Transcript 3360-03.ppt
Chapter Three Fundamentals of Organization Structure Thomson Learning © 2004 3-1 A Sample Organization Chart CEO Vice President Finance Chief Accountant Budget Analyst Vice President Manufacturing Plant Superintendent Maintenance Superintendent Thomson Learning © 2004 Director Human Resources Training Specialist Benefits Administrator 3-2 Organizational Structures Functional Functional + Cross- Functional Linkages Divisional Matrix Horizontal Modular Hybrid Thomson Learning © 2004 3-3 Symptoms of Structural Deficiency Decision making is delayed / poor quality: Overloaded at top Insufficient delegation to bottom Diagnosis: Inadequate vertical (esp.) linkages Thomson Learning © 2004 3-4 Symptoms of Structural Deficiency Lack of adaptive response: departmental ‘walls’ internal focus Diagnosis: Inadequate horizontal and external linkages Thomson Learning © 2004 3-5 Symptoms of Structural Deficiency Too much conflict is evident: Lack of goal congruence Sub-optimization Diagnosis: Inadequate horizontal linkages Thomson Learning © 2004 3-6 The Relationship of Organization Design to Efficiency vs. Learning Outcomes Horizontal Organization Designed for Learning (Exploration) 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 (Exploitation) Thomson Learning © 2004 3-7 Ladder of Non-Structural Mechanisms for Vertical Linkage and Coordination Amount of Horizontal Coordination Required H IGH Vertical Information Systems Rules & Plans LOW Hierarchical Referral LOW HIGH Information Capacity of Linkage Mechanism Thomson Learning © 2004 3-8 Ladder of Non-Structural Mechanisms for Horizontal Linkage and Coordination Teams Amount of Horizontal Coordination Required H IGH Full-time Integrators Task Forces Direct Contact LOW Information Systems LOW HIGH Cost of Coordination in Time and Human Resources Thomson Learning © 2004 3-9 Project Manager Location in the Structure (Full-time Integrators) President Finance Department Financial Accountant Budget Analyst Management Accountant Engineering Department Product Designer Draftsperson Electrical Designer Marketing Department Market Researcher Purchasing Department Buyer Buyer Project Manager New Product B Buyer Project Manager New Product C Advertising Specialist Market Planner Thomson Learning © 2004 Project Manager New Product A 3-10 Teams Used for Horizontal Coordination at Wizard Software Company President Marketing Vice Pres. Videogames Sales Manager Programming Vice Pres Videogames Chief Engineer Memory Products International Manager Advertising Manager Videogames Basic Research Supervisor Applications and Testing Supervisor Videogames Product Team Memory Products Sales Manager Research Vice Pres Memory Products Chief Programmer Memory Products Research Supervisor Memory Products Team Customer Service Manager Thomson Learning © 2004 Procurement Supervisor 3-11 Structural Design Options for Grouping Employees into Departments Functional Grouping CEO Engineering Marketing Divisional Grouping Product Division 1 Manufacturing CEO Product Division 2 Product Division 3 Source: Adapted from David Nadler and Michael Tushman, Strategic Organization Design (Glenview, Ill.: Scott Foresman, 1988), 68. Thomson Learning © 2004 3-12 Strengths and Weaknesses of Functional Organization 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 Source: Adapted from Robert Duncan, “What Is the Right Organization Structure? Decision Tree Analysis Provides the Answer,” Organizational Dynamics (Winter 1979): 429. 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 Thomson Learning © 2004 3-13 Geographical Structure for Apple Computer CEO Steve Jobs Apple Products Apple Americas Apple Europe Apple Pacific Canada France Australia Latin America/ Caribbean Sales Service and Marketing to Regions Source: www.apple.com Thomson Learning © 2004 Japan Asia 3-14 Strengths and Weaknesses of Divisional Organization 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 Source: Adapted from Robert Duncan, “What Is the Right Organization Structure? Decision Tree Analysis Provides the Answer,” Organizational Dynamics (Winter 1979): 431. Thomson Learning © 2004 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 3-15 Reorganization from Functional Structure to Divisional Structure at Info-Tech Functional Structure Info-Tech President R&D Manufacturing Divisional Structure R&D Accounting Marketing Info-Tech President Electronic Office Virtual Publishing Automation Reality Mfg Acctg Mktg R&D Mfg Acctg Thomson Learning © 