Transcript Chapter 13: Organizational Design - BYU

Chapter 13: Organizational
Design
Creating Effective Organizations
What is Organization Structure
and Design?
1.
2.
3.
4.
An authority system
A communication system
A decision making system
An activities/work system
Key Concepts in Design




Bureaucracy—Creation of formal rules to
solve organizational problems
Mechanistic versus Organic Structures—the
more environmental uncertainty the greater
the need for an organic structure
Differentiation (division of labor) and
Integration (coordinating mechanisms)
Span of Control
Functional Organizational Structures:
“Typical” Functional Organizational Structure
General Manager
Engineering
Manufacturing
Finance and
Accounting
Marketing
Personnel
Research and
Development
Process-Oriented Functional Structure
General Manager
Foundry
And
Castings
Milling
And
Grinding
Screw
Machining
Finishing
And Heat
Treating
Inspection
Loading
And
Shipping
Customer
Service
Billing
And
Accounting
Functional Organizational Structures:
Strategic Advantages/Disadvantages
Strategic Disadvantages
Strategic Advantages



Permits centralized
control of strategic
results
Promotes in-depth
functional expertise
Enhances operating
efficiency where
tasks are routine
and repetitive



Poses problems of
functional
coordination
Can lead to
interfunctional
rivalry, conflict, and
empire-building
May promote
overspecialization/
narrow viewpoints
Geographic Organizational Structure
Chief Executive
Corporate Staff
Finance and Accounting
Personnel
Marketing Services
Legal
Planning
Research and Development
General
Manager
General
Manager
General
Manager
General
Manager
General
Manager
Western
District
Southern
District
Central
District
Northern
District
Eastern
District
District Staff
Personnel
Accounting and Control
Engineering
Production
Marketing
Geographic Organizational
Structures: Strategic
Advantages/Disadvantages
Strategic Advantages



Allows tailoring
of strategy to
needs of each
geographic
market
Improves
coordination
within the market
Takes advantage
of economies of
local operations
Strategic Disadvantages


Greater difficulty in
maintaining
consistent company
image across areas
Can result in
duplication of staff
services at
headquarters and
district levels, making
a relative-cost
disadvantage
Divisional Structure--Usually done by
product or customer/market
Chief Executive Officer
Corporate Staff Services/Functions
R&D
Finance and Corporate Accounting
Marketing Services
Planning
Personnel
Legal Affairs
Public Relations and Communications
Group Vice President
SBU I
Business
Units/Divisions
Group Vice President
SBU II
Business
Units/Divisions
Group Vice President
SBU III
Business
Units/Divisions
Divisional/SBU Type Organization
Structure: Advantages/Disadvantages
Strategic Advantages



Provides a strategically
relevant way to organize
large numbers of
different business units
Improves coordination
within business units
Helps allocate corporate
resources to areas with
greatest growth
opportunities
Strategic Disadvantages




Divisions can still be
myopic in charting
their future direction
Adds another layer to
top management
Little coordination
across divisions
Redundant roles
cause increase
Matrix Organization Structure
General
Manager
Arrows denote
reporting channels
Head of R&D and
Engineering
Head of
Manufacturing
Head of
Marketing
Head of
Finance
Business/ Project/
Venture Manager 1
Engineering/R&D
Specialists
Production
Specialists
Marketing
Specialists
Finance
Specialists
Business/ Project/
Venture Manager 2
Engineering/R&D
Specialists
Production
Specialists
Marketing
Specialists
Finance
Specialists
Business/ Project/
Venture Manager 3
Engineering/R&D
Specialists
Production
Specialists
Marketing
Specialists
Finance
Specialists
Business/ Project/
Venture Manager 4
Engineering/R&D
Specialists
Production
Specialists
Marketing
Specialists
Finance
Specialists
Matrix Organization Structures:
Strategic Advantages/Disadvantages
Strategic Advantages



Gives formal
attention to each
dimension of
strategic priority
Creates checks and
balances among
competing
viewpoints
Promotes making
trade-off decisions
.
Strategic Disadvantages



Very complex to
manage
Hard to maintain
“balance” between
the two lines of
authority
It is hard to move
quickly and
decisively without
getting clearance
from other people
The Network Organization
Designers
Producers
Brokers
Suppliers
Distributors
Process for Creating an
Organization’s Structure
1.
2.
3.
4.
5.
Identify the critical activities needed to carry out
the organization’s strategy
Understand the relationships between these
activities (the degree of interdependence)
Group the activities into organizational units
Determine the degree of authority and
independence of each of these units
Provide for coordination between the various
units.
Source: Thompson
Signs of Poor Organization
Structure and Design
1.
2.
3.
4.
5.
6.
7.
Poor forecasting
Not meeting customer needs
Higher than expected costs
Slow response to changes in the environment
Conflict between individuals and/or groups
Poor communication/coordination
Poor decision making—Decisions being made
by the wrong people or at the wrong level in the
hierarchy. Inadequate information to make good
decisions.