Download - Org. Structure
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Chapter SixChapter Six
Fundamentals ofFundamentals of
Organization StructureOrganization Structure
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A Sample Organization ChartA Sample Organization Chart
C h ie fA cco u nta n t
B u dg etA n a lyst
V ice P re sid e n tF in an ce
P la n tS u pe rin ten de nt
M a in te na n ceS u pe rin ten de nt
V ice P re sid e n tM a nu fa c tu ring
T ra in ingS p e c ia list
B e ne fitsA d m in is tra to r
D ire c to rH u m an R e so u rces
C E O
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The Relationship of Organization The Relationship of Organization Design to Efficiency vs. Learning Design to Efficiency vs. Learning
OutcomesOutcomes
Horizontal OrganizationDesigned for Learning
Vertical OrganizationDesigned for Efficiency
DominantStructuralApproach
Horizontal structure is dominant• Shared tasks, empowerment• Relaxed hierarchy, few rules• Horizontal, face-to-face communication• Many teams and task forces• Decentralized decision making
Vertical structure is dominant• Specialized tasks• Strict hierarchy, many rules• Vertical communication and reporting systems• Few teams, task forces or integrators• Centralized decision making
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LinkagesLinkages
VerticalVerticalHierarchical ReferralHierarchical Referral
Rules and PlansRules and Plans
Vertical Information Vertical Information SystemsSystems
HorizontalHorizontalInformation SystemsInformation Systems
Direct ContactDirect Contact
Task ForcesTask Forces
Full-time IntegratorsFull-time Integrators
TeamsTeams
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Project Manager LocationProject Manager Locationin the Structurein the Structure
President
FinanceDepartment
FinancialAccountant
BudgetAnalyst
ManagementAccountant
EngineeringDepartment
ProductDesigner
Draftsperson
ElectricalDesigner
MarketingDepartment
MarketResearcher
AdvertisingSpecialist
MarketPlanner
PurchasingDepartment
Buyer
Buyer
Buyer
Project ManagerNew
Product B
Project ManagerNew
Product A
Project ManagerNew
Product C
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Teams Used for Horizontal Teams Used for Horizontal Coordination at Wizard Software Coordination at Wizard Software
CompanyCompany
VideogamesChief Engineer
Programming Vice Pres
Customer ServiceManager
Videogames Basic Research Supervisor
Research Vice Pres
Applications and Testing Supervisor
ProcurementSupervisor
Videogames Sales Manager
Marketing Vice Pres.
Memory Products International Manager
Advertising Manager
Memory Products Chief Programmer
Memory ProductsResearch Supervisor
Memory Products Sales Manager
President
Videogames Product Team
Memory Products Team
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Ladder of Mechanisms for Horizontal Ladder of Mechanisms for Horizontal Linkage and CoordinationLinkage and Coordination
HIGH
LOW
LOW
Information Systems
Direct Contact
Task Forces
Full-time Integrators
Teams
Am
ount
of
Hori
zonta
lC
oord
inati
on R
equir
ed
Cost of Coordination in Time and Human Resources
H IGH
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Structural Design Options for Structural Design Options for Grouping Employees into Grouping Employees into
DepartmentsDepartments
P ro du ctD iv is io n 1
P ro du ctD iv is io n 2
P ro du ctD iv is io n 3
C E O
Engineering Marketing Manufacturing
CEO
FunctionalGrouping
DivisionalGrouping
Source: Adapted from David Nadler and Michael Tushman,Strategic Organization Design (Glenview, Ill.: Scott Foresman, 1988), 68.
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Strengths and Weaknesses of Strengths and Weaknesses of Functional Organization StructureFunctional Organization Structure
STRENGTHS:STRENGTHS:– Allows economies of Allows economies of
scale within functional scale within functional departmentsdepartments
– Enables in-depth Enables in-depth knowledge and skill knowledge and skill developmentdevelopment
– Enables organization Enables organization to accomplish to accomplish functional goalsfunctional goals
– Is best with only one Is best with only one or a few productsor a few products
WEAKNESSES:WEAKNESSES:– Slow response time to Slow response time to
environmental changesenvironmental changes– May cause decisions to pile May cause decisions to pile
on top, hierarchy overloadon top, hierarchy overload– Leads to poor horizontal Leads to poor horizontal
coordination among coordination among departmentsdepartments
– Results in less innovationResults in less innovation– Involves restricted view of Involves restricted view of
organizational goalsorganizational goals
Source: Adapted from Robert Duncan, “What Is the Right Organization Structure? Decision Tree Analysis Provides the Answer,” Organizational Dynamics (Winter 1979): 429.
