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Topic 7: Designing Adaptive Organizations

Organizing

Organizing 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

Organization Structure

Organization structure is the framework in which the organization defines


how task are divided, resources are deployed, and departments are
coordinated. Organization Structure is defined as

i) Set of formal tasks assigned


ii) Formal reporting relationships
iii) The design of systems to ensure
iv) effective coordination of employees across departments

The set of formal tasks and formal reporting relationships provided a


framework for vertical control of the organization: Work Specialization and
Division of labor.

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

Chain of Command:

Unbroken line of authority that links all persons in an organization

Shows who reports to whom

It is associated with two underlying principles

– Unity of Command: employees held accountable to only one supervisor


– Scalar Principle: clearly defined line of authority

Chain of Command: Authority, Responsibility, Accountability and Delegation

a) Authority: The chain of command illustrates the authority structure of the


organization. Authority is the formal and legitimate right of a manager to
make decisions and issue orders, and allocate resources to achieve
organizationally desired outcomes. Authority is distinguished by three
characteristics: (1) Authority is vested in organizational positions, not
people. (2) Authority is accepted by subordinates. (3) Authority flows
down the vertical hierarchy.
b) Responsibility is the duty to perform the task or activity as assigned.
c) Accountability means that the people with authority and responsibility are
subject to reporting and justifying task outcomes to those above them in
the chain of command.
d) Delegation is the process managers use to transfer authority and
responsibility to positions below them in the hierarchy.

Line Authority:

Line departments perform the tasks that reflect the organization’s primary
goals. They work directly with customers/products.

Staff Authority:

Staff departments are those departments that provide specialized skills in


support of line departments

Span of Management/Span of Control

Number of employees who report to a supervisor

Traditional view = seven subordinates per manager

Lean organizations today = 30+ subordinates

Reorganization to Increase Span of Management:

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
Factors Associated With Supervisor Involvement:

– Work is stable and routine


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

Centralization and Decentralization

Change and uncertainty are usually associated with decentralization. The


amount of centralization or decentralization must fit the firm’s strategy.
During crisis or risk of company failure, authority may be centralization.

Departmentalization

– Basis for grouping positions into departments


– Choices regarding chain of command

Five traditional approaches:

– Functional
– Divisional
– Matrix
– Teams
– Virtual Networks

Vertical Functional Structure:

Divisional Structure:

– An organisation structure in which departments are grouped based on


similar organisational outputs

– An alternative for assigning divisional responsibility is to group company


activities by geographic region or customer group

Three types of Divisional Structure:


a) Geographic-based structure
b) Product structure
c) Customer-based strcture

Functional Structure VS Divisional Structure:

The primary difference between divisional and functional structures is that


the chain of command from each function converges lower in the hierarchy

In a divisional structure, differences of opinion among research, marketing,


manufacturing and finance would be resolved at the divisional level rather
than by the president

Thus, the divisional structure encourages decentralization

Decision making is pushed down at least one level in the hierarchy, freeing
the president and other top managers for strategic planning

Matrix Approach:

An organisation structure that uses functional and divisional chains of


command simultaneously in the same part of the organisation

The matrix structure evolved as a way to improve horizontal coordination and


information sharing

Team Approach:

The vertical chain of command is a powerful means of control, but passing all
decisions up the hierarchy takes too long and keeps responsibility at the top

The team approach gives managers a way to delegate authority, push


responsibility to lower levels, and be more flexible and responsive in the
competitive global environment

a) Cross-functional teams

The teams which consist of employees from various functional departments


who are responsible to meet as a team and resolve mutual problems

Team members typically still report to their functional departments, but they
also report to the team, one member of whom may be the leader

Cross-functional teams are used to provide needed horizontal coordination to


complement an existing divisional or functional structure

b) Permanent teams
It is a groups of employees who are organised in a way similar to a formal
department

Each team brings together employees from all functional areas focused on a
specific task or project

Emphasis is on horizontal communication and information sharing because


representatives from all functions are coordinating their work and skills to
complete a specific organisational task

Authority is pushed down to lower levels, and front-line employees are often
given the freedom to make decisions and take action on their own

Virtual Network Approach:

An organizational structure that disaggregates major functions to separate


companies that are brokered by small headquarters organization.

The organisation may be viewed as a central hub surrounded by a network of


outside specialist

Rather than being housed under one roof, services such as accounting,
design, manufacturing, and distribution are outsourced to separate
organisations that are connected electronically to the central office

The idea behind networks is that a company can concentrate on what it does
best and contract out other activities to companies with distinctive
competence in those specific areas, which enables a company to do more
with less

Approaches to Structural Design:

Struct Advantages Disadvantages


ural
Appro
ach
???? Can draw on Lack of control
expertise
Weak boundaries
worldwide
Greater demands on
Highly flexible and
managers
responsive
Employee loyalty
Reduced overhead
weakened
costs
???? Efficient use of Poor communication
resources across functional
departments
Economic of scale
Slow response to external
In depth skill
changes
specialization and
development Lagging innovation

Top manager Decisions concentrated at


direction and top of hierarchy, creating
control delay
???? Fast response Duplication of resources
across divisions
Flexibility in
unstable Less technical depth and
environment specialization

Foster concern for Poor coordination across


customer needs divisions

Excellent
coordination
across functional
departments
???? More efficient use Frustration and confusion
of resources than from dual chain of
single hierarchy command

Flexibility High conflict between two


sides of matrix
Adaptable to
changing Many meetings, more
environment than discussion than
action
Interdisciplinary
cooperation
Expertise
available to all
divisions

???? Reduced barriers Dual loyalties and conflict


among
Time and resources spent
departments
on meetings
Increase
Unplanned
compromise
decentralization
Shorter response
time

Quicker decisions

Better morale,
enthusiasm from
employee
involvement

Organizing for Horizontal Coordination

The Need for Coordination:

Coordination refers to the quality of collaboration across departments.

Without coordination, a company’s left hand will not act in concert with the
right hand, causing problems and conflicts

Required regardless of whether the organization has a functional, divisional,


or team structure

Task Forces, Teams, and Project Management

Task Force:

A task force is a temporary team or committee designed to solve a short-term


problem involving several departments

Team:

In addition to creating task forces, companies also set up cross-functional


teams

A cross-functional team furthers horizontal coordination because


participations from several departments meet regularly to solve ongoing
problems of common interest
Similar to a task force except that it works with continuing rather than
temporary problems and exist for several years.

Project Manager:

A project manager is a person who is responsible for coordinating activities of


several departments on a full-time basis for the completion of a specific
project

Examples of Project Manager Relationships

Project manager is not a member of one of the departments being


coordinated

Project managers are located outside of the departments and have


responsibility for coordinating several departments to achieve desired project
outcomes

Reengineering

Business process reengineering:

Radical redesign of business processes to achieve dramatic improvements in


cost, quality, service, and speed

Change the way manager think about how work is done

Focus on process rather than function

Process = organized group of related tasks and activities that work together
to transform inputs into outputs and create value

Reengineering at Michigan Casting Center:


Structure Follows Strategy:

The right structure is designed to fit the organization’s strategy

Recent study demonstrated that business performance is strongly influenced


by how well the company structure is aligned with its strategic.