© 2013 The McGraw-Hill Companies, Inc. All rights reserved. Copyright © 2013 by The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin

Organizational Organizational Design, Design,

Effectiveness, and Effectiveness, and InnovationInnovation

Chapter Seventeen

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Learning Objectives

LO.1 Describe the four characteristics common to all organizations, and explain the difference between closed and open systems.LO.2 Define the term learning organization.LO.3 Review the factors that hinder an organization’s

ability to learn from success and failure.LO.4 Describe seven basic ways organizations are

structured.LO.5 Discuss Burns and Stalker’s findings regarding

mechanistic and organic organizations.

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Learning Objectives (cont.)

LO.6 Identify when each of the seven organization structures is the right fit.LO.7 Describe the four generic organizational effectiveness criteria.LO.8 Discuss the difference between innovation, invention, creativity, and integration.LO.9 Review the myths about innovation.LO.10 Explain the model of innovation.

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What is an Organization?

Organization system of consciously coordinated activities or

sources of two or more people.

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What is an Organization?

Four common denominators Coordination of effort Common goal Division of labor Hierarchy of authority

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What is an Organization?

Unity of command principle each employee should report to a single

manager.

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Question?

At Creative Calendars, Inc., each employee reports only to one manager. This reflects:A.The division of labor.B.Coordination of effort.C.A narrow span on control.D.The unity of command principle.

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Organization Charts

Organization chart a graphic

representation of formal authority and division of labor relationships

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Dimensions of an Organizational Structure

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Sample Organization Chart for a Hospital

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Organization Charts

Span of control the number of people reporting directly to a

given manager.Generally, the narrower the span of control, the closer the supervision and the higher the administrative costs as a result of a higher manager-to-worker ratio.

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Organization Charts

Staff personnel Do background

research and provide technical advice, and recommendations to line managers.

Line Managers have authority to

make organizational decisions.

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An Open-System Perspective

Closed System self-sufficient entity, closed to the surrounding

environment.

Open System depends on constant interaction with the

environment for survival

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The Organization as an Open System

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Learning Organizations

Learning organization one that proactively creates, acquires, and

transfers knowledge and that changes its behavior on the basis of new knowledge and insights

Team mental model represents team members’ “shared, organized

understanding and mental representation of knowledge about key elements of the team’s relevant environment

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Factors That Detract from an Organization’s Ability to Learn from Failure

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Organization Design

Organizational design The structures of accountability and

responsibility used to develop and implement strategies, and the human resource practices and information and business processes that activate those structures

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Traditional Design

Functional structure groups people according to the business

functions they perform, for example, manufacturing, marketing, and finance

Divisional structure groups together activities related to outputs,

such as type of product or customer

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Traditional Design

Matrix structure combines functional

and divisional chains of command to form a grid with two command structures

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Matrix Structure

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Principles for Designing a Horizontal Organization

1. Organize around complete workflow processes2. Flatten hierarchy and use teams to manage

everything3. Appoint process team leaders to manage internal

team processes4. Let supplier and customer contact drive

performance5. Provide required expertise from outside the team

as required

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Designs That Open Boundaries between Organizations

Hollow structure organization identifies core competencies and

outsources noncore processes to vendors who can do them cheaper or faster

Modular structure Outsources parts of a product instead of

processes

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Question?

Chad has developed a new product to improve gas mileage. He has formed a new venture but must outsource his marketing and distribution. His firm has a _________ organization.A.Functional B.DivisionalC.MatrixD.Hollow

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Designs That Open Boundaries between Organizations

Virtual organization organization identifies partners with the needed

talents and negotiates an agreement in which the participants typically work in separate facilities, linked by technology

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The Contingency Approach to Designing Organizations

Contingency approach to organization design organizations tend to be more effective when

they are structured to fit the demands of the situation

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Mechanistic versus Organic Organizations

Mechanistic organizations Rigid bureaucracies with strict rules, narrowly

defined tasks, and top-down communication.

Organic organizations Flexible networks of multitalented individuals

who perform a variety of tasks

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Characteristics of Mechanistic and Organic Organizations

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Different Approaches to Decision Making

Centralized decision making key decisions are made by top management

Decentralized decision making important decisions are made by middle- and

lower-level managers

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Question?

Bankers International (BI) can be described as a rigid bureaucracy with strict rules, narrowly defined tasks and top-down communication. BI can also be described as a(n) __________ organization.A.MechanisticB.OrganicC.DecentralizedD.Wide-span

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Getting the Right Fit

A functional structure can save money by grouping together people who need similar materials and equipmentDivisional structures increase employees’ focus on customers and products

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Getting the Right Fit

A successful matrix structure requires superior managers who communicate extensively, foster commitment and collaboration, manage conflict and negotiate effectively to establish goals and priorities consistent with the organization’s strategy

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Getting the Right Fit

Horizontal designs improve coordination and communicationOrganizations that become hollow, modular, or virtual can generate superior returns by focusing on what they do best

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Question?

Oneal, CEO of Fredhandbag HobbyTown, wants to improve the communication in his firm. He should change to a _________ organization.A.FunctionalB.MatrixC.HorizontalD.Modular

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Four Dimensions of Organizational Effectiveness

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Generic Effectiveness Criteria

Goal accomplishment Key organizational results or outputs are

compared with previously stated goals or objectives

most widely used effectiveness criteria

Resource acquisition organization is effective if it acquires necessary

factors of production

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Question?

Sherman, a new manager at Get Well Industries, is interested in learning about the most likely used effectiveness criterion for organizations. Which of these would you recommend to Sherman?A.Goal accomplishmentB.Resource acquisitionC.Internal processesD.Strategic constituencies satisfaction

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Generic Effectiveness Criteria

Internal processes focuses on “what the organization must excel

at” to effectively meet its financial objectives and customers’ expectations.

Strategic constituencies satisfaction Strategic constituency: any group of people

with a stake in the organization’s operation or success.

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Organizational Innovation

Innovation Creation of

something new that is used by consumers.

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Seeds of Innovation

1. Hard work in a specific direction2. Hard work with direction change3. Curiosity and experimentation4. Wealth and money5. Necessity6. Combination of seeds

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Video: One Smooth Stone

The corporate event planning industry is very dynamic. What characteristics of One Smooth Stone help it to remain competitive and successful in this industry?Why won’t the premises of organization theory proposed by theorists like Fayol and Weber work for organizations in a dynamic environment? Why won’t they work with knowledge workers?How important is it to ensure that the values of outsourcing partners align with One Smooth Stone’s? Why?