Chapter
7
PowerPoint Presentation by Charlie Cook
© Copyright The McGraw
-
Hill Companies, Inc., 2004. All rights reserved.
Organizing:
Designing Organizational Structure
Essentials
of
Contemporary
Management
© Copyright 2004 McGraw
-
Hill. All rights reserved.
7
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2
Learning Objectives
•
After studying the chapter, you should be able to:
Identify the
factors that influence
managers’
choice of an
organizational structure
.
Explain
how managers group tasks into jobs
that are motivating and satisfying for employees.
Describe the
types of organizational structures
managers can design, and explain why they choose
one structure over another.
Explain why there is a need to both
centralize
and decentralized authority
.
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-
Hill. All rights reserved.
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Learning Objectives (cont’d)
Explain
why managers must coordinate and
integrate
between jobs, functions, and divisions
as an organization grows.
Explain why managers who seek new ways to
increase efficiency and effectiveness are using
strategic alliances and network structures
.
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Hill. All rights reserved.
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Organizational Structure
•
Organizational Architecture
The organizational
structure
,
control
systems,
culture
, and
human
resource management systems
that together determine how efficiently and
effectively organizational resources are used.
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Hill. All rights reserved.
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Designing Organizational Structure
•
Organizing
The process by which managers establish
working
relationships
among employees to achieve goals.
•
Organizational Structure
Formal system of
task
and
reporting
relationships
showing how workers use resources.
•
Organizational design
The process by which managers make specific
choices that result in a particular kind of
organizational structure.
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Hill. All rights reserved.
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Factors Affecting Organizational Structure
Figure 7.1
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Determinants of Structure
•
The Organizational
Environment
The quicker the environment changes, the more
problems face managers.
Structure must be more flexible (i.e., decentralized
authority) when environmental change is rapid.
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Hill. All rights reserved.
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Determinants of Structure
•
Strategy
Different strategies require the use of different
structures.
•
A differentiation strategy needs a flexible structure,
low cost may need a more formal structure.
•
Increased vertical integration or diversification also
requires a more flexible structure.
Chandler: Structure follows strategy
工欲善其事必先利其器
Corporate/
Business
Entities
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Hill. All rights reserved.
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9
Determinants of Structure
•
Technology
The combination of skills, knowledge, tools,
equipment, computers and machines used in the
organization.
More complex technology makes it harder for
managers to regulate the organization.
•
Organizations utilizing
complex
technology require a
flexible structure to be managed efficiently.
•
Organizations utilizing
routine
technology can be
more readily managed using a formal structure.
•
Organizations with high employee
interaction
requirements need a flexible structure.
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Hill. All rights reserved.
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Types of Technology
•
Small Batch Technology
Small quantities of one
-
of
-
a
-
kind products are
produced by the skills of the workers who work
together in small groups.
•
Appropriate structure is
decentralized
and flexible.
•
Mass Production Technology
Automated machines that are programmed to make
high volumes of standard products.
•
Formal
structure is the best choice for workers who
must perform repetitive tasks.
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Determinants of Structure
•
Human Resources
Highly skilled workers whose jobs require working
in teams usually need a more
flexible
structure.
Higher skilled workers (e.g., CPA’s and doctors)
often have internalized professional
norms
.
•
Managers must take into account all four
factors (environment, strategy, technology and
human resources) when designing the
structure of the organization.
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Hill. All rights reserved.
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Organization Structure Issues
•
How to group
tasks
into individual jobs.
•
How to group
jobs
into functions and divisions.
•
Coordinating
functions
and divisions.
•
Allocating
authority
.
•
Types of
integrating
mechanisms.
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Hill. All rights reserved.
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Grouping Tasks Into Jobs: Job Design
•
Job Design
The process by which managers decide how to divide
tasks into specific jobs.
•
Division of Labor
Splitting the work
to be performed into particularly
impersonal
tasks
and assigning tasks to individual workers.
The appropriate division of labor results in an effective
and efficient workforce.
•
Job Simplification
Reducing the tasks each worker performs: too much
simplification results in
boredom
.
Enhance specification and
independence
Internal cohesion and
external decoupling
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Job Design
•
Job
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
Enrichment
Increasing the degree of responsibility a worker has
over a job.
•
Intended to increase worker involvement and self
-
discretion.
•
Requires a flexible organizational structure to allow
employees to act flexibly and creatively.
