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Ch08 - Organisation theory design and change gareth jones
Ch08 - Organisation theory design and change gareth jones
Ch08 - Organisation theory design and change gareth jones
Ch08 - Organisation theory design and change gareth jones
Ch08 - Organisation theory design and change gareth jones
Ch08 - Organisation theory design and change gareth jones
Ch08 - Organisation theory design and change gareth jones
Ch08 - Organisation theory design and change gareth jones
Ch08 - Organisation theory design and change gareth jones
Ch08 - Organisation theory design and change gareth jones
Ch08 - Organisation theory design and change gareth jones
Ch08 - Organisation theory design and change gareth jones
Ch08 - Organisation theory design and change gareth jones
Ch08 - Organisation theory design and change gareth jones
Ch08 - Organisation theory design and change gareth jones
Ch08 - Organisation theory design and change gareth jones
Ch08 - Organisation theory design and change gareth jones
Ch08 - Organisation theory design and change gareth jones
Ch08 - Organisation theory design and change gareth jones
Ch08 - Organisation theory design and change gareth jones
Ch08 - Organisation theory design and change gareth jones
Ch08 - Organisation theory design and change gareth jones
Ch08 - Organisation theory design and change gareth jones
Ch08 - Organisation theory design and change gareth jones
Ch08 - Organisation theory design and change gareth jones
Ch08 - Organisation theory design and change gareth jones
Ch08 - Organisation theory design and change gareth jones
Ch08 - Organisation theory design and change gareth jones
Ch08 - Organisation theory design and change gareth jones
Ch08 - Organisation theory design and change gareth jones
Ch08 - Organisation theory design and change gareth jones
Ch08 - Organisation theory design and change gareth jones
Ch08 - Organisation theory design and change gareth jones
Ch08 - Organisation theory design and change gareth jones
Ch08 - Organisation theory design and change gareth jones
Ch08 - Organisation theory design and change gareth jones
Ch08 - Organisation theory design and change gareth jones
Ch08 - Organisation theory design and change gareth jones
Ch08 - Organisation theory design and change gareth jones
Ch08 - Organisation theory design and change gareth jones
Ch08 - Organisation theory design and change gareth jones
Ch08 - Organisation theory design and change gareth jones
Ch08 - Organisation theory design and change gareth jones
Ch08 - Organisation theory design and change gareth jones
Ch08 - Organisation theory design and change gareth jones
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Ch08 - Organisation theory design and change gareth jones

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  • 1. 6-Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall 1Organizational Theory,Design, and ChangeSixth EditionGareth R. JonesChapter 6DesigningOrganizationalStructure:Specialization andCoordination
  • 2. 6-Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall 2Functional StructureA functional structure is a design thatgroups people on the basis of theircommon skills, expertise, or resourcesthey useFunctional structure is the bedrock ofhorizontal differentiationAn organization groups tasks intofunctions to increase the effectivenesswith which it achieves its goals
  • 3. 6-Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall 3Figure 6.1: FunctionalStructure
  • 4. 6-Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall 4Figure 6-1: FunctionalStructure (cont.)
  • 5. 6-Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall 5Functional Structure:AdvantagesProvides people with the opportunity tolearn from one another and becomemore specialized and productivePeople who are grouped together bycommon skills can supervise oneanother and control each other’sbehaviorPeople develop norms and values thatallow them to become more effective atwhat they do
  • 6. 6-Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall 6Control Problems in aFunctional Structure Communication Problems: as moreorganizational functions develop, each withtheir own hierarchy, they become increasinglydistant from one another Measurement Problems: information neededto measure the profitability of any functionalgroup is difficult to obtain Location Problems: an organization mustbalance the need for centralized decisionmaking and the need to decentralize regionaloperations
  • 7. 6-Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall 7Control Problems in aFunctional Structure (cont.)Customer Problems: the ability toidentify and satisfy customer needsmay fall short and sales are lostStrategic Problems: top managersspend too much time finding ways toimprove coordination that they havenot time to address the longer term
  • 8. 6-Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall 8Solving the Control ProblemManagers can solve control problemsby redesigning the functional structureto increase integration betweenfunctions
  • 9. 6-Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall 9Figure 6.2: Improving Integration in a FunctionalStructure by Combining Sales and Marketing
  • 10. 6-Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall 10From Functional Structure toDivisional StructureFunctional structure is appropriate ifthe organization: Limits itself to producing a small numberof similar products Produces those products in one or a fewlocations Sells them to only one general type ofclient or customer
  • 11. 6-Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall 11From Functional Structure toDivisional Structure (cont.)As organizations grow, they producemore products and serve many differenttypes of customersA new structure is needed that will Increase manager’s control of individualsubunits Integrate the operation of the wholecompany and ensure subunits are meetingorganizational goals
  • 12. 6-Copyright © 2010 Pearson Education, Inc. Publishing as Prentice HallDifferentiation and IntegrationThis more complex structure is basedon: Increasing vertical differentiation Increasing horizontal differentiation Increasing integration12
  • 13. 6-Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall 13Figure 6.3: Differentiation and Integration:How Organizations Increase Control OverTheir Activities
  • 14. 6-Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall 14Figure 6.3: Differentiationand Integration (cont.)
