Tugas Pengantar Manajemen Konteporer Binder1

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ORGANISING

Intr oduction

Part Four examines how management creates the structure within which people

work. Alongside planning the direction of the usiness! managers need to consider

how the" will achie#e the direction chosen. A fundamental component of that is the

form of the organisation. $his is a highl" uncertain area of management as there are

conflicting #iews aout the kind of structure to ha#e and how much influence struc%

ture has on performance.

&hapter '( descries the main elements of organisation structure and the contrast%

ing forms the" take. &hapter '' deals with one aspect of an organisation)s structure*

the human resource management policies. $hese are intended to ensure that

emplo"ees work towards organisational o+ecti#es.

&hapter ', -formerl" &hapter ,( focuses on information technolog" and e%usiness!

showing how the application of technological de#elopments has deep implications for

organisations and their management. &hapter '/ looks at some of the issues that

arise in implementing organisational change and in stimulating inno#ation.


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&hapter '(

Organisation structure

Aim

Objectives

Key terms

$o introduce terms and practices that show the choices managers

face in shaping organisational structures.

0" the end of "our work on this chapter "ou should e ale to outline

the concepts elow in "our terms and*

1 Outline wh" the structure of an organisation affects performance

2 Gi#e examples of management choices aout di#iding and

coordinating work! with their likel" ad#antages and disad#antages

3 &ompare the features of mechanistic and organic structures

4 1se the 2contingencies) elie#ed to influence choice of structure

to e#aluate the suitailit" of a form for a gi#en unit

5 Summarise the work of 3oodward! 0urns and Stalker! 4awrence and

4orsch and 5ohn &hild! showing how the" contriuted to this area ofmanagement theor"

6 6xplain and illustrate the features of a learningorganisation.

$his chapter introduces the following ideas*

organisation structure

organisation chart

formal structure

informal structure

#ertical specialisationhori7ontal specialisation

formal authorit"

responsiilit"

delegation span

of control

centralisation

decentralisation

formalisation

functional structure

di#isional structure

matrix structure

network structure

mechanistic structureorganic structure

contingencies

technolog"

differentiation

integration

determinist

structural choice

6ach is a term defined within the text! as well

as in the Glossar" at the end of the ook.


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/'8

Oticon

Oticon www.oticon.com C A S E S T U DY

$his 9anish compan" is the world)s second largest pro%

ducer of hearing aids with aout '!,(( staff in 9enmark-the parent compan"! 3illiam 9emant :oldings! has

aout ;;(( emplo"ees worldwide. Oticon has research

and production facilities that help ensure the high%


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C$A%TE& 1" ORGANISA$ION S$R1&$1R6

1"#1 Introduction

Managers at Oticon had to adapt its structure to survive newcompetition. This required not only lower costs, but also an ability torespond more quickly to the needs of individual customers and to

broader changes in technology and in the market.enior managers of companies that have not been performingwell frequently announce structural changes. !hen hell was trying to recover from the "##$ oil reserves crisis the board firstdismissed the three senior e%ecutives involved in the failure& and then started to change the structure to prevent arecurrence. 'n "##( )adbury chweppes announced that it wouldsplit the drinks and confectionery parts of the business intoseparate companies, in the belief that this would allow both toperform better. Management at *hilips, the +utch electronicsgroup, has been working to ensure that the fiercely independent

units in the company cooperate more closely with each other toimprove performance.!hen an owner-manager is running a small business he or she

decides what tasks to do and coordinates them. 'f the enterprisegrows the entrepreneur usually passes some of the work to newlyrecruited staff, though the division will probably be fle%ible andinformal. Owner and staff can easily communicate directly with eachother, so coordination is easy. 'f the business continues to grow,new structural questions arise about how best to use availableresources. Managers divide the enterprise into distinct units ofactivity & which brings the possibility of misunderstanding between

people in separate units with less direct contact they need toestablish some mechanisms to ensure coordination. ow they dothis reflects their theory about organisation structure.

This chapter outlines the structural issues that managers in allorganisations need to resolve, and which igure /#./ illustrates.Managers create a formal structure when they decide how to divideand coordinate the work of the organisation. These decisions inpart reflect their interpretation of contingencies affecting thebusiness, and in part the views of stakeholders. Together withmany informal arrangements, these decisions create a structurethat balances mechanistic and organic forms, which affect

organisational performance.

Stakeholderpreferences

9i#iding work&o%ordinating work

Dechanistic ororganic forms Performance


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96SIGNING A S$R1&$1R6

'i(ure 1"#1

Alternati#e

structures and

performance

0usinesscontingencies

E strateg"E technolog"E agesi7eE en#ironment

/'>


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01

1"#2 9esigning a structure

Or(a!isati! structure describes the way work is divided, supervisedand coordinated. !hen people 2oin a department or take a 2obwithin the structure this gives a fairly clear signal about what they

should do. The director of marketing is e%pected to deal withmarketing, not finance. 3arious 4operating policies5 reinforce thesignal from the basic structure. These cover matters such asrecruitment, selection, appraisal and reward 6)hapter //7 whichmanagers design to influence employees to act in ways that supportwider ob2ectives.

Or(a!isati! structure

2$he structure of an

organisation isH the sum

total of the wa"s in which

it di#ides its laour intodistinct tasks and then

achie#es co%ordination

among them) -Dint7erg!

'=8=.

T)e r(a!isati! c)art

The r(a!isati! c)art shows the structure as a picture. 't shows themain departments and positions, with lines linking senior e%ecutives

to the departments or people for whose work they are responsible.'t shows who people report to, and clarifies four features of the*rma+ structure

1 tasks & the ma2or tasks or activities theorganisation undertakes82 subdivisions & how the ma2or tasks arefurther divided83 levels & the position of each post within themanagement hierarchy84 lines of authority & the lines linking the bo%es show who hasformal authority over

whom, and to whom people report.

Organisation charts give a convenient 6though transient7summary of the current allocation of tasks and who is responsiblefor them. igure /#." shows the chart for an aircraft factory withinwhat is now 9:; ystems, a


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An r(a!isati! c)art shows the main departments and senior positions in an organisation and the reporting

relations etween them.

'rma+ structure is the official guidelines! documents or procedures setting out how the organisation)s

acti#ities are di#ided and coordinated.

0!*rma+ structure is the undocumented relationships etween memers of the organisation that ine#ital"

emerge as people adapt s"stems to new conditions and satisf" personal and group needs.

ertica+ s.ecia+isati! refers to the extent to which responsiilities at different le#elsare defined.

$ri/!ta+ s.ecia+isati! is the degree to which tasks are di#ided among separate people or departments.


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Factor"

General Danager

9esign Production Purchasing In#entor" Production :uman

9irector 6ngineering 9irector 9irector 9irector Resources9irector 9irector

6lectrical

DanagerDechanical

Danager

Aerostructures

Danager

&ompletions

Danager

Area Danagers

Principal

Structures6ngineer

Principal

S"stems6ngineer

Principal

Furnishings

6ngineer

6lectrics Flight $est

FinalAsseml" 9e#elopment

Senior

6ngineers

6ngineers

6lectrics

Super#isors

Powerplant

Super#isors

:"draulics

Super#isors

Fl"ing

&ontrols

Operators

'i(ure 1"#2 $he structure within a 0A6 aircraft factor" -www.aes"stems.com

ma!a(eme!ti! .ractice u+tis) Eve!ts

Dulti%show 6#ents emplo"s '' people pro#iding a #ariet" of entertainment and promotional ser#ices

to large usinesses. 3hen 0rian Simpson created the usiness in '==( with a full%time staff of , the

compan" o#iousl" had no formal structure. :e reflected on the process of growth and structure*

3hile the compan" was small thinking aout a structure ne#er occurred to me. It ecame a considera%tion as sales grew and the complexit" of what we offered increased. $here were also more people

around and I elie#ed that I should introduce a structure so that clear di#isions of responsiilit"would

e #isile. It seemed natural to split sales and marketing from the actual deli#er" and production of

e#ents as these were two distinct areas. I felt that " creating 2specialised) departments we could gi#e

a etter ser#ice to clients as each area of the compan" could focus more on their own roles. Figure

'(./ shows the structure.H

3e had to redesign the office la"out and introduce a more formalised communication process to

ensure all rele#ant information is eing passed on @ and on the whole I think this structure will see

us through the next stage of usiness growth and de#elopment.

Source* Pri#ate communication.

/,(


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0A

C)ai! * cmma!

The lines of authority show the links between people & who theyreport to and who reports to them. 't shows who they can ask todo a piece of work, who they can ask for help & and who will bee%pecting results from them. 'n igure /#." the production director

can give instructions to the aerostructures manager, but not to theelectrical manager in production engineering. igure /#.1 shows thelines of authority in Multi-show ;vents. 'n both there are manyinformal contacts in the course of normal human activity, whichbring the organisation to life and help people cope with unplannedevents.

