7

Organizations and Structures

Module 7

LIS 580: Spring 2006

Instructor- Michael Crandall

April 18, 2006 LIS580- Spring 2006 2

Roadmap

• Organizing and organizations

• Structure of organizations

• Matrix organizations

• Networked organizations

• Learning organizations

• Challenges in organizations

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What Is Organizing?

• Organizing– Arranging the

activities of the enterprise in such a way that they systematically contribute to the enterprise’s goals.

G.Dessler, 2003

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Depicting the Organization

• Organization Chart– A chart that shows the

structure of the organization including the title of each manager’s position and, by means of connecting lines, who is accountable to whom and who has authority for each area.

G.Dessler, 2003

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Organization Chart

In form ation S e rvices G roup

C a ta log er

C a ta log er

C u sto m e r L ia ison

T a xo n om y D es ign er

K n ow le dg e A rch ite ctu re Le ad

D ev e lo per

D ev e lo per

S yste m s A dm in

S e arch /S ys te m s Le ad

A ssis tan t D e s ign er

D e sign Le ad

K no w le dg e A rch ite ctu re M an ag er

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Organization Design andStructure

• Organization design– A process in which managers develop or

change their organization’s structure

• Work specialization– A component of organization structure that

involves having each discrete step of a job done by a different individual rather than having one individual do the whole job

Prentice Hall, 2002

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Economies of WorkSpecialization

Prentice Hall, 2002

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Stages of OrganizationalDevelopment

• Simple structure– An organization that is low in specialization

and formalization but high in centralization

• Functional structure– An organization in which similar and related

occupational specialties are grouped together

• Divisional structure– An organization made up of self-contained

unitsPrentice Hall, 2002

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Stages of OrganizationalDevelopment (cont’d)

• Matrix structure– An organization in which specialists from functional

departments are assigned to work on one or more projects led by a project manager

• Team-based structure– An organization that consists entirely of work

groups or teams

• Boundaryless organization– An organization that is not defined or limited by

boundaries or categories imposed by traditional structures

Prentice Hall, 2002

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Mechanistic and OrganicOrganizations

• Mechanistic organization– The bureaucracy; a structure that is high in

specialization, formalization, and centralization

• Organic organization– An adhocracy; a structure that is low in

specialization, formalization, and centralization

• Structure follows strategyPrentice Hall, 2002

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G.Dessler, 2003

Burns and Stalker

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Structure Variables

• Principles– Chain of command– Span of control– Authority– Power– Responsibility

• Departmentalization– Functional– Divisional

• Product• Customer• Geographic• Process

Prentice Hall, 2002

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Organizational Structure: Control

• Chain of command– The management principle that no person should report to

more than one boss

• Span of control– The number of subordinates a manager can direct efficiently

and effectively

• Authority– The rights inherent in a managerial position to give orders

and expect them to be obeyed

• Responsibility– An obligation to perform assigned activities

• Power– An individual’s capacity to influence decisions

Prentice Hall, 2002

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Chain of Command

Prentice Hall, 2002

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Tall And Flat Organizations, And The Span Of Control

• Span of Control– The number of subordinates reporting directly to a

supervisor.• Wide spans: larger number of direct reports.• Narrow spans: fewer number of direct reports.

• Tall vs. Flat Organizations– Tall organizations: more management layers and

more hierarchical controls.– Flat organizations: fewer management layer and

decision making closer to the customer.G.Dessler, 2003

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FIGURE 6–9

Spans of Control in Country-Based Organization

G.Dessler, 2003

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Types of Organizational Authority

• Line authority– The position authority (given and defined by

the organization) that entitles a manager to direct the work of operative employees

• Staff authority– Positions that have some authority (e.g.,

organization policy enforcement) but that are created to support, assist, and advise the holders of line authority

Prentice Hall, 2002

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Authority Versus Power

Prentice Hall, 2002

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Types of Power

LegitimatePower based on one’s position in the formal hierarchy

Coercive Power based on fear

RewardPower based on the ability to distribute something that others value

ExpertPower based on one’s expertise, special skill, or knowledge

ReferentPower based on identification with a person who has resources or traits

Prentice Hall, 2002

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Checklist 7.3Principles of Delegation

The manager can delegate authority but cannot delegate responsibility.

