1. BA 5201 Organization and Management Patterns of strategic organizational design Instructor: Ça ğ rı Topal 1

2. Organizational design Grouping of individuals or tasks into work units, departments, and divisions Critical role in integration Functional: grouping according to the nature of the work or functions Output: grouping according to outcomes or products, markets, and geography 2

3. Functional design Grouping employees on the basis of functions or equipments Based on specialized knowledge, skills, information, and equipment Assigning partial responsibility Best suited for organizations of small- or medium-size, single-product or few-closely related-product, low-interdependence and routine technology, and fairly stable environment 3

4. Functional design-strengths Workers can develop refined expertise and skills Communication and thus coordination is facilitated within functions Newly hired employees can be easily socialized to acquire functional and interactional skills Economies of scale is more likely to emerge 4

5. Functional design-weaknesses It is difficult to coordinate the activities of different functions A narrow functional view of the organization may emerge Coordination may be pushed up the hierarchy, wasting top managerial resources It is likely that innovation will be inhibited 5

6. Output design Including groupings of products or services, markets, and geographical regions Based on output, its type or market, or geography where it is sold Involving semi-autonomous departments or divisions Suitable for uncertain environments and non- routine interdependent technologies 6

7. Output design-strengths Adaptation to environmental demands in general is easier Output rather than department orientation makes coordination easier The need for centralized coordination is less It is easier to identify and track responsibility for efficiency and profitability 7

8. Output design-weaknesses Product, market, or geographical biases are likely to occur The potential for economies of scale is considerably reduced The ability to share information and resources across divisions is low 8

9. Mixed designs: hybrid Combining both functional and output groupings Gaining economies of scale Functional departments serving the entire company Output divisions responding to product, market, or geographical requirements Suitable for uncertain environments Possibility of lack of a common vision shared by both functional headquarters units and divisional units 9

10. Mixed designs: matrix Overlapping existence of functional and output groups Functional resources allocated among output groups of products, projects, or programs Proper technical advice and expertise at the proper location and at the desired time When functional resources in short supply Responsive and flexible Suitable for complex\dynamic environments, and non-routine\highly interdependent tasks 10

11. Mixed designs: matrix-problems Possibility of domination of one group over other groups Violation of the unity of command principle and high mediation need Inherent potential for conflict Difficulty in responding to very fast circumstances 11

12. Evolving designs: virtual Core organization and critical functions Non-critical functions perfomed by partners or temporary workers Linkages kept if productive Flexibility 12

13. Evolving designs: virtual-problems Less control over outside partners Displacing labor to other nations Destabilizing jobs Socio-economic stratification 13

14. Evolving designs: federal Extension of product-based design A small central organization and a number of loosely affiliated subsidiaries Financial controls by the central organization The Japanese keiretsu and the Korean chaebol 14

15. Evolving designs: federal-keiretsu Major banks and trading companies at the core Member companies as independent entities tied together through cross holding of shares, overlapping boards of directors, and formal or informal agreements Cooperation to ensure individual companies’ viability and competitiveness Problem of inflexibility 15

16. Evolving designs: federal-chaebol Formed with the cooperation and support of the government Family-based Cross-ownership and long-standing family ties Features of family control and management, paternalistic leadership, centralized planning and control, entrepreneurial orientation, close ties with the government, and strong ties to schools 16