2004 Mktg R&D Mfg Acctg Mktg 3-16 Structural Design Options for Grouping Employees (Continued) Multifocused Grouping CEO Marketing Manufacturing Product Division 1 Product Division 2 Source: Adapted from David Nadler and Michael Tushman, Strategic Organization Design (Glenview, Ill.: Scott Foresman, 1988), 68. Thomson Learning © 2004 3-17 Dual-Authority Structure in a Matrix Organization President Director of Product Operations Design Vice President Mfg Vice President Marketing Vice President Controller Procurement Manager Product Manager A Product Manager B Product Manager C Product Manager D Thomson Learning © 2004 3-18 Strengths and Weaknesses of Matrix Organization 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 Source: Adapted from Robert Duncan, “What Is the Right Organization Structure? Decision Tree Analysis Provides the Answer,”Organizational Dynamics (Winter 1979): 429. 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 ThomsonLearning Requires great effort to maintain © 2004 3-19 power balance Structural Design Options for Grouping Employees (Continued) Horizontal Grouping CEO Human Resources Finance Core Process 1 Core Process 2 Source: Adapted from David Nadler and Michael Tushman, Strategic Organization Design (Glenview, Ill.: Scott Foresman, 1988), 68. Thomson Learning © 2004 3-20 A Horizontal Structure Top Management Team Process Owner Team 1 Market Analysis Research Team 2 Product Planning Team 3 Testing Customer New Product Development Process Process Owner Team 1 Analysis Sources: Based on Frank Ostroff, The Horizontal Organization, (New York: Oxford University Press, 1999); John A. Byrne, “The Horizontal Corporation,” Business Week, December 20, 1993, 76-81; and Thomas A. Stewart, “The Search for the Organization of Tomorrow,” Fortune, May 19, 1992, 92-98. Purchasing Team 2 Material Flow Team 3 Distrib. Customer Procurement and Logistics Process Thomson Learning © 2004 3-21 Strengths and Weaknesses of Horizontal Structure STRENGTHS: WEAKNESSES: 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 Thomson Learning © 2004 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 3-22 Modular Structure Cutting Edge Design People ‘R’ Us Product Design HR Admin Widgets Inc. Build Masters Manufacturing Ace Logistics Procurement & Distribution Thomson Learning © 2004 3-23 Strengths and Weaknesses of Modular Design - - - - Strengths Enables small org’s to obtain talent & resources worldwide Gives immediate reach & scale without large investments in factories, equip, distribution Enables the org to be highly flexible & responsive to change Reduces administrative overhead costs - - - - Weaknesses Managers do not have hands-on control of many activities and employees (Quality assurance) Requires time & skill to manage relationships and possible conflict with contract partners There is a risk of organizational failure if a partner fails to deliver or goes out of business Employee commitment weakened by divided loyalties and feeling that can be replaced Thomson Learning © 2004 3-24 Hybrid Structure Part 1. Sun Petrochemical Products President Functional Structure Product Structure Human Resources Director Chief Counsel Fuels Vice President Sources: Based on Linda S. Ackerman, “Transition Management: An In-Depth Look at Managing Complex Change,” Organizational Dynamics (Summer 1982): 46-66; and Frank Ostroff, The Horizontal Organization, (New York: Oxford University Press, 1999), Fig. 2.1, 34. Technology Vice President Lubricants Vice President Thomson Learning © 2004 Financial Services Vice Pres. Chemicals Vice President 3-25 Hybrid Structure Part 2. Ford Customer Service Division Vice President and General Manager Horizontal Structure Functional Structure Director and Process Owner 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 Sources: Based on Linda S. Ackerman, “Transition Management: An In-Depth Look at Managing Complex Change,” Organizational Dynamics (Summer 1982): 46-66; and Frank Ostroff, The Horizontal Organization, (New York: Oxford University Press, 1999), Fig. 2.1, 34. Thomson Learning © 2004 3-26 The Relationship of Structure to Organization’s Need for Efficiency vs. Learning Functional with Functional cross-functional Divisional Matrix Horizontal Modular Structure teams, integrators Structure Structure Structure Structure Horizontal: • Coordination • Learning • Innovation • Flexibility Dominant Structural Vertical: • Control Approach • Efficiency • Stability • Reliability Thomson Learning © 2004 3-27