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Organizational Design – Organizational Structure Team teaching Laboratory of Sytem Development and Industrial Management (PSMI) Departemen of Industrial Engineering Institut Teknologi Sepuluh Nopember (ITS) 2011
Group Discussion Discuss the following topics concerning with your study case! Look at your organization, Explore the structure – whether it is established or not, why do they choose this structure, is there any changes from the first launch of the structure? What are the consideration? Explore the issue of: Vertical vs horizontal integration Communication Response to challenge and environmental changes Authority & Control 4. Discuss the autority and control within your organization, and link with your exploration (point 1-2) Copyright 2004 Prentice Hall 2
Alignment Framework Business Strategy Organization Structure Human Resources Management “HR systems and theorganization structure should be managed in a way that is congruent withorganizational strategy (hence the name ‘matching model)” (Fombrun et al, 1984). 3
4 Naomi Stanford, 2007, “Guide to Organisational Design” 4
By the end of today’s class, students will: Be able to explain what organizational design is Be able to explain the main consideration of designing the organization Session objectives 5
Functional Structure Copyright 2004 Prentice Hall 11
12 Functional Structure A functional structure is a design that groups people on the basis of their common skills and expertise or resources they use. Functional structure is the bedrock of horizontal differentiation. An organization groups tasks into functions to increase the effectiveness with which it achieves its goals.
Functional Structure: Advantages 14 Provides people with the opportunity to learn from one another and become more specialized and productive People who are grouped together by common skills can supervise one another and control each other’s behavior. People develop norms and values that allow them to become more effective at what they do.
Control Problems in a Functional Structure Communication Problems: As more organizational functions develop, each with their own hierarchy, they become increasingly distant from one another. Measurement Problems: Information needed to measure the profitability of any functional group is difficult to obtain. Location Problems: Does not allow handling of sales on a geographic basis 15
Functional Structure: Control Problems 16 Customer Problems: Servicing needs of new kinds of customers are difficult. Strategic Problems: Top managers spend too much time finding ways to improve coordination.
17 Solving the Control Problem Managers can solve control problems by redesigning the functional structure between functions.
19 Divisional Structure I: Product Structure Product structure: a divisional structure in which products (goods or services) are grouped into separate divisions according to their similarities or differences Organizations need to decide how to coordinate its product activities with support functions. Three kinds of product structure
20 Product Division Structure Product division structure: a structure in which a centralized set of support functions service the needs of a number of different product lines Divided into product-oriented teams of functional specialists who focus on the needs of one particular product division
23 Divisional Structure II: Geographic Structure When the control problems that companies experience are a function of geography, a geographic divisional structure is appropriate. Allows the organization to adjust its structure to align its core competences with the needs of customers in different geographic regions Allows some functions to be centralized and others decentralized
Divisional Structure III : Market Structure A market structure aligns functional skills and activities with the needs of different customer groups. Each customer group has a different marketing focus, and the job of each group is to develop products to suit the needs of its specific customers. Each customer group makes use of centralized support function. 25