8

8-1

Organizational
Structure

Irwin/McGraw-Hill

©The McGraw-Hill Companies, Inc., 2000
8-2

Designing Organizational Structure
Organizing:

the process by which managers
establish working relationships among
...
8-3

Factors Affecting Organizational Design
Figure 8.1

Environment

Strategy

Determine design
Determine design
or organ...
8-4

Determinants of Structure
The environment: The quicker the environment
changes, the more problems face managers.
 St...
8-5

Determinants of Structure


Technology: The combination of skills, knowledge, tools,
equipment, computers and machin...
8-6

Technology & People
Small Batch Technology: produces small quantities of
one-of-a-kind products.
 Based on the skill...
8-7

Determinants of Structure
Human Resources: the final factor affecting
organizational structure.
 Higher skilled work...
8-8

Job Design
Job

Design: group tasks into specific jobs.

 Results







in a division of labor between workers ...
8-9

Job Characteristics Model

Figure 8.2

Skill Variety
Skill Variety
Task Identity
Task Identity
Task Significance
Task...
8-10

Job Characteristics Model
Jobs have five characteristics describing extent of:
– Skill variety: employee uses a wide...
8-11

Grouping Jobs into Functions
Once

tasks are grouped into jobs,
managers must decide how to group jobs
together.

...
8-12

A Sample of Pier 1’s Functional Structure
Figure 8.3
Clark Johnson
CEO

Exec. V.P.
Finance & Admin.

Senior V. P.
St...
8-13

Divisional Structures
A

division is a collection of functions working
together to produce a product.
 Divisions

...
8-14

Product Structure
Figure 8.4a

CEO
Corporation
Corporate
Managers

Washing Machine
Division

Irwin/McGraw-Hill

Ligh...
8-15

Figure 8.4 b

Geographic Structure
CEO
Corporation
Corporate
Managers

Northern
Region

Irwin/McGraw-Hill

Western
R...
8-16

Market Structure
Figure 8.4c
CEO
Corporation
Corporate
Managers
Large Business
Customers

Irwin/McGraw-Hill

Small B...
8-17

Global Structures
When

managers find different problems or
demands across the globe, global solutions are
needed.
...
8-18

Matrix & Product Teams


Matrix structure: managers group people by function
and product teams simultaneously.
 Re...
8-19

Figure 8.7a

Matrix Structure
CEO
Func.
Managers

Team Managers

Sales

Design

Production

Product
team A
Product
t...
8-20

Figure 8.7b

Product Team Structure
CEO
Func.
Managers
Sales

Manufacturing

Design

Manufacturing

= Product Team M...
8-21

Hybrid Structures
Many

large organizations have divisional
structures where each manager can select the
best struc...
8-22

Coordinating Functions
To

ensure sufficient coordination between
functions, managers delegate authority.
Authority...
8-23

Tall & Flat Organizations




Tall structures have many levels of authority relative to
the organization’s size.
...
8-24

Minimum Chain of Command


Managers should carefully evaluate:
 Do they have the right number of middle managers?
...
8-25

Integrating Mechanisms










Direct contact: get managers from different divisions or
functions together to...
8-26

Strategic Alliances
Strategic

alliance: a formal agreement
committing two or more firms to exchange
resources to p...
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Chpt08