The lines of authority show the allocation of *rma+ aut)rity within

the organisation& the right a person has to make decisions, allocate resources orgive instructions. 't isbased on the position, not the person. The production engineering

director at 9:; hasformal authority over a defined range of matters & and anyone elsetaking over the 2obwould have the same amount offormal authority.

ubordinates & those below someone else in the hierarchy &comply with instructions

or requests because they accept the person has the formal6sometimes called legitimate7authority to make them. :n operator in the hydraulics area offinal assembly would

accept an instruction from the hydraulics foreman, but probablynot from the power-plant foreman 6he or she may help them as a personal favour, butthat is different fromaccepting formal authority7. 'f managers attempt to give instructionsbeyond their areaof formal authority they are likely tomeet resistance.

&es.!sibi+ity is a person5s duty to meet the e%pectations associatedwith a task.The

production director and the hydraulics foreman are responsible for

the tasks that gowith those positions. To fulfil those responsibilities they requireformal authority tomanage relevantresources.

:ccountability means that people with formal authority over anarea are required to

report on their work to those above them in the chain of command.The principal sys-tems engineer is accountable to the mechanical manager for theway he or she has used

resources have they achieved what was e%pected as measured by

the cost,quantity, qual-it

yortimeline

ssofthewo

rkB


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'rma+ aut)rity is the right that a person in a specified role has tomake decisions! allocate resources or gi#e instructions.

&es.!sibi+ity refers to

a person)s dut" to meetthe expectations others

ha#e of them.

Danaging 9irector

Operations 9epartment

Operations DanagerSales and Darketing

Darketing Danager

0ookkeeper

6#ent

DanagerAssistant

Danager

Operations

&o%ordinator

Account

Danager

Account

Danager

Account

Danager

Admin

AssistantStoreman Admin

Assistant

'i(ure 1"#3 $he organisation structure at Dulti%show 6#ents


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Oticon @ the case continues @ hierarch"and rank www.oticon.com

C A S E S T U D Y

0efore the change the compan" had six distinct hierar%

chical le#els!with pri#ileges ased on rank*

Not onl" was there a specific compan" car assigned to

each management le#el!ut other material signs existed

... prestige and reward were #er" apparent* in the lengthof

the curtains! the t"pe of carpet ... the si7e of people)s

desks. It all ga#e status. And that was what people stro#e

for. -Ri#ard et al.! ,((;! p. '>'

:ori7ontal oundaries were also strong! as the two

main di#isions @ 6lectronics -product de#elopment and

International -sales communicated poorl". 3ithin these

di#isions work was organised round specific depart%

ments and tasks* 2People were lockedinto specific roles

and responsiilities and were rewarded onl" for those @

nood" took initiati#es) -Ri#ard et al.! ,((;! p. '>(.

Source* 0ased on 0+orn%Andersen and $urner -'==; and Ri#ard et al.

-,((;.

De+e(ati! occurs whenone person gi#es another

the authorit" to

undertake specific

acti#ities or decisions.

De+e(ati! is the process by which people transfer responsibilityand authority for certain parts of their work to people below themin the chain of command. !hile the production director isresponsible and accountable for all the work in that area, they areonly able to do this by delegating. They are still accountable for theresults, but they pass the responsibility, and the necessar yauthority, to subordinates & and this continues down the hierarchy.'f managers delegate more to their subordinates this enables quickerdecisions and more rapid responses to new conditions & thoughsome managers are reluctant to delegate in case it reduces theirpower 6)hapter /$7.

T)e s.a! * c!tr+

A s.a! * c!tr+ is

the numer of

suordinates reporting

directl" to the person

ao#e them in the

hierarch".

The s.a! * c!tr+ refers to the number of subordinates reportingto a supervisor. !here staff are closely supervised there is a narrowspan of control & as shown in the top half of igure /#.$. 'f staff havemore autonomy and responsibility they need less direct supervision,so more can report to the same manager & the span of controlbecomes wider, and the structure flatter.

- eyieas

6a! ,ar7s researc)

5oan 3oodward)s stud" of '(( firms in 6ssex found great #ariet" amongst them in the numer of su%

ordinates managers super#ised -3oodward! '=J. $he numer of people reporting directl" to the

chief executi#e ranged from , to '>! with the median span of control eing . $he a#erage span of

control of the first line super#isors #aried from '( to =(! with a median of /8. 3oodward explained

the #ariation " the technological s"stem used -discussed more full" in Section '(..

Ce!tra+isati! a! ece!tra+isati!
http://www.oticon.com/http://www.oticon.com/http://www.oticon.com/http://www.oticon.com/http://www.oticon.com/


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/,,

!hen an organisation grows beyond the smallest operationmanagement divides work vertically, as those at the top delegatemore of their work to those below them & and so begin to create ahierarchy such as that shown in igure /#.$. :s the business growsthe hierarchy becomes more comple%, but it is often possible to seethree levels & corporate, divisional and operating & such as at)adbury chweppes 6www.cadur"schweppes.com7.


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0(

-aA tall structure! with narrow spans of super#ision

-bA flat structure! with wide spans of super#ision

'i(ure 1"#4

$all and flat

organisation

structures

Corporate The most senior group, such as the board of )adburychweppes, who are responsible for managing the overall

direction of the organisation. This includes not only guiding andmonitoring the performance of the organisation but also maintain-ing links with significant e%ternal institutions such as banks andpolitical bodies.

Divisional Cesponsible for implementing broad areas of policyand for allocating budgets and other resources. )adburychweppes is organised geographically so the managers in, fore%ample, the ;urope, Middle ;ast and :frica 6;M;:7 division areresponsible for meeting the targets which the board sets for thatdivision. +ivisional managers represent the division5s interests tothe board and also monitor and control the performance of the

operating units. Operating The level responsible for the technical work of any

organisation & making products, catching thieves, caring forpatients or delivering services. !ithin ;M;: at )adbur y5s thereis a team responsible for the +air y Milk brand in the


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0E

Ce!tra+isati! is when arelati#el" large numer of decisions are taken " management at the top of the

organisation.

Dece!tra+isati! is when a relati#el" large numer of decisions are taken lowerdown the organisation in the

operating units.


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ma!a(eme!ti! .ractice %)i+i.s ww w.philips.com

After a period of hea#" lossesduring the '==(s Philips! the 9utch electronics compan"! appointed a

new chief executi#e in ,((' @ Gerard ?leisterlee. :e acted


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Tab+e 1"#1

'actr Ava!ta(es Disava!ta(es

&es.!se t c)a!(e $horough deate of issues Slower responseto localconditions

Use * e9.ertise &oncentration of expertise at the 4ess likel" to take account of local

centre makes it easier to de#elop knowledge

new ser#ices and promote est

practice methods

Cst 6conomies of scale in purchasing 4ocal suppliers ma" e etter #alue

6fficient administration i f use than corporate suppliers

common s"stems

%+icy im.+icati!s 4ess risk of localmanagers Dore risk of localmanagers

reaching legal re


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e%pertise worktogether,sharing andseeing aprofessionalcareer path. :difficulty is

that it may bea source ofconflict 6Fautaand aunders,"##/7 if theseparatefunctionsdevelopdifferentperceptions oforganisational

goals. Thesame mayhappen as anorganisationgrows anddiversifies intoa range ofdifferentproducts,markets orgeographical

areas.Managers


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GRO1PING 5O0S IN$O F1N&$IONS AN9 9IKISIONS

&hairman and Non%executi#e 9irectors

&hief 6xecuti#e Officer

9irector of Nursing

and Mualit"9irector of Dedical

Ser#ices

9irector of Finance 9irector of :uman

Resoures

&linical 9irectors

&linical Nurse Danager 0usiness Danagers

3ard Danagers -Sisters

3ard staff

Professional responsiilit"

Danagerial responsiilit"

'i(ure 1"#6

Partial

organisation

structure in a

hospital

responsible for these areas e%pect functional staff to give thempriority & leading to competition between business units forfunctional services.

S.ecia+isati! by ivisi!s

Managers create a ivisi!a+ structure when they arrange theorganisation around its main products, services or customergroups. 'n a divisional structure senior managers give each unit theauthority to design, produce and deliver the product or service.unctions within the division are likely to cooperate as theydepend on satisfying the same set of customers, though duplicatingfunctions make it e%pensive.