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Strengths and Weaknesses of Strengths and Weaknesses of Divisional Organization StructureDivisional Organization Structure
STRENGTHS:STRENGTHS:– Suited to fast change in unstable Suited to fast change in unstable
environmentenvironment– Leads to client satisfaction Leads to client satisfaction
because product responsibility because product responsibility and contact points are clearand contact points are clear
– Involves high coordination Involves high coordination across functionsacross functions
– Allows units to adapt to Allows units to adapt to differences in products, regions, differences in products, regions, clientsclients
– Best in large organizations with Best in large organizations with several productsseveral products
– Decentralizes decision-makingDecentralizes decision-making
WEAKNESSES:WEAKNESSES:– Eliminates economies of Eliminates economies of
scale in functional scale in functional departmentsdepartments
– Leads to poor Leads to poor coordination across coordination across product linesproduct lines
– Eliminates in-depth Eliminates in-depth competence and competence and technical specializationtechnical specialization
– Makes integration and Makes integration and standardization across standardization across product lines difficultproduct lines difficult
Source: Adapted from Robert Duncan, “What Is theRight Organization Structure? Decision Tree AnalysisProvides the Answer,” Organizational Dynamics(Winter 1979): 431.
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Reorganization from Functional Structure Reorganization from Functional Structure to Divisional Structure at Info-Techto Divisional Structure at Info-Tech
R&D Manufacturing Accounting Marketing
Info-TechPresident
FunctionalStructure
R & D M fg A c c tg M k tg
E le c tro n ic
P ub lis h ing
R & D M fg A c c tg M k tg
O ffi c e
A uto m a tio n
R & D M fg A c c tg M k tg
V irtua l
R e a lity
I n fo -T e c h
P re s ide n t
DivisionalStructure
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Structural Design Options for Structural Design Options for Grouping Employees (Continued)Grouping Employees (Continued)
MultifocusedGrouping
CEO
ManufacturingMarketing
ProductDivision 2
ProductDivision 1
Source: Adapted from David Nadler and Michael Tushman, Strategic Organization Design (Glenview, Ill.: Scott Foresman, 1988), 68.
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Structural Design Options for Structural Design Options for Grouping Employees (Continued)Grouping Employees (Continued)
HorizontalGrouping
CEO
FinanceHuman Resources
CoreProcess 2
CoreProcess 1
Source: Adapted from David Nadler and Michael Tushman,Strategic Organization Design (Glenview, Ill.: Scott Foresman, 1988), 68.
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Product
Manager A
Product
Manager B
Product
Manager C
Product
Manager D
Directorof ProductOperations
DesignVice
President
MfgVice
President
MarketingVice
PresidentController
Procure-ment
Manager
President
Dual-Authority Structure in a Dual-Authority Structure in a Matrix OrganizationMatrix Organization
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STRENGTHS:STRENGTHS:– Achieves coordination Achieves coordination
necessary to meet dual necessary to meet dual demands from customersdemands from customers
– Flexible sharing of human Flexible sharing of human resources across productsresources across products
– Suited to complex decisions Suited to complex decisions and frequent changes in and frequent changes in unstable environmentunstable environment
– Provides opportunity for Provides opportunity for both functional and product both functional and product skill developmentskill development
– Best in medium-sized Best in medium-sized organizations with multiple organizations with multiple productsproducts
WEAKNESSES:WEAKNESSES:– Causes participants to experience Causes participants to experience
dual authority, which can be dual authority, which can be frustrating and confusingfrustrating and confusing
– Participants need good interpersonal Participants need good interpersonal skills and extensive trainingskills and extensive training
– Is time consuming; involves frequent Is time consuming; involves frequent meetings and conflict resolution meetings and conflict resolution sessionssessions
– Will not work unless participants Will not work unless participants understand it and adopt collegial understand it and adopt collegial rather than vertical-type relationshipsrather than vertical-type relationships
– Requires great effort to maintain Requires great effort to maintain power balancepower balance
Strengths and Weaknesses of Strengths and Weaknesses of Matrix Organization StructureMatrix Organization Structure
Source: Adapted from Robert Duncan, “What Is the RightOrganization Structure? Decision Tree Analysis Provides theAnswer,”Organizational Dynamics (Winter 1979): 429.
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Matrix Structure forMatrix Structure forEnglander SteelEnglander Steel
President
IndustrialRelations
Vice President
Mfg.Services
Vice President
FinanceVice
President
MarketingVice
President
Mfg.Vice
President
MetallurgyVice
President
Field SalesVice
President
Open DieBusiness Mgr.
Ring ProductsBusiness Mgr.
Wheels & AxlesBusiness Mgr.
SteelmakingBusiness Mgr.