Clarify the assignment.

Delegate, don’t abdicate.

Know what to delegate.

Specify the subordinate’s range of discretion.

Authority should equal responsibility.

Make the person accountable for results.

Beware of backward delegation.G.Dessler, 2003

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Departmentalization:Creating Departments

• Departmentalization– The process through which an

organization’s activities are grouped together and assigned to managers; the organizationwide division of work.

G.Dessler, 2003

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Departmentalization

• Functional– The grouping of activities by functions performed

• Product– The grouping of activities by product produced

• Customer– The grouping of activities by common customers

• Geographic– The grouping of activities by territory

• Process– The grouping of activities by work or customer flow

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Organizing Departments by Function

• Functional Departmentalization– A form of organization that groups a

company’s activities around essential functions such as

manufacturing, sales, or finance.

G.Dessler, 2003

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Functional Departmentalization

FIGURE 6–1G.Dessler, 2003

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Organizing Departments by Self-Contained Divisions/Purposes

• Product Departmentalization– Grouping departments around a firm’s

products or services, or each family of products or services; also referred to as a “divisional” organization.

• Customer Departmentalization– Self-contained departments are organized

to serve the needs of specific groups of customers.

G.Dessler, 2003

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Divisional Organizationfor a Pharmaceuticals Company

FIGURE 6–2G.Dessler, 2003

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FIGURE 6–3

Customer Departmentalization,Grayson Steel Company

G.Dessler, 2003

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Organizing Departments by Self-Contained Divisions/Purposes (cont’d)

• Marketing-channel Departmentalization– Departments focus on particular marketing

channels, such as drugstores or grocery stores.

• Geographic (Territorial) Departmentalization– Separate departments are established for

each of the territories in which the enterprise does business.

G.Dessler, 2003

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FIGURE 6–4

Marketing Channel Departmentalization

G.Dessler, 2003

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FIGURE 6–5

Divisional OrganizationsFacilitate Coordination

G.Dessler, 2003

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Checklist 6.1Functional vs. Divisional Organizations Functional Organization Advantages

1. It is simple, obvious, and logical.2. It fosters efficiency.3. It can simplify executive hiring and training.4. It can facilitate the top manager’s control.

Functional Organization Disadvantages1. It increases the workload on the executive to

whom the functional department heads report.

2. It may reduce the firm’s sensitivity to and service to the customer.

3. It produces fewer general managers.

G.Dessler, 2003

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Checklist 6.1 (cont’d)Functional vs. Divisional Organizations Divisional Organization Advantages

1. The product or service gets the single-minded attention of its own general manager and unit, and its customers may get better, more responsive service.

2. It’s easier to judge performance.3. It develops general managers.4. It reduces the burden for the

company’s CEO.

G.Dessler, 2003

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Checklist 6.1 (cont’d)Functional vs. Divisional Organizations Divisional Organization

Disadvantages1. It creates duplication of effort.2. It may diminish top management’s

control.3. It requires more managers with

general management abilities.4. It can breed compartmentalization.

G.Dessler, 2003

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Creating Matrix Organizations

• Matrix Organization– An organization structure in which

employees are permanently attached to one department but also simultaneously have ongoing assignments in which they report to project, customer, product, or geographic unit heads.

G.Dessler, 2003

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FIGURE 6–6

Matrix Organization Departmentalization

G.Dessler, 2003

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Matrix Organizations

Advantages• Access to expertise.• Stability of

permanent department assignments for employees.

• Allows for focus on specific projects, products, or customers.

Disadvantages• Confusion of

command.• Power struggles and

conflicts.• Lost time in

coordinating.• Excess overhead for

managing matrix functions.

G.Dessler, 2003

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Departmentalization in Practice: A Hybrid

• Why mix the types of departmentalization?– Hierarchical considerations

• The relationship of top level departments to their subsidiary departments.

– Efficiency• Product, customer, and territorial departments tend to

result in duplicate sales, manufacturing, and other functional departments.

– Common sense• Departmentalizing is still more an art than a science.