%ruct r custmer

+ivisional structures enable staff to focus on a distinct group ofcustomers. 9anks know that wealthy clients have different needsfrom other people & and have created divisions to focus on meetingthose needs. ospitals can use what they term the 4named-nurse5system, in which one nurse is responsible for several identifiedpatients. That nurse is the patient5s point of contact with thesystem, managing the deliver y of services to the patient fromother 6functional7 departments. igure /#.( contrasts theapproaches.

;e(ra.)ic ivisi!s

ere managers group tasks by geography & a common approach

in companieswith manyservice outlets& supermarkets,hotels or pubchains. 't allowspeople to focuson identifyingand meetingdifferent

customerrequirementsin the region,and it is alsoeasier fordivisionalmanagers tomonitor andcontrol themany outlets &see Table /#.".


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C$A%TE& 1" ORGANISA$ION S$R1&$1R6A ivisi!a+ structure is when tasks are grouped in relation to their outputs! such as products or the needs of

different t"pes of customer.


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'u!cti!a+ &lear career paths andprofessional de#elopment

Specialisation leadsto high

standards and efficienc"

&ommon professional interests

support good internal relations

Isolation from wider interestsdamages promotion prospects

&onflict o#er priorities

4ack of wider awareness damages

external relations

Divisi!a+ Functional staff focus on product

and customer needs

9edicated facilities meet customer

needs


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1"#4 Grouping +os in matrices! teams and networks

atri9 structure

A matri9 structure combines functional and divisional structures

function on one a%is of the matri% and products or pro2ects on theother. unctional staff work on one or more pro2ects, movingbetween them as required. They report to two bosses & a func-tional head and the head of the current pro2ect.

A matri9 structure is

when those doing a taskreport oth to a

functional and a pro+ect

or di#isional oss.

%ruct eve+.me!t at Tyta ww w .to" ota.c omma!a(eme!t

i! .ractice

$o"ota used to organise its product de#elopment in a matrix form. $he product planning di#ision

emplo"ed aout 8((( people working on ' current pro+ects. 6ach represented a new model and

emplo"ed a chief engineer and se#eral hundred staff. $here were also ' functional engineering

di#isions.

A chief engineer had to co%ordinate people in ;> departments in ', di#isions to launch a new product

... In addition! relati#el" "oung chief engineers did not alwa"s get sufficient co%operation from

senior functional managers ... For their part! functional managers found it difficult to spend the time

on man% aging details on so man" pro+ects. Dost of these managers had to o#ersee work for aout 'J

different pro+ects at the same time.

Source* &usumano and Noeoka -'==>! pp. ,,@,;.

Teams

'n their search for more fle%ibility, lower costs and faster responsesome companies organise work into teams & most evident incompanies that depend on a steady flow of new products & such as>ohnson G >ohnson or *hilips. Management delegates significantresponsibilities and authority not to individual workers but to anidentifiable team, which is then accountable for the results 6)hapter/(7.

:etr-s:etr- structures refer to situations in which organisations remainindependent but agree to work together to deliver products orservices. ometimes this happens when managers arrange forother companies to undertake certain non-core activities on theirbehalf. The remaining organisation concentrates on setting strategydirection and managing the core units. :bbey 6a panish-owned


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GRO1PING 5O0S IN DA$RI&6S! $6ADS AN9 N6$3OR?S

managers sell one of their services to another company, but stilldeliver the service to customers under their own name. :bbeysold its credit card business to M9F: as the cost of updating itssystems to compete effectively in the card business was too high.The company continues to offer cards with the :bbey logo, butM9F: operates the service.

A !etr- structure

is when tasks re


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i9e *rms

Harge organisations typically combine functional, product andgeographical structures within the same company & the structure of


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Direct su.ervisi!

This is where a manager ensures coordination by directlysupervising his or her staff to ensure they work together in line withcompany policy. The number of people whom a


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manager can effectively supervise directly reflects the idea of thespan of control & that beyond some 6variable7 point directsupervision is no longer sufficient.

$ierarc)y

'f disputes or problems arise between staff or departments, theycan be reconciled by putting the arguments to their common boss inthe hierarchy. 't is the boss5s responsibility to reach a solution. :t9:; 6igure /#."7, if the engineer responsible for structures has adisagreement with the systems engineer, they can ask themechanical manager to ad2udicate. 'f that fails they can escalatethe problem to the production eng ineering director. The weaknessof this is that it takes time to get a response, and meantime theissue is unresolved. 'n rapidly changing circumstances thehierarchy cannot cope with the volume of issues requiring attention,

and becomes slow at making decisions.

Sta!arisi!( i!.uts a! ut.uts

This involves making sure that what goes into the system, and whatmanagers e%pect it to produce, are standardised. 'f the purchaser ofcomponents specifies accurately what is required, and the suppliermeets that specification, coordination between users will be easier.'f staff work to precise specifications that helps coordination withthe ne%t stage. 'f they receive the same training they will need lessdirect supervision, as their manager can be more confident that theywill be working consistently.

&u+es a! .rceures

:nother coordination method is to prepare rules or procedures,such as that shown in the Management in *ractice feature.Organisations have procedures for approving capi- tal e%penditure.To compare proposals on a common basis they set strict guidelineson the questions a bid should answer, how people should prepare acase, and to whom they should submit it. )ompanies developing

computer software have coordination problems if several designersare working on a pro2ect, so use strict change control procedures toensure that the sub-pro2ects fit together.

Sa*ety .rceures i! a .er stati!ma!a(eme!t

i! .ractice

$he following instructions go#ern the steps that staff must follow when the" inspect control e


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&OOR9INA$ING 3OR?

, Otain ke"s for rele#ant cuicles.

/ Kisuall" inspect the interior of each a" for dirt! water and e#idence of condensation.

; Kisuall" inspect the caling! glands! terminal locks and components for damage.

J Kisuall" check for looseconnections at all terminals.

4ock all cuicles and return the ke"s.

8 &lear the safet" document and return it to the Super#isorSenior Authorised person.


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0!*rmati! systems

'nformation systems help to ensure that people who need to workin a consistent way have common information, so that it is easier tocoordinate their activities. The 'nternet offers a radical way ofmoving information and knowledge between organisations, as the

iemens e%ample shows.

ma!a(eme!ti! .ractice 0!ter!et cri!ati! at Sieme!s ww w.siemens.com

Dr #on Pierer! chief executi#e of Siemens! is enthusiastic aout the wa" the compan" is using the

Internet to coordinate different parts of the compan". One example is online purchasing! which

enales the compan" to sa#e huge amounts of mone" " pooling the demands of se#eral purchasing

departments! using a compan"%wide s"stem called click,procure.

Another is encouraging customers to u" online. $he" can click on 2u" from Siemens) on the

we% site home page and place orders for most Siemens products. $he automation and dri#es

di#ision! for example! generates some /( per cent of its sales online. $he strateg" also helps to

impro#e internal administrati#e processes @ such as " handling /(!((( +o applications a "ear

online! or expecting emplo"ees to ook their usiness tra#el arrangements o#er the Internet.

$here is more to this than paperless administration. $he idea is to make sure that the whole suppl"

chain @ from customers! through Siemens! and then on to its suppliers @ runs smoothl".

Kon Pierer also wants customers to ha#e a single! coordinated #iew of thecompan"*

I don)t think that in the future customers will tolerate four or fi#e different #iews aout Siemens. $he"

want one #iew of our capailities. 6#en if a customer is u"ing things from se#eral different Siemens

di#isions! it should deal directl" with onl" one! which should act as a leadmanager within the compan".Inside Siemens! the customer should e identified " onl" one code.

:owe#er he acknowledged that reorganising all the internal processes would e a ma+ortask.

Source* 0odd" et al. -,((J and compan"wesite.

Many companies now conduct their purchasing over the 'nternet,ensuring that new instructions to hundreds of suppliers flow almost

automatically as the manufacturing programme changes to matchcurrent orders. This was previously a laborious task in whichpeople easily made mistakes the 'nternet makes it tightlycoordinated.

Direct .ers!a+ c!tact

The most human form of coordination is when people talk to eachother. Mint?berg 6/@(@7 found that people use this method in boththe simplest and the most comple% organisation. There is so much

uncertainty in the latter that information systems cannot cope & only
http://www.siemens.com/http://www.siemens.com/http://www.siemens.com/http://www.siemens.com/http://www.siemens.com/http://www.siemens.com/


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&OOR9INA$ING 3OR?

direct contact can do this, by enabling people to making personalcommit- ments to each other across business units 6ull and pinosa,"##A7.


