ch9organizationalstructureanddesign-130304101927-phpapp02

Organizational DesignOrganizational Design - the process of constructing and adjusting an organizations structure to achieve its goals.Step by step removes dysfunctional aspects of structure .The process focuses on improving both technical & people side of businessRealigns work flow, procedure, structure & system to fit current business realities
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Copyright 2010 Pearson Education, Inc. Publishing as Prentice Hall

BenefitsExcellent customer serviceIncrease profitabilityReduce operating costImproved efficiencyFor managing & growing business.Integrates people with core business , process , technology & system9*

Organisations that dont renew sufferInefficient workflow with breakdown Lack of ownershipDelay in decision makingMistrust between workers & managementRedundancies in effortLack of knowledge & focus on customerCover up blame rather than identifying & solving problems.9*

Steps in Design ProcessCharter the design processAssess the current state of the businessDesign the new organisationImplement the design
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9*Common Organizational DesignsTraditional DesignsSimple structureLow departmentalization, wide spans of control, centralized authority, little formalizationFunctional structureDepartmentalization by functionOperations, finance, marketing, human resources, and product research and developmentDivisional structureComposed of separate business units or divisions with limited autonomy under the coordination and control the parent corporation.

9*Exhibit 97Strengths and Weaknesses of Traditional Organizational Designs

9*Exhibit 98Contemporary Organizational Designs
Team Structure What it is:A structure in which the entire organization is made up of work groups or teams. Advantages:Employees are more involved and empowered. Reduced barriers among functional areas. Disadvantages:No clear chain of command. Pressure on teams to perform.Matrix-Project StructureWhat it is:A structure that assigns specialists from different functional areas to work on projects but who return to their areas when the project is completed. Project is a structure in which employees continuously work on projects. As one project is completed, employees move on to the next project. Advantages:Fluid and flexible design that can respond to environmental changes. Faster decision making. Disadvantages:Complexity of assigning people to projects. Task and personality conflicts.

9*Exhibit 98 (contd) Contemporary Organizational Designs
Boundaryless StructureWhat it is:A structure that is not defined by or limited to artificial horizontal, vertical, or external boundaries; includes virtual and network types of organizations. Advantages:Highly flexible and responsive. Draws on talent wherever its found. Disadvantages:Lack of control. Communication difficulties.

9* Organizational Designs (contd)Contemporary Organizational DesignsTeam structuresThe entire organization is made up of work groups or self-managed teams of empowered employees.Matrix and project structuresSpecialists from different functional departments are assigned to work on projects led by project managers.Matrix and project participants have two managers.In project structures, employees work continuously on projects; moving on to another project as each project is completed.

9*Organizational Designs (contd)Contemporary Organizational Designs (contd)Boundaryless OrganizationAn flexible and unstructured organizational design that is intended to break down external barriers between the organization and its customers and suppliers.Removes internal (horizontal) boundaries:Eliminates the chain of commandHas limitless spans of controlUses empowered teams rather than departmentsEliminates external boundaries:Uses virtual, network, and modular organizational structures to get closer to stakeholders.

9*Organizational Designs (contd)The Learning OrganizationAn organization that has developed the capacity to continuously learn, adapt, and change through the practice of knowledge management by employees.Characteristics of a learning organization:An open team-based organization design that empowers employeesExtensive and open information sharingLeadership that provides a shared vision of the organizations future.A strong culture of shared values, trust, openness, and a sense of community.

9*Designing Organizational StructureOrganizational DesignA process involving decisions about six key elements:Work specializationDepartmentalizationChain of commandSpan of controlCentralization and decentralizationFormalization

9*Exhibit 91Purposes of OrganizingDivides work to be done into specific jobs and departments.Assigns tasks and responsibilities associated with individual jobs.Coordinates diverse organizational tasks.Clusters jobs into units.Establishes relationships among individuals, groups, and departments.Establishes formal lines of authority.Allocates and deploys organizational resources.

9*Approaches to Organisational DesignFunctional StructureDivisional StructureMatrix StructureTeam StructureNetwork Structure

Functional structure**

Functional structure
Advantages
Specialization each department focuses on its own workAccountability someone is responsible for the sectionClarity know your and others rolesLearning- from one another**

Functional structureDisadvantages
Closed communication could lead to lack of focus.Departments can become resistant to change.Coordination .Customer problem.
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Multidivisional Structure.Consumer Products Company.CorporateManagersCEODivisional ManagersSenior VPMarketingSenior VPFinanceSenior VPMaterials ManagementSenior VPResearch andDevelopmentFunctional ManagersCorporate Headquarters StaffDivision BSupport functionsDivision DSupport functionsDivision ASupport functionsSupport functionsDivision C4-21**

