Chapter 7

Designing Adaptive Organizations

Major Concerns in Organizing

Division

of Labor (Differentiation) Coordination (Integration)

In Reference to the Organizational Chart, Organizing Involves:

VERTICAL STRUCTURE Coordination from Top to Bottom HORIZONTAL STRUCTURE Departmentalization (Who works together?)

Work Specialization
Degree

to which tasks are subdivided into individual jobs A highly specialized job is narrow in scope Increases efficiency up to a point With extreme specialization, workers tend to become bored and alienated

Chain of Command
The line of authority, shown in the organization chart, that links all persons and shows who reports to whom.
CEO

VP Marketing

VP Production

VP Finance

Authority
Managers have authority because of the positions they hold (not who they are) To be effective, it must be accepted by subordinates.

Responsibility
Duty to perform the task an employee has been assigned Authority should be commensurate with responsibility.

Delegation
Process

to transfer authority and responsibility to positions below Delegation does not reduce responsibility Benefits both the organization and the individual employee

Common Practice is to:

CENTRALIZE

(authority at top)

Accounting Finance Human Resources Management Information Systems

DECENTRALIZE

(much delegation)

Production Marketing

Span of Management
Number

of employees reporting to a supervisor Tradition has recommended a span of management of four to seven subordinates What is best depends on the situation

Departmentalization
Basis for grouping job positions into departments and departments into the total organization. Internal Operations Oriented
Functional Network (Virtual)

Output Oriented
Divisional
Product Geographic Customer

Team (Cluster)

Combinations
Hybrid (different types at different places in an org.) Matrix (different types at simultaneous at the same places in an org.)

Functional Approach
Departments based on similar activities, skills and resource use.

Advantages:
Efficient

Disadvantages:

use of resources Economies of Scale In-depth skill specialization

Poor communication among departments Slow response to external changes Loyalty more to function than customer or the whole organization

Divisional Approach
Departments

are grouped together based on organizational outputs (e.g., product, geography, customer) Functions (e.g., marketing) are split among the divisions Its advantages and disadvantages tend to be the opposite of those of the functional approach

Divisions
Advantages:
Quicker

Disadvantages:
Duplication

changes in an unstable environment More in touch with customers

Competition for resources among divisions More managers needed

Less

professional specialization

Matrix Approach
Functional

and divisional chains of command simultaneously Violates the unity of command concept.

Matrix Structure - Why?

To

get the advantages of both Functional and Divisional Structures Sophisticated technology, fast-changing environment Diverse products and geographical areas

Disadvantages of Matrix
Many

meetings to coordinate activities High conflict between two sides of matrix Need for extensive human relations training

Team Approach
Cross-functional

teams (Clusters) consist of employees from various functional departments Teams typically have more decision making power than previously held by workers at their levels.

Team Approach
Advantages

Quicker response time Better morale Reduced administrative overhead

Disadvantages

Conflict Time and resources spent on meetings

Network (Virtual) Approach

Organization

divides major functions among separate companies brokered by a small headquarters organization Somewhat like a functional organization.

Network Approach
Advantages Increases competitiveness, especially of small firms Flexibility Reduced Costs
Disadvantages

No hands-on control Loyalty weakened.

Mechanistic vs. Organic Organizations

Vertical vs. Horizontal Structural Dominance Rigid vs. Flexible Specialized Jobs vs. Unspecialized Boss Control vs. Self-Control Centralized Decisions vs. Decentralized Bureaucratic vs. Non-bureaucratic

Departmentalization Types
(From most Mechanistic to most Organic) Functional Functional with integrators, crossfunctional committees, etc. Matrix Divisional Team

When the Mechanistic (Vertical) Approach is most Appropriate:

External Environment is: Stable Growth and Innovation Goals are: Few or Nonexistent (Internal Stability) The Organizations Size is: Large The Life Cycle Stage is: Late The Technology is: Mass Production (or involving low-level skills)

Service Technology
Tends

to be more Organic (Horizontal) than manufacturing Employees have direct contact with customers Output of the firm is intangible Production and consumption are simultaneous