Five Approaches to Structural Design Slide 2

24. Functional Structure Advantages
Efficient use of resources
Skill specialization development
Top management control
Excellent coordination
Quality technical problem solving

25. Functional Structure Disadvantages
Poor communications
Slow response to external changes
Decisions concentrated at top
Pin pointing responsibility is difficult
Limited view of organizational goals by employees

26. Divisional Structure Advantages
Fast response, flexibility in an unstable environment
Fosters concern for customers’ needs
Excellent coordination across functional departments
Emphasis on overall product and divisional goals
Development of general management skills

27. Divisional Structure Disadvantages
Duplication of resources across divisions
Less technical depth and specialization in divisions
Poor coordination across divisions
Less top management control
Competition for corporate resources

28. Horizontal Matrix Advantages
More efficient use of resources than divisional structure
Adaptable to changing environment
Development of both general and specialists management skills
Expertise available to all divisions
Enlarged tasks for employees 32

29. Dual Authority Structure in a Matrix Organization

30. Horizontal Matrix Disadvantages
Dual chain of command
High conflict between two sides of matrix
Many meetings to coordinate activities
Need for human relations training
Power domination by one side of matrix 33

31. Team Advantages Same advantages as functional structure
Reduced barriers among departments
Quicker response time
Better morale
Reduced administrative overhead 35

32. Team Disadvantages Dual loyalties and conflict
Time and resources spent on meetings
Unplanned decentralization 36

33. Virtual Network Advantages Disadvantages
Can draw on expertise worldwide
Highly flexible and responsive
Reduced overhead costs
Disadvantages
Lack of control, weak boundaries
Greater demand on managers
Weakened employee loyalty

34. Chapter Outline The horizontal organization The need for coordination
Task force, teams and project management

35. Organizing for Horizontal Coordination
The need for coordination
Quality of collaboration across departments

36. Structural Design
Task Force...A temporary team or committee formed to solve a specific short-term problem
Team…Participants from several departments who meet to solve ongoing problems
Project Manager…A person responsible for coordinating the activities of several departments

37. Evolution of Organization Structures
Traditional Vertical Structure
Teams and Project Managers for Horizontal Coordination
Reengineering to Horizontal Processes
New Workplace Learning Organization

38. Factors Influencing Organizational Structure
Strategy
Traditional Vertical Structure
Environment
Company Performance
Technology
New Horizontal Structure
Interdependence

39. Strategy & Structure Which Comes first—strategy or structure?
Form follows function
But, once the form is in place, it impacts the function.

40. Structure Follows Strategy
Differentiation strategy, organization attempts to develop innovative products
Cost leadership strategy, striving for internal efficiency

41. Relationship of Strategic Goals to Structural Approach
Traditional Vertical Organization
Horizontal Teams
Strategic Goals:
Differentiation, innovations, flexibility
Strategic Goals
Strategic Goals:
Cost leadership, efficiency, stability

42. Three Things Happen Due To Uncertain Environments
Increased differences occur among departments
The organization needs increased coordination to keep departments working together
The organization must adapt to change

43. Structure Reflects the Environment Organic vs. Mechanistic Structure

44. Woodward’s Manufacturing Technology
Small batch and unit production
Large batch and mass production
Continuous process production

45. Manufacturing Technology and Organizational Structure

46. Interdependence
The extent to which departments depend on each other for resources or materials to accomplish their tasks.

47. Types of Interdependence and Required Coordination