ADVANTAGESIncreased Organizational Effectiveness.Increased control.Profitable growth.Internal Labour Market. **

DISADVANTAGESManaging the Corporate- Divisional relationship.Coordination problems between divisions.Transfer pricing.Bureaucratic costs.Communication Problems.
**

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Matrix Structure*

Advantages of a Matrix StructureUses cross-functional teams.Better communication between functional specialists, opportunity for learning, progress, innovation. Enables organization to maximize its use of skilled professionals, who move from product to product as needed.The dual functional and product focus promotes concern for both cost and quality.
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Disadvantages of a Matrix StructureLacks the advantages of bureaucratic structure role ambiguity, role conflictConflict between function and product teams over the use of resources, power.Lack of coordination, stress, uncertainty.Over a time, people experience a vacuum of authority and responsibility.
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Network StructureA recent innovation in organizational architecture is the use of network structures.
A network structure is a cluster of different organizations whose actions are coordinated by contracts and agreementsrather than through a formal hierarchy.
**

Network Structure
Network structures often result from outsourcing.
Outsourcing is the process of moving activities that were previously performed inside the organization to the outside (where they are done by other companies).**

Advantages of Network StructureOrganization can find a network partner reduction in production cost.Avoids the high bureaucratic costs of operating a complex organizational structure.Organization acts in organic way.Organization can gain access to low cost foreign sources of inputs and functional expertise.**

Disadvantages of Network StructureOutsourcing ??Coordination problem- different companies perform different parts of the work.Trust among groups, Trust that outsourcing will not leak confidential information of company to its competitors.
**

Merits & Demerits of Organisational DesignClarityGrowthAdaptabilityOpportunities
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9*Organizational StructureWork SpecializationThe degree to which tasks in the organization are divided into separate jobs with each step completed by a different person.Overspecialization can result in human diseconomies from boredom, fatigue, stress, poor quality, increased absenteeism, and higher turnover.

9*Departmentalization by TypeFunctional Grouping jobs by functions performedProductGrouping jobs by product lineGeographicalGrouping jobs on the basis of territory or geographyProcess Grouping jobs on the basis of product or customer flowCustomerGrouping jobs by type of customer and needs

9*Organizational Structure (contd)Chain of CommandThe continuous line of authority that extends from upper levels of an organization to the lowest levels of the organization and clarifies who reports to whom.

9*Organizational Structure (contd)AuthorityThe rights inherent in a managerial position to tell people what to do and to expect them to do it.ResponsibilityThe obligation or expectation to perform.Unity of CommandThe concept that a person should have one boss and should report only to that person.

9*Organizational Structure (contd)Span of ControlThe number of employees who can be effectively and efficiently supervised by a manager.

9*Exhibit 93Contrasting Spans of Control

9*Organizational Structure (contd)CentralizationThe degree to which decision making is concentrated at upper levels in the organization.Organizations in which top managers make all the decisions and lower-level employees simply carry out those orders.DecentralizationOrganizations in which decision making is pushed down to the managers who are closest to the action.Employee EmpowermentIncreasing the decision-making authority (power) of employees.

9*Exhibit 94Factors that Influence the Amount of Centralization and DecentralizationMore CentralizationEnvironment is stable.Lower-level managers are not as capable or experienced at making decisions as upper-level managers.Lower-level managers do not want to have a say in decisions.Decisions are relatively minor.Organization is facing a crisis or the risk of company failure.Company is large.Effective implementation of company strategies depends on managers retaining say over what happens.

9*Exhibit 94 (contd) Factors that Influence the Amount of Centralization and DecentralizationMore DecentralizationEnvironment is complex, uncertain.Lower-level managers are capable and experienced at making decisions.Lower-level managers want a voice in decisions.Decisions are significant.Corporate culture is open to allowing managers to have a say in what happens.Company is geographically dispersed.Effective implementation of company strategies depends on managers having involvement and flexibility to make decisions.

9*Exhibit 95Mechanistic Versus Organic Organization High specialization Rigid departmentalization Clear chain of command Narrow spans of control Centralization High formalization Cross-functional teams Cross-hierarchical teams Free flow of information Wide spans of control Decentralization Low formalization

9*Removing External BoundariesVirtual OrganizationAn organization that consists of a small core of full-time employees and that temporarily hires specialists to work on opportunities that arise.Network OrganizationA small core organization that outsources its major business functions (e.g., manufacturing) in order to concentrate on what it does best.Modular OrganizationA manufacturing organization that uses outside suppliers to provide product components for its final assembly operations.

9*Todays Organizational Design ChallengesKeeping Employees ConnectedWidely dispersed and mobile employeesBuilding a Learning OrganizationManaging Global Structural IssuesCultural implications of design elements
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