G.Dessler, 2003

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FIGURE 6–8

The New Summer Tour Organization

G.Dessler, 2003

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Network-based Organizations

• Organizational Network– A system of interconnected or cooperating

individuals.

• Informal Networks– Communication pathways and relationships

between individuals in an organization that do not necessarily conform to the formal chain of command and communication networks of an organization.

G.Dessler, 2003

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Network-based Organizations (cont’d)

• Formal Organizational Network– A recognized group of managers or other

employees assembled by the CEO and the other senior executive team, drawn from across the company’s functions, business units, geography, and levels.

• Electronic Organizational Networks– Networking through technology-supported

devices such as e-mail, video-conferencing, and collaborative computing software like Lotus Notes.

G.Dessler, 2003

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Formal vs. Social Structure

Cross, Rob. A bird's-eye view: Using social network analysis to improve knowledge creation and sharing. IBM Executive strategy report  04Jun2002 http://www-1.ibm.com/services/us/index.wss/xs/imc/a1001262

Rarely do the communication patterns match the formal structure

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Network-based Organizations (cont’d)

• Team-Based Organizations– Team

• A group of people committed to a common purpose, set of performance goals, and approach for which they hold themselves mutually accountable.

• Horizontal Corporations– A structure that is organized around customer-

oriented processes performed by multidisciplinary cross-functional teams rather than by formal functional departments.

G.Dessler, 2003

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FIGURE 6–11

The Horizontal Corporation

Source: John A. Byrne, “The Horizontal Corporation,” Business Week, 20 December 1993, p. 80. G.Dessler, 2003

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Checklist 6.2Building Horizontal Organizations Make responsibilities overlap. Design

individual jobs as broadly as possible, and keep the number of job titles to a minimum.

Base rewards on unit performance to emphasize the importance of working together.

Change the physical layout to promote collective responsibility. Let people see each other’s work.

Redesign work procedures, provide computer terminals, use the e-mail network, and make sure managers are available.

G.Dessler, 2003

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FIGURE 6–12

How to Create a Horizontal Corporation

Source: Source: Reprinted from the December 20, 1993, issue of Business Week by special permission. Copyright © 1993 by the McGraw-Hill Companies, Inc. G.Dessler, 2003

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Other Organization Types

• Federal Organization– An organization in which power is distributed

between a central unit and a number of constituents, but the central unit’s authority is intentionally limited.

• Virtual Organization– A temporary network of independent companies

that use information technology to share skills, reduce costs, and provide access to one another’s markets.

– Its success depends on each of the individual firms’ responsibility and self-interest to accomplish the network’s purpose.

G.Dessler, 2003

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G.Dessler, 2003

Effect of Technology on Structure

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When Organizing:Always Keep Your Goals in Mind

• Business environments are in a constant state of change.

• An organization’s strategy must be adapted to changes in its competitive environment.

• Structure follows strategy.– Strategic change creates the need for restructuring

the organization to acquire new and different knowledge, skills and abilities.

G.Dessler, 2003

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Checklist 7.1What Determines Organization Structure

Environment. Fast-changing environments require organic structures; slowly changing environments favor mechanistic structures.

Technology. Unit and continuous production processes favor organic structures. Mass production processes favor mechanistic structures.

Goals. Ask, “What are the main goals we want to achieve via this organization?”

Pros and cons. Each approach to departmentalization has pros and cons.

Logic and common sense.

G.Dessler, 2003

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What Are Learning Organizations?

1. Adopt an organic, networked organizational form.

2. Encourage their employees to learn and to confront their assumptions

3. Have employees who share a common vision4. Have the capacity

• to adapt to unforeseen situations• to learn from their own experiences• to shift their shared mindsets• to change more quickly, broadly, and deeply than

ever before.

G.Dessler, 2003

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Organizational Learning as aDynamic Process

Crossan, Lane, & White (1999)

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Abolishing Organizational Boundaries

• Boundaryless Organization– An organization in which management

strips away the “walls” which typically separate organizational functions and hierarchical levels, through

the widespread use of teams, networks, and similar structural mechanisms.

