1. CHAPTER 7: ORGANIZATION STRUCTURES AND DESIGN © John Wiley & Sons Canada, Ltd. John R. Schermerhorn, Jr., Barry Wright, and Lorie Guest Business Leadership: Management Fundamentals John R. Schermerhorn, Jr., Barry Wright, and Lorie Guest

2. o Describe organizing as a management function o Understand, describe and sketch the traditional types of organization structures o Understand the newer types of organization structures o Describe organizational designs changing the workplace o Explain the alternative approaches to job design PLANNING AHEAD — CHAPTER 7 LEARNING GOALS

3. Organizing: – The process of arranging people and other resources to work together to accomplish a goal Organization structure: –The system of tasks, workflows, reporting relationships, and communication channels that link together diverse individuals and groups © John Wiley & Sons Canada Ltd. ORGANIZING AS A MANAGEMENT FUNCTION

4. © John Wiley & Sons Canada Ltd. FIGURE 7.1 ORGANIZING VIEWED IN RELATIONSHIP WITH THE OTHER MANAGEMENT FUNCTIONS.

5. The structure of the organization in its official state. An organization chart is a diagram describing reporting relationships and the formal arrangement of work positions within an organization An organization chart identifies the following aspects of formal structure: –The division of work –Supervisory relationships –Communication channels –Major subunits –Levels of management © John Wiley & Sons Canada Ltd. FORMAL STRUCTURES

6. A “shadow” organization made up of the unofficial, but often critical, working relationships between organization members – Potential advantages of informal structures: Helping people accomplish their work Overcoming limits of formal structure Gaining access to interpersonal networks Informal learning © John Wiley & Sons Canada Ltd. INFORMAL STRUCTURES

7. Potential disadvantages of informal structures: –May work against best interests of entire organization –Susceptibility to rumour –May carry inaccurate information –May breed resistance to change –Diversion of work efforts from important objectives –Feeling of alienation by outsiders © John Wiley & Sons Canada Ltd. INFORMAL STRUCTURES (CONT’D)

8. Functional structures: – People with similar skills and performing similar tasks are grouped together into formal work units – Members work in their functional areas of expertise – Are not limited to businesses – Work well for small organizations producing few products or services © John Wiley & Sons Canada Ltd. TRADITIONAL ORGANIZATION STRUCTURES

9. FIGURE 7.3 FUNCTIONAL STRUCTURES IN A BUSINESS, BRANCH BANK, AND HOSPITAL

10. Potential advantages of functional structures: – Economies of scale – Task assignments consistent with expertise and training – High-quality technical problem solving – In-depth training and skill development – Clear career paths within functions © John Wiley & Sons Canada Ltd. TRADITIONAL ORGANIZATION STRUCTURES (CONT’D)

11. Potential disadvantages of functional structures: – Difficulties in pinpointing responsibilities – Functional chimneys problem – Sense of cooperation and common purpose break down – Narrow view of performance objectives – Excessive upward referral of decisions © John Wiley & Sons Canada Ltd. TRADITIONAL ORGANIZATION STRUCTURES (CONT’D)

12. Group together people who work on the same product or process, serve similar customers, and/or are located in the same area or geographical region Common in complex organizations Avoid problems associated with functional structures © John Wiley & Sons Canada Ltd. DIVISIONAL STRUCTURES

13. © John Wiley & Sons Canada Ltd. FIGURE 7.4 DIVISIONAL STRUCTURES BASED ON PRODUCT, GEOGRAPHY, CUSTOMER, AND PROCESS

14. Types of divisional structures and how they group job and activities: – Product structures focus on a single product or service – Geographical structures focus on the same location or geographical region – Customer structures focus on the same customers or clients – Process structures focus on the same processes © John Wiley & Sons Canada Ltd. DIVISIONAL STRUCTURES (CONT’D)

