1. Organizing Dr. Ananda Sabil Hussein

2. Organization Architecture Organization architecture: The totality of a firm ’ s organization, including formal organization structure, control systems, incentive systems, organizational culture, and people. Organization architecture: The totality of a firm ’ s organization, including formal organization structure, control systems, incentive systems, organizational culture, and people. Organization structure: The location of decision- making responsibilities in the firm, the formal division of the organization into subunits, and the establishment of integrating mechanisms to coordinate the activities of subunits. Organization structure: The location of decision- making responsibilities in the firm, the formal division of the organization into subunits, and the establishment of integrating mechanisms to coordinate the activities of subunits.

3. Organization Architecture Controls: Metrics used to measure the performance of subunits and to judge how well managers are running those subunits. Controls: Metrics used to measure the performance of subunits and to judge how well managers are running those subunits. Incentives: Devices used to encourage desired employee behavior. Incentives: Devices used to encourage desired employee behavior. Organizational culture: Values and assumptions that are shared among the employees of an organization. Organizational culture: Values and assumptions that are shared among the employees of an organization. People: The employees of an organization, the strategy used to recruit, compensate, motivate, and retain those individuals, and the type of people they are in terms of their skills, values, and orientation. People: The employees of an organization, the strategy used to recruit, compensate, motivate, and retain those individuals, and the type of people they are in terms of their skills, values, and orientation.

4. Organization Architecture PeopleControlsIncentives Structure Culture

5. Designing Structure Vertical differentiation: The location of decision-making responsibilities within a structure. Vertical differentiation: The location of decision-making responsibilities within a structure. Horizontal differentiation: The formal division of the organization into subunits. Horizontal differentiation: The formal division of the organization into subunits. Integrating mechanisms: Mechanisms for coordinating subunits. Integrating mechanisms: Mechanisms for coordinating subunits.

6. Centralization Versus Decentralization Centralization: The concentration of decision- making authority at a high level in a management hierarchy. Centralization: The concentration of decision- making authority at a high level in a management hierarchy. Decentralization: Vesting decision-making authority in lower-level managers or other employees. Decentralization: Vesting decision-making authority in lower-level managers or other employees.

7. Arguments for Centralization Centralization can facilitate coordination. Centralization can facilitate coordination. Centralization can help ensure that decisions are consistent with organizational objectives. Centralization can help ensure that decisions are consistent with organizational objectives. Centralization can avoid duplication of activities by various subunits within the organization. Centralization can avoid duplication of activities by various subunits within the organization. By concentrating power and authority in one individual or a management team, centralization can give top-level managers the means to bring about needed major organizational changes. By concentrating power and authority in one individual or a management team, centralization can give top-level managers the means to bring about needed major organizational changes.

8. Arguments for Decentralization Top management can become overburdened when decision- making authority is centralized. Top management can become overburdened when decision- making authority is centralized. Motivational research favors decentralization. Motivational research favors decentralization. Decentralization permits greater flexibility—more rapid response to environmental changes. Decentralization permits greater flexibility—more rapid response to environmental changes. Decentralization can result in better decisions. Decentralization can result in better decisions. Decentralization can increase control. Decentralization can increase control.

9. Centralization vs. Decentralization in Purchasing Centralize for greater cost control and corporate leverage Centralize for greater cost control and corporate leverage Decentralize for nimbler procurement responsiveness Decentralize for nimbler procurement responsiveness Centralize procurement of common products Centralize procurement of common products Decentralize procurement of specialized products Decentralize procurement of specialized products Align purchasing structure with corporate strategy, structure, and size Align purchasing structure with corporate strategy, structure, and size Source: Global Best Practices, Pricewaterhousecoopers

10. Question Decentralization argument works for large businesses. For a small business, it is better to have centralization. Do you agree? Explain.

11. Decentralization and Control Decentralization of decisions to a subunit … Increases responsibility … Which increases accountability Thereby enhancing control.

12. Tall Versus Flat Hierarchies Tall hierarchies: Organizations with many layers of management. Tall hierarchies: Organizations with many layers of management. Flat hierarchies: Organizations with few layers of management. Flat hierarchies: Organizations with few layers of management.

