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Chapter 6:
Organizing Structure
Organization Growth and Change Organization size
Craft or family stage
Entrepreneurial stage
Professional management stage
Time
2
Factors Affecting Organization Structure • Mechanistic Systems – – – –
Rigid delineation of functional duties. Fixed authority and responsibility. Well-developed organizational hierarchy. Information filters up and instructions flow down.
• Organic Systems – – – –
Less formal job descriptions. Greater emphasis on adaptability. More participation. Less fixed authority. 3
Organization and Technology Woodward’s findings: 2.
The number of levels in an organization increased as technical complexity increased.
3.
The ratio of managers and supervisors to total personnel increased as technical complexity increased.
4.
Organic systems predominate in firms at both ends of the scale of technical complexity, while mechanistic systems predominated in firms falling in the middle ranges.
5.
No significant relationship existed between technical complexity and organizational size.
4
Outsourcing • Benefits: – Allowing the organization to emphasize its core competencies by not spending time on routine areas that can be outsourced. – Reducing operating costs by utilizing others who can do the job more efficiently. – Accessing top talent and state-of-the-art technology without having to own it. – Fewer personnel headaches. – Improving resource allocation by allowing growth to take place more quickly. 5
Outsourcing • Drawbacks: – Loss of control and being at the mercy of the vendor. – Loss of in-house skills. – Threat to morale of the workforce if too many areas are dominated by outside vendors. – There is no guarantee that it will save money or provide higher service standards. 6
Variables Affecting Appropriate Organization Structure Objectives of organization Stability of environment
Technology involved
Differences in subunits or organization Strategy of organization
Most appropriate organization structure
National culture Age and tradition
Communication technology
Size of organization
Management approach and style Characteristics of workforce 7
Functional Departmentation President
Vice President, Marketing
Vice President, Production
Vice President, Finance
Advertising Manager
Engineering Manager
Accounting Manager
Sales Manager
Manufacturing Manager
Credit Manager
Market Research Manager
Quality Control Manager
8
Product Departmentation XYZ Corporation
Chemical
Oil and gas
Automotive
Industrial and technology
9
Customer Departmentation
Johnson & Johnson
Consumer group
Professional group
Pharmaceutical group
Industrial group
10
Simplified Line Structure President
Vice President, Sales
Advertising
Sales Personnel
Vice President, Manufacturing
Fabrication
Assembly
11
Simplified Line and Staff Structure President
Assistant to President
Vice President, Personnel
Vice President, Manufacturing
Vice President, Sales
Quality Control
Production Manager
Purchasing
12
Illustrative Matrix Structure Division B Planners and analysts
Production Project Manager Project C
Production Group
Project Manager Project D
Production Group
Engineering
Personnel
Finance
Engineering Group
Personnel Group
Accounting Group
Engineering Group
Personnel Group
Accounting Group 13
Horizontal Structure Characteristics: 2.
The organization is built around three to five core processes, each with an owner or champion.
3.
The hierarchy is flattened to reduce supervision.
4.
Teams manage everything, even themselves. They are held accountable for performance goals.
5.
Customers, not stock appreciation or profitability, drive performance.
6.
Team performance, not just the individual, is rewarded.
7.
Customer contact is maximized with employees.
8.
Emphasis is on informing and training all employees. 14
Virtual Organizations • Benefits: • Increased productivity. • Decreased costs of doing business. • The ability to hire the best talent regardless of location. • Quicker problem solving by dynamic teams. • Easier leverage of both static and dynamic staff. • Improved work environment. • Better balance for professional and personal lives. • Enhanced competitive advantage. 15
Virtual Organizations • Drawbacks: • Leaders must move from a control model to a trust model. • New forms of communication and collaboration are required. • Management must enable a learning culture and be willing to change. • Staff reeducation may be required. • Increased difficulty monitoring employee behavior.
16
Committees and Boards • Committee – Organization structure in which a group of people are formally appointed, organized, and superimposed on the line or line and staff structure to consider or decide certain matters.
