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“ Sometimes, the more chairs you move around, the more dust you see behind the chairs” High Costs Weak Sales Falling Profits Slow to introduce new products “Four-S Management” Strategy – Simple-Small-Speedy-Strategic What advice would you give President about structural design? What structural changes will enable Matsushita to reduce high internal costs and move quickly to introduce new products? Every firm wrestles with the problem how to organize Reorganization often is necessary to reflect a new strategy, changing market condition or innovative production technology Xerox Corp has restructured itself AT&T broke into three decentralized businesses “Each of these Organizations is using fundamental concepts of organizing” Deciding on how best to group Organizational activities & Resources OR Deployment of Organizational resources to achieve strategic goals OR the process of creating an organization’s structure The organizing process leads to the creation of Organizations structure, which defines how tasks are divided & resources deployed 1. 2. 3. Set of formal tasks assigned to individuals & departments Formal reporting relationships, including line of authority, decision responsibility, number of hierarchical levels and span of managers control Design of systems to ensure effective coordination of employees across departments Just as humans have skeleton that define their shapes, organizations have structures that that define theirs. President VP Accounting Chief Acc Director HR Financial Analyst I R manager Benefits Admin Director Marketing VP Manufacturing Advertising Manger Plant supervisor Accountant Budget Analyst Weaving supervisor Cost clerk Info center Yarn Supervisor Payroll clerk Needling Supervisor Important features of Vertical Structure Org perform a wide variety of tasks Fundamental principle is that work can be performed more efficiently if employees are allowed to specialize Sometimes called division of labor, is the degree to which organizational tasks are subdivided into separate jobs Employees within each department perform only the tasks relevant to their specialized function Specialization • Benefits • Dis-Advantages • Workers performing small, simple tasks will become more proficient at each task • Transfer time btw tasks decreases • More narrowly defined a job is, the easier it is to develop specialized equipment to assist with that job • too much specialization, employees are isolated and do only a single, tiny, boring job • employees become dissatisfied & bored • Absenteeism rises Alternatives Job rotation Job Enlargement Job Enrichment • Moving employee from one job to another • Jobs do not change but instead workers move from job to job… •Example Warehouse •Increase total number of tasks worker perform •Example : Water pumps •Increases both number of tasks & control the worker has over the job •Assigning new & challenging tasks •Example : AT&T typist An unbroken line of authority that links all individuals in the Organization and specifies who reports to whom All persons in the Org should know to whom they report as well as the successive management levels all the way to the top (Org-Chart) Two Components Unity of command Each employee is held accountable to only one supervisor each employee is held accountable to only one supervisor Scalar principle Clearly defined line of authority in the org that includes all employees Authority & responsibility for different tasks should be distinct Authority Responsibility Delegation Formal and legitimate right of a manager to make decisions, issue orders, allocate resources to achieve Org desired outcomes Three Characteristics– Open Book The duty to perform the task or activity an employee has been assigned The process managers use to transfer authority and responsibility to positions below them in the hierarchy Characteristics of Authority 1. Authority is vested in Organizational positions, not people 2. Authority is accepted by subordinates 3. Authority flows down the vertical hierarchy ? Parts of the Delegation Process a. Manager assign responsibility or gives the subordinate a job to do (assignment) b. Assignment + authority to do the job c. Manager establishes the subordinate’s accountability Step 1 Assign responsibility Manager Subordinate Step 2 Granting Authority Manager Subordinate Step 3 Creating accountability Manager Subordinate Line & Staff Authority Span of Management • The number of employees who report to a supervisor; also called span of control • Traditional views recommends 7 subordinates per manager • When Supervisors closely involved with subordinates, the span should be small, & when the supervisor need little involvement with subordinates, it can be large • Factors associated with less supervisor involvement & thus larger spans of control 1. Work performed by subordinates is stable & routine 2. Subordinates perform similar work tasks 3. Subordinate are concerned in a single location 4. Subordinates are highly trained & need little direction in performing tasks 5. Rules & procedures defining task activities are available Tall structure Flat Structure • A management • A management structure structure characterized by an characterized by an overall narrow span of overall broad span of management and a control & relatively relatively large few hierarchical levels number of hierarchical levels Tall Structure CEO McDonald’s President & CEO USA EVP EVP President & CEO international EVP Zone Manager Zone Manager Regional Manager Regional Manager Operations Manager Supervisors Store Manager Shift Manager Crew Persons FLAT STRUCTURE President & CEO • The location of decision authority near top Organizational levels • The process of systematically retaining power and authority in the hands of higher-level managers • The location of decision making authority near lower organizational levels • The process of systematically delegating power and authority throughout the organization to middle and lower level managers • Relieve the burden on top managers 1. Greater change & Uncertainty in the environment are usually associated with decentralization 