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Cri!ati! i! a scia+ servicema!a(eme!t

i! .ractice

$he organisation cares for the elderl" in a large cit". Someone who had worked there for se#eral

"ears reflected on coordination*

3ithin the centre there was a manager! , deputies! an assistant manager! J senior care officers

-S&Os and /( officers. 6ach S&O is responsilefor care officers! allowing dail" contact etween the

super#i% sor and the suordinates. 3hile this defines +o roles


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D6&:ANIS$I& AN9 ORGANI& S$R1&$1R6S

rather than position. Management accepts

A mec)a!istic

structure means

there is a high degree

of task specialisation!people)s responsiilit"

and authorit" are

closel" defined and

decision making is

centralised.


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An r(a!ic structure is

one where people are

expected to work together

and to use their initiati#e

to sol#e prolems+o

descriptions and rules are

few and imprecise.

that those at the centre must depend on those nearest the actionto find the best solution. )ommunication is likely to be hori?ontalamongst those familiar with the task. There may not be anorganisation chart, so fluid is the division of work. 9urns andtalker 6/@0/7 called this an r(a!ic structure. Table /#.1 comparesmechanistic and organic forms.

Tab+e1"#3

&haracteristics of

mechanistic and

organic s"stems

ec)a!istic Or(a!ic

Specialised tasks &ontriute experience to common tasks

:ierarchical structure of control Network structure of contacts

?nowledge locatedat top of hierarch" ?nowledge widel" spread

Kerticalcommunication :ori7ontal communication

4o"alt" and oedience stressed &ommitment to goals more important

Source* 0ased on 0urrns and Stalker -'='.

ma!a(eme!ti! .ractice A mre r(a!ic structure at %)i+i.s ww w.philips.com

$he 9utch group Philips is the world)s third largest consumer electronics compan" @ renownedfor

its inno#ati#e products. It has faced man" crises in recent "ears! and in ,((, was trading at a hea#"

loss. Gerard ?leisterlee ecame chief executi#e in ,((' and has made radical changes in the

compan")s structure. :e reduced the man" separate di#isions to +ust fi#e! and is reaking down

long%estalished internal di#isions) arriers to communication! so that expertise in one can e

used in another. For example the lighting group is working with the consumer electronics di#ision to

produce a room light% ing s"stem that changes colour according to what is eing shown on the $K.

Source* $he 6conomist! ', 5une,((;.

!ithin a large organisation some units will correspond tomechanistic forms and others to organic. : company may have acentralised information system and tightly controlled policies oncapital e%penditure & while also allowing divisions considerableautonomy on research or advertising.

Case questi!s 1"#2 3hat was the role of strateg" and technolog" in encouraging the change at OticonC

3hat features of the present form correspond to the organic modelC

:ow does management hope that the new structure will support their strateg"C

C!ti!(e!cies are

factors such as

uncertaint"!

interdependence and si7ethat reflect the situation

of the organisation.
http://www.philips.com/http://www.philips.com/http://www.philips.com/http://www.philips.com/http://www.philips.com/http://www.philips.com/


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!hy domanagersfavour oneform ofstructurerather thananotherB :

widely held6thoughdisputed7 viewis that itdepends oncertainc!ti!(e!cies

the essence ofthecontingencyparadigm is

thatorgani?ationaleffectivenessresults fromfittingcharacteristicsof theorgani?ation,such as itsstructure, tocontingenciesthat reflect the

situation oftheorgani?ation.6+onaldson,"##/, p. /7


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uccessful organisations appear to be those in which managersmaintain a good fit between contingent factors 6such as strategy,technology, si?eIlife cycle and environmental uncertainty7 and thestructure within which people work. igure /#./ illustrated thesecontingent factors & strategy, technology, ageIsi?e and environment.

Strate(y

)hapter E outlined *orter5s view that firms adopt one of threegeneric strategies & cost leadership, differentiation or focus. !ith acost leadership strategy managers concentrate on increasingefficiency to keep costs low. : mechanistic structure is likely to bethe best support for this strategy, with closely defined tasks in anefficient functional structure. There is likely to be a hierarchicalchain of command to ensure that people work to plan and verticalcommunication to keep the centre well informed. *owerDen, a

privatised electricity utility, initially took a cost&leadership approachand adopted a tight functional structure with detailed rules andperformance measures.

: differentiation strategy focuses on innovation & developing newproducts rapidly and imaginatively. :n organic structure is mostlikely to support this, by enabling ideas to flow easily betweenpeople with something to contribute, regardless of their function.Oticon moved towards this team-based structure, as has Microsoft inits efforts to maintain high levels of innovation in its researchorganisation. :s *owerDen diversified into different businesses itsupported this with a structure of autonomous product divisions,

able to respond quickly to new demands. ill and *ickering 6/@E07showed that companies in which business units had relativelyhigh decision-making authority were more successful than thosethat were centralised. The Management in *ractice feature showshow Dla%omith=line 6D=7 followed this approach when theboard restructured its CG+ activities into si% autonomous, but tightlyfocused, units.

;+a9Smit)K+i!e ww w .gsk.c omma!a(eme!t

i! .ractice

In Feruar" ,((' $achi Namada!head of RL9 at GlaxoSmith?line -GS?! set out the compan")s plan

to split the compan")s research organisation -2the engine room of an" pharmaceutical compan") into

six

2internal iotechnolog" companies). $hese units will compete for resources. 9i#ided along

therapeutic lines! the" will operate autonomousl". GS? is the world)s second largest drugs compan"!

and emplo"s

'J!((( scientists with an annual udget of ,.J illion. 5ean%Paul Garnier! chief executi#e! said that

organising this research group re


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J

attempted this efore.)

$he +o of the six autonomous units is to deli#er drugs with 2proof of concept) @ after small%scale

clinical tests on patients @ to GS?)s de#elopment organisation. $hat will put drugs through full

clinical trials! aimed at winning regulator" appro#al and maximising sales potential.

$he usiness units! called &entres of 6xcellence for 9rug 9isco#er" -&699s! can deli#er mole%

cules in#ented at GS? or rought in from academia or external iotech groups. 9r Namada said*

2$he" ha#e complete autonom". $he" can ha#e '(( chemists per pro+ect! or J. It doesn)t matter to

me how the" do it! solongas the" produce drugs.)&linical trials are undertaken on a massi#e scale! often across continents! and must compl" with

strict regulator" conditions. $hus corporate control! uniformit" and economies of scale are pre%


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eminent. $he other area where scale will e le#eragedis earl" research! where hundreds of millions

of pounds are spent on platform technolog". $wo di#isions! Genetics Research and 9isco#er"

Research! will work on understanding asic iolog" and on producing leadsto set drug disco#er"

units on their wa". Figure '(.> illustrates the new structure.

Internal 0iotechnolog" &ompanies

-small units

Neurolog"

1?

Ps"chiatr"

Ital"

Genetics and

disco#er"research

-large units

Anti%acterials1S

Respirator"

1?

Pre%clinical and

new product

de#elopment

-large units

1rogenital

1S

Detaolic! one

anti%#irals

'i(ure 1"#> $he structure introduced at GlaxoSmith?line

In ,((8 5ean%Pierre Garnier was ale to report that the change in structure was pa"ing off @ the

compan" now had a strong pipeline of new drugs! and was planning fi#e ma+or product launches

during the "ear.It was also creating additional &699s for inflammator" diseases and infection.

Source* 0ased on Financial $imes! ,; Octoer ,((, and = Feruar" ,((8.

igure /#.@ e%presses the idea that different strategies requiredifferent structures. The more the strategy corresponds to costleadership, the more likely it is that managers will support it with afunctional structure. 'f the balance is towards differentiation, themore likely there will be a divisional, team or network structure.

Tec)!+(y is the

knowledge! e


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Tec)!

+

(

y

Tec)!+(y

includes theknowledge,tools andtechniquesused to

transformorganisa-tional inputsinto outputs.'t includesbuildings,machines,computersystems andtheknowledge

andproceduresassociatedwith them.ometechnologiesseem to bebettersupported bysomestructures

than others.


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Functional

structure9i#isional Datrix Network or

team structures

Strategic

goals&ost leadership!

9ifferentiation!

inno#ation! flexiilit"! creati#it"

'i(ure 1"#?

$he relationshipprice! efficienc"! stailit" etween strategies

and structuralt"pes

>oan !oodward5s study of organisations and their structure 6/@0A7had a great influence on thinking about management. hegathered information from /## 9ritish firms to establish whetherstructural features such as the span of control or the number of

levels in the hierarchy varied between them. The researchers couldsee no pattern until they analysed the companies by theirmanufacturing process, which they grouped into// categories, of three broad types. These formed a scale ofincreasing technical comple%ity. The researchers then noticed arelationship between the degree of technical comple%ity andcompany structure.

