W6 7 organizational design-structure
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Organizational Design – Organizational Structure Team teaching Laboratory of Sytem Development and Industrial Management (PSMI) Departemen of Industrial Engineering Institut Teknologi Sepuluh Nopember (ITS) 2011
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Transcript of W6 7 organizational design-structure
Organizational Design – Organizational Structure
Team teachingLaboratory of Sytem Development and Industrial Management
(PSMI)
Departemen of Industrial EngineeringInstitut Teknologi Sepuluh Nopember (ITS)
2011
Group Discussion
Discuss the following topics concerning with your study case!
1. Look at your organization, 2. Explore the structure – whether it is established or
not, why do they choose this structure, is there any changes from the first launch of the structure? What are the consideration?
3. Explore the issue of:1. Vertical vs horizontal integration2. Communication3. Response to challenge and environmental changes4. Authority & Control
4. Discuss the autority and control within your organization, and link with your exploration (point 1-2)
Copyright 2004 Prentice Hall2
Alignment FrameworkBusinessStrategy
OrganizationStructure
Human ResourcesManagement
“HR systems and theorganization structure should be managed in a way that is congruent withorganizational strategy (hence the name ‘matching model)”(Fombrun et al, 1984).
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Naomi Stanford, 2007, “Guide to Organisational Design”
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By the end of today’s class, students will:
Be able to explain what organizational design is Be able to explain the main consideration of designing
the organization
Session objectives
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Organizational Design: Organizational Structure
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© 2003 Prentice Hall Inc. All rights
reserved.
Economies and Diseconomies of Work Specialization
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© 2003 Prentice Hall Inc. All rights
reserved.
What Is Organizational Structure? (cont’d)
Grouping Activities By:
• Function
• Product
• Geography
• Process
• Customer
Grouping Activities By:
• Function
• Product
• Geography
• Process
• Customer
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© 2003 Prentice Hall Inc. All rights
reserved.
What Is Organizational Structure? (cont’d)
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© 2003 Prentice Hall Inc. All rights
reserved.
Common Organization Designs
A Simple Structure:Jack Gold’s Men’s Store
A Simple Structure:Jack Gold’s Men’s Store
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Functional Structure
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Functional Structure A functional structure is a design that groups
people on the basis of their common skills and expertise or resources they use.
Functional structure is the bedrock of horizontal differentiation.
An organization groups tasks into functions to increase the effectiveness with which it achieves its goals.
Figure 1: Functional Structure
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Functional Structure: Advantages
Provides people with the opportunity to learn from one another and become more specialized and productive
People who are grouped together by common skills can supervise one another and control each other’s behavior.
People develop norms and values that allow them to become more effective at what they do.
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Control Problems in a Functional Structure
Communication Problems: As more organizational functions develop, each with their own hierarchy, they become increasingly distant from one another.
Measurement Problems: Information needed to measure the profitability of any functional group is difficult to obtain.
Location Problems: Does not allow handling of sales on a geographic basis
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Functional Structure: Control Problems
Customer Problems: Servicing needs of new kinds of customers are difficult.
Strategic Problems: Top managers spend too much time finding ways to improve coordination.
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Solving the Control Problem
Managers can solve control problems by redesigning the functional structure between functions.
Divisional Structure
Product Structure Geographical Structure Market Structure
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Divisional Structure I: Product Structure Product structure: a divisional structure
in which products (goods or services) are grouped into separate divisions according to their similarities or differences
Organizations need to decide how to coordinate its product activities with support functions.
Three kinds of product structure
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Product Division Structure
Product division structure: a structure in which a centralized set of support functions service the needs of a number of different product lines
Divided into product-oriented teams of functional specialists who focus on the needs of one particular product division
Figure 2: Product Division Structure
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Figure 3: Product Team Structure
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Divisional Structure II: Geographic Structure
When the control problems that companies experience are a function of geography, a geographic divisional structure is appropriate.
Allows the organization to adjust its structure to align its core competences with the needs of customers in different geographic regions
Allows some functions to be centralized and others decentralized
Figure 4. Geographic Structure
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Divisional Structure III : Market Structure
A market structure aligns functional skills and activities with the needs of different customer groups.
Each customer group has a different marketing focus, and the job of each group is to develop products to suit the needs of its specific customers.
Each customer group makes use of centralized support function.
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Figure 5.Market Structure
© 2003 Prentice Hall Inc. All rights
reserved.
Common Organization Designs (cont’d)
Key Elements:
+ Gains advantages of functional and product departmentalization while avoiding their weaknesses.
+ Facilitates coordination of complex and interdependent activities.
– Breaks down unity-of-command concept.
Key Elements:
+ Gains advantages of functional and product departmentalization while avoiding their weaknesses.
+ Facilitates coordination of complex and interdependent activities.
– Breaks down unity-of-command concept.
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Figure 6. Matrix Structure
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Matrix Structure (College of Business Administration)
(Dean)
(Director)
Employee
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© 2003 Prentice Hall Inc. All rights
reserved.
New Design Options
Characteristics:• Breaks down departmental
barriers.• Decentralizes decision
making to the team level.• Requires employees to be
generalists as well as specialists.
• Creates a “flexible bureaucracy.”
Characteristics:• Breaks down departmental
barriers.• Decentralizes decision
making to the team level.• Requires employees to be
generalists as well as specialists.
• Creates a “flexible bureaucracy.”
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© 2003 Prentice Hall Inc. All rights reserved.
New Design Options (cont’d)
Concepts:
Provides maximum flexibility while concentrating on what the organization does best.
Disadvantage is reduced control over key parts of the business.
Concepts:
Provides maximum flexibility while concentrating on what the organization does best.
Disadvantage is reduced control over key parts of the business.
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© 2003 Prentice Hall Inc. All rights
reserved.
A Virtual Organization
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Another reference for organizational structure
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Review the lecture note of general courses presented by Patdono Suwignjo, PhD
Assignment for next Week
Copyright 2004 Prentice Hall 34
