Organizations and Structures

Module 7 LIS 580: Spring 2006 Instructor- Michael Crandall

Roadmap
Organizing and organizations Structure of organizations Matrix organizations Networked organizations Learning organizations Challenges in organizations

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What Is Organizing?
Organizing
Arranging the activities of the enterprise in such a way that they systematically contribute to the enterprises goals.

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Depicting the Organization

Organization Chart
A chart that shows the structure of the organization including the title of each managers position and, by means of connecting lines, who is accountable to whom and who has authority for each area.
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Organization Chart
Information Services Group
Knowledge Architecture Manager

Knowledge Architecture Lead

Search/Systems Lead

Design Lead

Customer Liaison

Developer Developer

Assistant Designer

Cataloger Systems Admin Cataloger Taxonomy Designer

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Organization Design and Structure

Organization design
A process in which managers develop or change their organizations structure

Work specialization
A component of organization structure that involves having each discrete step of a job done by a different individual rather than having one individual do the whole job
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Economies of Work Specialization

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Stages of Organizational Development

Simple structure
An organization that is low in specialization and formalization but high in centralization

Functional structure
An organization in which similar and related occupational specialties are grouped together

Divisional structure
An organization made up of self-contained units
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Stages of Organizational Development (contd)

Matrix structure
An organization in which specialists from functional departments are assigned to work on one or more projects led by a project manager

Team-based structure
An organization that consists entirely of work groups or teams

Boundaryless organization
An organization that is not defined or limited by boundaries or categories imposed by traditional structures
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Mechanistic and Organic Organizations

Mechanistic organization
The bureaucracy; a structure that is high in specialization, formalization, and centralization

Organic organization
An adhocracy; a structure that is low in specialization, formalization, and centralization

Structure follows strategy

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Burns and Stalker

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Structure Variables
Principles
Chain of command Span of control Authority Power Responsibility

Departmentalization
Functional Divisional
Product Customer Geographic Process

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Organizational Structure: Control

Chain of command
The management principle that no person should report to more than one boss

Span of control
The number of subordinates a manager can direct efficiently and effectively

Authority
The rights inherent in a managerial position to give orders and expect them to be obeyed

Responsibility
An obligation to perform assigned activities

Power
An individuals capacity to influence decisions
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Chain of Command

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Tall And Flat Organizations, And The Span Of Control

Span of Control
The number of subordinates reporting directly to a supervisor.
Wide spans: larger number of direct reports. Narrow spans: fewer number of direct reports.

Tall vs. Flat Organizations

Tall organizations: more management layers and more hierarchical controls. Flat organizations: fewer management layer and decision making closer to the customer.
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Spans of Control in Country-Based Organization

FIGURE 69
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Types of Organizational Authority

Line authority
The position authority (given and defined by the organization) that entitles a manager to direct the work of operative employees

Staff authority
Positions that have some authority (e.g., organization policy enforcement) but that are created to support, assist, and advise the holders of line authority
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Authority Versus Power

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Types of Power
Legitimate
Power based on ones position in the formal hierarchy Power based on fear Power based on the ability to distribute something that others value Power based on ones expertise, special skill, or knowledge Power based on identification with a person who has resources or traits
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Coercive Reward
Expert Referent
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Checklist 7.3
Principles of Delegation
The manager can delegate authority but cannot delegate responsibility.
Clarify the assignment. Delegate, dont abdicate. Know what to delegate. Specify the subordinates range of discretion. Authority should equal responsibility. Make the person accountable for results. Beware of backward delegation.
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Departmentalization: Creating Departments

Departmentalization
The process through which an organizations activities are grouped together and assigned to managers; the organizationwide division of work.

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Departmentalization
Functional
The grouping of activities by functions performed

Product
The grouping of activities by product produced

Customer
The grouping of activities by common customers

Geographic
The grouping of activities by territory

Process
The grouping of activities by work or customer flow
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Organizing Departments by Function

Functional Departmentalization
A form of organization that groups a companys activities around essential functions such as manufacturing, sales, or finance.

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Functional Departmentalization

FIGURE 61
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Organizing Departments by SelfContained Divisions/Purposes

Product Departmentalization
Grouping departments around a firms products or services, or each family of products or services; also referred to as a divisional organization.

Customer Departmentalization
Self-contained departments are organized to serve the needs of specific groups of customers.
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Divisional Organization for a Pharmaceuticals Company

FIGURE 62
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Customer Departmentalization, Grayson Steel Company

FIGURE 63
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Organizing Departments by SelfContained Divisions/Purposes (contd)

Marketing-channel Departmentalization
Departments focus on particular marketing channels, such as drugstores or grocery stores.

