Fundamentals of Org. Str

8/7/2019 Fundamentals of Org. Str

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Thomson Learning 2004 3-1

Chapter Three

Fundamentals of

Organization Structure


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A Sample Organization

Chart

C h i e f

A c c o u

B u d g

A n a l y

V i c e P r F i n a n c

P l a n t

S u p e r i n

M a i n t e

S u p e r i n

V i c e P r M a n u f a

T r a i n i

S p e c i

B e n e

A d m i n

D i r e c tH u m a n

C E O


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The Relationship of OrganizationDesign to Efficiency vs. Learning

Outcomes

Horizontal Organization

Designed for Learning

Vertical Organization

Designed for Efficiency

Dominant

Structural

Approach

Horizontal structure is dominant Shared tasks, empowerment

Relaxed hierarchy, few rules

Horizontal, face-to-face

communication

Many teams and task forces

Decentralized decision makingVertical structure is dominant

Specialized tasks

Strict hierarchy, many rules

Vertical communication and reporting systems

Few teams, task forces or integrators

Centralized decision making


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Ladder of Mechanisms forHorizontal Linkage and

Coordination

HIGHLOW

LOWInformation Systems

Direct Contact

Task Forces

Full-time Integrators

Teams

Am

ountofHorizonta

l

Coo

rdinationRequire

d

Cost of Coordination in

Time and Human Resources

H IGH


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Project Manager Location

in the StructurePresident

Finance

DepartmentFinancial

Accountant

Budget

Analyst

Management

Accountant

Engineering

Department

Product

Designer

Draftsperson

Electrical

Designer

Marketing

Department

Market

Researcher

Advertising

Specialist

Market

Planner

Purchasing

Department

Buyer

Buyer

Buyer

Project Manager

New

Product B

Project Manager

New

Product A

Project Manager

New

Product C


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Teams Used for HorizontalCoordination at Wizard

Software Company

Videogames

Chief Engineer

Programming Vice Pres

Customer Service

Manager

Videogames Basic Research

Supervisor

Research Vice Pres

Applications and Testing

Supervisor

Procurement

Supervisor

Videogames

Sales Manager

Marketing Vice Pres.

Memory Products

International Manager

Advertising Manager

Memory Products

Chief Programmer

Memory Products

Research Supervisor

Memory Products

Sales Manager

President

Videogames Product Team

Memory Products Team


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St th d W k f


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Strengths and Weaknesses ofFunctional Organization

Structure STRENGTHS:

Allows economies of scalewithin functionaldepartments

Enables in-depth knowledgeand skill development

Enables organization toaccomplish functional goals

Is best with only one or afew products

WEAKNESSES: Slow response time to

environmental changes

May cause decisions topile on top, hierarchyoverload

Leads to poor horizontalcoordination amongdepartments

Results in less innovation Involves restricted view of

organizational goals

Source: Adapted from Robert Duncan, What Is the Right

Organization Structure? Decision Tree Analysis Provides the Answer,

Organizational Dynamics (Winter 1979): 429.

St th d W k f


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Strengths and Weaknesses ofDivisional Organization


Suited to fast change in unstableenvironment

Leads to client satisfaction

because product responsibility andcontact points are clear Involves high coordination across

functions Allows units to adapt to

differences in products, regions,clients

Best in large organizations withseveral products

Decentralizes decision-making

WEAKNESSES: Eliminates economies

of scale in functionaldepartments

Leads to poorcoordination acrossproduct lines

Eliminates in-depthcompetence andtechnical specialization

Makes integration andstandardization acrossproduct lines difficult

Source: Adapted from Robert Duncan, What Is theRight Organization Structure? Decision Tree Analysis

Provides the Answer, Organizational Dynamics

(Winter 1979): 431.


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Reorganization from FunctionalStructure to Divisional Structure at

Info-Tech

R&D Manufacturing Accounting Marketing

Info-Tech

PresidentFunctional

Structure

R & M f A c M k

E l e c t

P u b l i

R & M f A c M k

O f f i c

A u t o m

R & M f A c M k

V i r t u

R e a l

I n f o -

P r e s

Divisional

Structure


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Structural Design Options forGrouping Employees

(Continued)Horizontal

GroupingCEO

FinanceHuman Resources

Core

Process 2

Core

Process 1

Source: Adapted from David Nadler and Michael Tushman,

Strategic Organization Design (Glenview, Ill.: Scott Foresman,

1988), 68.


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Geographical Structurefor Apple Computer

CEO

Steve Jobs

Apple

Europe

Apple

Pacific

France

Apple

Products

Asia

Japan

Australia

Apple

Americas

Canada

Latin

America/Caribbean

Sales

Service and

Marketing

to Regions

Source: www.apple.com


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Product

Manager A

Product

Manager B

Product

Manager C

Product

Manager D

Director

of ProductOperations

Design

VicePresident

Mfg

VicePresident

Marketing

VicePresident Controller

Procure-

mentManager

President

Dual-Authority Structure in

a Matrix Organization


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STRENGTHS: Achieves coordination necessary to

meet dual demands fromcustomers

Flexible sharing of human

resources across products Suited to complex decisions and

frequent changes in unstableenvironment

Provides opportunity for bothfunctional and product skilldevelopment

Best in medium-sized organizations

with multiple products

WEAKNESSES: Causes participants to experience dual

authority, which can be frustrating andconfusing

Means participants need goodinterpersonal skills and extensive training Is time consuming; involves frequent

meetings and conflict resolution sessions Will not work unless participants

understand it and adopt collegial ratherthan vertical-type relationships

Requires great effort to maintain powerbalance

reng s an ea nessesof Matrix Organization

Structure

Source: Adapted from Robert Duncan, What Is the Right

Organization Structure? Decision Tree Analysis Provides the

Answer,Organizational Dynamics (Winter 1979): 429.


