Chapter 11

Organizational Structures and Processes

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What Would You Do?

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Exide Technologies is currently organized geographically Share prices are decreasing Debt load is increasing Which organizational structure should Exide have?

© 2004 by Nelson, a division of Thomson Canada Limited

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Learning Objectives:
Designing Organizational Structures
After reading these next three sections, you’ll have a better understanding of the importance of organizational structure because you should be able to: 1. describe the departmentalization approach to organizational structure 2. explain organizational authority 3. discuss the different methods for job design
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Departmentalization
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Functional Product Customer Geographic Matrix

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Functional Departmentalization

Exhibit 11.1 © 2004 by Nelson, a division of Thomson Canada Limited

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Functional Departmentalization
Advantages
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Disadvantages

creates highly skilled specialists lowers costs through reduced duplication communication and coordination problems are lessened

cross-department coordination can be difficult may lead to slower decision making produces managers with narrow experiences
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Product Departmentalization
Easy Food Market Cheese Milk Ice cream

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Product Departmentalization
Advantages

Disadvantages

managers specialize but have broader experience easier to assess work-unit performance decision making is faster

duplication often increases costs difficult to coordinate across departments

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Customer Departmentalization
American Express

Cards

Travel

Financial Services Business Services

Adapted from Exhibit 11.3 © 2004 by Nelson, a division of Thomson Canada Limited

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Customer Departmentalization
Advantages
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Disadvantages

focuses on customer needs products and services tailored to specific customers

duplication of resources difficult to achieve coordination across departments decisions that please the company but may hurt the company
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Geographic Departmentalization
Coca-Cola Enterprises Central North America Eastern North America Western North America

Europe

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Geographic Departmentalization
Advantages

Disadvantages

responsive to demand of different markets reduce costs by locating resources close to customers

duplication of resources difficult to coordinate across departments

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Matrix Departmentalization
A hybrid structure in which two or more forms of departmentalization are used together
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most common forms combine product and functional employees report to two bosses increased cross-functional interaction significant interaction between functional and project managers required
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Matrix Departmentalization
Advantages

Disadvantages

efficiently manage large, complex tasks effectively manage large, complex tasks

requires high levels of coordination increased conflict levels requires high level of management skills

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Organizational Authority
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Chain of command Line versus staff authority Delegation of authority Degree of centralization

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Chain of Command

The vertical line of authority in an organization

clarifies who reports to whom workers report to only one boss violated by matrix structure Number of people reporting to a specific supervisor

Unity of command
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Span of control

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Line Versus Staff Authority

Line authority-function

the right to command immediate subordinates in the chain of command an activity that contributes directly to creating or selling a company’s products the right to advise but not command others 17 an activity that supports line activities

Staff authority-function
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Delegation of Authority
The assignment of direct authority and responsibility to a subordinate to complete tasks for which the manager is normally responsible  Three transfers from manager to subordinate
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transfer of full responsibility of assignment transfer of authority over required resources transfer of accountability
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How to Be a More Effective Delegator
1. 2. 3. 4. 5. Trust your staff to do a good job Avoid seeking perfection Give effective instructions Know your true interests Follow up on progress

Adapted from Exhibit 11.7 © 2004 by Nelson, a division of Thomson Canada Limited

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How to Be a More Effective Delegator
6. Praise the efforts of your staff 7. Don’t wait until the last minute to delegate 8. Ask questions, expect answers and assist employees 9. Provide sufficient resources 10. Delegate to the lowest possible level
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Adapted from Exhibit 11.7

© 2004 by Nelson, a division of Thomson Canada Limited

Degree of Centralization

Centralization of authority

most authority is held at the upper levels of the organization significant authority is found in lower levels of the organization Solving problems by applying rules, procedures, and processes
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Decentralization

Standardization

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Job Design
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Job Job Job Job

specialization rotation enlargement enrichment

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Job Design

Job specialization
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breaking jobs into smaller tasks simple, easy-to-learn, and economical can lead to low job satisfaction, high absenteeism, and turnover periodically moving workers from one job to another
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Job rotation

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Job Design

Job enlargement

increasing the number of tasks performed by a worker adding more tasks and authority to a worker’s job

Job enrichment

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Learning Objectives: Designing Organizational Processes
After reading these next two sections, you should be able to: 4. explain the methods that companies are using to redesign internal organizational processes (i.e., intraorganizational processes) 5. describe the methods that companies are using to redesign external organizational processes (i.e., interorganizational 25
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Intraorganizational Processes

Reengineering Empowerment Behavioural informality

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Reengineering

Fundamental rethinking of business processes Intended to achieve dramatic improvements in performance Changes the organization’s orientation form vertical to horizontal Changes task interdependence
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Task Interdependence

The extent to which collective action is required to complete an entire piece of work Three types
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pooled sequential reciprocal
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Empowerment

Permanently passing decisionmaking authority and responsibility from managers to workers

workers need information and resources to make good decisions workers should be rewarded for taking initiative
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Behavioural Informality
Behavioural informality
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Behavioural formality

spontaneity casualness interpersonal familiarity

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routine and regimen specific rules impersonal detachment

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Interorganizational Processes

Modular organizations Virtual organizations Boundaryless organizations

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Modular Organization

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Virtual Organization

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Boundaryless Organization

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What Really Happened?

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Exide Technologies implemented a product structure around global business units Problems associated with product structure caused a return to a geographic structure Exide is still searching for the proper structure

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