1. Organizational Design, Effectiveness, and Innovation
Chapter Seventeen

2. Organization Charts Organization chart
a graphic representation of formal authority and division of labor relationships
Organization chart
a graphic representation of formal authority and division of labor relationships

3. Dimensions of an Organizational Structure
Hierarchy of authority
Division of labor
Spans of control
Line and staff positions
There are four basic dimensions of organizational structure: (1) hierarchy of authority (who reports to whom), (2) division of labor, (3) spans of control, and (4) line and staff positions.

4. Sample Organization Chart for a Hospital
The partial organization chart in Figure 17–1 reveals four basic dimensions of organizational structure: (1) hierarchy of authority (who reports to whom), (2) division of labor, (3) spans of control, and (4) line and staff positions.

5. Organization Charts Span of control
the number of people reporting directly to a given manager.
Generally, the narrower the span of control, the closer the supervision and the higher the administrative costs as a result of a higher manager-to-worker ratio.
Span of control
the number of people reporting directly to a given manager.
Generally, the narrower the span of control, the closer the supervision and the higher the administrative costs as a result of a higher manager-to-worker ratio.

6. Organization Charts Staff personnel Line Managers
Do background research and provide technical advice, and recommendations to line managers.
Line Managers
have authority to make organizational decisions.
Staff personnel
Do background research and provide technical advice, and recommendations to line managers.
Line Managers
have authority to make organizational decisions.

7. An Open-System Perspective
Closed System
self-sufficient entity, closed to the surrounding environment.
Open System
depends on constant interaction with the environment for survival
Closed System
self-sufficient entity, closed to the surrounding environment.
Open System
depends on constant interaction with the environment for survival

8. The Organization as an Open System
The model in Figure 17–2 reveals the organization to be a living organism that transforms inputs into various outputs. The outer boundary of the organization
is permeable. People, information, capital, and goods and services move back and forth across this boundary. Moreover, each of the five organizational subsystems—goals and values, technical, psychosocial, structural, and managerial—is dependent on the others.

9. Organization Design Organizational design
The structures of accountability and responsibility used to develop and implement strategies, and the human resource practices and information and business processes that activate those structures
Organizational design
The structures of accountability and responsibility used to develop and implement strategies, and the human resource practices and information and business processes that activate those structures

10. Traditional Design Functional structure Divisional structure
groups people according to the business functions they perform, for example, manufacturing, marketing, and finance
Divisional structure
groups together activities related to outputs, such as type of product or customer
Functional structure
groups people according to the business functions they perform, for example, manufacturing, marketing, and finance
Divisional structure
groups together activities related to outputs, such as type of product or customer

11. Traditional Design Matrix structure
combines functional and divisional chains of command to form a grid with two command structures
Matrix structure
combines functional and divisional chains of command to form a grid with two command structures

12. Matrix Structure
In the example shown in Figure 17–3 , Ford might set up vice presidents for each functional group and project managers for each make of car. Employees would report to two managers: one in charge of the function they perform and the other in charge of the project they are working on.

13. Principles for Designing a Horizontal Organization
Organize around complete workflow processes
Flatten hierarchy and use teams to manage everything
Appoint process team leaders to manage internal team processes
Let supplier and customer contact drive performance
Provide required expertise from outside the team as required
Organize around complete workflow processes
Flatten hierarchy and use teams to manage everything
Appoint process team leaders to manage internal team processes
Let supplier and customer contact drive performance
Provide required expertise from outside the team as required

14. Designs That Open Boundaries between Organizations
Hollow structure
organization identifies core competencies and outsources noncore processes to vendors who can do them cheaper or faster
Modular structure
Outsources parts of a product instead of processes
Hollow structure
organization identifies core competencies and outsources noncore processes to vendors who can do them cheaper or faster
Modular structure
Outsources parts of a product instead of processes

15. Question?
Chad has developed a new product to improve gas mileage. He has formed a new venture but must outsource his marketing and distribution. His firm has a _________ organization.
Functional
Divisional
Matrix
Hollow
The correct answer is “D” – hollow. See previous slide

16. Designs That Open Boundaries between Organizations
Virtual organization
organization identifies partners with the needed talents and negotiates an agreement in which the participants typically work in separate facilities, linked by technology
Virtual organization
organization identifies partners with the needed talents and negotiates an agreement in which the participants typically work in separate facilities, linked by technology

17. The Contingency Approach to Designing Organizations
Contingency approach to organization design
organizations tend to be more effective when they are structured to fit the demands of the situation
Contingency approach to organization design
organizations tend to be more effective when they are structured to fit the demands of the situation

18. Mechanistic versus Organic Organizations
Mechanistic organizations
Rigid bureaucracies with strict rules, narrowly defined tasks, and top-down communication.
Organic organizations
Flexible networks of multitalented individuals who perform a variety of tasks
Mechanistic organizations
Rigid bureaucracies with strict rules, narrowly defined tasks, and top-down communication.
Organic organizations
Flexible networks of multitalented individuals who perform a variety of tasks

19. Characteristics of Mechanistic and Organic Organizations
As illustrated in Table 17–2 , each of the mechanistic-organic characteristics is a matter of degree. Organizations tend to be relatively mechanistic or relatively organic.

20. Different Approaches to Decision Making
Centralized decision making
key decisions are made by top management
Decentralized decision making
important decisions are made by middle- and lower-level managers
Centralized decision making
key decisions are made by top management
Decentralized decision making
important decisions are made by middle- and lower-level managers

21. Getting the Right Fit
A functional structure can save money by grouping together people who need similar materials and equipment
Divisional structures increase employees’ focus on customers and products
A functional structure can save money by grouping together people who need similar materials and equipment
Divisional structures increase employees’ focus on customers and products

22. Getting the Right Fit
A successful matrix structure requires superior managers who communicate extensively, foster commitment and collaboration, manage conflict and negotiate effectively to establish goals and priorities consistent with the organization’s strategy
A successful matrix structure requires superior managers who communicate extensively, foster commitment and collaboration, manage conflict and negotiate effectively to establish goals and priorities consistent with the organization’s strategy

23. Getting the Right Fit
Horizontal designs improve coordination and communication
Organizations that become hollow, modular, or virtual can generate superior returns by focusing on what they do best
Horizontal designs improve coordination and communication
Organizations that become hollow, modular, or virtual can generate superior returns by focusing on what they do best

24. Question?
Oneal, CEO of Fredhandbag HobbyTown, wants to improve the communication in his firm. He should change to a _________ organization.
Functional
Matrix
Horizontal
Modular
The correct answer is “C” – horizontal. See previous slide.

25. Four Dimensions of Organizational Effectiveness
A good way to better understand this complex subject is to consider four generic approaches to assessing an organization’s effectiveness (see Figure 17–4 ). These effectiveness criteria apply equally well to large or small and profit or not-for-profit organizations. Moreover, as denoted by the overlapping circles in Figure 17–4 , the four effectiveness criteria can be used in various combinations.

26. Generic Effectiveness Criteria
Internal processes
focuses on “what the organization must excel at” to effectively meet its financial objectives and customers’ expectations.
Strategic constituencies satisfaction
Strategic constituency: any group of people with a stake in the organization’s operation or success.
Internal processes
focuses on “what the organization must excel at” to effectively meet its financial objectives and customers’ expectations.
Strategic constituencies satisfaction
Strategic constituency: any group of people with a stake in the organization’s operation or success.