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Matrix Structure forWorldwide Steel Company

President

IndustrialRelations

VicePresident

Mfg.Services

VicePresident

FinanceVice

President

MarketingVice

President

Mfg.Vice

President

MetallurgyVice

President

Field SalesVice

President

Open DieBusiness Mgr.

Ring ProductsBusiness Mgr.

Wheels & AxlesBusiness Mgr.

SteelmakingBusiness Mgr.

Vertical Functions

Horizont

alProductLines


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A Horizontal Structure

Team3

Team2

Team1

Top

Management

Team

Team

3

Team

2

Team

1

Customer

Customer

ProcessOwner

Process

Owner

TestingProduct

PlanningResearch

Market

Analysis

New Product Development Process

Distrib.Material

FlowPurchasingAnalysis

Procurement and Logistics Process

Sources: Based on Frank Ostroff,

The Horizontal Organization, (New York:

Oxford University Press, 1999); John A. Byrne,

The Horizontal Corporation, Business Week,

December 20, 1993, 76-81; and Thomas A. Stewart,The Search for the Organization of Tomorrow,

Fortune, May 19, 1992, 92-98.


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Weaknesses of Horizontal


Flexibility and rapid response to changesin customer needs

Directs the attention of everyone towardthe production and delivery of value to

the customer Each employee has a broader view of

organizational goals Promotes a focus on teamwork and

collaborationcommon commitment tomeeting objectives

Improves quality of life for employees by

offering them the opportunity to shareresponsibility, make decisions, and beaccountable for outcomes

WEAKNESSES: Determining core processes to

organize around is difficult and time-consuming

Requires changes in culture, job

design, management philosophy, andinformation and reward systems Traditional managers may balk when

they have to give up power andauthority

Requires significant training ofemployees to work effectively in ahorizontal team environment

Can limit in-depth skill development

Sources: Based on Frank Ostroff, The Horizontal Organization: What the

Organization of the Future Looks Like and How It Delivers Value to

Customers, (New York: Oxford University Press, 1999);

and Richard L. Daft, Organization Theory and Design, 6th ed.,

(Cincinnati, Ohio: South-Western College Publishing, 1998) 253.

H b id St t


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FunctionalStructure

Hybrid StructurePart 1. Sun Petrochemical

ProductsPresident

TechnologyVice

President

FinancialServices

Vice Pres.

HumanResources

Director

Chief

Counsel

Chemicals

VicePresident

Lubricants

VicePresident

Fuels

VicePresident

ProductStructure

Sources: Based on Linda S. Ackerman, Transition Management:

An In-Depth Look at Managing Complex Change,

Organizational Dynamics (Summer 1982): 46-66;

and Frank Ostroff, The Horizontal Organization,

(New York: Oxford University Press, 1999), Fig. 2.1, 34.

H b id St t


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Hybrid StructurePart 2. Ford Customer Service

Division

Director and

Process Owner

Director and

Process Owner

Sources: Based on Linda S. Ackerman, Transition Management:

An In-Depth Look at Managing Complex Change,Organizational Dynamics

(Summer 1982): 46-66; and Frank Ostroff,The Horizontal Organization,

(New York: Oxford University Press, 1999), Fig. 2.1, 34.

Human

Resources

Strategy and

CommunicationFinance

Vice President and

General Manager

Teams

Teams

Director and

Process Owner Teams

Technical Support Group

Vehicle Service Group

Parts Supply / Logistics Group

Functional

Structure

HorizontalStructure

Teams

Teams

Organization Contextual


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Organization ContextualVariables that Influence

Structure

Structure

(learning vs.

efficiency)

Environment

Chapters 4, 6

Culture

Chapter 10

Size

Chapter 9

Strategy,

Goals

Chapter 2

Technology

Chapters 7,8

Sources: Adapted from Jay R. Galbraith,

Competing with Flexible Lateral Organizations, 2nd ed.

(Reading, Mass.: Addison-Wesley, 1994), Ch.1;

Jay R. Galbraith, Organization Design (Reading, Mass.:

Addison-Wesley, 1977), Ch. 1.


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The Relationship of Structure toOrganizations Need for Efficiency

vs. LearningHorizontal

Structure

Dominant

Structural

Approach

Horizontal:

Coordination

Learning

Innovation

FlexibilityVertical:

Control

Efficiency

Stability

Reliability

Matrix

StructureDivisional

Structure

Functional with

cross-functional

teams, integrators

Functional

Structure

Modular

Structure


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Symptoms of

Structural Deficiency Decision making is delayed or

lacking in quality

The organization does not respondinnovatively to a changingenvironment

Too much conflict is evident

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