Transcript G.T. Payne

Managing Innovation
and Change
Structure (4)
Dr. Tyge Payne (with Dr. Keith Brigham)
Office: BA1015
Office Phone: (806) 742-1514
Email: [email protected]
Structure

Definition: “the sum total of the ways in which an
organization divides its labor into distinct tasks and then
coordinates them.”



“the distributions, along various lines, of people among social positions that
influence the role relations among these people” (Blau, 1974).
“a complex medium of control which is continually produced and recreated
in interaction and yet shapes that interaction: structures are constituted and
constitutive” (Ranson, Hinings & Greenwood, 1980).
Basically, structure is an arrangement of parts that serve
three basic functions:
1. To produce outputs or achieve goals the best way possible.
2. To minimize the influence of individual variations on the
organization.
3. To establish the basis for power and decision-making,
communications, information, and activity flow in the organization.
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Purposes of Structure

Differentiation / Division of Labor
 Ability to perform tasks more effectively and efficiently than individuals
working alone
 Specialization and specifically designated tasks

Coordination
 Create activities towards a productive goal while still operating separately
 Rules and procedures used for this purpose

Integration
 Come together and create something new by combining knowledge and
operating as a unit
 Teams and task forces often used for this purpose
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Structural Forms

Recall Weber’s (1947) description of the ideal type of
bureaucracy:
1.
2.
3.
4.
5.
6.
7.

Hierarchy of Authority
Limited Authority
Division of Labor
Technically Competent Participants
Procedures for Work
Rules for Incumbents
Differential Rewards
But not all organizations resemble this ideal type. Burns
& Stalker (1961) recognized this and developed a
continuum of organizational forms identifying the
“mechanistic” and the “organic” forms.
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Dimensions of Structure

Complexity: Creation of distinct tasks and responsibilities within the
firm. The more complex an organization is, the more complex it will
become.
 Types of Complexity or Differentiation




Degree of Specialization (horizontal differentiation)
Levels of Hierarchy (vertical differentiation)
Geographic Spread or Dispersion
Control/Centralization: Design of hierarchy to supervise various
differentiated elements. The distribution of power within the firm or
the level and variety of participation in strategic decisions by groups
relative to the number of groups in an organization (Hage, 1980)
 Extent to which authority for decision making is held at higher
levels of the organization



Higher levels - Centralization
Lower levels - Decentralization
Formalization: Extent to which rules and procedure govern the
actions of individuals and groups within the organization

Consists of rules and procedures as well as tradition and culture.

Too Low = Uncertainty about authority and responsibility
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Too High = Limit innovation and creativity
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5
Vertical Differentiation
Tall
Organization
Flat
Organization
Governing Body
President / CEO
Senior Vice
President
VP
President / CEO
Director Director
Director Director
Director
Senior Vice
President
VP
VP
VP
Director Director Director Director Director Director Director Director
Director
Director
Director
Example: U.S. Army
Example: University
General >>>>>>>>>Private
President > Provost > Dean > Chair > Professor
Low Vertical Complexity <<< High Vertical Complexity
Few Hierarchical Levels <<< Many Hierarchical Levels
Broad Span of Control <<< Narrow Span of Control
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Tall vs Flat Designs
Horizontal Organization
Designed for Learning
Dominant
Structural
Approach
Horizontal structure is dominant
• Shared tasks, empowerment
• Relaxed hierarchy, few rules
• Horizontal, face-to-face communication
• Many teams and task forces
• Decentralized decision making
Vertical structure is dominant
• Specialized tasks
• Strict hierarchy, many rules
• Vertical communication and reporting systems
• Few teams, task forces or integrators
• Centralized decision making
Vertical Organization
Designed for Efficiency
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Centralization

Centralization: Extent to which rules and procedure
govern the actions of individuals and groups within
the organization
Don’t confuse with vertical differentiation, although
they are often correlated.
Decentralized decision making may lead to more
localized concerns taking the forefront rather than the
organization’s interests.

Organizations relying heavily on centralization
assume that employees may lack the information,
knowledge, skills, and good judgment to solve
problems or make decisions.

EXAMPLES??
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Formalization

Formalization: Extent to which rules and procedure
govern the actions of individuals and groups within
the organization
Consists of rules and procedures as well as tradition and
culture.
Unwritten norms and standards can be just as binding as
those in writing…but written systems are generally used
to measure formalization.


Organizations relying heavily on formalization
assume that employees may lack the information,
knowledge, skills, judgments, or self-control
necessary to coordinate diverse sets of tasks in the
organization.
EXAMPLES??
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Other Terms

Span of Control: The number of immediate
subordinate positions a superior position controls or
coordinates.
Broader spans of control linked to flatter
organizations; narrower, taller.

Standardization: Reduces the uncertainty and
unpredictability of organizational work. Comes
throughProcess – how to guidelines on output
Specifications – human resources or raw material
inputs listing requirements for each.
Inspection specifications – ensures final product or
service is delivered according to specific requirements.
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Mechanistic vs. Organic
Structural
Characteristics
Mechanistic
Organic
Complexity
High Vertical and
Horizontal
Low Vertical and
Horizontal
Formalization
High
Low
Centralization
High
Centralization
High
Decentralization
Spans of Control
Narrow
Broad
Standardization
High
Low
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Types of Structures
Need to focus on task efficiency
Functional Structure
Grouping by function
Matrix Structure
Grouping by function and purpose
Divisional Structure
Primary grouping by purpose;
secondary grouping by function
Multidivisional Structure
Primary grouping by purpose;
secondary grouping by purpose;
lowest grouping by function
Need to focus on purpose
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Functional Forms
Traditional
Functional
General Manager Structure
Process-Oriented
Functional Structure
General Manager
Research &
Development
Manufacturing
Engineering
Foundry &
Castings
Screw
Machining
Milling &
Grinding
Inspection
Finishing &
Heat Treating
Marketing
Human
Resources
Finance &
Accounting
Customer
Service
Loading &
Shipping
Billing &
Accounting
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S/W of Traditional Functional Structure

