1. PowerPoint Presentation by Charlie Cook The Environment of Managing Gary Dessler Principles and Practices for Tomorrow’s Leaders Copyright © 2004 Prentice Hall, Inc. All rights reserved. Designing Organizational Structures Designing Organizational Structures 7 C H A P T E R

2. Copyright © 2004 Prentice Hall. All rights reserved.7–2 Chapter Objectives After studying this chapter and the case exercises at the end, you should be able to: 1.Explain what the situation calls for in terms of organizing the firm’s lines of authority, departmentalization, degree of specialization of jobs, delegation and decentralization, and span of control. 2.Design an organization structure for a company. 3.Reorganize a company from its current structure to that of a “learning organization.”

3. Copyright © 2004 Prentice Hall. All rights reserved.7–3 Chapter Objectives (cont’d) 4.Explain why a company is not achieving coordination and how you would correct the situation. 5.Explain what the manager is doing wrong about delegating authority and how you would correct the situation.

4. Copyright © 2004 Prentice Hall. All rights reserved.7–4 Henri Fayol’s Principles of Management Division of work Authority and responsibility Discipline Unity of command Unity of direction Subordination of individual interests Remuneration of personnel Centralization Scalar chain Order Equity Stability of tenure of personnel Initiative Esprit de corps

5. Copyright © 2004 Prentice Hall. All rights reserved.7–5 Organization and Environment: The Burns and Stalker Study Mechanistic Organization  An organizational structure characterized by close adherence to the established chain of command, highly specialized jobs, and vertical communications. Organic Organization  An organizational structure characterized by flexible lines of authority, less specialized jobs, and decentralized decisions.

6. Copyright © 2004 Prentice Hall. All rights reserved.7–6

7. Copyright © 2004 Prentice Hall. All rights reserved.7–7

8. Copyright © 2004 Prentice Hall. All rights reserved.7–8 When Organizing: Always Keep Your Goals in Mind Business environments are in a constant state of change. An organization’s strategy must be adapted to changes in its competitive environment. Structure follows strategy.  Strategic change creates the need for restructuring the organization to acquire new and different knowledge, skills and abilities.

9. Copyright © 2004 Prentice Hall. All rights reserved.7–9 Back in the Corporate Fold FIGURE 7–1 Source: Keith Bradsher, “The Reality Behind the Slogan,” New York Times, 23 August, 2001, p. C1, and General Motors. Note: Saturn’s president once reported to GM’s president and oversaw the entire Saturn operation. Now the Saturn president reports to a GM vice president and runs its factories. Design, engineering, and marketing report to other GM executives.

10. Copyright © 2004 Prentice Hall. All rights reserved.7–10 Checklist 7.1 What Determines Organization Structure  Environment. Fast-changing environments require organic structures; slowly changing environments favor mechanistic structures.  Technology. Unit and continuous production processes favor organic structures. Mass production processes favor mechanistic structures.  Goals. Ask, “What are the main goals we want to achieve via this organization?”  Pros and cons. Each approach to departmentalization has pros and cons.  Logic and common sense.

11. Copyright © 2004 Prentice Hall. All rights reserved.7–11 What Are Learning Organizations? 1.Adopt an organic, networked organizational form. 2.Encourage their employees to learn and to confront their assumptions 3.Have employees who share a common vision 4.Have the capacity to adapt to unforeseen situations to learn from their own experiences to shift their shared mindsets to change more quickly, broadly, and deeply than ever before.

12. Copyright © 2004 Prentice Hall. All rights reserved.7–12 Two Experimental Communications Networks FIGURE 7–2 Source: Harold Leavitt, “Some Effects of Certain Communication Patterns on Group Performance, ” Journal of Abnormal and Social Psychology 46, 1972, p. 11.

13. Copyright © 2004 Prentice Hall. All rights reserved.7–13 Abolishing Organizational Boundaries Boundaryless Organization  An organization in which management strips away the “walls” which typically separate organizational functions and hierarchical levels, through the widespread use of teams, networks, and similar structural mechanisms.

14. Copyright © 2004 Prentice Hall. All rights reserved.7–14 Organizational Boundaries Authority Boundary  The boundary created by differences in organizational level or status across which communications may be distorted or constrained due to the status difference. Task Boundary  The boundary created by the tendency of employees to focus on their own specialized tasks.

