Organization Structures That Support Strategic Initiatives

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Organizational Structures
That Support Strategic
Initiatives

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Strategic Initiatives
• Of all the possible directions a company
could go, the best one is the direction
that will maximize …
– Core Competencies
– Top Line Revenue
– Net Profit
– Customer Retention
– Employee Retention
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• Divides work to be done into specific jobs and departments.
• Assigns tasks and responsibilities associated with individual jobs.
• Coordinates diverse organizational tasks.
• Clusters jobs into units.
• Establishes relationships among individuals, groups, and departments.
• Establishes formal lines of authority.
• Allocates and deploys organizational resources.
Purposes of Organizing

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Departmentalization by Type
• Functional
– Grouping jobs by functions
performed
• Product
– Grouping jobs by product line
• Geographical
– Grouping jobs on the basis of
territory or geography
• Process
– Grouping jobs on the basis of
product or customer flow
• Customer
– Grouping jobs by type of customer
and needs

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• Advantages
• Efficiencies from putting together similar specialties and
people with common skills, knowledge, and orientations
• Coordination within functional area
• In-depth specialization
• Disadvantages
• Poor communication across functional areas
• Limited view of organizational goals
Functional Departmentalization

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• Advantages
• More effective and efficient handling of specific
regional issues that arise
• Serve needs of unique geographic markets better
• Disadvantages
• Duplication of functions
• Can feel isolated from other organizational areas
Geographic Departmentalization

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+ Allows specialization in particular products and services
+ Managers can become experts in their industry
+ Closer to customers
– Duplication of functions
– Limited view of organizational goals
Product Departmentalization

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+ More efficient flow of work activities
– Can only be used with certain types of products
Process Departmentalization

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+ Customers’ needs and problems can be met by specialists
- Duplication of functions
- Limited view of organizational goals
Customer Departmentalization

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Matrix Organization

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Organization Design
• Centralized - The degree to which decision-making is concentrated at a single point in the
organizations.
– Organizations in which top managers make all the decisions and lower-level employees simply
carry out those orders.
• Decentralized
– Organizations in which decision-making is pushed down to the managers who are closest to the
action.
• Employee Empowerment
– Increasing the decision-making authority (power) of employees.

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• More Centralization
 Environment is stable.
 Lower-level managers are not as capable or experienced at
making decisions as upper-level managers.
 Lower-level managers do not want to have a say in decisions.
 Decisions are relatively minor.
 Organization is facing a crisis or the risk of company failure.
 Company is large.
 Effective implementation of company strategies depends on
managers retaining say over what happens.
Factors that Influence …

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• More Decentralization
 Environment is complex, uncertain.
 Lower-level managers are capable and experienced at making
decisions.
 Lower-level managers want a voice in decisions.
 Decisions are significant.
 Corporate culture is open to allowing managers to have a say in
what happens.
 Company is geographically dispersed.
 Effective implementation of company strategies depends on
managers having involvement and flexibility to make decisions.
Factors that Influence …

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Contingency Factors
• Structural decisions are influenced by:
– Overall strategy of the organization
• Organizational structure follows strategy
– Size of the organization
• Firms change from organic to mechanistic organizations as they grow in size
– Technology use by the organization
• Firms adapt their structure to the technology they use
– Degree of environmental uncertainty
• Dynamic environments require more “Agile” structures & processes; whereas
more stable environments require established structures & processes

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• Define the primary IT
roles along with their
associated
responsibilities.
• Discuss the gap
between IT and
business professionals.
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EXAMPLE – Structure of IT Department

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IT Roles & Responsibilities
• Information technology is a
relatively new functional
area, having been around
formally in most organizations
only for about 40 years.
• Job titles, roles, and
responsibilities often differ
dramatically from organization
to organization.
• Clear trends are developing
toward elevating some IT
positions within an organization
to the strategic level.
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Traditional Strategic Positions
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Chief Executive
Officer
Chief Financial
Officer
Chief Operating
Officer
Chief Information
Officer
Chief Technology
Officer

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Technology Officers & Roles
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CIO’s Job
• The Chief Information Officer (CIO) is
responsible for …
– (1) overseeing all uses of information
technology
– (2) ensuring the strategic alignment
of IT with business goals and
objectives
• The CIO often reports directly to the CEO
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The Gap Between Business & IT
• One of the greatest challenges today is effective communication between business
personnel and IT personnel.
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Business Benefits from IT
• Accurate and speedy
processing of information
• Globalization
• Effective Internal
Communication
• Effective P.R. & Corporate
News Initiatives
• Remote Accessibility
• Profitable Supply Chain
• Reliable H.R. Functions
• Increased Marketing &
Sales Effectiveness
• Creation of New Jobs
• Enhanced Customer
Service
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Privacy
• In today’s electronic world,
privacy has become a major
ethical issue.
• Privacy is the right to be left
alone when you want to be, to
have control over your own
personal possessions, and to
not be observed without your
consent.
• Privacy is one of the biggest
ethical issues facing
organizations today.
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Organization Design Challenges
• Keeping Employees Connected
– Widely dispersed and mobile employees
• Building a Learning Organization
• Managing Global Structural Issues
– Cultural implications of design elements