Unit and small batchproduction irms in this group produce goodsin small numbers, often to a customer5s unique order. 't is similarto craft work, as people and their skills are deeply involved in the

process & custom-built cycles, designer furniture, :ston Martinsports cars or lu%ury yachts. Large batch and mass production This form is typified by the

production of large quantities of standard products. The physicalproducts move along an assembly line, with peoplecomplementing the machinery & mobile phones, ord cars or;lectrolu% washing machines.

Continuous process ere the entire workflow is mechanised, in asophisticated and

comple% production technology. The machiner y does the production work,withoperators monitoring it, fi%ing faults and generally overseeing the process &aDuinness 9rewery, a hell oil refinery or a Mittal steel plant.

!oodward concluded that the different technologies imposedifferent demands on people.


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Technology also helps to deliver services, and managers createstructures to shape the way staff interact with customers. taff atbanks used to handle many cash transactions, and sat behindsecure glass screens that made them seem remote andunwelcoming.Technology means that little cash is now handled inbranches & which have been redesigned to bring staff andcustomers closer together. The *art $ )ase & Coyal 9ank of cotland

& traces structural changes in that service business, including itscentralised manufacturing division.


40/196

E!vir!me!t

)hapter 1 showed how environments vary in terms of theircomple%ity and dynamism. Cesearch by age and :iken 6/@0(7,Derwin 6/@(@7 and ill and *ickering 6/@E07 shows that a firm5sperformance depends on having a structure that is suitable for its

environment. 9urns and talker 6/@0/7 compared the structureof a long-established rayon plant in Manchester with the structuresof several new electronics companies then being created in the eastof cotland. 9oth types of organisation were successful & but haddif- ferent structures.

The rayon plant had clearly set out rules, tight 2ob descriptions,clear procedures, and coordination was primarily through thehierarchy. There was a high degree of specialisation, with tasksdivided into small parts. Managers had defined responsibilitiesclearly and discouraged people from acting outside of their remit.They had centralised decisions, with information flowing up the

hierarchy, and instructions down.The small companies in the newly created electronics industry had

few 2ob descriptions, while procedures were ambiguous andimprecise. taff were e%pected to use their initiative to decidepriorities and to work together to solve problems. )ommunicationwas hori?ontal, rather than vertical 6see Table /#.17.

9urns and talker 6/@0/7 concluded that both forms wereappropriate for their circumstances. The rayon plant had a stableenvironment, as it was the production unit of a larger business, andits sole purpose was to supply a steady flow of rayon to thecompany5s spin- ning factories. +elivery schedules rarely changed,

the technology of rayon manufacture was well known and fullydocumented. 'n contrast, the electronics companies were in directcontact with their customers, mainly the Ministry of +efence. Thedemand for com- mercial and military products was volatile, withfrequent changes in delivery requirements.The technology was new,often applying the results of recent research. )ontracts were oftentaken in which neither the customer nor the company knew whatthe end product would be it was likely to change during the courseof the work.

Oticon @ the case continues @ communicationand technolog" www.oticon.com

C A S E S T U D Y

4ars ?olind knew that the dramatic change in structure

he proposed would not e achie#ed without pain* he

was attacking the estalished culture! pri#ileges tied to

seniorit" and titles! and on work processes. In mo#ing to

an organi% sation in which there would e onl" pro+ect

memers! pro+ect leaders and pro+ect owners! man"

would not easil" accept losing the power the" deri#edfrom controlling infor% mation. :e used his power to dri#e

the change! announcing*

I am '(( per cent sure that we will tr" this. $here)s enough

time so that "ou can make a choice @ whether "ou are

going to tr" it with us or whether ... "ou find another +o

-


41/196

dialogue is etter than e%mail! and designed the uild% ing to support face%to%face dialogue etween staff. $he

prolem owner will usuall" use e%mail or personal con%

tact to ring two or three people together and ha#e a

stand%up meeting. 9ecisions are noted in the computer

-accessile " e#er"one.

0" '==; the compan" had hal#ed product

de#elopment time and more than douled sales. It

emplo"ed half as man" administrati#e staff as in

'==(! ut doule the numer on product de#elopment.

Financial performance impro#ed dramaticall" in the

"ears following the change. 4ars ?olind said! 2:ardware

companies ha#e organisa% tions that look like

machines* a compan" that produces knowledge needs

an organisation that looks like a rain! i.e. which looks

chaotic and is unhierarchical.)

Source* 0ased on 0+orn%Andersen and $urner -'==; Ri#ard et al.-,((;.


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Case questi!s 1"#3 Oticon has had oth mechanistic and organic structures* what prompted the changeC

3h" has the new structure impro#ed usiness performanceC

9urns and talker 6/@0/7 concluded that neither mechanistic nororganic structures were appropriate in all situations. table,predictable environments were likely to encourage a mechanisticstructure. 3olatile, unpredictable environments were likely toencourage an organic structure. This recognition thatenvironmental conditions place different demands uponorganisations was a ma2or step in understanding why companies

adopt contrasting structures & an idea illustrated in igure /#./#.

Structure

Dechanistic Organic

0!crrect 'it@ Crrect 'it@

1ncertain

-unstale

E!vir!me!t

&ertain

-stale

Dechanistic structure in uncertain

en#ironmentStructure too tight

Crrect 'it@

Dechanistic structure in certain

en#ironment

Organic structure in uncertain

en#ironment

0!crrect 'it@

Organic structure in certain

en#ironment

Structure too loose

'i(ure 1"#1" $he relationshipetween en#ironment and structure

Activity 1"#5 Cm.ari!( mec)a!istic a! r(a!ic *rms

$hink of a department "ou ha#e worked in! or aout which "ou can

gather information.

3as it roadl" mechanistic or organicC 3h" has that form e#ol#ed! and is it suitaleC :ow does it compare to other departments in the organisationC


43/196


44/196

Si/e a! +i*e cyc+e

mall organisations tend to be less formal with less division of labour& people take part in a wide range of tasks and coordination isachieved informally by face-to-face contact or direct supervision.!eber 6/@$(7 noted that larger organisations tended to have more

formal, bureaucratic structures, and research by 9lau 6/@(#7 and*ugh and ickson 6/@(07 showed that as organisations grow theydevelop more formal structures, hierar- chies and specialised units.Hike the head of Multi-show ;vents, as managers divide a growingbusiness into separate units they need more controls such as 2obdescriptions and reporting relationships.

;rt) a! structure i! a )usi!( assciati!ma!a(eme!t

i! .ractice

A manager in a housing association! which was created to pro#ide affordale housing for those onlow incomes! descries how its structure changed as it grew.

:ousing associations ha#e to gi#e tenants and their representati#esthe opportunit" to influence polic".

In the earl" da"s it had few staff! no clear di#ision of laour and few rules and procedures. It was suc%

cessful in pro#iding housing! which attracted more go#ernment funds! and the association grew.

Danaging more houses re


45/196

their companies with a degree of formalisation, specialisation andadministrative intensity. They survived, while those that lackedeven the most rudimentary structures failed.

'f a business continues to grow it takes on more of the featuresof a bureaucracy. There is more division of responsibilities andmore rules to ensure coordination. There are more professional andspecialist staff in areas such as finance or human resources, with

systems for budgeting, financial control and rewards. Mature,established firms tend to become mechanistic, with a strongvertical system and well-developed controls.


46/196

More decisions are made at the centre & bringing the danger ofslow response to new conditions. To overcome these barriers toinnovation and to encourage cross-functional communicationmanagers may change the structure. One approach is todecentralise the organisation by creating separate divisions withprofit responsibility & as Microsoft did when it created seven

business units with a high degree of autonomy.

Oticon @ the case continues @ limitingriskswww.oticon.com

C A S E S T U D Y

3hile the changes at Oticon had spurred creati#it"! the

oard of the firm also ecame concerned aout prof%

itailit" in the earl" "ears! as the new structure wascreating so man" initiati#es and new products that it

was difficult to manage them all effecti#el". $he" there%

fore appointed Neils 5acosen as co%chief executi#e in

'==,! to place more emphasis on financial discipline

and performance. 5acosen took o#er from ?olind as

chief executi#e in '==>.

In '== more controls were introduced! to alance

some of the risks of the new form. A competence centre

was estalished that took o#er some of the rights pre#i%

ousl" held " pro+ect managers. It alone now had the

right

to initiate pro+ects and appoint pro+ect managers @ thus

restraining the earlier principle that an"one could start a

pro+ect. It also took o#er the task of negotiating salaries

that had initiall" een delegated to pro+ect managers.$hese changes were intended to o#ercome some of

the costs associated with the radical structure. 3hen

there was no limit to the numer of pro+ects! nor to the

numer of pro+ects on which a person could work! it had

ecome hard to ensure completion* the most capale

staff were spread o#er too man" pro+ects. $here was

also some concern that staff and teams were not alwa"s

sharing knowledge as full" as expected. 9espite these

ad+ustments! the compan" remains a radicall" different

form of organisation.

