1. © Copyright 2004 McGraw-Hill. All rights reserved.7–1 Designing Organizational Structure OrganizingOrganizing  The process by which managers establish working relationships among employees to achieve goals. Organizational StructureOrganizational Structure  Formal system of task and reporting relationships showing how workers use resources. Organizational designOrganizational design  The process by which managers make specific choices that result in a particular kind of organizational structure.

2. © Copyright 2004 McGraw-Hill. All rights reserved.7–2 Factors Affecting Organizational Structure Figure 7.1

3. © Copyright 2004 McGraw-Hill. All rights reserved.7–3 Grouping Tasks Into Jobs: Job Design Job DesignJob Design  The process by which managers decide how to divide tasks into specific jobs. Division of LaborDivision of Labor  Splitting the work to be performed into particular tasks and assigning tasks to individual workers.  The appropriate division of labor results in an effective and efficient workforce. Job SimplificationJob Simplification  Reducing the tasks each worker performs: too much simplification and boredom results.

4. © Copyright 2004 McGraw-Hill. All rights reserved.7–4 Job Design Job EnlargementJob Enlargement  Increasing the number of tasks for a given job by changing the division of labor.  The intention is to reduce boredom and fatigue by increasing variety of tasks performed. Job EnrichmentJob Enrichment  Increasing the degree of responsibility a worker has over a job. Intended to increase worker involvement.Intended to increase worker involvement. Requires a flexible organizational structure to allow employees to act flexibly and creatively.Requires a flexible organizational structure to allow employees to act flexibly and creatively.

5. © Copyright 2004 McGraw-Hill. All rights reserved.7–5 Grouping Jobs into Functions Functional StructureFunctional Structure  An organizational structure composed of all the departments that an organization requires to produce its goods or services.  Advantages Encourages learning from others doing similar jobs.Encourages learning from others doing similar jobs. Easy for managers to monitor and evaluate workers.Easy for managers to monitor and evaluate workers.  Disadvantages Difficult for departments to communicate with others.Difficult for departments to communicate with others. Preoccupation with own department and losing sight of organizational goals.Preoccupation with own department and losing sight of organizational goals.

6. © Copyright 2004 McGraw-Hill. All rights reserved.7–6 Divisional Structures Divisional StructureDivisional Structure  An organizational structure composed of separate business units within which are the functions that work together to produce a specific product for a specific customer. Divisions create smaller, manageable parts of a firm.Divisions create smaller, manageable parts of a firm. Divisions develop a business-level strategy to compete.Divisions develop a business-level strategy to compete. Divisions have marketing, finance, and other functions.Divisions have marketing, finance, and other functions. Functional managers report to divisional managers who then report to corporate upper management.Functional managers report to divisional managers who then report to corporate upper management.

7. © Copyright 2004 McGraw-Hill. All rights reserved.7–7 Types of Divisional Structures Product StructureProduct Structure  Customers are served by self-contained divisions that handle a specific type of product or service. Allows functional managers to specialize in one product area.Allows functional managers to specialize in one product area. Division managers become experts in their area.Division managers become experts in their area. Removes need for direct supervision of division by corporate managers.Removes need for direct supervision of division by corporate managers. Divisional management improves the use of resources.Divisional management improves the use of resources.

8. © Copyright 2004 McGraw-Hill. All rights reserved.7–8 Types of Divisional Structures (cont’d) Geographic StructureGeographic Structure  Each regional or a country or area with customers with differing needs is served by a local self- contained division producing products that best meet those needs.  Global geographic structure Different divisions serve each world region when managers find different problems or demands across the globe.Different divisions serve each world region when managers find different problems or demands across the globe. Generally, this structure is adopted when managers are pursuing a multidomestic strategy.Generally, this structure is adopted when managers are pursuing a multidomestic strategy.

9. © Copyright 2004 McGraw-Hill. All rights reserved.7–9 Types of Divisional Structures (cont’d) Market (Customer) StructureMarket (Customer) Structure  Each kind of customer is served by a self-contained division  Global market (customer) structure Customers in different regions buy similar products so firms can locate manufacturing facilities and product distribution networks where they decide is best.Customers in different regions buy similar products so firms can locate manufacturing facilities and product distribution networks where they decide is best. Firms pursuing a global strategy will use this type of structure.Firms pursuing a global strategy will use this type of structure.

10. © Copyright 2004 McGraw-Hill. All rights reserved.7–10 Matrix Design Structure Matrix StructureMatrix Structure  An organizational structure that simultaneously groups people and resources by function and product. Results in a complex network of superior-subordinate reporting relationships.Results in a complex network of superior-subordinate reporting relationships. The structure is very flexible and can respond rapidly to the need for change.The structure is very flexible and can respond rapidly to the need for change. Each employee has two bosses (functional manager and product manager) and possibly cannot satisfy both.Each employee has two bosses (functional manager and product manager) and possibly cannot satisfy both.

11. © Copyright 2004 McGraw-Hill. All rights reserved.7–11 Product Team Design Structure Product Team StructureProduct Team Structure  The members are permanently assigned to the team and empowered to bring a product to market. Avoids problems of two-way communication and the conflicting demands of functional and product team bosses.Avoids problems of two-way communication and the conflicting demands of functional and product team bosses.  Cross-functional team is composed of a group of managers from different departments working together to perform organizational tasks.

12. © Copyright 2004 McGraw-Hill. All rights reserved.7–12 Coordinating Functions and Divisions: Allocating Authority AuthorityAuthority  The power to hold people accountable for their actions and to make decisions concerning the use of organizational resources. Hierarchy of AuthorityHierarchy of Authority  An organization’s chain of command, specifying the relative authority of each manager. Span of Control: refers to the number of workers a manager manages.Span of Control: refers to the number of workers a manager manages.

13. © Copyright 2004 McGraw-Hill. All rights reserved.7–13 The Minimum Chain of Command Managers should carefully evaluate:Managers should carefully evaluate:  Do the organization have the right number of middle managers?  Can the structure be altered to reduce levels? Centralized and Decentralized of AuthorityCentralized and Decentralized of Authority  Decentralization puts more authority at lower levels and leads to flatter organizations. Works best in dynamic, highly competitive environments.Works best in dynamic, highly competitive environments.  Stable environments favor centralization of authority.

14. © Copyright 2004 McGraw-Hill. All rights reserved.7–14 Strategic Alliances and Network Structures Strategic AllianceStrategic Alliance  An agreement in which managers pool or share firm’s resources and know-how with a foreign company and the two firms share in the rewards and risks of starting a new venture. Network Structure:Network Structure:  A series of strategic alliances that an organization creates with suppliers, manufacturers, and distributors to produce and market a product.  Network structures allow firms to bring resources together in a boundary-less organization.