2. Amount of C or D should fit the firms strategy J&J and Banking Industry switched to centralization to cut costs, speed up etc 3. Crisis or Risk of Company failure, authority may be centralized at the top Honda : could not get agreement among divisions about new car models, President made the decision himself P&G Global Exec VP---Synergy (soup & detergent, health care, beauty) • The written documentation used to direct & control employees • Includes Rule books, Policies, Job descriptions & Regulations • These documents complement the ORG Chart by providing description of tasks, responsibilities, & decision making Departmentalization • The process of grouping jobs, according to some logical order • Another characteristic of Org Structure, grouping individuals/positions into dept’s & dept’s into the total Organization Functional Approach Divisional Approach Team Approach Matrix approach Network Approach •People are grouped together by common skills & work activities • Organization staff all important positions with functional experts & facilitates coordination President V PR&D V P Finance V P Marketing V P Manufacturing Regional Sales Manger District Sales Manger • None of the functional departments can survive without the others….HOW? • Marketing needs product from operations to sell & funds from finance to pay for advertising • Mostly commonly used in small Org because an individual CEO can easily oversee & coordinate the entire Org • • • • Advantages Disadvantages Employees perform common • communication & coordination task are grouped together so across functional dept’s is poor as to permit Eco of scales & efficient use or Resources • Poor coordination means slow Career progress within response to environmental functional dept’s changes, because innovation & High quality technical problem change require involvement of solving several dept’s Excellent Coordination within • Responsibility for problems is functions difficult to pinpoint – product fails • Limited view of Organizational goals by employees Divisional Approach •Organizational structure in which dept’s are grouped based on similar outputs • divisions are created as self contained units for producing a Single product President Division 1 R&D Manufacturing Finance Marketing R&D Theme parks Movies Marketing Finance Merchandising Unit Divisional Structure • Divisional structure is essential for large companies (Time Warner) • Each division is an autonomous business, huge Org produces products for different markets • Important: Employees goals typically are directed toward product success rather their own functional departments Adv & Disadvantages • Excellent coordination across functional departments • Easy pinpointing of responsibility for product problems • Emphasis on overall product & divisional goals • Development of General management skills • Duplication of resources across divisions • Less technical depth & specialization in divisions • Poor coordination across divisions • Competition for corporate resources •Differences of opinion among different dept’s would be resolved at divisional level rather than president •Thus DS encourages decentralization •Decision making is pushed down at least one level in the hierarchy freeing President & other Top managers for Strategic planning Geographic Based Divisions Alternative for assigning divisional responsibility is to group company activities by geographic region President Corporate Staff Western U.S R&D Marketing Easter U.S HR Latin America Finance Asian Division Matrix Approach • It is also known as a multiple command structure. •Employees have two bosses. •It means the employee has to report to both a functional or divisional manager and to a project or group manger. Matrix Structure • • • President VP HR VP F inance VP Marketing Project Head A ------HR----- Finance -------Marketing Project Head B ------HR----- Finance --------Ma rketing Project Head C-------HR------- Finance ------Marke ting Developing a new product Representative chosen from each functional areas to work as a team on the new product They also retain membership in the original functional group Global Matrix Structure •GM of plant producing plastic containers in Germany reports to both head of the plastics products division and the head of German operations •German boss coordinates all the affiliates within Germany and the plastics products boss coordinates the Manufacturing & sale of products around the world CEO Germany Plastic Products Glass Fibers Insulation Latin America Spain Key positions in a Matrix Structure Two Boss employee : reports to 2 supervisor simultaneously Matrix Boss : Product or functional boss, responsible for one side of the matrix Top Leader : overseer of both Product & functional chain of command Top Leader President Matrix Boss Director Engineer Matrix Boss Matrix Boss V.P Medical Product Division Matrix Boss Two Boss Employee Senior Engineer Matrix Boss Matrix Boss Adv & Disadvantages • Team members highly motivated & committed to the Org, assume major role in decision • Opportunity to learn new skills • Efficient use of Human Resource because specialists can be transferred from one division to another • Confusion & frustration caused by the dual chain of command • Difficulty with the dual reporting relationships • Time lost during resolving conflicts regarding goal preferences Network Approach Series of strategic alliances that an Org creates with suppliers, manufacturers & distributors to produce & market a product Southeast Asian Suppliers • Instructions new sole design Sent to Taiwan •Instructions for leather uppers to supplier in Malaysia Strategic Alliances Nike’s Headquarter Design the shoe South Asian Manufacturing • send them for final assembly to China • Strategic alliance is an agreement in which managers share their Organizations resources and know how with a foreign company & the two Organizations share rewards & risks of starting a new venture Advantages & Disadvantages • Global competitiveness • Workforce flexibility • Reduced administrative overhead • NO hands on control • can lose Organizational part • Employee loyalty weakened • TEAM APPROACH • Summary