bm_ch 7
DESCRIPTION
Business Management Chapter 7TRANSCRIPT
Chapter 7
Designing Adaptive
Organizations
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New Manager’s Questions
Managers should give employees the choice to work on whatever they want to that motivation stays high.
1 2 3 4 5
Most Yes Mostly No
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New Manager’s Questions
If people make mistakes on the job, they shouldn’t be punished.
1 2 3 4 5
Most Yes Mostly No
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New Manager’s Questions
It is better for one person to be in charge of making decisions.
1 2 3 4 5
Most Yes Mostly No
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Organizing
• The deployment of organizational resources to achieve strategic goals.– Division of labor– Lines of authority– Coordination
• Organizing is important because it follows from strategy
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Organizing
• Strategy defines what to do• Organizing defines how to do it• Structure is a powerful tool for reaching
strategic goals• A strategy’s success often is determines by
its fit with organizational structure
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Organizing the Vertical Structure
Organizing Structure Defines: The set of formal tasks assigned to individuals
and departments
Formal reporting relationships including lines of authority, decision responsibility, number of hierarchical levels & span of manager’s control
The design of the systems to ensure effective coordination of employees across departments
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Organizing
• Organization chart– Visual representation of an organization’s
structure– Delineates the chain of command– Indicates departmental tasks and how they fit
together– Provides order and logic for the organization
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Sample Organization Chart
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Organizing Concepts
Work Specialization is the degree to which organizational tasks are subdivided into
individual jobs; also called division of labor.
• Organizations are moving away from this because it leads to being isolated and performing only a single boring job
• Too much specialization creates separation & hinders coordination
• Companies are enlarging groups and assigning teams
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Organizing Concepts
Chain of Command is an unbroken line of authority that links all individuals in the
organization and specifies who reports to whom.
• Unity of command – each employee is held accountable to only 1 supervisor
• Scalar principle – clearly defined line of authority in the organization that includes all employees
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Authority, Responsibility, and Delegation
Authority – formal & legitimate right of a manger to make decisions, issue orders & allocate resources
Authority is vested in organizational positions, not people.
Authority is accepted by subordinates.
Authority flows down the vertical hierarchy.
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Authority, Responsibility, and DelegationResponsibility duty to perform the task or
activity assigned
Accountability is the mechanism through which authority and responsibility are aligned.
People with authority & responsibility are subject to reporting & justifying task outcomes to those above them in the chain of command
Delegation is the process managers use to transfer authority and responsibility down the chain.
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Line and Staff Authority
• Line departments perform the tasks that reflect the organization’s primary goal & mission– Sales– Production
• Line authority – managers have formal authority to direct & control immediate subordinates
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Line and Staff Authority
• Staff departments support line departments– Marketing– Human Resources– Accounting– Research
• Staff authority – narrower than line authority and includes the right to advise, recommend & counsel in the staff specialists area of expertise
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Span of Management
• Span of management = the number of employees reporting to a supervisor– Determines how closely a supervisor can
monitor subordinates
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Span of Management• Factors that determine the span of mgmt– Subordinates’ work is stable & routine– Subordinates perform similar work task– Subordinates are concentrated in a single location– Subordinates are trained and need little direction– Rules & procedures define tasks– Support systems & personnel are available for the
manager– Minimum time is required for nonsupervisory tasks– Managers' personal preferences favor a large span
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Span of Management
• The average span of control used in an organization determines whether the structure is tall or flat
Tall Structure – has n overall narrow span of mgmt & more levels in the hierarch
Flat Structure – has a wide span, is horizontally dispersed, and has fewer hierarchical levels Way to facilitate delegation
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Reorganization and Span of Management
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Centralization and Decentralization• Centralization – decision authority is located
near the top of the organization• Decentralization – decision authority is pushed
downward to lower organization levels• Factors that influence centralization versus
decentralization:– Greater change and uncertainty are usually
associated with decentralization– 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: Functional & Divisional
• Departmentalization – basis for grouping positions into departments and departments into the total organization
• 3 traditional methods– Functional, divisional & matrix
• 2 innovative methods– Team-based & virtual networks
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Departmentalization: Functional & Divisional
• Vertical Functional Approach– Grouping of positions into departments based
on skills, expertise, work activities and resource use
– People facilities, and other resources representing a common organizational resource are grouped together into a single dept.