STRENGTHS:
– Allows economies of
scale within functional
departments
– Enables in-depth
knowledge and skill
development
– Enables organization to
accomplish functional
goals
– Is best with only one or
a few products

WEAKNESSES:
– Slow response time to
environmental changes
– May cause decisions to pile on
top, hierarchy overload
– Leads to poor horizontal
coordination among
departments
– Results in less innovation
– Involves restricted view of
organizational goals
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S/W of Process Functional Structure
(aka, Horizontal Structure)

STRENGTHS:

 Flexibility and rapid response to
changes in customer needs
 Directs the attention of everyone
toward the production and delivery of
value to the customer
 Each employee has a broader view of
organizational goals
 Promotes a focus on teamwork and
collaboration—common commitment
to meeting objectives
 Improves quality of life for employees
by offering them the opportunity to
share responsibility, make decisions,
and be accountable for outcomes
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WEAKNESSES:
 Determining core processes to
organize around is difficult and
time-consuming
 Requires changes in culture, job
design, management philosophy,
and information and reward
systems
 Traditional managers may balk
when they have to give up power
and authority
 Requires significant training of
employees to work effectively in
a horizontal team environment
 Can limit in-depth skill
development
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Divisional Forms
Geographic
Structure
GM
GM
North America Latin America
CEO
Corporate
Staff
GM
Europe
GM
GM
Central Asia &
Asia Pacific
Africa
Decentralized Line-ofBusiness Structure
District
Staff
Engineering &
Prod. Design
Production
Marketing &
Distribution
CEO
Corporate
Services
GM
Business A
GM
Business B
GM
Business C
Functional/Process
Departments
Functional/Process
Departments
Functional/Process
Departments
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S/W of Divisional Structure

STRENGTHS:

 Suited to fast change in unstable
environment
 Leads to client satisfaction
because product responsibility and
contact points are clear
 Involves high coordination across
functions
 Allows units to adapt to
differences in products, regions,
clients
 Best in large organizations with
several products
 Decentralizes decision-making
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WEAKNESSES:
 Eliminates economies of
scale in functional
departments
 Leads to poor coordination
across product lines
 Eliminates in-depth
competence and technical
specialization
 Makes integration and
standardization across
product lines difficult
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Matrix Forms
General Manager
Example:
Biotech Firm
Head
R&D
Head
Manufacture
Head
Marketing
Head
Finance
Venture
Manager 1
R&D
Specialists
Production
Specialists
Marketing
Specialists
Finance
Specialists
Venture
Manager 2
R&D
Specialists
Production
Specialists
Marketing
Specialists
Finance
Specialists
Venture
Manager 3
R&D
Specialists
Production
Specialists
Marketing
Specialists
Finance
Specialists
R&D
Specialists
Production
Specialists
Marketing
Specialists
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Venture
Manager 4
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Finance
Specialists
S/W of Matrix Structure

STRENGTHS:

 Achieves coordination
necessary to meet dual
demands from customers
 Flexible sharing of human
resources across products
 Suited to complex decisions
and frequent changes in
unstable environment
 Provides opportunity for both
functional and product skill
development
 Best in medium-sized
organizations with multiple
products
WEAKNESSES:
 Causes participants to experience
dual authority, which can be
frustrating and confusing
 Means participants need good
interpersonal skills and extensive
training
 Is time consuming; involves frequent
meetings and conflict resolution
sessions
 Will not work unless participants
understand it and adopt collegial
rather than vertical-type relationships
 Requires great effort to maintain
power balance
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Hybrids Do Exist
Sun Petrochemical
Functional
Structure
Product
Structure
Chief
Counsel
President
Human
Resources
Director
Fuels
Vice
President
Technology
Vice
President
Lubricants
Vice
President
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Financial
Services
Vice Pres.
Chemicals
Vice
President
20
Hybrids Do Exist
Ford Customer
Service Division
Functional
Structure
Horizontal Structure
Director and
Process Owner
Vice President and
General Manager
Strategy and
Communication
Finance
Human
Resources
Teams
Parts Supply / Logistics Group
Director and
Process Owner
Teams
Vehicle Service Group
Director and
Process Owner
Teams
Technical Support Group
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Structure & Fit

Organizations may diversify or reorganize to
better fit their environments.




They adapt forms to fit culture
They try to differentiate themselves from
others (not conforming to institutional
pressures)
Technologies may limit or enhance options.
Decisions made in regard to attempted
strategies affect structure.
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A Visual Representation of
Structure-Environment/Strategy
Fit in a Corporation
Environment
Corporate
Strategy
A
Business
Strategy
2
B
Business
Strategy
1
Corporate Structure
3
Business Structure A
5
4
Business Structure B
Environment
5
Structure Follows Strategy
Strategy is Created
Problems Emerge
Economic Performance Declines
Profit
Does Not
Return
Improve
New Appropriate Structure Applied
Profit Level Improves
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Structure Fit with Various Factors
Factor
Mechanistic
Organic
1.Size
Larger
Smaller
2.Strategy
Cost-minimization,
imitation
Innovation, single
product line
3.Technology
Mass production,
routine tasks, welldefined problems
4.Environment
Placid-randomized,
placid-clustered
Unit production,
intensive technology
(combining services
tailored to customer),
non-routine tasks, illdefined problems
Disturbed-reactive,
turbulent field
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