  • 15. 6-Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall 15Moving to aDivisional Structure Organizations most commonly adopt thedivisional structure to solve control problemsthat arise with too many products, regions, orcustomers The type of divisional structure depends onthe problem to be solved Divisional structure creates smaller, moremanageable subunits and takes the formProduct structureGeographic structureMarket structure
  • 16. 6-Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall 16Product StructureProduct structure: a divisionalstructure in which products (goods orservices) are grouped into separatedivisions according to their similaritiesor differencesOrganizations need to decide how tocoordinate its product activities withsupport functions
  • 17. 6-Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall 17Product Structure (cont.) Product division structure: a structure inwhich a centralized set of support functionsservice the needs of a number of differentproduct lines Each product division uses the services ofthe central support function Support function is divided into product-oriented teams who focus on the needs ofone particular product division
  • 18. 6-Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall 18Figure 6.4: Product DivisionStructure
  • 19. 6-Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall 19Figure 6.5: Assignment of Product-OrientedFunctional Teams to Individual Divisions
  • 20. 6-Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall 20Product Structure (cont.)Multidivisional structure: structurein which support functions are placed independent self-contained divisions withits own set of support functionsCorporate headquarters staff:responsible for overseeing the activitiesof the managers heading each divisionAllows a company to operate in manydifferent businesses
  • 21. 6-Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall 21Figure 6.6: MultidivisionalStructure
  • 22. 6-Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall 22Advantages of aMultidivisional StructureIncreased organizational effectiveness:clear division of labor betweencorporate and divisional managersgenerally increases organizationaleffectivenessIncreased control: extra control canencourage the stronger pursuit ofinternal organizational efficiency bydivisional managers
  • 23. 6-Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall 23Advantages of a MultidivisionalStructure (cont.)Profitable growth: when each division isits own profit center, individualprofitability can be clearly evaluatedInternal labor market: the most abledivisional managers are promoted tobecome corporate managers
  • 24. 6-Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall 24Figure 6.7: Multidivisional Structure inWhich Each Division Has a DifferentStructure
  • 25. 6-Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall 25Disadvantages of aMultidivisional StructureManaging the corporate-divisionalrelationship: finding the balancebetween centralization anddecentralizationCoordination problems betweendivisions: divisions start competing forresources and rivalry preventscooperation
  • 26. 6-Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall 26Disadvantages of aMultidivisional Structure (cont.) Transfer pricing: problems between divisionsoften revolve around the transfer price, i.e.,the price at which one division sells a productor information about innovations to anotherdivision Bureaucratic costs: multidivisional structuresare very expensive to operate Communication problems: tall hierarchiestend to have communication problems,particularly the distortion of information
  • 27. 6-Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall 27Product StructureProduct team structure: specialistsfrom the support functions are createdthat specialize in the needs of particularkind of product Focus on the needs of one product (or client) or afew related productsEach team is a self-contained divisionheaded by a product team manager
  • 28. 6-Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall 28Figure 6.8: Product TeamStructure
  • 29. 6-Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall 29Divisional Structure II:Geographic StructureWhen the control problems thatcompanies experience are a functionof geography, a geographic divisionalstructure is appropriateAllows the organization to adjust itsstructure to align its core competenceswith the needs of customers indifferent geographic regionsAllows some functions to becentralized and others decentralized
  • 30. 6-Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall 30Figure 6.9: Geographic Structure
  • 31. 6-Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall 31Divisional Structure III:Market StructureA market structure aligns functionalskills and activities with the needs ofdifferent customer groupsEach customer group has a differentmarketing focus, and the job of eachgroup is to develop products to suit theneeds of its specific customersEach customer group makes use ofcentralized support function