G.Dessler, 2003

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FIGURE 0–3

The Four Organizational Boundaries That Matter

Source: Reprinted by permission of Harvard Business Review. “The Four Organizational Boundaries that Matter,” from “The New Boundaries of the Boundaryless Company,” by Larry Hirschorn and Thomas Gilmore, May–June 1992. Copyright © 1992 by the President and Fellows of Harvard College. All rights reserved.

G.Dessler, 2003

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Managing Learning Organizations

• How to Streamline Organizational Decision Making– Downsize– Reduce management layers– Establish miniunits

• How to Cultivate Employees’ Personal Mastery– Provide continuous learning opportunities.– Foster inquiry and dialogue.– Establish mechanisms to ensure that the

organization is continuously aware of and can interact with its environment.

G.Dessler, 2003

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Challenges in Organization

• Merging separate organizations with different structures

• Changing an existing organization to meet external or internal changes in conditions

• Conflicts between departments or groups• Interdependence between organizational units• Centralization vs. decentralization

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FIGURE 7–5

Part of the “Independent Integrator” Challenge Facing the Homeland Security Director

Source: Alison Mitchell, “Disputes Erupt over Ridges Needs for His Job,” New York Times, 9 November 2001, p. B7. G.Dessler, 2003

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Methods for Achieving Coordination

• Mutual Adjustment– Achieving coordination

through face-to-face interpersonal interaction.

• Use Rules and Procedures

• Standardize• Exercise Direct

Supervision: Use the Chain of Command

• Divisionalize

• Appoint Staff Assistants

• Appoint Liaisons• Appoint Committees• Organize Independent

Integrators– An individual or a group

that coordinates the activities of several interdependent departments, but is independent of them.

G.Dessler, 2003

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Managing Organizational Conflict

• Line–Staff Conflict– Disagreements between a line manager

and the staff manager who is giving him or her advice.

• How to Organize to Reduce Interunit Conflict– Appeal to power and the chain of command– Reduce interdependence– Exchange personnel

G.Dessler, 2003

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FIGURE 7–6

Types of Interdependence

Source: Based on James Thompson, Organizations in Action (New York: McGraw-Hill, 1967), Chapter 2.

G.Dessler, 2003

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Centralization and Decentralization

• Centralization– A function of how much decision-making

authority is pushed down to lower levels in an organization; the more centralized an organization, the higher the level at which decisions are made

• Decentralization– The pushing down of decision-making

authority to the lowest levels of an organization

Prentice Hall, 2002

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Decentralize?• Decentralized Organization

– Organizational authority for most departmental decisions is delegated to the department heads.

– Control for major companywide decisions is maintained at the headquarters office.

• Decentralization Rules:– Decentralize decisions that affect only one division

or area and that would take a long time for upper management to make.

– Centralize decisions that could adversely affect the entire firm and that upper management can fairly quickly and easily.

G.Dessler, 2003

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Problems With Size

• “There is a fairly common perception that large organizations tend to behave much less “intelligently” than their size suggests. They often lose the decisiveness seen in small groups and may seem "stupid" to people within them who work with ideas and knowledge.”

• “There appears to be a fundamental upper limit on the average per capita decision rate that an organization can sustain, depending inversely on the organization's entropy. If the limit is broached, impaired productivity among knowledge managers may result and large organizations may be disadvantaged when performing knowledge-intensive tasks that require efficient use of intellectual capital.”

Janow, R. Shannon “Entropy and Productivity: Why Big Organizations Can Seem Stupid”. Analytic Solutions Group, LLC. 2/28/2004 http://physics.njit.edu/~janow/Paper20040228njit.pdf

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Hammer vs. Deming

• What tradeoffs did Deming and Hammer make in their approaches to designing organizations?

• Did you notice who was given power in Deming’s approach vs. Hammer?

• What is driving NYNEX to make changes in their organization structure?

• What component of the organization is hardest to change?

• Do you see the same issues arising in the “War at Work” article?

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Next Time

• Managing People– Read Chapter 9 (not 8!!) and the articles

• Discussion group questions:– How can relations be improved between Stanley

and the reference librarians?– How, without simply complaining about Stanley,

can you persuade Joanna to listen to the reference department’s perspective?

– Who defines the responsibilities of each department, and how can you, as an interested party, help accomplish this?