Session 9 Organization Structures

8/19/2019 Session 9 Organization Structures

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Fundamentals of

Organization Structure

Session 9


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Chapter Overview

• Denition of organization structure

• Information processing perspective

to design vertical and horizontallinkages

• Basic design options

• Smptoms of structuralmisalignment


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Structure and strateg

• Components in the denition of

organization structure!"# Designates formal reporting relationship$including the of levels in the hierarchand the span of control of managers and

supervisor#%# Identies the grouping together ofindividuals into departments anddepartments into total organization

Includes the design of sstems to ensuree'ective communication$ coordination$and integration of e'ort acrossdepartments


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Organization Conte(tual )aria*lesthat In+uence Structure

Structure

(learning vs.

efficiency)

Environment

Culture Size

Strategy,

Goals

Technology


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,he -elationship of OrganizationDesign to ./cienc vs# 0earning

Outcomes Horizontal OrganizationDesigne for !earning

"ertical Organization

Designe for Efficiency

Dominant

Structural

#$$roach

Horizontal structure is ominant

% Share tas&s, em$o'erment

% elae hierarchy, fe' rules% Horizontal, face*to*face communication

% +any teams an tas& forces

% Decentralize ecision ma&ing "ertical structure is ominant

% S$ecialize tas&s

% Strict hierarchy, many rules% "ertical communication an re$orting

systems

% e' teams, tas& forces or integrators

% Centralize ecision ma&ing


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FIT

Information-

processing capacity

of structural design

choices

Vertical andhorizontal linkages,

department grouping

Organizational

Information

processing

requirements of goals,environment,

technology, and size

Organizational

Effectiveness

Information – processing Approach to

structural Design


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)ertical Information0inkages

• 0inkages is dened as the e(tent ofcommunication and coordinationamong organizational linkages

• )ertical linkages are used to!

Coordinate activities *etween thetop and *ottom of an organization

Designed primaril for control of theorganization


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Hierarchical referral

Rules and lans

!dd position to

Hierarchy

Vertical

information

system

low High

Information capacity linkage mechanism

Low

High

Degree

Of

Vertical

oor!ination

re"uire!

"adder of #echanisms for vertical linkage and control


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0adder of 1echanisms for 2orizontal0inkage and Coordination

H-GH!O

!O

-nformation Systems

Direct Contact

Tas& orces

ull*time -ntegrators

Teams

# m

o u n t o f H o r i z o n t a

l

C o o

r i n a t i o n ( e / u i r e

Cost of Coorination in

Time an Human esources

H -GH

low


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2orizontal 0inkages

• -efers to the amount of communication andcoordination horizontall across organizationaldepartments

• 2orizontal linkage mechanisms are often not

drawn on the organizational chart *utnevertheless are part of organization structure"#Information Sstems3se of cross functional information sstem

Computerized information sstem can ena*lemanagers and frontline workers through outthe organization to e(change informationa*out pro*lems$ opportunities$ activities ordecisions


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2orizontal 0inkages

%# Direct Contact 4 higher level of horizontal linkage is direct contact *etween

managers or emploees a'ected * the pro*lem One wa to to create direct control is to create a special liaison

role 4 liaison person is located in one department *ut has the

responsi*ilit for communicating and achieving coordination withanother department

3. Task Forces 5hen linkage involves several departments a more comple(

device such as task force is re6uired 4 task force is a temporar committee composed of

representatives of each organizational unit a'ected * a pro*lem 4re e'ective horizontal linkage device for temporar issues ,he solve pro*lems * direct horizontal coordination and

reduce information load on vertical hierarch ,picall$ the are dis*anded after their tasks are accomplished


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2orizontal 0inkages4. Full Time Integrator Create a full time position or department solel for the purpose

of coordination Full time integrator ma have titles like product manager$

pro7ect manager$ program manager or *rand manager Does not report to one functional department *eing coordinated 2e or she is located outside the departments and has the

responsi*ilit of coordinating several departments ,he integrator can also *e responsi*le for innovation or change

pro7ect such as coordinating the design$ nancing$ andmarketing a new product

Integrators need e(cellent people skills Integrators have lot of responsi*ilit *ut little authorit ,he integrator has to use e(pertise and persuasion to achieve

coordination

2e or she spans the *oundar *etween departments and *ea*le to !

