Topic 7: Designing Adaptive Organizations

Organizing

Organizing is the deployment of resources to achieve strategic goals. It is reflected in Division of labor into specific departments & jobs, Formal lines of authority, Mechanisms for coordinating diverse organizational tasks

Organization Structure

Organization structure is the framework in which the organization defines how task are divided, resources are deployed, and departments are coordinated. Organization Structure is defined as

i) Set of formal tasks assignedii) Formal reporting relationshipsiii) The design of systems to ensure iv) effective coordination of employees across departments

The set of formal tasks and formal reporting relationships provided a framework for vertical control of the organization: Work Specialization and Division of labor.

Tasks are subdivided into individual jobs

Employees perform only the tasks relevant to their specialized function

Jobs tend to be small, but they can be performed efficiently

Chain of Command:

Unbroken line of authority that links all persons in an organization

Shows who reports to whom

It is associated with two underlying principles

- Unity of Command: employees held accountable to only one supervisor- Scalar Principle: clearly defined line of authority

Chain of Command: Authority, Responsibility, Accountability and Delegation

a) Authority: The chain of command illustrates the authority structure of the organization. Authority is the formal and legitimate right of a manager to make decisions and issue orders, and allocate resources to achieve organizationally desired outcomes. Authority is distinguished by three characteristics: (1) Authority is vested in organizational positions, not people. (2) Authority is accepted by subordinates. (3) Authority flows down the vertical hierarchy.

b) Responsibility is the duty to perform the task or activity as assigned.c) Accountability means that the people with authority and responsibility are subject to

reporting and justifying task outcomes to those above them in the chain of command.d) Delegation is the process managers use to transfer authority and responsibility to positions

below them in the hierarchy.

Line Authority:

Line departments perform the tasks that reflect the organization’s primary goals. They work directly with customers/products.

Staff Authority:

Staff departments are those departments that provide specialized skills in support of line departments

Span of Management/Span of Control

Number of employees who report to a supervisor

Traditional view = seven subordinates per manager

Lean organizations today = 30+ subordinates

Reorganization to Increase Span of Management:

Tall versus Flat Structure:

Span of Control used in an organization determines whether the structure is tall or flat. Tall structure has a narrow span and more hierarchical levels. Flat structure has a wide span, is horizontally dispersed and fewer hierarchical levels. The trend has been toward wider spans of control

Factors Associated With Supervisor Involvement:

- Work is stable and routine- Subordinates perform similar work tasks- Subordinates are concentrated in a single location- Subordinates are highly trained- Rules and procedure defining task activities are available- Support systems and personnel are available for the manager- Little time is required in nonsupervisory activities- Managers’ preferences and styles favor a large span

Centralization and Decentralization

Change and uncertainty are usually associated with decentralization. The amount of centralization or decentralization must fit the firm’s strategy. During crisis or risk of company failure, authority may be centralization.

Departmentalization

- Basis for grouping positions into departments- Choices regarding chain of command

Five traditional approaches:

- Functional- Divisional- Matrix- Teams- Virtual Networks

Centralization means that decision authority is located near the

top of the organization

Decentralization means decision authority is

pushed downward to lower organizational levels

Vertical Functional Structure:

Divisional Structure:

- An organisation structure in which departments are grouped based on similar organisational outputs

- An alternative for assigning divisional responsibility is to group company activities by geographic region or customer group

Three types of Divisional Structure:

a) Geographic-based structureb) Product structurec) Customer-based strcture

Functional Structure VS Divisional Structure:

The primary difference between divisional and functional structures is that the chain of command from each function converges lower in the hierarchy

The grouping of positions into departments based on similar skills, expertise, and resource use

President

FinanceManufacturingMarketing

In a divisional structure, differences of opinion among research, marketing, manufacturing and finance would be resolved at the divisional level rather than by the president

Thus, the divisional structure encourages decentralization

Decision making is pushed down at least one level in the hierarchy, freeing the president and other top managers for strategic planning

Matrix Approach:

An organisation structure that uses functional and divisional chains of command simultaneously in the same part of the organisation

The matrix structure evolved as a way to improve horizontal coordination and information sharing

Team Approach:

The vertical chain of command is a powerful means of control, but passing all decisions up the hierarchy takes too long and keeps responsibility at the top

The team approach gives managers a way to delegate authority, push responsibility to lower levels, and be more flexible and responsive in the competitive global environment

a) Cross-functional teams

The teams which consist of employees from various functional departments who are responsible to meet as a team and resolve mutual problems

Team members typically still report to their functional departments, but they also report to the team, one member of whom may be the leader

ProductManager C

ProductManager B

ProductManager A

Finance Marketing Design

President

Cross-functional teams are used to provide needed horizontal coordination to complement an existing divisional or functional structure

b) Permanent teams

It is a groups of employees who are organised in a way similar to a formal department

Each team brings together employees from all functional areas focused on a specific task or project

Emphasis is on horizontal communication and information sharing because representatives from all functions are coordinating their work and skills to complete a specific organisational task

Authority is pushed down to lower levels, and front-line employees are often given the freedom to make decisions and take action on their own

Virtual Network Approach:

An organizational structure that disaggregates major functions to separate companies that are brokered by small headquarters organization.

The organisation may be viewed as a central hub surrounded by a network of outside specialist

Rather than being housed under one roof, services such as accounting, design, manufacturing, and distribution are outsourced to separate organisations that are connected electronically to the central office

The idea behind networks is that a company can concentrate on what it does best and contract out other activities to companies with distinctive competence in those specific areas, which enables a company to do more with less

Approaches to Structural Design:

Structural Approach

Advantages Disadvantages

???? Can draw on expertise worldwide

Highly flexible and responsive

Reduced overhead costs

Lack of control

Weak boundaries

Greater demands on managers

Employee loyalty weakened

???? Efficient use of resources

Economic of scale

In depth skill specialization and development

Top manager direction and control

Poor communication across functional departments

Slow response to external changes

Lagging innovation

Decisions concentrated at top of hierarchy, creating delay

???? Fast response

Flexibility in unstable environment

Foster concern for customer needs

Excellent coordination across functional departments

Duplication of resources across divisions

Less technical depth and specialization

Poor coordination across divisions

???? More efficient use of resources than single hierarchy

Flexibility

Adaptable to changing environment

Interdisciplinary

Frustration and confusion from dual chain of command

High conflict between two sides of matrix

Many meetings, more than discussion than action

cooperation

Expertise available to all divisions

???? Reduced barriers among departments

Increase compromise

Shorter response time

Quicker decisions

Better morale, enthusiasm from employee involvement

Dual loyalties and conflict

Time and resources spent on meetings

Unplanned decentralization

Organizing for Horizontal Coordination

The Need for Coordination:

Coordination refers to the quality of collaboration across departments.

Without coordination, a company’s left hand will not act in concert with the right hand, causing problems and conflicts

Required regardless of whether the organization has a functional, divisional, or team structure

Task Forces, Teams, and Project Management

Task Force:

A task force is a temporary team or committee designed to solve a short-term problem involving several departments

Team:

In addition to creating task forces, companies also set up cross-functional teams

A cross-functional team furthers horizontal coordination because participations from several departments meet regularly to solve ongoing problems of common interest

Similar to a task force except that it works with continuing rather than temporary problems and exist for several years.

Project Manager:

A project manager is a person who is responsible for coordinating activities of several departments on a full-time basis for the completion of a specific project

Examples of Project Manager Relationships

Project manager is not a member of one of the departments being coordinated

Project managers are located outside of the departments and have responsibility for coordinating several departments to achieve desired project outcomes

Reengineering

Business process reengineering:

Radical redesign of business processes to achieve dramatic improvements in cost, quality, service, and speed

Change the way manager think about how work is done

Focus on process rather than function

Process = organized group of related tasks and activities that work together to transform inputs into outputs and create value

Reengineering at Michigan Casting Center:

Structure Follows Strategy:

The right structure is designed to fit the organization’s strategy

Recent study demonstrated that business performance is strongly influenced by how well the company structure is aligned with its strategic.

FunctionalStructure

DivisionalStructure

HorizontalTeams

Functional withInterdepartmental

Task forces,Integrators

Strategic Goals:Cost leadership, efficiency, stability

Strategic Goals:Differentiation, innovation, flexibility

???? ????