Source* 0ased on Foss -,((/.

C!ti!(e!cies r ma!a(eria+ c)iceB

Determi!ism is the

#iew that an

organisation)s structure

is determined " its

en#ironment.

Structura+ c)ice

approaches emphasise the scope management has for deciding the form of structure! irrespecti#e of external

conditions.
http://www.oticon.com/http://www.oticon.com/http://www.oticon.com/http://www.oticon.com/http://www.oticon.com/


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)ontingencyapproaches toorganisationstructurepropose thatthe mosteffective

structure willdepend 6becontingent7upon thesituation inwhich theorganisation isoperating

Theorgani?ation isseen as

e%isting in anenvironmentthat shapesits strategy,technology,si?e andinnovationrate. Thesecontingentfactors in turndetermine therequiredstructure8 thatis, thestructure thattheorgani?ationneeds toadopt if it isto operateeffectively.6+onaldson,/

@

@

0

,

p

.

"

7

;ffective

management

involves formulating an appropriate strategy and developing astructure which supports that strategy by encouraging appropriatebehaviour. The emphasis is etermi!ist 6the form is determined bythe environment7 and functionalist 6the form is intended to serveorganisational effectiveness7 6+onaldson, /@@A7. Management5srole is to make suitable ad2ustments to the structure to improveperform- ance as conditions change & such as by increasing

formality as the company grows. Others, such as D=, introducegreater divisional autonomy to encourage creativity orresponsiveness to local conditions.

>ohn )hild 6/@(", /@E$7 disagreed with this view, arguing thatcontingency theorists ignore the degree of structura+ c)ice whichmanagers have. The process of organisational design is not only atechnical, rational matter but one shaped by political processes.These political considerations 6reflecting the values and interests ofinfluential groups7 are able to influence the structure that emergesfor these reasons


48/196

46ARNING ORGANISA$IONS

The standards of performance against which organisationalperformance is assessed are not always rigorous. ome degree ofunder-performance caused by an inappropri- ate structure may betolerated if there is sufficient 4slack5 within the system.

To some e%tent structures will reflect the interests of powerfulgroups within the organisation. They will try to secure structuresthat protect or advance their positions, even if this reducesperformance to some degree.

Overall, writers of this view argue that contingency theory reducesmanagers almost to automatons, or puppets, able to e%ercise littleinfluence on their own actions. 'n practice, they argue, managers dohave choice over the structure they design. The contrasting ways inwhich leading grocery companies have used the 'nternet seems tosupport that view.

&etai+ers7 res.!se t t)e 0!ter!etma!a(eme!t

i! .ractice$he Internet makes it possile for supermarket chains to create a wesite on which customers can

order their shopping! which the compan" then deli#ers to their home. Sainsur")s responded" cre%

ating a new di#ision to handle this usiness! with a separate management structure! warehouses

and distriution s"stem. $esco chose to integrate its Internet shopping usiness with existing

stores @ staff pick the customer)s Internet order from the shel#es of a con#entional store. Other

chains! such as Somerfield and Dorrisons do not -in ,((8 offer an online ser#ice. So while the

technolog" is a#ail% ale to all! onl" some ha#e chosen to use it and the" manage it with different

structures.

Activity 1"#6 Critica+ re*+ecti!< c!ti!(e!cy r c)iceB

Recall some significant changes in the structure of "our organisation. $r" to

estalish the reasonsfor them! and whether the" had the intended effects. 9o

those reasonstend to support the contingenc" or management choice

perspecti#esC

Case questi!s 1"#4 9oes the Oticon example support contingenc" or management choice

approachesC

Gather specific examples of management actions in the case which illustrate

each theor".

:nother consideration is that the direction of causality is notnecessarily from strategy to structure. 't is also possible that anorganisation with a given structure finds that that makes it easier toembark on a particular strategy.


49/196


1"#= 4earning organisations

'nnovation is the main reason why many advocate the developmentof 4learning organi- sations5, since organisations that operate incomple% and dynamic environments can only be successfulinnovators if they develop the capacity to learn and respondquickly


50/196

to changing circumstances. The term 4learning organisation5 isused to describe an organisation that has developed the capacity tocontinuously learn, adapt and change. 'n a learning organisation thefocus is on acquiring, sharing and using knowledge to encourageinnovation.

:ccording to Fonaka and Tageuchi 6/@@A7 the ability to create

knowledge and solve problems has become a core competence inmany businesses. 'n their view, everyone is a knowledge worker &someone dealing with customers, for e%ample, quickly finds outabout their likes and dislikes, and their view of the service. 9ecausethey are typically in low-paid 2obs far from corporate headquarters,this valuable intelligence is overlooked.

Tab+e1"#4

Features of a

learning

organisation

'eature E9.+a!ati!

A learningapproach $he use of trials and experiments to impro#e understanding and

to strateg" generate impro#ements! and to modif" strategic direction

Participati#e polic" All memers are in#ol#ed in strateg" formation! influencing decisions

making and #alues and addressing conflict

Informati#e Information technolog" is used to make information a#ailale to

e#er"one and to enale front%line staff to use their initiati#e

Formati#e accounting Accounting! udgeting and reporting s"stems are designed to help

and control people understand the operations of organisational finance

Internal exchange Sections and departments think of themsel#es as customers and

suppliers in an internal 2suppl" chain)! learningfrom each other

Reward flexiilit" A flexile and creati#e reward polic"! with financial and non%

financial rewards to meet indi#idual needs and performance

6naling structures Organisation charts! structures and procedures are seen as

temporar"! and can e changed to meet task re


51/196

working, and employees operate with a high degree of autonomyto work as they think will best enhance performance. Cather thandirecting and controlling, managers act as facilitators,supporters and advocates & enabling their staff to work and learnto the greatest degree possible.

Hearning depends on information, so there is an emphasis onsharing information amongst employees in a timely and open

manner. This too depends on managers creat-


52/196

Strate(y

E 4earning approachto strateg"

E Participati#e polic"

making

-i!( i!

E Informati#e

E Formati#e accountingand control

E Internal exchangeE Reward flexiilit"

Structure

E 6naling structures

-i!( ut

E 0oundar" workersas en#ironmentalscanners

E Inter%compan"learning

Source* Pedler et al. -'==8.

ear!i!( ..rtu!itiesE 4earning climateE Self%de#elopment

opportunities 'i(ure 1"#11

&lusters of

learning

organisation

features

ing a structure that encourages people to pass information in this

way. Headership is also important in the sense that one of theirprimary roles is to facilitate the creation of a shared vision for thebusiness, and ensuring employees are enabled to work continuallytowards that. inally the culture is one in which all agree on ashared vision and understand how all aspects of the organisation& its processes, activities, environment & are related to each other.There is a strong sense of community and mutual trust. *eople feelfree to share ideas and communicate, share and e%periment & ableto learn without fear of criticism or punishment.

:rgyris 6/@@@7 distinguished between single-loop and double-looplearning. The clas- sic e%ample of single-loop learning is the

domestic thermostat which, by detecting temperature variations,takes action to correct deviations from a predetermined level. 'nsingle-loop learning, the system maintains performance at the setlevel, but is unable to learn that the temperature is set too high ortoo low. Hearning how to learn involves double-loop learning &challenging assumptions, beliefs and norms, rather than accept- ingthem and working within their limitations. 'n single-loop learning,the question is4ow can we better achieve that standard of performanceB5 'ndouble-loop learning the question becomes 4's that an appropriatetarget in the first placeB5 'n the conte%t of developing the skills to

cope more effectively with change, the aim is to enhance the abil-


53/196

ity of members to engage in double-loop learning.


54/196

Structura+ e+eme!ts C!ve!ti!a+ r(a!isati! :e r(a!isati!

Initiati#e and authorit" &entralised 9istriuted

&ontrol &entralised! rule ased 9ecentralised! cultural

0asis of reward Indi#idual)s position Group performance

Roles Specialised! defined Fu77"! loosel"defined

S"stems $o reduceuncertaint" $o signal need for change

&oordination 0" rules and procedures 0" direct contact and IS

Networking Onl" ma+or stakeholders Integral to the #alue chain

Outsourcing 4ittle Duch -non%core acti#ities

Alliances A#oided 6xtensi#e

1"#> &urrent themes and issues

%er*rma!ce

)hanges in the business environment are encouraging managers

to e%periment with new forms of organisation

+uring the /@@#s the transition from an economy based on theprocessing of materials to one based on flows of information became evermore apparent, especially in the developed economies. The transitionunfettered many aspects of organi?ation from their former physicalconstraints, permitting, for e%ample, activities in dispersed locations to beas effectively integrated as those gathered on the same site. 'ncreasedinformation intensity is today the fundamental development to which neworgani?ational designs must respond. 6)hild, "##A, p. "(7

These trends encourage many to advocate a move from

bureaucratic, hierarchical, mechanistic structures to smaller, moreorganic units with more emphasis on personal discretion andcreativity. They argue that arrangements which encourageempower- ment, fle%ibility, learning, innovation and teamwork arethe only ways to survive in many sectors of the economy, andTable /#.A contrasts some features of conventional and 4new5forms.