8et people together 1aintain their trust Confront pro*lems -esolve con+icts and disputes in the interest of the

organization


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ro7ect 1anager 0ocationin the Structure

0resient

inance

De$artmentinancial

#ccountant

1uget

#nalyst

+anagement

#ccountant

Engineering

De$artment

0rouct

Designer

Drafts$erson

Electrical

Designer

+ar&eting

De$artment

+ar&et

esearcher

#vertising

S$ecialist

+ar&et

0lanner

0urchasing

De$artment

1uyer

1uyer

1uyer

0ro2ect +anager

3e'

0rouct 1

0ro2ect +anager

3e'

0rouct #

0ro2ect +anager

3e'

0rouct C


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2orizontal 0inkages:# ,eams

ro7ect teams tend to *e strongesthorizontal mechanism

4re permanent taskforces and are oftenused in con7unction with full time

integrator 5hen activities *etween departments

re6uire strong coordination over a longperiod of time cross functional team is

often the solution Special pro7ect teams ma *e used when

organizations have a large scale pro7ect$a ma7or innovation$ or a new product line


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,eams 3sed for 2orizontalCoordination at 5izard Software

Compan

"ieogames

Chief Engineer

0rogramming "ice 0res

Customer Service

+anager

"ieogames 1asic esearch

Su$ervisor

esearch "ice 0res

#$$lications an Testing

Su$ervisor

0rocurement

Su$ervisor

"ieogames

Sales +anager

+ar&eting "ice 0res.

+emory 0roucts

-nternational +anager

#vertising +anager

+emory 0roucts

Chief 0rogrammer

+emory 0roucts

esearch Su$ervisor

+emory 0roucts

Sales +anager

0resient

"ieogames 0rouct Team

+emory 0roucts Team


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Functional structure ,asks$ people$ and technologies necessar to do the work of the *usiness

are divided into separate functional groups

Formal procedures for coordinating and integrating their activities toprovide products and services redominant in rms with a single or narrow product focus -e6uires well dened skills and areas of specialization to *uild competitive

advantages in providing their products or services Dividing task into functional specialties ena*les the rm to concentrate on

onl one aspect necessar work

,his allows use of latest technical skills and develops a high level ofe/cienc ,he strategic challenge presented * the functional structure is the

e'ective coordination of functional units ,he narrow technical e(pertise achieved through specialization lead to

limited perspectives and to di'erences in priorities of functional units Specialists ma see the rm;s strategic issues primaril related to their

functional areas

,he potential con+ict *etween units makes the coordinating role of C.Ocritical#

,he integrating devices such as pro7ect teams or planning committees arefre6uentl used in functionall organized rms to enhance coordinationand to enhance communication and understanding across functional units


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Strengths and 5eaknesses ofFunctional Organization Structure

• S,-.


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ontingencies an! internal systems# Functional structure

$ontingencies Internal %ystems

$n%ironment#

Low uncertainty& 'ta(le

Technology#

)outine& Low inter!epen!ence

'i*e#

'mall to me!ium

+oals#

$fficiency& technical "uality

Operati%e +oals#

Functional goal emphasis

,lanning an! (u!geting#

ost (asis – (u!gets&

statistical reports

Formal Authority#

Functional -angers


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Functional Structure with2orizontal 0inkages

• )er few of toda;s successfulcompanies can maintain strictlfunctional structure

• Organizations compensate for thevertical functional hierarch *installing horizontal linkages


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Divisional Structure• 5hen a rm diversies its products or service lines$

covers *road geographic areas$ utilizes unrelated market

channels $ or *egins to serve heterogeneous customergroup$ a functional structure *ecomes inade6uate• ,his structure is necessar to meet the increased

coordination and decision making re6uirements• Set of relativel autonomous units or divisions$ are

governed * a central corporate o/ce *ut each

operating division has its own functional specialists whoprovide products or services di'erent from those ofother divisions

• 4llows corporate management to delegate authorit forthe strategic management of distinct *usiness entities

• ,his e(pedite decision making in response to varied

competitive environments and ena*les corporatemanagement to concentrate on corporate level strategicdecisions

• ,he division is usuall given prot responsi*ilit


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Strengths and 5eaknesses ofDivisional Organization Structure

• S,-.


