Organizational structure and design

Defines how task are divided, resources are deployed and departments are coordinated. The set of formal tasks assigned. Formal reporting relationships. The design of systems to ensure effective co-ordination of employees across department. Organization structure are describes How information flows. How & where decision are made. How the behavior of people is influenced.

. . .

Firms growth as evolutionary process

single business

Geographic Diversification

product diversification

product & geographic diversification

 Structure evolves in response to changing information processing requirements. Structure becomes more complex as information processing requirement increase. Information processing requirement change in response to growth ( product offering, geography, sales volume etc) .

Traditional logic
add new layers of management to handle increasing information processing requirements.

Emerging logic
Use technology and innovative relationship to handle increasing information processing requirements. All organization require some form of org. structure to implement and manage their strategies. Firms frequently alter their structure as they grow in size and complexity.

What is organization structure:An authority system. A communication system. An activities / work system.

Objectives of org. structure

Need to create division of labour. Ned to integrate these groups to ensure org. effectiveness. Dimension of macro structure.

Vertical differentiation:CEO EVP EVP Sr.VP VP Ast.VR VP Ast.VR Branch mgr. Asst.branch mgr. EVP Sr.VP VP VP Ast.VR Branch mgr. Asst.branch mgr. EVP

Sr.VP VP

Branch mgr.

Horizontal differentiation
CEO PROD.1 PROD.2 PROD. 3 PROD.4

1.Function wise. 2.Geography wise 3.Product wise 4.Production stage wise.

Special dispersion
HQ U.S. PACIFIC EUROPE

SUPPORT

MFG.

MFG.

R&D

LEGAL

PRODUCT1

PRODUCT2

HIGH

HORIZONTAL DIFFERENTIATION
PRESSURE

FOR GLOBALIZATION & CENTRALIZATION

VERTICAL DIFFERENTIATION SPECIAL DIFFERENTIATION

LOW

PRESSURE FOR LOCAL RESPONSIVENESS & DECENTRALIZATION

WHAT DETERMINES ORG. STRUCTURE

To what degree are tasks subdivided into separate jobs. On what basis will job be grouped together. To whom do individual and groups report. How many individual can a manager efficiently & effectively directs. Where does decision making authority be. To what degree will then be rules & regulations to direct employees and managers.

Functional org. structure

G.M. ENGRG. MFG. MKTG. FINANCE PERSONNEL R&D

Process oriented functional structure

Foundry Costing milling grinding screw making finished heat traetment customer billing service accounting

Strategic advantages of functional org. structure

Permits centralised control of strategic results. Very well suited for structuring a single business. Structure is linked tightly to strategy by designing key activaties as functional units . Promotes in depth functional expertise. Conducive to exploiting learning experience curve effects associated with functional specialisation. Enhances operational efficiency where tasks are routine and repitive.

Strategic disadvantages
Poses problems of functional coordination. Can lead to inter functional rivalary, conflict and empire building. May promote over specialization and narrow management view points. hinders development of managers with cross functional experience because the ladder of advancement is up the ranks with in same functional area. Forces profit responsibility to the top. Functional specialist often attach more importance to what is best for the functional area than to what is best the whole business.

Geographic org. structure

Chief executive
corporate staff finance & accounting personnel/ legal marketing, r& d

G.M. western region

G.M. eastern region

G.M. southern region

personnel

G.M. northern region

accounting & control

Engineering

production

marketing

Strategic advantages
Allows tailoring of strategy to needs of each geographic market. delegates profits/ loss responsibility to lowest strategic level. Improves functional coordination with in the target market. Area units make an excellent training ground for higher level general managers. Takes advantage of economies of local operations.

Strategic disadvantages
Poses a problem of how much geographic uniformity head quaters should be allowed. Greater difficulty in maintaining consistent company image/ reputation from area to area when area managers exercise much strategic freedom. Adds another layer of management to run the geographic units. Can result in duplication of staff services at head quarters and distt. Levels making a relative cost disadvantage.