Geographic (Territorial) Departmentalization

Separate departments are established for each of the territories in which the enterprise does business.
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Marketing Channel Departmentalization

FIGURE 64
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Divisional Organizations Facilitate Coordination

FIGURE 65
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Checklist 6.1 Functional vs. Divisional Organizations

Functional Organization Advantages
1. 2. 3. 4. It is simple, obvious, and logical. It fosters efficiency. It can simplify executive hiring and training. It can facilitate the top managers control.

Functional Organization Disadvantages

1. It increases the workload on the executive to whom the functional department heads report. 2. It may reduce the firms sensitivity to and service to the customer. 3. It produces fewer general managers.
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Checklist 6.1 (contd) Functional vs. Divisional Organizations

Divisional Organization Advantages
1. The product or service gets the singleminded attention of its own general manager and unit, and its customers may get better, more responsive service. 2. Its easier to judge performance. 3. It develops general managers. 4. It reduces the burden for the companys CEO.
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Checklist 6.1 (contd) Functional vs. Divisional Organizations

Divisional Organization Disadvantages
1. It creates duplication of effort. 2. It may diminish top managements control. 3. It requires more managers with general management abilities. 4. It can breed compartmentalization.
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Creating Matrix Organizations

Matrix Organization
An organization structure in which employees are permanently attached to one department but also simultaneously have ongoing assignments in which they report to project, customer, product, or geographic unit heads.

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Matrix Organization Departmentalization

FIGURE 66
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Matrix Organizations
Advantages Access to expertise. Stability of permanent department assignments for employees. Allows for focus on specific projects, products, or customers.
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Disadvantages Confusion of command. Power struggles and conflicts. Lost time in coordinating. Excess overhead for managing matrix functions.
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Departmentalization in Practice: A Hybrid

Why mix the types of departmentalization?
Hierarchical considerations
The relationship of top level departments to their subsidiary departments.

Efficiency
Product, customer, and territorial departments tend to result in duplicate sales, manufacturing, and other functional departments.

Common sense
Departmentalizing is still more an art than a science.
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The New Summer Tour Organization

FIGURE 68
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Network-based Organizations
Organizational Network
A system of interconnected or cooperating individuals.

Informal Networks
Communication pathways and relationships between individuals in an organization that do not necessarily conform to the formal chain of command and communication networks of an organization.
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Network-based Organizations (contd)

Formal Organizational Network
A recognized group of managers or other employees assembled by the CEO and the other senior executive team, drawn from across the companys functions, business units, geography, and levels.

Electronic Organizational Networks

Networking through technology-supported devices such as e-mail, video-conferencing, and collaborative computing software like Lotus Notes.
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Formal vs. Social Structure

Rarely do the communication patterns match the formal structure

Cross, Rob. A bird's-eye view: Using social network analysis to improve knowledge creation and sharing. IBM Executive strategy report 04Jun2002 http://www1.ibm.com/services/us/index.wss/xs/imc/a1001262 April 18, 2006 LIS580- Spring 2006 41

Network-based Organizations (contd)

Team-Based Organizations
Team
A group of people committed to a common purpose, set of performance goals, and approach for which they hold themselves mutually accountable.

Horizontal Corporations
A structure that is organized around customeroriented processes performed by multidisciplinary cross-functional teams rather than by formal functional departments.

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The Horizontal Corporation

Source: John A. Byrne, The Horizontal Corporation, Business Week, 20 December 1993, p. 80.

FIGURE 611
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Checklist 6.2 Building Horizontal Organizations

Make responsibilities overlap. Design individual jobs as broadly as possible, and keep the number of job titles to a minimum. Base rewards on unit performance to emphasize the importance of working together. Change the physical layout to promote collective responsibility. Let people see each others work. Redesign work procedures, provide computer terminals, use the e-mail network, and make sure managers are available.
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How to Create a Horizontal Corporation

Source: Source: Reprinted from the December 20, 1993, issue of Business Week by special permission. Copyright 1993 by the McGraw-Hill Companies, Inc.

FIGURE 612
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Other Organization Types

Federal Organization
An organization in which power is distributed between a central unit and a number of constituents, but the central units authority is intentionally limited.

Virtual Organization
A temporary network of independent companies that use information technology to share skills, reduce costs, and provide access to one anothers markets. Its success depends on each of the individual firms responsibility and self-interest to accomplish the networks purpose.
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Effect of Technology on Structure

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When Organizing: Always Keep Your Goals in Mind

Business environments are in a constant state of change. An organizations strategy must be adapted to changes in its competitive environment. Structure follows strategy.
Strategic change creates the need for restructuring the organization to acquire new and different knowledge, skills and abilities.
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Checklist 7.1
What Determines Organization Structure
Environment. Fast-changing environments require organic structures; slowly changing environments favor mechanistic structures. Technology. Unit and continuous production processes favor organic structures. Mass production processes favor mechanistic structures. Goals. Ask, What are the main goals we want to achieve via this organization? Pros and cons. Each approach to departmentalization has pros and cons. Logic and common sense.
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What Are Learning Organizations?