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$ontingencies and Internal %ystems of &ivisional

%tructure$ontingencies Internal %ystems

$n%ironment#

-o!erate uncertainty

Technology#

.on/routine& highinter!epen!ence among

!epartments'i*e#

Large+oals#

$0ternal effecti%eness&

a!aptation& client satisfaction

Operati%e +oals#

,ro!uct line emphasis

,lanning an! (u!geting#

,rofit center (asis – cost an!

income

Formal Authority#

Di%isional -anagers


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Copyright 2004 Prentice Hall 23

1ultidivisional Structure


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8eographical structure

$ h i e f ' i n a n c i a l

O f f i c e r

V R e s e a r c h

& i v i s i o n # a n a g e r

! s i a

V H u m a n

R e s o u r c e s

V O p e r a t i o n s V % a l e s a n d

# a r k e t i n g


( o r t h ! m e r i c a


E u r o p e

$ h i e f E ) e c u t i v e

O f f i c e r


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8eographical Structurefor 4pple Computer

CEO

Steve Jobs

Apple

Europe

Apple

Pacific

France

Apple

Products

Asia

Japan

Australia

Apple

Americas

Canada

Latin

America/Caribbean

Sales

Service and

Marketing

to egions

Source: www.apple.com


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1atri( Structure• 1atri( structure is one in which functional and sta' personnel

are assigned to *oth a *asic functional area and to a pro7ect

• It provides dual channels of authorit$ performance$responsi*ilit$ evaluation$ and control• ,he matri( structure is intended to make the *est use of

talented people within a rm * com*ining the advantages offunctional specialization and product specialization

• ,he matri( structure also increases the num*er of middlemanagers who e(ercise general manager responsi*ilities? through the pro7ect manager role@ and thus *roaden theire(posure to organization wide strategic concerns

• 1atri( structure overcomes a ke decienc of functionalorganization while retaining the advantage of functionalspecialization

• It is di/cult to implement

• Dual chain of command challenges fundamentalorganizational orientation

•


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1atri( Structure• 5hen one sector of the environment

re6uires technological e(pertise$ and

another sector re6uires rapid changewithin each product line

• Conditions!

"# ressure e(ist to share scarce resources

across product lines%# 5hen pressure e(ists for two or more

critical outputs such as technical 6ualit ?functional structure@ and fre6uent newproducts ? divisional structure@

.nvironmental Domain of theorganization is *oth comple( anduncertain


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Strengths and 5eaknesses of1atri( Organization Structure

• S,-.


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ontingencies an! Internal systems of -atri0 'tructure

$ontingencies Internal systems

$n%ironment#-o!erate to high uncertainty&

changing customer !eman!s

Technology#

.on/routine& with

inter!epen!encies (etween

functions'i*e#

Large

+oals#

$0ternal effecti%eness an!

a!aptation plus efficiency withsome functions

Operati%e +oals#$"ual pro!uct an! functional

emphasis

,lanning an! 1u!geting#

Dual system – (y function an!

pro!uct

Formal Authority#

2oint (etween functional an!

pro!uct (asis


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,pes Of 1atri( Structure

• Functional matri(!

Functional *osses have the primarauthoritA pro7ect or product managers

simpl coordinate the activities roduct 1atri(

,he pro7ect or product managers have theprimar authoritA functional managers

simpl assign technical personnel to thepro7ects and provides advisor e(pertiseas needed


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1atri( Structure for5orldwide Steel Compan

President

Industrial

Relations

Vice

President

Mfg.

Services

Vice

President

Finance

Vice

President

Marketing

Vice

President

Mfg.

Vice

President

Metallurgy

Vice

President

Field Sales

Vice

President

Open Die

Business Mgr.

Ring Products

Business Mgr.

Weels ! "#les

Business Mgr.

Steel$aking

Business Mgr.

"ertical unctions

H o r i z o n t a l 0 r o u c t ! i n e s


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8lo*al 1atri( Structure

!nternational

E"ecutive

Committee

Po#er

$ransformers

%erman& 'or#a& Argentina/

(ra)il

Spain/

Portugal

$ransportation

!ndustr&

(usiness

Areas

Countr& Managers

Local

Companies


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2orizontal Structures• Organizes emploees around core processes

• Organizations tpicall shift toward horizontal structure duringthe procedure called re=engineering$

• -e=engineering or *usiness process re=engineering *asicallmeans the redesign of a vertical organization along itshorizontal work+ows and processes

• 4 process refers to an organized group of related task and

activities that work together to transform inputs into outputsthat create value for the customer• -ather than focusing on narrow 7o*s structured into distinct

functional departments! it emphasizes core processes that cut horizontall across the

organization

Involves teams of emploees working together to servecustomers In horizontal structure$ all the people through out the

organization who work on a particular process have easassess to one another so that the can communicate andcoordinate their e'ortsIt virtuall eliminates *oth the verticalhierarch and departmental *oundaries


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2orizontal Structures• Characteristics

Structure is created around cross functional core processesrather than task$ functions$ or geograph

Self directed teams not individuals$ are the *asis oforganizational design and performance

rocess owners have responsi*ilit for each core process in itsentirel

eople on the team are given the skills$ tools$ motivation$ andauthorit to make decisions central to team;s performance ,eam mem*ers are cross trained to perform one another;s 7o*s$

and the com*ined skills su/cient to complete a ma7ororganizational task

,eams have the freedom to think creativel and respond +e(i*lto new challenges that arise

