1. McGraw-Hill/Irwin © 2004 The McGraw-Hill Companies, Inc., All Rights Reserved. Decision Rights Bundling Tasks into Jobs and Subunits

2. McGraw-Hill/Irwin © 2004 The McGraw-Hill Companies, Inc., All Rights Reserved. Bundling tasks… learning objectives Identify and apply the trade-offs in bundling tasks into jobs and subunits Evaluate alternative organizational structures –Functional –Product –Matrix

3. McGraw-Hill/Irwin © 2004 The McGraw-Hill Companies, Inc., All Rights Reserved. Task assignment Specialized –perform limited number of functions e.g. traditional assembly line Broad –perform multiple functions e.g. professors

4. McGraw-Hill/Irwin © 2004 The McGraw-Hill Companies, Inc., All Rights Reserved. Specialized task assignment Benefits –comparative advantage –lower cross-training expense Costs –foregone complementarities across tasks –coordination costs –functional myopia –reduced flexibility

5. McGraw-Hill/Irwin © 2004 The McGraw-Hill Companies, Inc., All Rights Reserved. Tasks at Finware

6. McGraw-Hill/Irwin © 2004 The McGraw-Hill Companies, Inc., All Rights Reserved. Methods of grouping jobs U-form of organization (unitary) –by functional specialty –each primary function in one major subunit

7. McGraw-Hill/Irwin © 2004 The McGraw-Hill Companies, Inc., All Rights Reserved. Finware as functional organization

8. McGraw-Hill/Irwin © 2004 The McGraw-Hill Companies, Inc., All Rights Reserved. Functional subunits advantages and disadvantages Advantages –promotes effective coordination –promotes functional expertise –well-defined promotion path Disadvantages –opportunity cost of senior management time –coordination problems across departments –employee focus on functions, not customers

9. McGraw-Hill/Irwin © 2004 The McGraw-Hill Companies, Inc., All Rights Reserved. Methods of grouping jobs U-form of organization (unitary) M-form of organization (multidivisional) –collection of business units product geographic area –each unit has multiple functions

10. McGraw-Hill/Irwin © 2004 The McGraw-Hill Companies, Inc., All Rights Reserved. Finware as product and geographic organization

11. McGraw-Hill/Irwin © 2004 The McGraw-Hill Companies, Inc., All Rights Reserved. Product/geographic subunits advantages and disadvantages Advantages –decision rights tied to specific knowledge –senior management able to focus on strategy –promotes coordination pertinent to product/area Disadvantages –unit interdependencies may be ignored –economies may be foregone

12. McGraw-Hill/Irwin © 2004 The McGraw-Hill Companies, Inc., All Rights Reserved. Methods of grouping jobs U-form of organization (unitary) M-form of organization (multidivisional) Matrix organization –intersecting lines of authority –functional departments address performance reviews and professional development –product/geographic subunits address customer/client needs

13. McGraw-Hill/Irwin © 2004 The McGraw-Hill Companies, Inc., All Rights Reserved. Matrix organizations Employees are assigned to two subunits –functional department –other pertinent subunit Intersecting lines of authority –functional managers handle performance reviews –product or other managers provide input

14. McGraw-Hill/Irwin © 2004 The McGraw-Hill Companies, Inc., All Rights Reserved. Finware as matrix organization

15. McGraw-Hill/Irwin © 2004 The McGraw-Hill Companies, Inc., All Rights Reserved. Reorganization of IBM Credit

16. McGraw-Hill/Irwin © 2004 The McGraw-Hill Companies, Inc., All Rights Reserved. IBM Credit originally Originally organized around functions –employees assigned specialized set of tasks within functional area –employees had limited decision authority Credit application processing took 6 days

17. McGraw-Hill/Irwin © 2004 The McGraw-Hill Companies, Inc., All Rights Reserved. IBM Credit with functional organization

18. McGraw-Hill/Irwin © 2004 The McGraw-Hill Companies, Inc., All Rights Reserved. A “reengineered” IBM Credit New technology and information systems supported task reassignment and job redesign As reorganized, empowered caseworkers handle process in 4 hours

19. McGraw-Hill/Irwin © 2004 The McGraw-Hill Companies, Inc., All Rights Reserved. IBM Credit’s revised organization

20. McGraw-Hill/Irwin © 2004 The McGraw-Hill Companies, Inc., All Rights Reserved. Battle of the functional managers Quick Motorcycle Company –functionally organized design department marketing department New product design options –speed –safety Marketing options –magazine advertising  older consumers –television advertising  younger consumers

21. McGraw-Hill/Irwin © 2004 The McGraw-Hill Companies, Inc., All Rights Reserved. Battle of the functional managers game matrix