Tab+e1"#5

&ontrasts etween

con#entional and

new forms oforganisation

The Oticon case in this chapter, and the e%amples of emco 6)hapter/$7 and !.H. Dore6the *art A )ase7 illustrate how some managements have respondedto these conditions.

owever, these decentralised structures also e%pose theorganisation to the danger

that actions by managers in the autonomous units damages thebusiness as a whole. 9*has suffered because staff in its


55/196

companies have decen-tralised decision making to local managers.

&es.!sibi+ity

Many companies respond to competitive pressures by granting

significant autonomy to local subsidiaries, or 2oining a networkstructure of suppliers contributing to the final product. This oftenenables them to outsource the production of many goods and serv-


56/196

S1DDAR

ices to poor regions of the world, which in turn is one of the maindrivers of globalisa- tion. These structural choices add to localincomes, and many governments compete for this work.

owever many criticise the policies and behaviour ofsubsidiaries and suppliers & especially when they adopt labourandIor environmental standards that would be unac- ceptable in the

companies5 home country. The structural changes do not, in theview of their critics, absolve the organisation from responsibility forwhat happens in their suppliers. Fike suffered bad publicity foryears after the conditions e%perienced by staff producing Fikeproducts in 'ndonesia were revealed. The company responded byfurther structural measures, such as a requirement that all supplierswould be regularly moni- tored and inspected to ensure they metadequate labour standards. )oca-)ola is currently receiving similarcriticism over the practices of some of its overseas 2oint ventures.

Ceconciling demands for greater accountability and control withthe performance benefits of decentralisation is a challenge for those

shaping organisational structure.

0!ter!ati!a+isati!

'nternationalisation makes it possible for a firm to e%tend itsoperations into many other countries, and so be able to producemore cheaply by spreading costs over a larger volume. :t the sametime it may face pressure to vary the design of its products andservices to suit local tastes. o managers may need to create astructure that is able to achieve both more standardisation and

more fle%ibility within the same organisational structure.The same process e%poses a firm to greater e%ternal comple%ity,by e%panding the number of organisations & customers, competitors,suppliers, governments, non-govern- mental organisations 6FDOs7and many more & whose actions may be relevant to it. Many moreevents in the e%ternal world are relevant to the global firm, whichneeds to enter into more intensive dialogue with e%ternal parties.This greater e%ternal comple%- ity has to be matched by suitablestructural arrangements & more specialists in relevant fields, andmore attempts to influence a wider constituency of stakeholders.

Summar"

1 Outline why the structure of an organisation affects performance *eople create structures to signify people5s tasks and

responsibilities towards the current ob2ectives, and to provideincentives for work that supports them. The structure signalswhat people are e%pected to do within the organisation, and isintended to support actions that are in line with performancegoals.

2 Dive e%amples of management choices about dividing andcoordinating work, with their likely advantages and disadvantages


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Managers divide work to enable individuals and groups tospecialise on a limited aspect of the whole, and then combinethe work into related areas of activity.Task division needs to beaccompanied by suitable methods of coordination.

)entralisation brings consistency and efficiency, but also thedanger of being slow and out of touch with local conditions.*eople in decentralised units can respond quickly to local

conditions but risk acting inconsistently.


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S1DDAR

unctional forms allow people to specialise and develop e%pertiseand are efficient8

but they may be inward looking and prone to conflictingdemands.

+ivisional forms allow focus on particular markets of customergroups, but can duplicate facilities thus adding to cost.

Matri% forms try to balance the benefits of functional anddivisional forms, but can again lead to conflicting priorities overresources.

Fetworks of organisations enable companies to draw upon awide range of e%pertise, but may involve additionalmanagement and coordination costs.

3 )ompare the features of mechanistic and organic structures Mechanistic & people perform specialised tasks, hierarchical

structure of control, knowledge located at top of hierarchy,vertical communication, loyalty and obedi- ence valued.

Organic & people contribute e%perience to common tasks,network structure of contacts, knowledge widely spread,hori?ontal communication, commitment to task goals moreimportant than to superiors

4 ohn )hild, showing how they contributed to this area ofmanagement theory

!oodward appropriate structure depends on the type ofproduction system

64technology57 & unit, small batch, process.

9urns and talker appropriate structure depends onuncertainty of the organisa- tion5s environment & mechanistic instable, organic in unstable.

Hawrence and Horsch units within an organisation facedifferent environmental demands, which implies that there willbe both mechanistic and organic forms within the sameorganisation, raising new problems of coordination.

>ohn )hild contingency theory implies too great a degree ofdeterminism & managers have greater degree of choice overstructure than contingency theories implied.

6 ;%plain and illustrate the features of a learning organisation Hearning organisations are those that have developed the

capacity to continuously learn, adapt and change. This depends,


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according to *edler et al. 6/@@(7, on evolv- ing learning-friendlyprocesses for looking in, looking out, learning opportunities,strategy and structure.


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&ON&419ING &RI$I&A4 R6F46&$ION

&evie questi!s

1 9raw the organisation chart of a compan" or department that "ou know. From discussing

it with people in one or more of the positions shown! compare their account of the

structure with that shown on the chart.

2 3hat factors are encouraging companies to -a centralise! - decentraliseorganisational functionsC

3 Se#eral forms of coordination are descried. Select two that "ou ha#e seen in operation

and descrie in detail how the" work @ and how well the" work.

4 :ow does the structure of an organisation support or hinder its strateg"C

5 6xplain the difference etween a mechanistic and an organic form of organisation.

6 6xplain the term 2contingenc" approach) and gi#e an example of each of the factors

that influence the choice etween mechanistic and organic structures.

= If contingenc" approaches stress the influence of external factors on

organisational structures! what is the role of management in designing

organisational structuresC

> 3hat is the main criticism of the contingenc" approach to organisation structureC

? 3hat examples can "ou find of organisational acti#ities that correspond to some of

the features of a learningorganisation identified " Pedler et al. -'==8C

C!c+ui!( critica+ re*+ecti!

$hink aout the structure and culture of "our compan"! or one with which "ou are familiar.

Re#iew the material in the chapter! and perhaps #isit some of the wesites identified. $hen

make notes on these


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Further reading

3oodward! 5. -'=J! Industrial Organi7ation* $heor" and practice! Oxford 1ni#ersit" Press!

Oxford. Second edition '=>(.

0urns! $. and Stalker! G.D. -'='! $he Danagement of Inno#ation! $a#istock! 4ondon.

4awrence! P. and 4orsch! 5.3. -'=8! Organi7ation and 6n#ironment! :ar#ard 0usiness SchoolPress! 0oston! DA.

$hese influential ooks are short and accessile accounts of the research process! and it

would add to "our understanding to readat leastone of them in the original. $he second

edition of 3oodward)s ook -'=>( is e#en more useful! as it includes a commentar" on her

work " two later scholars.

9onaldson! 4. -,(('! $he &ontingenc" $heor" of Organi7ations! Sage! 4ondon.

A comprehensi#e and up%to%date account " one of the leadingscholars of contingenc"

theor". Outlines the underl"ing principles of the theor" and the contro#ersies surrounding

it! as well as offering #aluale guidance on emerging research possiilities.

Ri#ard! S.! 0enoit! A.A.! Patr"! D.! Pare! G. and Smith! :.A. -,((;! Information $echnolog" andOrgani7ational $ransformation! 6lse#ier0utterworth%:einemann! Oxford.

As well as eing the source of some information on the Oticon case! this ook includes

other examples of the wa" in which information technolog" is enaling managers to

de#elop new forms of organisation. A coherent theoretical structure makes the ook a

useful addition to this area.

3elinks

$hese wesites ha#e appeared in the chapter*

ww w .oticon.comww w.aes"stems.com

ww w.cadur"schweppes.com

ww w.philips.com

ww w .+n+.com

www.to"ota.com

ww w.unile#er.com

ww w.siemens.com

ww w.gsk.com

Kisit two of the usiness sites in the list! and na#igate to the pages dealing with corporate

news! in#estor relations or 2our compan").