13. Problems in Tall Hierarchies There is a tendency for information to get accidentally distorted as it passes through layers in a hierarchy. There is a tendency for information to get accidentally distorted as it passes through layers in a hierarchy. There is also the problem of deliberate distortion by midlevel managers who are trying to curry favor with their superiors or pursue some agenda of their own. There is also the problem of deliberate distortion by midlevel managers who are trying to curry favor with their superiors or pursue some agenda of their own. They are expensive. They are expensive.

14. Types of Structures Functional structure: A structure that follows the obvious division of labor within the firm, with different functions focusing on different tasks. Functional structure: A structure that follows the obvious division of labor within the firm, with different functions focusing on different tasks. Multidivisional structure: A structure in which a firm is divided into different divisions, each of which is responsible for a distinct business area. Multidivisional structure: A structure in which a firm is divided into different divisions, each of which is responsible for a distinct business area. Geographic structure: A structure in which a firm is divided into different units on the basis of geography. Geographic structure: A structure in which a firm is divided into different units on the basis of geography. Matrix structure: An organization with two overlapping hierarchies. Matrix structure: An organization with two overlapping hierarchies.

15. Hybrid Structure at Ranbaxy Ranbaxy Laboratories – An India-based generic drug maker The company redesigned the organization in internationalizing its operations The company redesigned the organization in internationalizing its operations Developed a hybrid structure: it placed R&D in a global unit and other functions in several geographic units. Developed a hybrid structure: it placed R&D in a global unit and other functions in several geographic units. Result: Ranbaxy's managers adopted a global mind-set and began spending a substantial amount of time in their most important market—the United States. Result: Ranbaxy's managers adopted a global mind-set and began spending a substantial amount of time in their most important market—the United States. Source: The McKinsey Quarterly, 2005 Number 2

16. Formal Integrating Mechanisms Direct contact: This is the simplest integrating mechanism. Managers of the various subunits just contact each other whenever they have a concern. Direct contact: This is the simplest integrating mechanism. Managers of the various subunits just contact each other whenever they have a concern. Liaison roles: This is a bit more complex than direct contact. As the need for coordination between subunits increase, integration can be improved by assigning a person in each subunit to coordinate with another subunit. Liaison roles: This is a bit more complex than direct contact. As the need for coordination between subunits increase, integration can be improved by assigning a person in each subunit to coordinate with another subunit. Teams: When the need for coordination is greater still, firms use temporary or permanent teams composed of individuals from the subunits that need to achieve coordination. Teams: When the need for coordination is greater still, firms use temporary or permanent teams composed of individuals from the subunits that need to achieve coordination. Matrix structure: When the need for integration is very high, firms may institute a matrix structure, in which all roles are viewed as integrating roles. Matrix structure: When the need for integration is very high, firms may institute a matrix structure, in which all roles are viewed as integrating roles.

17. Integrating Mechanisms High Lo w Need for coordination SimpleComplex Integrating mechanisms Centralization Direct contact Liaison roles Teams Matrix structure Favored by firms in rapidly changing and high-technology environments Favored by firms in stable and low-technology environments

18. Informal Integrating Mechanisms: Knowledge Networks Knowledge network: A network for transmitting information within an organization based on informal contacts between managers within an enterprise and on distributed information systems. Knowledge network: A network for transmitting information within an organization based on informal contacts between managers within an enterprise and on distributed information systems. A B CD F E G

19. Strategy, Coordination, and Integrating Mechanisms All enterprises need coordination between subunits, whether those subunits are functions, businesses, or geographic areas. All enterprises need coordination between subunits, whether those subunits are functions, businesses, or geographic areas. There is a high need for coordination in firms that face an uncertain and highly turbulent competitive environment, where rapid adaptation to changing market conditions is required for survival. There is a high need for coordination in firms that face an uncertain and highly turbulent competitive environment, where rapid adaptation to changing market conditions is required for survival. In contrast, if a firm is based in a stable environment characterized by little or no change, and if developing new products is not a central aspect of firm ’ s business strategy, the need for coordination between functions may be lower. In contrast, if a firm is based in a stable environment characterized by little or no change, and if developing new products is not a central aspect of firm ’ s business strategy, the need for coordination between functions may be lower.