  • 32. 6-Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall 32Figure 6.11: Market Structure
  • 33. 6-Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall 33Matrix Structure Matrix structure: an organizational designthat groups people and resources in two wayssimultaneously, by function and product A matrix is a rectangular grid that shows avertical flow of functional responsibility and ahorizontal flow of product responsibility The members of the team are called two-boss employees because they report to twosuperiors: the product team manager and thefunctional manager The team is the building block and principalcoordination and integration mechanism
  • 34. 6-Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall 34Figure 6.12: Matrix Structure
  • 35. 6-Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall 35Advantages of aMatrix Structure The use of cross-functional teams reducesfunctional barriers and subunit orientation Opens communication between functionalspecialists The matrix enables an organization tomaximize its use of skilled professionals, whomove from product to product as needed The dual functional and product focuspromotes concern for both cost and quality
  • 36. 6-Copyright © 2010 Pearson Education, Inc. Publishing as Prentice HallCopyright 2010 Prentice Hall 36Disadvantages of aMatrix Structure Matrix lacks a control structure that leadsemployees to develop stable expectations ofone another The lack of a clearly defined hierarchy ofauthority can also lead to conflict betweenfunctions and product teams over the use ofresources People are likely to experience a vacuum ofauthority and responsibility People then create their own informalorganization to provide themselves with somesense of structure and stability
  • 37. 6-Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall 37The MultidivisionalMatrix StructureMultidivisional matrix structure: astructure that provides for moreintegration between corporate anddivisional managers and betweendivisional managersMakes it easier for top executives fromdivisions and corporate headquartersto cooperate and jointly coordinateorganizational activities
  • 38. 6-Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall 38Figure 6.13: MultidivisionalMatrix Structure
  • 39. 6-Copyright © 2010 Pearson Education, Inc. Publishing as Prentice HallHybrid StructureHybrid structure: large complexorganizations that have many divisionsmake use of many different structuresEach product division’s managerselects the structure (functional,product, geographic) that best meetsthe needs of their particularenvironment and strategy39
  • 40. 6-Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall 40Network Structure Network structure: a cluster of differentorganizations whose actions are coordinatedby contracts and agreements rather thanthrough a formal hierarchy of authority Very complex as companies form agreementswith many suppliers, manufacturers, anddistributors Such agreements are necessary as theorganization outsources many of the valuecreation activities involved in production andmarketing goods and services
  • 41. 6-Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall 41Advantages of NetworkStructures If a network partner can perform a specificfunctional activity reliably, and at a lower cost,production costs are reduced Avoids the high bureaucratic costs ofoperating a complex organizational structure Allows an organization to act in an organicway Network partners can be replaced if they donot perform up to standards If network partners fail to perform, they canbe easily replaced
  • 42. 6-Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall 42Disadvantages of NetworkStructuresA considerable level of mutualadjustment is needed to allow thegroups to interact so that they canlearn from one another and constantlyimprove the productAbility to control a complex value-creation process is difficult becausemanagers lack the means to effectivelycoordinate and motivate the variousnetwork partners
  • 43. 6-Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall 43The BoundarylessOrganizationBoundaryless organization:composed of people who are linked bycomputers, faxes, CAD systems, andvideo conferencingThe use of outsourcing and thedevelopment of network organizationare increasing rapidly as organizationsrecognize the many opportunities theyoffer to reduce costs and increaseflexibility
  • 44. 6-Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall 44E-commerce E-commerce: trade that takes placebetween companies, and between companiesand individual customers, using IT and theInternet Business-to-business (B2B): trade thattakes place between companies that linksand coordinates their value chains B2B marketplace: industry-specific trading networkconnecting buyers and sellers Business-to-customer (B2C): trade thattakes place between a company and itsnetwork of individual customers using IT andthe Internet
  • 45. 6-Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall 45Figure 6.15: Types ofE-Commerce

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