3hat organisational structure issues can "ou identif" that managers in the compan" arelikel" to e dealing withC &an "ou find an" information aout their likel" culture from the

wesiteC

3hat kind of en#ironment are the" likel" to e working in! and how ma" that affect their

structure and cultureC

Annotated welinks! multiple choice


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&hapter ''

:uman resourcemanagement

Aim

Objectives

Key terms

$o introduce the topic of human resourcemanagement and to

examine some of the ma+or practices.

0" the end of "our work on this chapter "ou should e ale to outline

the concepts elow in "our own terms and*

1 1nderstand the contriution of :RD to organisational performance

2 1nderstand the potential links etween strateg" and :RD

3 9escrie the :RD practices concerned with the flow of people into

and through the organisation

4 9escrie the :RD practices concerned with reward management

5 1nderstand how :RD aims to manage workforce di#ersit"

6 Recognise the issues "ou will face as a +o seeker at the recruitment

selection stage.

$his chapter introduces the following ideas*

human resourcemanagement

external fit

internal fit

succession planning

+o anal"sis

competencies

#alidit"selection tests

assessment centres

performance%related pa"

6ach is a term defined within the text! as well

as in the Glossar" at the end of the ook.


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0D3G

roup.

0D3 www.mwgroup.com C A S E S T U DY

0D3! whose head!((( automoiles to cus%

tomers! an increase of /.J per cent o#er the pre#ious

"ear! and at the end of that "ear 0D3 emplo"ed

'(!((( people. 3estern 6urope is its ma+or market!

accounting for J= per cent of all 0D3 cars sold -though

&hina is an increasingl" important market for luxur"

Rolls%Ro"ce #ehicles. 0D3 also manufactures motor%

c"cles and has a +oint #enture with Rolls%Ro"ce to

produce aircraft +et engines.

0D3 needs to e placed in the larger context of

com% petiti#eness in the German motor industr". A '==

report " the German Dotor Industr" Association

identified increased wage costs! higher non%wage

laour costs! shorter agreed working time than man"

competitor coun% tries and the continuing strength of

the 9eutschmark as factors undermining German

competiti#eness. $hese had lowered emplo"ment in the

industr"! stimulated in#est% ments aroad and

encouraged companies to gi#e high priorit" to

impro#ing laour producti#it".

$he strateg" of focusing on the premium end of the

car market is supported " its approach to :RD! whichderi#es from! and is highl" consistent with! the com%

pan")s 2six inner #alues)* communication! ethical

eha#iour to its staff! achie#ement and remuneration!

independence! self%fulfilment and the pursuit of new

goals. $his #alue%oriented polic" dates ack to the earl"

'=>(s! arising out of a scenario%planning exercise

among senior managers. $his underl"ing philosoph" is

important in shaping the design of an" new 0D3 plant

-2an open design) that ad#ances the #isual management

of the process and the process of introducing an" new

or reformed :RD practices. $he compan" emphasises

extensi#e consultation! information sharing and seeking

to estalish positi#e interrelationships etween indi#id%

ual changes.

Source* 6uropean Industrial Relations Re#iew! issue ,8 -'==! pp. /,@/;.

Case questi!s 11#1 3hat issues concerning the management of

people are likel" to e raised in a group such

as 0D3 that has rapidl" expanded its produc%

tion and distriution facilitiesC

:ow ha#e these issues een affected

" domestic de#elopments in

German"C

:ow is increased competition likel" to affect

the people who work for 0D3C

/J/
http://www.bmwgroup.com/http://www.bmwgroup.com/


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C$A%TE& 11 :1DAN R6SO1R&6 DANAG6D6N$

@E

Activity 11#1 De*i!i!( $&

0efore readingon! note down how "ou would define human resource management.

3hat topics and issues do "ou think it deals with! and how does it relate to

management as a wholeC ?eep "our notes " "ou and compare them with the

topics co#ered in the chapter as "ou work through it.

11#1 Introduction

$uma! resurce

ma!a(eme!t

is the effecti#e use of

human resources in

order to enhance

organisational

performance.

9M! is a large and successful business in a growing area of theworld economy & auto- mobile production. Ket it faces competitiveproblems stemming in part from high employment costs in itsDerman operations, and competition from new sources.

Management is attempting to retain the company5s position bydiversifying the product range and the number of countries in whichit manufactures. The company believes that its business strategyhas to be matched by its CM strategy & and is adapting this tobring about a better-trained and more fle%ible workforce suited to thenew conditions.

uch activities are part of a wider change taking place in manywestern companies, as managers try to align the way they dealwith people with broader company strategies. Managementinfluences other people through both personal and institutionalisedprac- tices. 't seeks to be less reactive, less focused on grievances

and the routine aspects of personnel administration. 'nstead itwants to be more proactive in developing a labour force at all levelsthat will support the organisation5s strategy. 't also seeks greatercoher- ence between the main aspects of CM & especially in theareas of selection, development, appraisal and rewards.

This chapter focuses on some institutionalised practices intendedto influence the attitudes and actions of employees. These practicesare commonly referred to as )uma! resurce ma!a(eme!t 6CM7. CMcovers four main areas 69eer et al., /@E$7

1 employee influence 6employee involvement indecision making782 work systems 6work design,

supervisory style783 human resource flow 6recruitment, selection, training,development and deployment784 reward management 6pay andother benefits7.

;mployee influence and work systems are discussed in )hapters/$ and /A. )onsequently this chapter focuses on human resourceflow and reward management. uman resource flow is concernedwith the flow of individuals into and through the organisation &human resource planning, 2ob analysis, employee recruitment and

selection. Management designs these practices to help ensurethat the organisation has the right people available to help it


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6D6RG6N&6 AN9 D6ANING OF :RD

@@

achieve itslargerstrategicob2ectives.Cewardmanage-ment aims

to attract,retain andacknowledgeemployees.

Thechapterbegins bydiscussingthe basicpurpose andob2ectives of

CM, andthe reasonsfor itsgreaterprominenceinmanagementdiscussions.'t thenpresents a

range ofcurrentpractices inthe areas ofhumanresourceflow andrewardmanagement. CM ismore than a

sum ofpolicies andit isimportant tosee howthese fittogetherwithin acompany5sbroadapproach to

CM.


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11#2 6mergence and meaning of :RD

CM refers to all aspects of managing people in the workplace thissection outlines why the function has become an essentialcomponent in organisational success.

$istrica+ eve+.me!t * $&

The term 4human resource management5 is relatively new, gainingprominence in


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strategic & believing that managing people more effectively wouldimprove organisational performance. This reflected theories of sus-tained competitive advantage that emphasise the importance offirm-specific resources and competences that are difficult toimitate 6*feffer, /@@$7. Table //./ highlights the policies that arelikely to affect CM and organisational outcomes.

Case questi!s 11#2 3hen did :RD policies egin to e seriousl" de#eloped at 0D3C

3hat ledmanagement to take this initiati#eC


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%+icies $uma! resurce utcmes Or(a!isati!a+ utcmes

Or(a!isati!a+ a!

jb esi(!

:igh +o performance

a!a(i!( c)a!(e Strategic planning and

integration

:igh prolem sol#ing

&ecruitme!t se+ecti!

a! scia+isi!(

&ommitment Successful change

A..raisa+ trai!i!(

a! eve+.me!t

Flexiilit"adaptailit" 4ow turno#er

a!.er *+s t)ru()

t)e r(a!isati!

4ow asence

&ear systems Mualit" 4ow grie#ance le#el

Source* Guest-'=>8! p. J(/.

Tab+e11#1

Policies for

supporting :RD

and organisational

outcomes

Activity 11#2 Assessi!( t)e c)a!(es !eee

An organisation has decided to pursue a


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6D6RG6N&6 AN9 D6ANING OF :RD

T)e .)i+s.)y * $&

CM adopts a strategic perspective and contributes toorganisational performance by managing staff effectively. Thephilosophy through which this is pursued aims for a win& winsituation for both employer and employee8 the organisation gains

profitability and employees gain not only economically but alsointrinsically through having a satisfying and challenging 2ob. Thisassumes that employees and employer share the same goal & thelong-term success of the organisation. This unitary view 6see)hapter "7 is widely held by the management community 6Deare etal., "##07 and can be contrasted with the pluralist view, whichrecognises the legitimacy of different views & between trade unions,between managerial functions, and between managers and tradeunions.

: distinction within CM itself is between 4hard5 and 4soft5approaches 6torey, /@@", pp. "0&"E8 Hegge, /@@A, pp. 00&0(7. The

former takes a business-led perspective, while the latter seespeople as valuable assets whose motivation, involvement anddevelopment should have priority. :nother theme is that if CM isto support performance, management needs to balance e%ternaland internal fit 69eer and pector, /@EA7.

E9ter!a+ *

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