Chapter 10 designing adaptive organizations(1)

Designing Adaptive Organizations

Chapter 10

Organizing

 Organization 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
Manager’s Challenge: Nissan

Copyright © 2005 by South-Western, a division of Thomson Learning. All rights reserved.
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Topics
Designing Adaptive Chapter 10
Organizations

 Organizing Principles and Concepts
 Organizing the Vertical Structure
 Using Mechanisms for Horizontal
Coordination
 Tailoring Various Elements of Structural
Design to Organizational Situations

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Organization Structure

Defines how tasks are divided, resources
are deployed, and departments are
coordinated
● Set of formal tasks assigned
● Formal reporting relationships
● The design of systems to ensure
effective coordination of employees
across department
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The Organization Chart

• Visual representation of an organization’s
structure “The Home Depot is the world's largest home
improvement retailer currently operating 1,363
• Important Features of Vertical Structure:
stores.

1. Work Specialization
2. Chain of Command
3. Authority, Responsibility and Delegation
4. Span of Management or Span of Control
5. Centralization/Decentralization
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Work Specialization
Division of Labor concept

 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

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Chain of Command

 Unbroken line of authority that links all
 Unbroken line of authority that links all
persons in an organization
persons in an organization
 Shows who reports to whom
 Shows who reports to whom

 Associated with two underlying principles
 Associated with two underlying principles
 Unity of Command
 Unity of Command
 Scalar Principle
 Scalar Principle

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Authority
 Formal and legitimate right of a manager to
 Formal and legitimate right of a manager to
make decisions and issue orders
make decisions and issue orders
 Allocate resources to achieve organizationally
 Allocate resources to achieve organizationally
desired outcomes
desired outcomes
 Authority is distinguished by three characteristics
 Authority is distinguished by three characteristics
 Authority is vested in organizational positions, not
 Authority is vested in organizational positions, not
people
people
 Authority is accepted by subordinates
 Authority is accepted by subordinates
 Authority flows down the vertical hierarchy
 Authority flows down the vertical hierarchy

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Responsibility
Flip Side of the Authority coin

 The duty to perform the task or activity
an employee has been assigned

 Managers are assigned authority
commensurate with responsibility

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Accountability

● Mechanism through which authority and
responsibility are brought into alignment
● People are subject to reporting and
justifying task outcomes to those above
them in the chain of command
● Can be built into the organization
structure

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Delegation

●Process managers use to transfer
authority and responsibility

●Organizations encourage
managers to delegate authority to
lowest possible level

Ethical Dilemma: A Matter of Delegation

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Delegation
Give Maintain Evaluate and reward
thorough feedback performance
instructions

Techniques for Delegation

Ensure that
Delegate the authority equals Select the right
whole task responsibility person
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Line and Staff Authority

 Line Authority = individuals in management
positions have the formal power to direct and
control immediate subordinates

 Staff Authority = granted to staff specialists in
their area of expertise

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Span of Management (also called
Span of Control)
 Number of employees who report to a supervisor
– Traditional view = seven subordinates per manager
– Lean organizations today = 30+ subordinates

 Supervisor Involvement
– must be closely involved with subordinates, the span
should be small
– need little involvement with subordinates, it can be
large

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Factors Associated With Less
Supervisor Involvement

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

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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

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Centralization versus Decentralization

 Centralization – the location of decision
authority near top organization levels

 Decentralization – the location of decision
authority near lower organization levels

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Centralization versus Decentralization

 Greater change and uncertainty in the
environment are usually associated with
decentralization
 The amount of centralization or
decentralization should fit the firm’s
strategy
 In times of crisis or risk of company failure,
authority may be centralized at the top
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Departmentalization

 The basis on which individuals are grouped into
departments and departments into the total
organization
• Five Approaches to Structural Design
1. Vertical Functional Structure
2. Divisional Structure
3. Matrix Structure
4. Team-Based Structure
5. Virtual Network Structure

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Vertical Functional Organizational
Structure

CEO

Finance Production Marketing


Vertical Functional Structure

 Grouping of positions into departments
based on similar skills, expertise, and
resource use
● Information flows up and down
● Chain of command converges at the top
● Managers and employees are compatible
because of similar training and expertise
● Rules and procedures governing duties and
responsibilities

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Divisional Structure

CEO

Consumer Lighting Medical
Products Products Systems



 Departments are grouped based on similar
organizational outputs
● Each division is autonomous of the others in a
huge corporation or organization

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Divisional Structure Advantages

 Efficient use of resources
 Skill specialization development
 Top management control
 Excellent coordination
 Quality technical problem solving

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Disadvantages

 Poor communications
 Slow response to external changes
 Decisions concentrated at top
 Pin pointing responsibility is difficult
 Limited view of organizational goals by
employees
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Matrix Structure (Project-
based)
Employees ( ) are temporrily assigned to a specific
project team and have a permanent functional unit

CEO

Engineering Marketing Design

Project A
Manager

Project B
Manager

Project C
Manager


General Motors’ IT Matrix Structure


Matrix Structure

 Utilizes functional and divisional chains of
command simultaneously in the same part of
the organization

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Matrix Advantages

 More efficient use of resources than single
hierarchy
 Adaptable to changing environment
 Development of both general and specialists
management skills
 Expertise available to all divisions
 Enlarged tasks for employees

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Dual-Authority Structure in a
Matrix Organization

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Matrix Disadvantages

 Dual chain of command
 High conflict between two sides of matrix
 Many meetings to coordinate activities
 Need for human relations training
 Power domination by one side of matrix

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Team Structure

Organization is made up of horizontal teams that
coordinate their activities and work directly with
customers to achieve the organization’s goals
Cross-functional teams – a group of employees from
various functional departments that meet as a team to
resolve problems
Permanent teams – a group of participants from
several functions who are permanently assigned to
solve ongoing problems of common interest

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Team Advantages

 Same advantages as functional
structure
 Reduced barriers among
departments
 Quicker response time
 Better morale
 Reduced administrative overhead
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Team Disadvantages

 Dual loyalties and conflict
 Time and resources spent on
meetings
 Unplanned decentralization

34

Virtual Network Structure
Product Call center
development partner
partner (India)
(U.S.A.)

Core
Firm
Package
Accounting
design
partner
partner
(Canada)
(UK)
Assembly
partner
(Mexico)


Virtual Network Structure

 Disaggregates major functions to separate
companies that are brokered by a small
headquarters organization

OUTSOURCING

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Virtual Network Advantages

 Global competitiveness
 Work force flexibility
 Reduced administrative overhead

37

Virtual Network Disadvantages

 No hands-on control
 Loss of part of the organization severely
impacts remainder of organization
 Employee loyalty weakened

38

Task Forces, Teams, Project
Management

 Task Force = temporary team/committee
designed to solve a short-term problem
involving several departments

 Project Manager = responsible for
coordinating activities of several departments
on a full-time basis for the completion of a
specific project
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Reengineering

 Radical redesign of business processes to
achieve dramatic improvements in cost,
quality, service, and speed
 Process = organized group of related tasks
and activities that work together to transform
inputs into outputs and create value

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Factors Shaping Structure

Structure Follows Strategy
Structure Reflects the Environment
Structure Fits the Technology
Service Technology – technology characterized
by intangible outputs and direct contact between
employees and customers
Digital Technology – technology characterized
by use of the internet and other digital processes to
conduct or support business operations
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Chapter 10 designing adaptive organizations(1)

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