15. Potential advantages of divisional structures: – More flexibility in responding to environmental changes – Improved coordination – Clear points of responsibility – Expertise focused on specific customers, products, and regions – Greater ease in restructuring © John Wiley & Sons Canada Ltd. DIVISIONAL STRUCTURES (CONT’D)

16. Potential disadvantages of divisional structures: – Duplication of resources and efforts across divisions – Competition and poor coordination across divisions – Emphasis on divisional goals at expense of organizational goals © John Wiley & Sons Canada Ltd. DIVISIONAL STRUCTURES (CONT’D)

17. Combines functional and divisional structures to gain advantages and minimize disadvantages of each Used in: –Manufacturing –Service industries –Professional fields –Non-profit sector –Multi-national corporations © John Wiley & Sons Canada Ltd. MATRIX STRUCTURE

18. © John Wiley & Sons Canada Ltd. FIGURE 7.5 MATRIX STRUCTURE IN A SMALL MULTI-PROJECT BUSINESS FIRM

19. Potential advantages of matrix structures: – Better cooperation across functions – Improved decision making – Increased flexibility in restructuring – Better customer service – Better performance accountability – Improved strategic management © John Wiley & Sons Canada Ltd. MATRIX STRUCTURES (CONT’D)

20. Potential disadvantages of matrix structures: – Two-boss system is susceptible to power struggles – Two-boss system can create task confusion and conflict in work priorities – Team meetings are time consuming – Team may develop “groupitis” – Increased costs due to adding team leers to structure © John Wiley & Sons Canada Ltd. MATRIX STRUCTURES (CONT’D)

21. Team structures: –Extensively use permanent and temporary teams to solve problems, complete special projects, and accomplish day-to- day tasks –Often use cross-functional teams composed of members from different functional departments –Project teams are convened for a specific task or project and disbanded once completed © John Wiley & Sons Canada Ltd. HORIZONTAL ORGANIZATION STRUCTURES

22. © John Wiley & Sons Canada Ltd. FIGURE 7.6 HOW A TEAM STRUCTURE USES CROSS-FUNCTIONAL TEAMS FOR IMPROVED LATERAL RELATIONS

23. Potential advantages of team structures: – Eliminates difficulties with communication and decision making – Eliminates barriers between operating departments. – Improved morale – Greater sense of involvement and identification – Increased enthusiasm for work – Improved quality and speed of decision making © John Wiley & Sons Canada Ltd. TEAM STRUCTURES (CONT’D)

24. Potential disadvantages of team structures: – Conflicting loyalties among members – Excessive time spent in meetings – Effective use of time depends on quality of interpersonal relations, group dynamics, and team management © John Wiley & Sons Canada Ltd. TEAM STRUCTURES (CONT’D)

25. A central core that is linked through networks of relationships with outside contractors and suppliers of essential services Own only core components and use strategic alliances or outsourcing to provide other components © John Wiley & Sons Canada Ltd. NETWORK STRUCTURES

26. © John Wiley & Sons Canada Ltd. FIGURE 7.7 A NETWORK STRUCTURE FOR A WEB-BASED RETAIL BUSINESS

27. Potential advantages of network structures: – Firms can operate with fewer full-time employees and less complex internal systems – Reduced overhead costs and increased operating efficiency – Permits operations across great distances © John Wiley & Sons Canada Ltd. NETWORK STRUCTURES (CONT’D)

28. Potential disadvantages of network structures: – Control and coordination problems may arise from network complexity – Potential loss of control over outsourced activities – Potential lack of loyalty among infrequently used contractors – Excessively aggressive outsourcing can be dangerous © John Wiley & Sons Canada Ltd. NETWORK STRUCTURES (CONT’D)

29. Eliminate internal boundaries among subsystems and external boundaries with the external environment A combination of team and network structures, with the addition of “temporariness” Key requirements: –Absence of hierarchy –Empowerment of team members –Technology utilization –Acceptance of impermanence © John Wiley & Sons Canada Ltd. BOUNDARYLESS ORGANIZATIONS