Customers drive horizontal corporation# .'ectiveness ismeasured * end=of process performance o*7ectives as well ascustomer satisfaction$ emploee satisfaction$ and nancialcontri*ution

,he culture is one of openness$ trust$ and colla*oration focussedon continuous improvement


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The Process-BasedStructure

& e v e l o p i n g ( e * r o d u c t s r o c e s s

, r o c e s s O w n e r r o s s F u n c t i o n a l T e a m - e m ( e r s

! c q u i r i n g a n d ' i l l i n g $ u s t o m e r O r d e r s r o c e s s

, r o c e s s O w n e r

r o s s F u n c t i o n a l T e a m - e m ( e r s

% u p p o r t i n g $ u s t o m e r + s a g e r o c e s s

, r o c e s s O w n e r

r o s s F u n c t i o n a l T e a m - e m ( e r s

% e n i o r # a n a g e m e n t , e a m

h a i r a n ! 3 e y ' u p p o r t , r o c e s s O w n e r s


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4 2orizontal Structure

Team4

Team5

Team6

To$

+anagement

Team

Team

4

Team

5

Team

6

Customer

Customer

0rocessO'ner

0rocess

O'ner

Testing Product

Planning Research

Market

Analysis

3e' 0rouct Develo$ment 0rocess

Distrib. Material

Flow Purchasing Analysis

0rocurement an !ogistics 0rocess

Sources: Based on Frank stro!!"

The Horizontal Organization" #$ew %ork:

&!ord 'ni(ersity Press" )***+, -ohn A. Byrne"

The /ori0ontal 1orporation"2 Business Week,

December 34" )**5" 6789), and Thomas A. tewart"

The earch !or the rgani0ation o! Tomorrow"2 Fortune, May )*" )**3" *38*9.


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Strengths and 5eaknesses of2orizontal Structure

• S,-.


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Process-Based Structure

Contingencies• 3ncertain and changingenvironments

• 1oderate to large size

•


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2*rid Structures• 2*rid structures com*ine characteristics of

various approaches tailored to specic needs

"# 1ost often used is to com*ine characteristics offunctional structure and divisional structure

Functions that are important for each product ormarket are decentralized to self contained units

Some functions that are relativel sta*le andre6uire economies of scale and in=depthspecialization are centralized at head6uarters

%# Second tpe of h*rid approach is to com*inecharacteristics of functional and horizontal

structures


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unctionalStructure

2*rid Structureart "# Sun etrochemical roducts

0resient

Technology "ice

0resient

inancialServices

"ice 0res.

Humanesources

Director

ChiefCounsel

Chemicals

"ice0resient

!u7ricants

"ice0resient

uels

"ice0resient

0rouct

Structure

Sources: Based on ;inda . Ackerman" Transition Management:

An >n8Depth ;ook at Managing 1omple& 1hange"2

Organizational D$na#ics #ummer )*93+: ?7877,and Frank stro!!" The Horizontal Organization,

#$ew %ork: &!ord 'ni(ersity Press" )***+" Fig. 3.)" 5?.


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2*rid Structureart %# Ford Customer Service Division

Director an

0rocess O'ner

Director an

0rocess O'ner

Human

esources

Strategy an

Communicationinance

"ice 0resient an

General +anager

Teams

Teams

Director an

0rocess O'ner Teams

Technical Su$$ort Grou$

"ehicle Service Grou$

0arts Su$$ly 8 !ogistics Grou$

unctional

Structure

H o r i z o n t a

l S t r u c t u r e

Teams

Teams


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Stages of International Development

45 Domestic65

international

75

multinational85 glo(al

'trategic

Orientation

Domestic

Oriente!

$0port

oriente!

multi!omestic

-ultinational +lo(al

'tage of

De%elopment

Initial foreign

in%ol%ement

ompetiti%e

positioning $0plosion +lo(al

'tructure Domestic

structure plus

e0port

!epartment

Domestic

structure

plus

international!i%ision

9orl! wi!e&

geographic&

pro!uct

-atri0&

transnational

-arket

,otential

-o!erate&

mostly

!omestic

Large&

multi!omesticVery large

multinational

9hole worl!