15. Copyright © 2004 Prentice Hall. All rights reserved.7–15 Organizational Boundaries (cont’d) Political Boundary  The boundary created special interests or agendas within an organization that may oppose each other Identity Boundary  The boundary created by identifying with those groups with which one has shared experiences and with which one believes one shares fundamental values.

16. Copyright © 2004 Prentice Hall. All rights reserved.7–16 FIGURE 0–3 The Four Organizational Boundaries That Matter Source: Reprinted by permission of Harvard Business Review. “The Four Organizational Boundaries that Matter,” from “The New Boundaries of the Boundaryless Company,” by Larry Hirschorn and Thomas Gilmore, May–June 1992. Copyright © 1992 by the President and Fellows of Harvard College. All rights reserved.

17. Copyright © 2004 Prentice Hall. All rights reserved.7–17 Managing Learning Organizations How to Streamline Organizational Decision Making  Downsize  Reduce management layers  Establish miniunits How to Cultivate Employees’ Personal Mastery  Provide continuous learning opportunities.  Foster inquiry and dialogue.  Establish mechanisms to ensure that the organization is continuously aware of and can interact with its environment.

18. Copyright © 2004 Prentice Hall. All rights reserved.7–18 FIGURE 7–4 Union Pacific Railroad Hierarchy: Before and After Source: From Liberation Management by Tom Peters. Copyright © 1992 by Excel, a California Limited Partnership. Reprinted by permission of Alfred A. Knopf, Inc.

19. Copyright © 2004 Prentice Hall. All rights reserved.7–19 FIGURE 7–5 Part of the “Independent Integrator” Challenge Facing the Homeland Security Director Source: Alison Mitchell, “Disputes Erupt over Ridges Needs for His Job,” New York Times, 9 November 2001, p. B7.

20. Copyright © 2004 Prentice Hall. All rights reserved.7–20 Methods for Achieving Coordination Mutual Adjustment  Achieving coordination through face-to-face interpersonal interaction. Use Rules and Procedures Standardize Exercise Direct Supervision: Use the Chain of Command Divisionalize Appoint Staff Assistants Appoint Liaisons Appoint Committees Organize Independent Integrators  An individual or a group that coordinates the activities of several interdependent departments, but is independent of them.

21. Copyright © 2004 Prentice Hall. All rights reserved.7–21 Checklist 7.2 How to Achieve Coordination  Consider all available tools.  Ask, “How unpredictable is the task?”  Ask, “How differentiated are the units we want to coordinate?”  Use logic and common sense.

22. Copyright © 2004 Prentice Hall. All rights reserved.7–22 Managing Organizational Conflict Line–Staff Conflict  Disagreements between a line manager and the staff manager who is giving him or her advice. How to Organize to Reduce Interunit Conflict  Appeal to power and the chain of command  Reduce interdependence  Exchange personnel

23. Copyright © 2004 Prentice Hall. All rights reserved.7–23 FIGURE 7–6 Types of Interdependence Source: Based on James Thompson, Organizations in Action (New York: McGraw-Hill, 1967), Chapter 2.

24. Copyright © 2004 Prentice Hall. All rights reserved.7–24 Delegation  The act of passing down authority from supervisor to subordinate. Sources of Authority  Organizational position  Personal traits (charisma) and abilities (expertise)  Acceptance by employees

25. Copyright © 2004 Prentice Hall. All rights reserved.7–25 Checklist 7.3 Principles of Delegation  The manager can delegate authority but cannot delegate responsibility.  Clarify the assignment.  Delegate, don’t abdicate.  Know what to delegate.  Specify the subordinate’s range of discretion.  Authority should equal responsibility.  Make the person accountable for results.  Beware of backward delegation.

26. Copyright © 2004 Prentice Hall. All rights reserved.7–26 Decentralize? Decentralized Organization  Organizational authority for most departmental decisions is delegated to the department heads.  Control for major companywide decisions is maintained at the headquarters office. Decentralization Rules:  Decentralize decisions that affect only one division or area and that would take a long time for upper management to make.  Centralize decisions that could adversely affect the entire firm and that upper management can fairly quickly and easily.