Increase the width of task
Increase the depth of task
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Hill. All rights reserved.
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The Job Characteristics Model
Figure 7.2
Source: Adapted from J. R. Hackman and G. R. Oldham,
Work Redesign
(Reading, MA: Addison
-
Wesley, 1980).
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Job Characteristics Model
Job Characteristic
Skill variety
Employee uses a wide range of skills.
Task identity
Worker is involved in all tasks of the job
from beginning to end of the production
process
Task significance
Worker feels the task is meaningful to
organization.
Auton
omy
Employee has freedom to schedule tasks
and carry them out.
Feedback
Worker gets direct information about how
well the job is done.
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Grouping Jobs into Functions
•
Functional 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.
•
Easy for managers to monitor and
evaluate
workers.
Disadvantages
•
Difficult for departments to
communicate
with others.
•
Preoccupation with own department and losing sight
of organizational
goals
.
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The
Functional
Structure of
Pier 1
Imports
Figure 7.3
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Divisional Structures
•
Divisional 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 develop a
business
-
level
strategy to
compete.
•
Divisions have marketing, finance, and other
functions.
•
Functional
managers report to
divisional
managers
who then report to
corporate
upper management.
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Types of Divisional Structures
•
Product
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.
•
Division managers become experts in their area.
•
Removes need for direct supervision of division by
corporate managers.
•
Divisional management improves the use of
resources.
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Types of Divisional Structures (cont’d)
•
Geographic
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.
•
Generally, this structure is adopted when managers
are pursuing a multidomestic strategy.
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Types of Divisional Structures (cont’d)
•
Market (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.
•
Firms pursuing a
global strategy
will use this type of
structure.
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Hill. All rights reserved.
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Product,
Market, and
Geographic
Structures
Figure 7.4
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Viacom’s 2001
Product
Structure
Figure 7.5
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Global Geographic and Global Product Structures
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Matrix Design Structure
•
Matrix
Structure
An organizational structure that simultaneously
groups people and resources
by function and
product.
•
Results in a complex network of superior
-
subordinate
reporting relationships.
•
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.
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Matrix Structure
Figure 7.6a
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Product Team Design Structure
•
Product 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.
Cross
-
functional team is composed of a group of
managers from different departments working
together to perform organizational tasks.
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Product Team Structure
Figure 7.6b
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Coordinating Functions and Divisions:
Allocating Authority
•
Authority
The power to hold people accountable for their
actions and to make decisions concerning the use
of organizational resources.
•
Hierarchy 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.
Authority vs. responsibility vs. accountability
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Allocating Authority (cont’d)
•
Span of Control
The
number of subordinates
who report directly to
a manager.
•
Line Manager
Managers in the direct
chain of command
who have
authority over people and resources lower down.
Primarily responsible for the production of goods or
services.
•
Staff Manager
Managers who are functional
-
area specialists that
give
advice
to line managers.
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Hill. All rights reserved.
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The Hierarchy
of Authority
and Span of
Control at
McDonald’s
Corporation
Figure 7.7
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Tall and Flat Organizations
•
Tall structures have
many levels
of authority
and narrow spans of control.
As hierarchy levels increase, communication gets
difficult, creating delays in the time being taken to
implement decisions.
Communications can also become
garbled
as it is
repeated through the firm.
•
Flat structures have
fewer levels
and wide
spans of control.
Structure results in quick communications but can
lead to overworked managers.
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Hill. All rights reserved.
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Flat Organizations
Figure 7.8a
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Hill. All rights reserved.
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Tall Organizations
Figure 7.8b
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The Minimum Chain of Command
•
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 Authority
Decentralization puts more authority at lower levels
and leads to flatter organizations.
•
Works best in
dynamic
, highly competitive
environments.
Stable
environments favor centralization of
authority.
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Hill. All rights reserved.
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37
Integrating Mechanisms
Figure 7.9
Internal coordination
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Strategic Alliances and Network Structures
•
Strategic 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:
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.
Externally cooperative linkage
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Hill. All rights reserved.
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Homework 6
•
Adam Smith, in his Wealth of Nations (Book 5,
Chapter 1, Part 3, Article 2), argued that
university teachers should not be paid salaries
but rather that they should have to rely on the
fees they can collect from the students they
teach. What would be the advantages of this
systems? What difficulties do you see with this
proposal to pay piece rates to faculty?
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