• Board of Directors – Carefully selected committee that reviews major policy and strategy decisions proposed by top management. 17
Organizing Structure
Organization Growth and Change Organization size
Craft or family stage
Entrepreneurial stage
Professional management stage
Time
2
Factors Affecting Organization Structure • Mechanistic Systems – – – –
Rigid delineation of functional duties. Fixed authority and responsibility. Well-developed organizational hierarchy. Information filters up and instructions flow down.
• Organic Systems – – – –
Less formal job descriptions. Greater emphasis on adaptability. More participation. Less fixed authority. 3
Organization and Technology Woodward’s findings: 2.
The number of levels in an organization increased as technical complexity increased.
3.
The ratio of managers and supervisors to total personnel increased as technical complexity increased.
4.
Organic systems predominate in firms at both ends of the scale of technical complexity, while mechanistic systems predominated in firms falling in the middle ranges.
5.
No significant relationship existed between technical complexity and organizational size.
4
Outsourcing • Benefits: – Allowing the organization to emphasize its core competencies by not spending time on routine areas that can be outsourced. – Reducing operating costs by utilizing others who can do the job more efficiently. – Accessing top talent and state-of-the-art technology without having to own it. – Fewer personnel headaches. – Improving resource allocation by allowing growth to take place more quickly. 5
Outsourcing • Drawbacks: – Loss of control and being at the mercy of the vendor. – Loss of in-house skills. – Threat to morale of the workforce if too many areas are dominated by outside vendors. – There is no guarantee that it will save money or provide higher service standards. 6
Variables Affecting Appropriate Organization Structure Objectives of organization Stability of environment
Technology involved
Differences in subunits or organization Strategy of organization
Most appropriate organization structure
National culture Age and tradition
Communication technology
Size of organization
Management approach and style Characteristics of workforce 7
Functional Departmentation President
Vice President, Marketing
Vice President, Production
Vice President, Finance
Advertising Manager
Engineering Manager
Accounting Manager
Sales Manager
Manufacturing Manager
Credit Manager
Market Research Manager
Quality Control Manager
8
Product Departmentation XYZ Corporation
Chemical
Oil and gas
Automotive
Industrial and technology
9
Customer Departmentation
Johnson & Johnson
Consumer group
Professional group
Pharmaceutical group
Industrial group
10
Simplified Line Structure President
Vice President, Sales
Advertising
Sales Personnel
Vice President, Manufacturing
Fabrication
Assembly
11
Simplified Line and Staff Structure President
Assistant to President
Vice President, Personnel
Vice President, Manufacturing
Vice President, Sales
Quality Control
Production Manager
Purchasing
12
Illustrative Matrix Structure Division B Planners and analysts
Production Project Manager Project C
Production Group
Project Manager Project D
Production Group
Engineering
Personnel
Finance
Engineering Group
Personnel Group
Accounting Group
Engineering Group
Personnel Group
Accounting Group 13
Horizontal Structure Characteristics: 2.
The organization is built around three to five core processes, each with an owner or champion.
3.
The hierarchy is flattened to reduce supervision.
4.
Teams manage everything, even themselves. They are held accountable for performance goals.
5.
Customers, not stock appreciation or profitability, drive performance.
6.
Team performance, not just the individual, is rewarded.
7.
Customer contact is maximized with employees.
8.
Emphasis is on informing and training all employees. 14
Virtual Organizations • Benefits: • Increased productivity. • Decreased costs of doing business. • The ability to hire the best talent regardless of location. • Quicker problem solving by dynamic teams. • Easier leverage of both static and dynamic staff. • Improved work environment. • Better balance for professional and personal lives. • Enhanced competitive advantage. 15
Virtual Organizations • Drawbacks: • Leaders must move from a control model to a trust model. • New forms of communication and collaboration are required. • Management must enable a learning culture and be willing to change. • Staff reeducation may be required. • Increased difficulty monitoring employee behavior.
16
Committees and Boards • Committee – Organization structure in which a group of people are formally appointed, organized, and superimposed on the line or line and staff structure to consider or decide certain matters.
• Board of Directors – Carefully selected committee that reviews major policy and strategy decisions proposed by top management. 17
