Org Stucture

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Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.

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Bateman Snell

Management

5thEdition

Competingin theNew Era


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Part ThreeOrganization Structure

Chapter OutlineFundamentals of Organizing

The Vertical StructureThe Horizontal StructureOrganizational IntegrationLooking Ahead


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Learning Objectives

After studying Chapter 8, you will know:

how differentiation and integration influence your

organizations structure

how authority operates

the roles of the board of directors and the chief executive

officer

how span of control affects structure and managerial

effectivenesshow to delegate work effectively

the difference between centralized and decentralized

organizations


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Learning Objectives (cont.)

After studying Chapter 8, you will know:

how to allocate jobs to work units

how to manage the unique challenges of the matrix

organization

the nature of important integrative mechanisms


5/33Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.

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Fundamentals Of Organizing

Organization chart

depicts the positions in the firm and how they are arranged

provides a picture of the reporting structure

Differentiation aspect of the organizations internal environment

division of labor - assignment of different tasks to different

people or groups

specialization - process in which different individuals and unitsperform different tasks

differentiation is high when there are many subunits and

many kinds of specialists who think differently



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Fundamentals Of Organizing(cont.)

Integration

degree to which differentiated units work together and

coordinate their efforts

all the specialized tasks in an organization cannot be performed

completely independently

coordination - procedures that link the various parts of the

organization to achieve the organizations overall mission

any job activity that links different work units performs an

integrative function

the more a firm is differentiated, the greater the need for

integration among the units



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Personnel Finance

Manufacturing Sales

Personnel Finance

Manufacturing Sales

Finance R&D Marketing Personnel

Chemical

Products

Metal

Products

President

Conventional Organization Chart



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The Vertical Structure

Authority in organizations

authority - the legitimate right to make decisions and to tell

other people what to do

resides inpositions rather than people

in private business enterprises, owners have ultimate authority

traditionally authority has been the primary means of running an

organization

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Authority in organizations (cont.)board of directors - elected by the stockholders to run the

organization

led by a chair

performs three functions selecting, assessing, rewarding, and perhaps replacing the CEO

determining the firms strategic direction and reviewing financial

performance

assuring ethical, socially responsible, and legal conduct

inside directors - the firms top managers who sit on the board

outside directors - are likely run other companies

successful boards tend to be active, critical participants in

determining company strategies

The Vertical Structure (cont.)

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Authority in organizations (cont.)

chief executive officer(CEO) - occupies the top of the

organizational pyramid

authority officially vested in the board of directors is assigned to

the CEO

CEO personally responsible to the board and owners

top management team - typically comprised of the CEO,

president, chief operating officer, chief financial officer, and

other key executives

frequently meet with the CEO to make important decisions

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Hierarchical levelshierarchy - the authority levels of the organizational pyramid

top management - strategic managers in charge of the entire

organization

middle management - in charge of plants or departmentslowest levels - made up of lower management and workers

called theoperational levelof the organization

trend in U.S. is to reduce the number of hierarchical layers

Span of control the number of subordinates who report directly to a manager

narrow spans produce tall organizations

wide spans produce flat organizations

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Capability and

supportiveness

of manager

Similarity of jobs

and performance

measures

Ambiguity

of work

Optimal

Span of

Control

Subordinate

training andaccess to

information

Subordinate

preference for

autonomy

Factors Affecting The OptimalSpan Of Control

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Delegation assignment of authority and responsibility to a subordinate

can occur between any two individuals in any type of

structure with regard to any task

responsibility - assignment of a task that an employee is

supposed to carry out

common for people to have more responsibility than authority

accountability - expectation that employees perform a job,

take corrective action when necessary, and report upward onthe status and quality of their performance

managers remain responsible and accountable for their own

actions and those of their subordinates

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Delegation (cont.)

advantages of delegation

permits getting work done through others

manager saves time

manager frees herself/himself to devote energy to other

important, higher-level activities

provides subordinate with a more important job

from the organizations perspective, jobs are done more

efficiently and cost-effectively

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Schedule checkpoints for

Reviewing progress

Follow through by discussing

Progress at appropriate intervals

Give the subordinate the authority, time, and resources

(people, money,equipment) to perform the assignment

Define the goal succinctly

Select the person for the task

Solicit the subordinates viewabout suggested approaches

Steps In Effective Delegation

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Decentralization

result of the delegation of responsibility and authority

centralized organization - high-level executives make most

decisions and pass them down to lower levels for

implementation

decentralized organization - lower-level managers make

important decisions

most U.S. executives understand the importance of

decentralizing decision making

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The Horizontal Structure

Basic concepts

departmentalization - subdividing the organization into

smaller subunits

line departments - have responsibility for the principle activities

of the firm

deal directly with the organizations primary goods and services

line managers typically have:

substantial authority and power

ultimate responsibility for major operating decisions accountability for bottom-line results

staff departments - provide specialized support for line units

moving toward role focused on strategic support and expert advice

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The Horizontal Structure (cont.)