30. Encourage creativity, quality, timeliness, flexibility, and efficiency Knowledge sharing is both a goal and essential component. Virtual organization –A special form of boundaryless organization –Operates in a shifting network of external alliances that are engaged as needed, using IT and the Internet © John Wiley & Sons Canada Ltd. BOUNDARYLESS ORGANIZATIONS (CONT’D)

31. © John Wiley & Sons Canada Ltd. FIGURE 7.8 THE BOUNDARYLESS ORGANIZATION ELIMINATES INTERNAL AND EXTERNAL BARRIERS

32. Choosing and implementing structures that best arrange resources to serve the organization’s mission and objectives A problem-solving activity that should be approached from a contingency perspective © John Wiley & Sons Canada Ltd. ORGANIZATIONAL DESIGN

33. Bureaucracy – A form of organization based on logic, order, and the legitimate use of formal authority – Bureaucratic designs feature: Clear-cut division of labour Strict hierarchy of authority Formal rules and procedures Promotion based on competency © John Wiley & Sons Canada Ltd. STUDY QUESTION 4: HOW ARE ORGANIZATIONAL DESIGNS CHANGING THE WORKPLACE?

34. Contingency perspective on bureaucracy asks the questions: – When is a bureaucratic form a good choice for an organization? – What alternatives exist when it is not a good choice? Environment determines the answers to these questions – A mechanistic design works in a stable environment – An organic design works in a rapidly changing and uncertain environment © John Wiley & Sons Canada Ltd. STUDY QUESTION 4: HOW ARE ORGANIZATIONAL DESIGNS CHANGING THE WORKPLACE?

35. © John Wiley & Sons Canada Ltd. ORGANIZATIONAL DESIGNS (CONT’D) Mechanistic Designs –Predictable goals –Centralized authority –Many rules and procedures –Narrow spans of control –Specialized tasks –Few teams and task forces –Formal and impersonal means of coordination Organic Designs – Adaptable goals – Decentralized authority – Few rules and procedures – Wide spans of control – Shared tasks – Many teams and task forces – Informal and personal means of coordination

36. © John Wiley & Sons Canada Ltd. FIGURE 7.9 A CONTINUUM OF ORGANIZATIONAL DESIGN ALTERNATIVES: FROM BUREAUCRATIC TO ADAPTIVE

37. Contemporary organizing trends include: – Fewer levels of management Shorter chains of command Less unity of command Wider spans of control – More delegation and empowerment – Decentralization with centralization – Reduced use of staff. © John Wiley & Sons Canada Ltd. TRENDS IN ORGANIZATIONAL DESIGN

38. Shorter chains of command: – The line of authority that vertically links all persons with successively higher levels of management – Organizing trend: Organizations are being “streamlined” by cutting unnecessary levels of management Flatter structures are viewed as a competitive advantage © John Wiley & Sons Canada Ltd. STUDY QUESTION 4: HOW ARE ORGANIZATIONAL DESIGNS CHANGING THE WORKPLACE?

39. Less unity of command: – Each person in an organization should report to one and only one supervisor – Organizing trend: Organizations are using more cross-functional teams, task forces, and horizontal structures Organizations are becoming more customer conscious Employees often find themselves working for more than one boss © John Wiley & Sons Canada Ltd. TRENDS IN ORGANIZATIONAL DESIGN (CONT’D)

40. Wider spans of control: – The number of persons directly reporting to a manager – Organizing trend: Many organizations are shifting to wider spans of control as levels of management are eliminated Managers have responsibility for a larger number of subordinates who operate with less direct supervision © John Wiley & Sons Canada Ltd. TRENDS IN ORGANIZATIONAL DESIGN (CONT’D)

41. More delegation and empowerment: – Delegation is the process of entrusting work to others by giving them the right to make decisions and take action – The manager assigns responsibility, grants authority to act, and creates accountability – Authority should be commensurate with responsibility © John Wiley & Sons Canada Ltd. TRENDS IN ORGANIZATIONAL DESIGN (CONT’D)