1. Adopt an organic, networked organizational form. 2. Encourage their employees to learn and to confront their assumptions 3. Have employees who share a common vision 4. Have the capacity
to adapt to unforeseen situations to learn from their own experiences to shift their shared mindsets to change more quickly, broadly, and deeply than ever before.
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Organizational Learning as a Dynamic Process

Crossan, Lane, & White (1999)

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Abolishing Organizational Boundaries

Boundaryless Organization
An organization in which management strips away the walls which typically separate organizational functions and hierarchical levels, through the widespread use of teams, networks, and similar structural mechanisms.
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The Four Organizational Boundaries That Matter

Source: Reprinted by permission of Harvard Business Review. The Four Organizational Boundaries that Matter, from The New Boundaries of the Boundaryless Company, by Larry Hirschorn and Thomas Gilmore, MayJune 1992. Copyright 1992 by the President and Fellows of Harvard College. All rights reserved.

FIGURE 03
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Managing Learning Organizations

How to Streamline Organizational Decision Making
Downsize Reduce management layers Establish miniunits

How to Cultivate Employees Personal Mastery

Provide continuous learning opportunities. Foster inquiry and dialogue. Establish mechanisms to ensure that the organization is continuously aware of and can interact with its environment.
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Challenges in Organization
Merging separate organizations with different structures Changing an existing organization to meet external or internal changes in conditions Conflicts between departments or groups Interdependence between organizational units Centralization vs. decentralization

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Part of the Independent Integrator Challenge Facing the Homeland Security Director

Source: Alison Mitchell, Disputes Erupt over Ridges Needs for His Job, New York Times, 9 November 2001, p. B7.

FIGURE 75
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Methods for Achieving Coordination

Mutual Adjustment
Achieving coordination through face-to-face interpersonal interaction.

Use Rules and Procedures Standardize Exercise Direct Supervision: Use the Chain of Command Divisionalize
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Appoint Staff Assistants Appoint Liaisons Appoint Committees Organize Independent Integrators
An individual or a group that coordinates the activities of several interdependent departments, but is independent of them.
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Managing Organizational Conflict

LineStaff Conflict
Disagreements between a line manager and the staff manager who is giving him or her advice.

How to Organize to Reduce Interunit Conflict

Appeal to power and the chain of command Reduce interdependence Exchange personnel
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Types of Interdependence

Source: Based on James Thompson, Organizations in Action (New York: McGraw-Hill, 1967), Chapter 2.

FIGURE 76
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Centralization and Decentralization

Centralization
A function of how much decision-making authority is pushed down to lower levels in an organization; the more centralized an organization, the higher the level at which decisions are made

Decentralization
The pushing down of decision-making authority to the lowest levels of an organization
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Decentralize?
Decentralized Organization
Organizational authority for most departmental decisions is delegated to the department heads. Control for major companywide decisions is maintained at the headquarters office.

Decentralization Rules:
Decentralize decisions that affect only one division or area and that would take a long time for upper management to make. Centralize decisions that could adversely affect the entire firm and that upper management can fairly quickly and easily.
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Problems With Size

There is a fairly common perception that large organizations tend to behave much less intelligently than their size suggests. They often lose the decisiveness seen in small groups and may seem "stupid" to people within them who work with ideas and knowledge. There appears to be a fundamental upper limit on the average per capita decision rate that an organization can sustain, depending inversely on the organization's entropy. If the limit is broached, impaired productivity among knowledge managers may result and large organizations may be disadvantaged when performing knowledge-intensive tasks that require efficient use of intellectual capital.
Janow, R. Shannon Entropy and Productivity: Why Big Organizations Can Seem Stupid. Analytic Solutions Group, LLC. 2/28/2 004 http://physics.njit.edu/~janow/Paper20040228njit.pdf April 18, 2006 LIS580- Spring 2006 62

Hammer vs. Deming

What tradeoffs did Deming and Hammer make in their approaches to designing organizations? Did you notice who was given power in Demings approach vs. Hammer? What is driving NYNEX to make changes in their organization structure? What component of the organization is hardest to change? Do you see the same issues arising in the War at Work article?
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Next Time
Managing People
Read Chapter 9 (not 8!!) and the articles

Discussion group questions:

How can relations be improved between Stanley and the reference librarians? How, without simply complaining about Stanley, can you persuade Joanna to listen to the reference departments perspective? Who defines the responsibilities of each department, and how can you, as an interested party, help accomplish this?

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