Functional organization

jobs (and departments) are specialized and grouped

according to business functions and the skills they require

e.g., production, marketing, R&D, human resources, and finance

at the most basic level, functional structure is organized

around the companys value chain

value chain - sequence of activities that flow from raw materials

to the delivery of a product or service

common in both large and small organizations

may be most appropriate in rather simple, stable

environments

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Functional organization (cont.)

advantages of functional structure include:

economies of scale can be realized

effective environmental monitoring

performance standards are better maintained

greater opportunity for specialized training and in-depth skill

development

technical specialists are relatively free of administrative work

decision making and lines of communication are simple and

clearly understood


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Functional organization (cont.)disadvantages of functional structure

people may care more about their own function than about

company as a whole

may lose focus on overall product quality and customersatisfaction

managers do not develop knowledge of the other areas of the

business

become specialists, not generalists

conflicts arise among functions and communications suffer

accordingly

high differentiation may create barriers to coordination across

functions

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G i V l Ch i A d


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Support activities

Primary activities

Generic Value Chain AndFunctional Structure

Service

Firm infrastructure

Human resource management

Technology developmentProcurement

Inbound

logistics

Operations Marketing

And sales

Outbound

logistics

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ProcurementHuman

resources

Informationtechnology

services

Inbound

logisticsOperations

Outbound

logistics

Marketing

And salesService

President

Line departments

Staff departments

Functional Structure

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Divisional organizationunits grouped around products, customers, or geographic

regions

groups all functions into a single division

duplicates each function across all of the divisions

separate divisions may act almost as separate businesses

work autonomously to achieve the goals of the organization

several ways to create divisional structure

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Divisional organization (cont.)product divisions - all functions that contribute to a given

product are organized under one manager

advantages

information needs are managed more easily people have full-time commitment to a particular product line

task responsibilities are clear

people receive broader training

flexibility of structure better suits it for unstable environments

disadvantages

difficult to coordinate across product lines

managers may not acquire depth of functional knowledge

duplication of effort is expensive


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Apparel Intimate Brands Support

Businesses

CEO (Les Wexner)

Victorias Secret

Bath & Body

Works

White Barn

Candle Co.

Lane Bryant

New York & Co.

Lerner New York

Express

Limited Stores

Structure

Express

Limited Stores

Design Services

Real Estate

Store Planning

Distribution

Services

Brand &Creative Services

Technology

Services

limitedthe

Product Divisions At The limited

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Divisional organization (cont.)customer and geographical divisions

build divisions around customer or geographical distinctions

advantages

can focus on customer needs

can provide faster and better service

disadvantage

duplication of activities across many customer groups and

geographic areas is expensive

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Generalmanagers for:

New York

Philadelphia

Boston


Cleveland

Chicago

St. Louis


Raleigh

Atlanta

Orlando


Seattle

San Francisco

Los Angeles


Dallas

Houston

Albuquerque

Northeast

regionalmanager

Midwest

regionalmanager

Southeast

regionalmanager

Pacific

regionalmanager

ChairmanCEO

Southwest

regionalmanager

Geographical Organization

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Matrix organizationhybrid form of organization

dual reporting relationships in which some managers report

to two superiors

one functional and one product

advantages

higher degree of flexibility and adaptability

disadvantages

violation of the unity of command principle

reporting to two superiors can create confusion

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Production

group

Two-boss

manager

Engineering

group

Two-boss

manager

Personnel

group

Two-boss

manager

Accounting

group

Two-boss

manager

Matrix Organizational Structure

Production

group

Two-boss

manager

Engineering

group

Two-boss

manager

Personnel

group

Two-boss

manager

Accounting

group

Two-boss

manager

Accounting

Project

Manager

A

Project

Manager

B

Project

managementProduction

Chairman

CEO

Engineering PersonnelFunctional

managers

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Matrix organization (cont.)matrix survival skills - depend on position in the matrix

the matrix diamond illustrates needed skills

matrix form today - resurgence based on:

pressures to consolidate costs and be faster to market

need for coordination across countries in global business

understanding of the matrix has increased

matrix is not a structure, but a process

relationships allow information to flow through theorganization

norms, values, and attitudes shape how people think

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Top ExecutiveNeeds to balance powerand emphasis between

functions and divisions

2-Boss Manager/EmployeeMust learn how to respond to two

Superiors and prioritize multiple

demands

Functional ManagerMust collaborate and

manage conflicts withproduct/division manager

Product ManagerMust collaborate and

manage conflicts withfunctional manager

The Matrix Diamond

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Organizational Integration

Coordination by standardizationstandardization - establishing common rules and procedures

that apply uniformly to everyone

constrains actions

integrates various units by regulating what people do

formalization - reliance on rules and regulations to promote

conformance

should apply to most (if not all) situations

most applicable in relatively stable and unchanging

circumstances

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Organization Integration (cont.)

Coordination by plan interdependent units are required to meet deadlines and

objectives that contribute to a common goal

does not require a high degree of stability and routinization

units free to modify their actions as long as they are able to meet

deadlines and targets required for working with others

Coordination by mutual adjustment

involves feedback and discussion to jointly determine how to

approach problems and devise mutually agreeable solutions

allows for flexible coordination to deal with novel problems

costly from the standpoint of time

Org Stucture

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