42. Three Steps in Delegation: –Assign responsibility – explain task and expectations –Grant authority – allow others to make decisions and act –Create accountability – require others to report back on results © John Wiley & Sons Canada Ltd. TRENDS IN ORGANIZATIONAL DESIGN (CONT’D)

43. More delegation and empowerment: – A common management failure is unwillingness to delegate – Delegation leads to empowerment – Organizing trend: Managers are delegating more and finding more ways to empower people at all levels © John Wiley & Sons Canada Ltd. TRENDS IN ORGANIZATIONAL DESIGN (CONT’D)

44. Decentralization with centralization: – Centralization is the concentration of authority for making most decisions at the top levels of the organization – Decentralization is the dispersion of authority to make decisions throughout all levels of the organization © John Wiley & Sons Canada Ltd. TRENDS IN ORGANIZATIONAL DESIGN (CONT’D)

45. Decentralization with centralization: – Centralization and decentralization not an “either/or” choice – Organizing trend: Delegation, empowerment, and horizontal structures contribute to more decentralization in organizations Advances in information technology allow for the retention of centralized control © John Wiley & Sons Canada Ltd. TRENDS IN ORGANIZATIONAL DESIGN (CONT’D)

46. Reduced use of staff: – Specialized staff: People who perform a technical service or provide special problem-solving expertise to other parts of the organization – Personal staff: People working in “assistant-to” positions that provide special support to higher-level managers © John Wiley & Sons Canada Ltd. TRENDS IN ORGANIZATIONAL DESIGN (CONT’D)

47. Reduced use of staff (cont’d): – Line and staff managers may disagree over staff authority. Advisory Authority Functional authority – No one best solution for dividing line-staff responsibilities. – Organizing trend: Organizations are reducing staff size Organizations are seeking increased operating efficiency by employing fewer staff personnel and smaller staff units © John Wiley & Sons Canada Ltd. TRENDS IN ORGANIZATIONAL DESIGN (CONT’D)

48. The process of arranging work tasks for individuals and groups © John Wiley & Sons Canada Ltd. JOB DESIGN

49. © John Wiley & Sons Canada Ltd. FIGURE 7.11 BASIC JOB DESIGN ALTERNATIVES

50. Job Simplification –Employs people in clearly defined and specialized tasks with narrow job scope Automation –Is the total mechanization of a job © John Wiley & Sons Canada Ltd. SCIENTIFIC MANAGEMENT

51. Job Rotation – Increases task variety by periodically shifting workers between jobs involving different task assignments Job Enlargement – Increases task variety by combining into one job two or more tasks previously done by separate workers © John Wiley & Sons Canada Ltd. JOB ROTATION AND JOB ENLARGEMENT

52. Job Enrichment – Increases job depth by adding work planning and evaluating duties normally performed by the supervisor Job Satisfaction and Performance influenced by: – Experienced meaningfulness of the work – Experienced responsibility for the outcomes of the work – Knowledge of actual results of work activities © John Wiley & Sons Canada Ltd. JOB ENRICHMENT

53. Five core characteristics that influence job performance: – Skill variety – Task identity – Task significance – Autonomy – Feedback from the job itself © John Wiley & Sons Canada Ltd. JOB ENRICHMENT (CONT’D)

54. Form natural units of work Combine tasks Establish client relationships Open feedback channels Practice vertical loading © John Wiley & Sons Canada Ltd. IMPROVING JOB CHARACTERISTICS

55. Flexible Working Hours: – Give employees some choice in daily work hours Compressed Workweek: – Allows a full-time job to be completed in less than five days Job Sharing: – Splits one job between two or more people Telecommuting: – Involves using IT to work at home or outside the office Part-Time Work: – Temporary employment for less that the standard 40-hour workweek © John Wiley & Sons Canada Ltd. ALTERNATIVE WORK SCHEDULES

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