1. Organizational Design
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2. Learning Objectives Describe the two fundamentals of organizing.
Explain the five aspects of an organization’s vertical design.
Describe four types of horizontal design.
Describe two methods of integration.
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3. Fundamentals of Organizing
The organization chart is a diagram that illustrates the reporting lines between units and people within the organization.
The organization chart conveys four kinds of information:
The boxes represent different units.
The titles in each box show the work performed by that person.
Reporting relationships are shown by the lines connecting superiors and subordinates.
Levels of the organization are indicated by the number of vertical layers in the chart
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4. Organization Chart for Home Depot
Chairman of
Board and CEO
Executive
Vice President,
Chief Financial
Officer
Executive
Vice President,
Legal
Executive
Vice President,
International
Technology
Executive
Vice President,
Operations
Executive
Vice President,
Marketing
Executive
Vice President,
Human
Resources
Executive
Vice President,
Merchandising
Vice President,
Investor
Relations
Senior
Vice President,
Real Estate
Senior
Vice President,
Operations
Senior
Vice President,
Customer
Service
President,
Mexico
President,
Atlantic
President,
Western
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5. Fundamental Concepts of Organizing
Differentiation means that the organization is composed of units that work on specialized task using different work methods and requiring employees with unique competencies.
Division of labor means that the work of the organization is divided into smaller tasks.
Specialization is the process of identifying particular tasks and assigning them to departments, teams, or divisions.
Integration means that the various units must be put back together so that work is coordinated.
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6. Five Elements of Vertical Design (1)
Hierarchy is a pyramid showing relationships among levels.
Span of control refers to the number of employees directly reporting to a person.
Factors influencing span of control include:
The competence of both the manager and the employee.
The similarity or dissimilarity of tasks being supervised.
The incidence of new problems in the manager’s department.
The extent of clear operating standards and rules.
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7. Five Elements of Vertical Design (2)
Authority, Responsibility, and Accountability
Authority is the right to make a decision.
Responsibility is an employee’s duty to perform the assigned task.
Accountability is the manager’s expectation that the employee will accept credit or blame for his work.
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8. Five Elements of Vertical Design (3)
Delegation is the process of giving authority to a person (or group or team) to make decisions and act in certain situations.
Practices useful in effective delegation include:
Establish goals and standard
Ensure clarity
Involvement
Expect completed work
Provide training
Timely feedback
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9. Five Elements of Vertical Design (4)
Centralization and Decentralization
Centralization is the concentration of authority at the top of an organization or department.
Decentralization is the delegation of authority to lower level employees or departments.
Key factors affecting decision to centralization or decentralization.
Cost of decisions
Uniformity of policy
Competency levels
Control mechanisms
Environmental influences
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10. Horizontal Organizational Design
Functional Design
Product Design
Geographical Design
Network Design
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11. Functional Design (1)
Function design means grouping managers and employees according to their areas of expertise and the resources they use to perform their jobs.
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12. Functional Design (3) Potential Benefits Potential Pitfalls
Supports skill specialization
Reduces duplication of resources & increases coordination
Enhances career development & training within functional area
Allows superiors and subordinates to share common expertise
Promotes high-quality technical
decision making
Potential Pitfalls
Inadequate communication
Conflicts over product priorities
Difficulties with interunit coordination
Focus on departmental rather than organizational issues and goals
Develops managers who are experts in a narrow field
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13. Harley-Davidson Organization Chart
CEO
General
Counsel
Manufacturing
Merchandise
Controller
Owners Groups
(HOGS)
Strategic
Planning
Engineering
Human
Resources
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14. Product Design (1)
Product design means that all functions that contribute to a product are organized under one manager.
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15. Product Design (2) Potential Benefits Potential Pitfalls
Permits fast changes in a product line
Allows greater product line visibility
Fosters a concern for customer demand
Clearly defines responsibilities for each product line
Develops managers who can think across functional lines
Potential Pitfalls
Not allowing efficient utilization of skills and resources
Not fostering coordination of activities across product
Encourages politics and conflicts in resource allocation across product lines
Limits career mobility for personnel outside their own product lines
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16. General Dynamics Organization Chart
Chairman & Chief
Executive Officer
Information
Systems &
Technology
Combat
Systems
Marine
Systems
Aerospace
Land
Systems
Armament
Systems
Ordnance &
Tactical
Systems
Aviation
Services
Bath
Iron
Works
Electric
Boat
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17. Geographical Design (1)
Geographical design organizes activities around location.
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18. Geographical Design (2)
Potential Benefits
Has facilities and the equipment used for production and/or distribution all in one place, saving time and costs
Able to develop expertise in solving problems unique to one location
Gaining an understanding of customers’ problems and desires
Getting production closer to raw materials and suppliers
Potential Pitfalls
Duplication of functions, to varying degrees, at each regional or individual unit location
Conflict between each location's goals and the organization's goals
Adds levels of management and extensive use of rules and regulations to coordinate and ensure uniformity of quality among locations
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19. Starbucks Organization Chart
CEO
President
Executive VP,
Legal
Executive VP,
Supply Chain & Coffee
Executive VP,
Partner Resources
Executive VP,
Chief Financial Officer
Senior VP,
Coffee
President,
Japan
President, Europe,
Middle East, Africa
President,
North America
VP,
Southwest
VP,
South Central
VP,
Northwest
President,
International
United Kingdom
Australia
Thailand
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20. Network Design (1)
Network design subcontracts some or many of its operations to other firms and coordinates them to accomplish specific goals.
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21. Network Design (2) Potential Benefits Potential Pitfalls
Ability to gain special knowledge and skills of others without having to hire employees
Brings together people with different insights
Allows managers the flexibility to work with a wide variety of different suppliers, customers, and other organizations
Potential Pitfalls
Other organizations may fail to live up to established deadlines
Managers must constantly monitor the quality of work provided by other organizations
Employees in the outsourced organization may not commit to the same values and sense of time urgency to which employees in the networked organization are committed
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22. DreamWorks SKG Network Design
Computer
Hardware/
Software
Legal
Marketing
Makeup
Artists
Spielberg Katzenberg Geffen
(Films) (Animation) (Music)
Future
Games
Costume
Designers
Technicians
Agents
Actors
Media
Relations
Talent
Scouts
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23. Organic Versus Mechanistic Organizations
Tasks tend to be interdependent.
Tasks are continually adjusted and redefined through interaction and as situations change.
Generalized roles are accepted.
Network structure of control, authority, and communication.
Communication and decision making are both vertical and horizontal, depending on information and expertise reside.
Communication emphasizes the form of mutual influence and advice among all levels.
Mechanistic
Tasks are highly specialized.
Tasks tend to remain rigidly defined unless changed by top management.
Specific roles are prescribed for each employee.
Hierarchical structure of control, authority, and communication.
Communication and decision making are primarily vertical, top-town.
Communication emphasizes directions and decisions issued by superiors.
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24. Integration through Technology
Technology interdependence is the degree of coordination required between individuals and units to transform information and raw materials into goods and services.
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25. Three Types of Technological Interdependence
Output
Input
Output
Sequential interdependence
Input
Output
Input
Output
Input
Input
Input
Pooled interdependence
Input
Output
Reciprocal interdependence
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