S.B.U. type of organization structure

Chief executive officer
CORPORATE STAFF R&D FINANCE & CORPORATE ACCOUNTING MARKETING SERVICES PERSONNEL / LEGAL AFFAIRS PUBLIC RELATION

GP vice president SBU-I

BUSINESS UNIT DIVISION

GP vice president SBU-II

BUSINESS UNIT DIVISION

GP vice president SBU-III

BUSINESS UNIT DIVISION

STRATEGIC ADVANTAGES
Provides a strategically relevant way to organize large numbers of different business units. Improves coordination between the role and authority of the business with similar strategies ,market and growth opportunities. Allows strategic planning to be done at the most relevant level with in the total enterprise. Makes the task of strategic review by top executives more objective and more effective. Helps allocate corporate resources to area with greatest growth opportunities. Promote more cohesiveness among the new initiatives of separate but related business. Facilitates the coordination of related activities with in an sbu there helping to capture the benefits of strategic fits in the sbu.

Strategic disadvantages
It is easy for the definition and grouping of business into sbu to be arbitrary that sbu server no other purpose than administrative convenience. Sbu can still be myopic in charting their future direction. Adds another layer to top management . The role and authority of the ceo , the gp. Vice president and the business unit manager have to be carefully worked out. unless the sbu head is strong willed, very little strategic coordination is likely to occur across business units in the sbu. Performance recognition gets blurred , credit for successful business units tend to go to corporate ceo, then to business unit head, last to group vice president.

Matrix organizational structure

Chief executive officer
Vice president Engineering
Project A manager

vice president vice president production purchase

production

vice president adm.

adm.

engg. staff

purchase

Project B Manager

engg. staff

production

purchase

adm.

Project C Manager

engg. staff

production

purchase

adm.

Project D manager

engg. staff

production

purchase

adm.

ADVANTAGES
Accomodates a wide variety of project oriented business activity. Good training ground for strategic managers. Maximize efficient use of functional managers. Fasters creativity and multiple sources of diversity. Broader middle management exposure to strategic issues for the business.

Disadvantages
Dual accounting can create confusion and contradictory policies. Necessitates tremendous horizontal and vertical coordination. Very complex to manage. Hard to maintain balance between two lines of authority.

Process for creating an organization structure

Identify the critical activities needed to carry out the orgs strategy. Understand the relationship between these activities (degree of interdependence). Group the activities into organizational units. Determine the degree of authority and independence of each of these units. Provide for coordination between the various units.

Signs of poor organization structure

Poor forecasting. Not meeting customer needs. Slow response to changes in the environment . Conflicts between individuals or groups. Poor communication / coordination. Poor decision making decision being made lay the wrong people or at the wrong level in the hierarchy inadequate information to make good decision.

Organization structure
Organizational culture is the underlying values, beliefs and principle thats serves as the foundation for an organization management system. in addition its includes the management practices and behavior that exemplify and reinforce those basic principles. A culture is a pattern of basic assumption invented, discovered or developed by a given group as it learns to cope with its problem of external adaptation and internal integration . That has worked well enough to be considered valid therefore ,to be taught to new members as the correct way to perceive , hunk and feel in relation to those problems. Culture once established ,it may resistant to change. >culture is nurtured and sustained through hiring practices. >socialization of new hires.

Organization culture largely dictates issues like Formation of rules. People / team orientation . Task orientation. Work hours and dedication to the company. Dress code. Ethical standards.

Function of organization culture

Culture is the social glue that helps hold an organization together by providing standards for what employees say or do. Culture provides boundary - defining roles. Culture conveys a sense of identity for org. members. It serves as a sense making and control mechanism that guides and shapes the attitudes and behavior of employees.

Significant components of culture

Relationship. Language & communication. Institutional & legal system Values & value system Time orientation Mind sets or world view.

5 basic process of organizational culture

Cooperation:-willingness to act. contigencies. intent, goodwill and mutual trust. . Decision making :-basic assumption & preferences. efficiency & effectiveness. . Control:- formal procedure & plan control. shared belief & values. . Communication:-communication & miscommunication. assumption reduces the needs. guidelines & clue control to interpret massage. . Commitment:-sense of identification. salary , prestige & sense of worth.