International Strategic 4lliances


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International Strategic 4lliances

• 0icensing

0icensing agreements are fre6uentl entered into *

manufacturing rms to capitalize on the di'usion ofnew technolog 6uickl and ine(pensivel whilegetting advantage of of lucrative world wide markets

• Eoint ventures

4re separate entities created with two or more activerms as sponsors

8rowing wa to share development and productioncosts and penetrating customers or competitors

• Consortia virtual organizations network organizations

8roup of companies will 7oin together to share skills$resources$ costs$ and access to one another;s market

Structural Designs for 8lo*al


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Structural Designs for 8lo*alOperations

• 1odel for 8lo*al )ersus 0ocal Opportunities

"# 8lo*al Strateg

roduct design and advertising strateg arestandardized throughout the world

%# 1ulti=domestic StrategCompetition in each countr is handledindependentl of competition in othercountries

.ncourage product design$ assem*l$ andmarketing tailored to specic needs of eachcountr

1atching Organizational Structure to


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1atching Organizational Structure toInternational 4dvantage

When Forces forWhen Forces forGlobalGlobal

Integration are .Integration are .

. .. .

And Forces forAnd Forces forNationalNational

ResponsivenessResponsiveness

areare .. . .. .StrategyStrategy StructureStructure

LowLow LowLow ExportExport InternationalInternational

DivisionDivisionHighHigh LowLow Gloali!atioGloali!atio

nnGloal Pro"#ctGloal Pro"#ct

$tr#ct#re$tr#ct#re

LowLow HighHigh %#lti&%#lti&

"o'estic"o'esticGloalGloal

GeographicGeographic

$tr#ct#re$tr#ct#re

HighHigh HighHigh Gloali!atioGloali!atio

n an" %#lti&n an" %#lti&

"o'estic"o'estic

Gloal %atrixGloal %atrix

$tr#ct#re$tr#ct#re


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artial 8lo*al roduct Structure 3sed *.aton Corporation

Engineering

President

!nternationalLa# *Corporate

elations

C+airman

Finance *Administration

egional

Coordinators

%lobal

Automotive

Components

%roup

%lobal

!ndustrial

%roup

%lobal

!nstruments

Product

%roup

%lobal

Materials

,andling

%roup

%lobal$ruck

Components

%roup


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8lo*al 8eographic DivisionStructure

CEO

Pacific

-ivision

European

-ivision

LatinAmerican

-ivision

Canadian

-ivision

Corporate

Staff

Long.term

Planning

Product

Coordinators


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8lo*al 1atri( Structure

!nternational

E"ecutive

Committee

Po#er

$ransformers

%erman& 'or#a& Argentina/

(ra)il

Spain/

Portugal

$ransportation

!ndustr&

(usiness

Areas

Countr& Managers

Local

Companies


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The Networkrgani!ation

Designer

Organizations

Supplier

Organizations

Broker

Organization

Producer

Organizations

Distributor

Organizations

Characteristics o" Network


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Characteristics o" NetworkStructures

• #ertical Disaggregation

Breaking up of organization functions into separateorganizations performing specialized work

• Brokersmanaged * *roker organizations that locate and assem*lemem*er organizationsBroker ma pla a central role and su*contract for needed

products or services$ or it ma specialize in linking e6ualpartners into network

• Coordinating $echanisms!Coordination falls into three categories!

"# Interpersonal relationship among individuals who havedeveloped partnerships# Con+icts are resolved through

reciprocit%# Formal contacts$ ownership control$ licensing arrangement

1arket mechanisms such as spot paments$ performanceaccounta*ilit$ information sstems$ ensure all parties areaware of each others; activities

%d&antages o" Network Structures


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%d&antages o" Network Structures

• .na*les highl +e(i*le and

adaptive response to dnamicenvironments

• Creates a H*est of the *estorganization to focus resources oncustomer and market needs

• .ach organization can leverage adistinctive competenc

• ermits rapid glo*al response• Can produce Hsnergistic results


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Disad&antages o"Network Structures

• 1anaging lateral relationships acrossautonomous organizations is di/cult

• 1otivating mem*ers to relin6uish

autonom to 7oin network is di/cult• Sustaining mem*ership and *enets

can *e pro*lematic

• 1a give partners access to proprietarknowledge and technolog

N t k St t


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Network StructureContingencies

• 2ighl comple( and uncertainenvironments

• 4ll size organizations

• 8oals of organizationalspecialization and innovation

• 2ighl uncertain technologies

• 5orldwide operations

,he -elationship of Structure to


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,he -elationship of Structure toOrganization;s


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Smptoms ofStructural Decienc

• Decision making is delaed or lackingin 6ualit

• ,he organization does not respond

innovativel to a changingenvironment

• ,oo much con+ict is evident

Session 9 Organization Structures

Documents

Transcript of Session 9 Organization Structures