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Departmentalization: Functional & Divisional
• Divisional Approach– Grouping based on organizational output• Product, Program, Business (self-contained unit)• Geographic or Customer-Based Divisions
– Most large corporations have separate divisions that perform different tasks, use different technologies or serve different customers
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Functional Versus Divisional Structures
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Departmentalization: Matrix & Team Approach• Matrix combines functional and divisional
approaches– Improve coordination and information– Dual lines of authority• Runs vertically – providing traditional control within
functional depts.• Runs horizontally – providing coordination across
depts.
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Departmentalization: Matrix & Team Approach• 3 key Matrix roles– Two-boss employees – report to 2 supervisors
simultaneously– Matrix boss – product or functional boss
responsible for one side of the matrix– Top leader – responsible for the entire matrix &
oversees both the product and functional chains of command• Must maintain a power balance between the 2 sides
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Matrix Structure
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Global Matrix Structure
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Departmentalization: Matrix & Team Approach• Team approach is very widespread trend– Allows managers to delegate authority– Push responsibility to lower levels– Flexible, responsive in the competitive global
environment– 3 approaches• Cross-functional teams – employees from various
functional depts. who are responsible to meet as a team & resolve mutual problems– Used to provide needed horizontal coordination to
complement an existing divisional or functional structure
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Departmentalization: Matrix & Team Approach• 3 approaches (cont’d)– Permanent teams – groups of employees who
are organized in a way similar to a formal dept.• Emphasis is on horizontal communication and
information sharing because representatives from all functions are coordinating their work and skills to complete a specific organizational task
– Team-based Structure – the entire organization is made up of horizontal teams that coordinate activities and work with customers to accomplish the organization’s goals
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Virtual Network Approach• Extends idea of horizontal coordination and
collaboration– Partnerships– Alliances
• Could be a loose interconnected group– i.e. outsourcing
Virtual network structure means that the firm subcontracts most of its major functions to separate companies so that it can concentrate on what it does best
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Network Approach to Departmentalization
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Advantages and Disadvantages of Each Structure
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Organizing for Horizontal Coordination
• Companies need more flexibility than vertical structure can offer– Meet fast-shifting environment– Break down barriers between departments– Need integration and coordination
• Coordination – quality of collaboration across depts. – Required whether its functional, divisional or
team
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Organizing for Horizontal Coordination
• Coordination problems are greater in the global arena because units differ by distance, time, culture & language
• Coordination results from information & cooperation– Managers can design structures to promote
horizontal coordination
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Evolution of Organization Structures
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Task Forces, Teams, And Project Management
Project Manager – a person responsible for
coordinating the activities of several
departments on a full-time basis for the completion of a specific project.
Project Manager – a person responsible for
coordinating the activities of several
departments on a full-time basis for the completion of a specific project.
Task Force – a temporary team or committee formed to solve a specific short-term problem
involving several departments.
Cross-functional Team – furthers horizontal coordination by
including members across the organization.
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Project Manager Relationships to Departments
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Reengineering
…or business process reengineering, is the radical redesign of business
processes to achieve dramatic improvements in cost, quality,
service, and speed.
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Reengineering & Process
• Leads away from a strong vertical structure• Uses horizontal team-based structure• Best suited for companies that are facing
serious competitive threats
• Process – organized group of related tasks & activities that work together to transform inputs into outputs & create value– Ex: new product development, order
fulfillment, customer service
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Reengineering Examples
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Structure Follows Strategy
• Business performance is influenced by the company’s structure– In today’s environment, organizations with
stronger horizontal designs typically perform better
• Strategic goals should drive structure• Structure should be used to facilitate
strategic goals
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Relationship to Structural Approach to Strategy