Vertical Functions
Hori
zon
tal Pro
du
ct L
ines
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A Horizontal StructureA Horizontal Structure
Team3
Team2
Team1
TopManagement
Team
Team3
Team2
Team1
Customer
Customer
ProcessOwner
ProcessOwner
Testing Product Planning
Research Market
Analysis
New Product Development Process
Distrib. Material
Flow Purchasing Analysis
Procurement and Logistics ProcessSources: Based on Frank Ostroff,The Horizontal Organization, (New York:Oxford University Press, 1999); John A. Byrne,“The Horizontal Corporation,” Business Week, December 20, 1993, 76-81; and Thomas A. Stewart,“The Search for the Organization of Tomorrow,”Fortune, May 19, 1992, 92-98.
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Strengths and Weaknesses of Strengths and Weaknesses of Horizontal StructureHorizontal Structure
STRENGTHS:STRENGTHS:– Flexibility and rapid response to Flexibility and rapid response to
changes in customer needschanges in customer needs– Directs the attention of everyone Directs the attention of everyone
toward the production and delivery of toward the production and delivery of value to the customervalue to the customer
– Each employee has a broader view of Each employee has a broader view of organizational goalsorganizational goals
– Promotes a focus on teamwork and Promotes a focus on teamwork and collaboration—common commitment collaboration—common commitment to meeting objectivesto meeting objectives
– Improves quality of life for employees Improves quality of life for employees by offering them the opportunity to by offering them the opportunity to share responsibility, make decisions, share responsibility, make decisions, and be accountable for outcomes and be accountable for outcomes
WEAKNESSES:WEAKNESSES:– Determining core processes to Determining core processes to
organize around is difficult and organize around is difficult and time-consumingtime-consuming
– Requires changes in culture, job Requires changes in culture, job design, management design, management philosophy, and information and philosophy, and information and reward systemsreward systems
– Traditional managers may balk Traditional managers may balk when they have to give up when they have to give up power and authoritypower and authority
– Requires significant training of Requires significant training of employees to work effectively in employees to work effectively in a horizontal team environmenta horizontal team environment
– Can limit in-depth skill Can limit in-depth skill developmentdevelopment
Sources: Based on Frank Ostroff, The Horizontal Organization: What the Organization of the Future Looks Like and How It Delivers Value to Customers, (New York: Oxford University Press, 1999);and Richard L. Daft, Organization Theory and Design, 6th ed.,(Cincinnati, Ohio: South-Western College Publishing, 1998) 253.
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FunctionalStructure
Hybrid StructureHybrid StructurePart 1. Sun Petrochemical ProductsPart 1. Sun Petrochemical Products
President
TechnologyVice
President
FinancialServices
Vice Pres.
HumanResourcesDirector
ChiefCounsel
ChemicalsVice
President
LubricantsVice
President
FuelsVice
President
ProductStructure
Sources: Based on Linda S. Ackerman, “Transition Management: An In-Depth Look at Managing Complex Change,” Organizational Dynamics (Summer 1982): 46-66;and Frank Ostroff, The Horizontal Organization, (New York: Oxford University Press, 1999), Fig. 2.1, 34.
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Hybrid StructureHybrid StructurePart 2. Ford Customer Service DivisionPart 2. Ford Customer Service Division
Director andProcess Owner
Director andProcess Owner
Sources: Based on Linda S. Ackerman, “Transition Management:An In-Depth Look at Managing Complex Change,” Organizational Dynamics(Summer 1982): 46-66; and Frank Ostroff, The Horizontal Organization, (New York: Oxford University Press, 1999), Fig. 2.1, 34.
HumanResources
Strategy andCommunicationFinance
Vice President andGeneral Manager
Teams
Teams
Director andProcess Owner Teams
Technical Support Group
Vehicle Service Group
Parts Supply / Logistics Group
FunctionalStructure
Hori
zon
tal S
truct
ure
Teams
Teams
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The Relationship of Structure to The Relationship of Structure to Organization’s Need for Efficiency vs. Organization’s Need for Efficiency vs.
LearningLearning
Horizontal
Structure
DominantStructuralApproach
Horizontal:• Coordination• Learning• Innovation• Flexibility
Vertical:• Control• Efficiency• Stability• Reliability
MatrixStructu
re
DivisionalStructure
Functional withcross-functional
teams, integratorsFunctionalStructure
Modular
Structure
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Symptoms of Symptoms of Structural DeficiencyStructural Deficiency
Decision making is delayed or lacking in Decision making is delayed or lacking in qualityquality
The organization does not respond The organization does not respond innovatively to a changing environmentinnovatively to a changing environment
Too much conflict is evidentToo much conflict is evident