managerial economics and organizational architecture, chapter 13 decision rights bundling tasks into...
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Managerial Economics and Organizational Architecture, Chapter 13
Decision Rights
Bundling Tasks into Jobs and Subunits
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Managerial Economics and Organizational Architecture, Chapter 13
Bundling tasks…learning objectives
• Identify and apply the trade-offs in bundling tasks into jobs and subunits
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Managerial Economics and Organizational Architecture, Chapter 13
Task assignment
• Specialized– perform limited number of functions
• e.g. traditional assembly line
• Broad– perform multiple functions
• e.g. professors
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Managerial Economics and Organizational Architecture, Chapter 13
Specialized task assignment
• Benefits– comparative advantage– lower cross-training expense
• Costs– foregone complementarities across tasks– coordination costs– functional myopia– reduced flexibility
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Managerial Economics and Organizational Architecture, Chapter 13
Tasks at Finware
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Managerial Economics and Organizational Architecture, Chapter 13
Methods of grouping jobs
• U-form of organization (unitary)– by functional specialty– each primary function in one major subunit
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Managerial Economics and Organizational Architecture, Chapter 13
Finware as functional organization
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Managerial Economics and Organizational Architecture, Chapter 13
Functional subunitsadvantages and disadvantages
• Advantages– promotes effective coordination– promotes functional expertise– well-defined promotion path
• Disadvantages– opportunity cost of senior management time– coordination problems across departments– employee focus on functions, not customers
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Managerial Economics and Organizational Architecture, Chapter 13
Methods of grouping jobs
• U-form of organization (unitary)
• M-form of organization (multidivisional)– collection of business units
• product
• geographic area
– each unit has multiple functions
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Managerial Economics and Organizational Architecture, Chapter 13
Finware as product and geographic organization
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Managerial Economics and Organizational Architecture, Chapter 13
Product/geographic subunitsadvantages and disadvantages
• Advantages– decision rights tied to specific knowledge– senior management able to focus on strategy– promotes coordination pertinent to product/area
• Disadvantages– unit interdependencies may be ignored– economies may be foregone
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Managerial Economics and Organizational Architecture, Chapter 13
Methods of grouping jobs
• U-form of organization (unitary)
• M-form of organization (multidivisional)
• Matrix organization– intersecting lines of authority– functional departments address performance
reviews and professional development– product/geographic subunits address
customer/client needs
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Managerial Economics and Organizational Architecture, Chapter 13
Matrix organizations
• Employees are assigned to two subunits– functional department– other pertinent subunit
• Intersecting lines of authority– functional managers handle performance
reviews– product or other managers provide input
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Managerial Economics and Organizational Architecture, Chapter 13
Finware as matrix organization
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Managerial Economics and Organizational Architecture, Chapter 13
Reorganization of IBM Credit
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Managerial Economics and Organizational Architecture, Chapter 13
IBM Credit originally
• Originally organized around functions– employees assigned specialized set of tasks
within functional area– employees had limited decision authority
• Credit application processing took 6 days
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Managerial Economics and Organizational Architecture, Chapter 13
IBM Credit with functional organization
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Managerial Economics and Organizational Architecture, Chapter 13
A “reengineered” IBM Credit
• New technology and information systems supported task reassignment and job redesign
• As reorganized, empowered caseworkers handle process in 4 hours
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Managerial Economics and Organizational Architecture, Chapter 13
IBM Credit’s revised organization
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Managerial Economics and Organizational Architecture, Chapter 13
Battle of the functional managers
• Quick Motorcycle Company– functionally organized
• design department
• marketing department
• New product design options– speed
– safety
• Marketing options– magazine advertising older consumers
– television advertising younger consumers
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Managerial Economics and Organizational Architecture, Chapter 13
Battle of the functional managersgame matrix