  1. 1. 8 8-1 Organizational Structure Irwin/McGraw-Hill ©The McGraw-Hill Companies, Inc., 2000
  2. 2. 8-2 Designing Organizational Structure Organizing: the process by which managers establish working relationships among employees to achieve goals.   Organizational Structure: formal system of task & reporting relationships showing how workers use resources. Organizational design: managers make specific choices resulting in a given organizational structure. Successful organizational design depends on the organization’s unique situation. Irwin/McGraw-Hill ©The McGraw-Hill Companies, Inc., 2000
  3. 3. 8-3 Factors Affecting Organizational Design Figure 8.1 Environment Strategy Determine design Determine design or organizational or organizational structure structure Technology Human Resources Irwin/McGraw-Hill ©The McGraw-Hill Companies, Inc., 2000
  4. 4. 8-4 Determinants of Structure The environment: The quicker the environment changes, the more problems face managers.  Structure must be more flexible when environmental change is rapid.  Usually need to decentralize authority. Strategy: Different strategies require the use of different structures.  A differentiation strategy needs a flexible structure, low cost may need a more formal structure.  Increased vertical integration or diversification also requires a more flexible structure. Irwin/McGraw-Hill ©The McGraw-Hill Companies, Inc., 2000
  5. 5. 8-5 Determinants of Structure  Technology: The combination of skills, knowledge, tools, equipment, computers and machines used in the organization.  More complex technology makes it harder for managers to regulate the organization. Technology can be measured by:   Task Variety: new problems a manager encounters. Task Analyzability: programmed solutions available to a manager to solve problems.  High task variety and low analyzability present many unique problems to managers.  Flexible structure works best in these conditions.  Low task variety and high analyzability allow managers to rely on established procedures. Irwin/McGraw-Hill ©The McGraw-Hill Companies, Inc., 2000
  6. 6. 8-6 Technology & People Small Batch Technology: produces small quantities of one-of-a-kind products.  Based on the skills of the workers who need a flexible structure. Mass Production Technology: automated machines make high volumes of standard products.  Workers perform repetitive tasks so a formal structure works well. Continuous Process Technology: totally mechanized systems of automatic machines.  Workers must watch for unexpected problems and react quickly. A flexible structure is needed here. Irwin/McGraw-Hill ©The McGraw-Hill Companies, Inc., 2000
  7. 7. 8-7 Determinants of Structure Human Resources: the final factor affecting organizational structure.  Higher skilled workers who need to work in teams usually need a more flexible structure.  Higher skilled workers often have professional norms (CPA’s, physicians). Managers must take into account all four factors (environment, strategy, technology and human resources) when designing the structure of the organization. Irwin/McGraw-Hill ©The McGraw-Hill Companies, Inc., 2000
  8. 8. 8-8 Job Design Job Design: group tasks into specific jobs.  Results    in a division of labor between workers that is effective and efficient. Job simplification: reduction of the tasks each worker performs.  Too much and boredom results. Job enlargement: increase tasks for a given job to reduce boredom. Job enrichment: increases the degree of responsibility a worker has over a job.  can lead to increased worker involvement. Irwin/McGraw-Hill ©The McGraw-Hill Companies, Inc., 2000
  9. 9. 8-9 Job Characteristics Model Figure 8.2 Skill Variety Skill Variety Task Identity Task Identity Task Significance Task Significance Meaningfulness Meaningfulness of work of work Autonomy Autonomy Responsibility Responsibility for Work for Work Outcomes Outcomes Feedback Feedback Knowledge of Knowledge of results of results of work work Irwin/McGraw-Hill High: High: Motivation Motivation Performance Performance Satisfaction Satisfaction ©The McGraw-Hill Companies, Inc., 2000
  10. 10. 8-10 Job Characteristics Model Jobs have five characteristics describing extent of: – Skill variety: employee uses a wide range of skills – Task identity: worker involved in all tasks of job from beginning to end of the production process – Task significance: worker feels the task is meaningful to organization. – Autonomy: employee has freedom to schedule tasks and carry them out. – Feedback: worker gets direct information about how well the job is done. These affect the motivation, satisfaction and performance of employees. Irwin/McGraw-Hill ©The McGraw-Hill Companies, Inc., 2000
  11. 11. 8-11 Grouping Jobs into Functions Once tasks are grouped into jobs, managers must decide how to group jobs together.  Function: people working together with similar skills, tools or techniques to perform their jobs.  Functional structure consists of departments such as marketing, production, and finance. Pros Pros Cons Cons Irwin/McGraw-Hill     Workers can learn from others doing similar tasks. Easy for managers to monitor and evaluate workers. Hard for one department to communicate with others. Managers can become preoccupied with their department and forget the firm ©The McGraw-Hill Companies, Inc., 2000
  12. 12. 8-12 A Sample of Pier 1’s Functional Structure Figure 8.3 Clark Johnson CEO Exec. V.P. Finance & Admin. Senior V. P. Stores V.P. Tax V.P. Controller V.P. MIS Director Corp. Planning Irwin/McGraw-Hill Senior V.P. Logistics V.P. Distribution Director Transportation ©The McGraw-Hill Companies, Inc., 2000
  13. 13. 8-13 Divisional Structures A division is a collection of functions working together to produce a product.  Divisions create smaller, manageable parts of a firm. Divisions develop a business-level strategy to compete. A division has marketing, finance, and other functions. Functional managers report to divisional managers who then report to corporate management.    Product structure: divisions created according to the type of product or service. Geographic structure: divisions based on the area of a country or world served. Market structure: divisions based on the types of customers served. Irwin/McGraw-Hill ©The McGraw-Hill Companies, Inc., 2000
  14. 14. 8-14 Product Structure Figure 8.4a CEO Corporation Corporate Managers Washing Machine Division Irwin/McGraw-Hill Lighting Division Television Division ©The McGraw-Hill Companies, Inc., 2000
  15. 15. 8-15 Figure 8.4 b Geographic Structure CEO Corporation Corporate Managers Northern Region Irwin/McGraw-Hill Western Region Southern Region Eastern Region ©The McGraw-Hill Companies, Inc., 2000
  16. 16. 8-16 Market Structure Figure 8.4c CEO Corporation Corporate Managers Large Business Customers Irwin/McGraw-Hill Small Business Customers Educational Institutions Individual Customers ©The McGraw-Hill Companies, Inc., 2000
  17. 17. 8-17 Global Structures When managers find different problems or demands across the globe, global solutions are needed.   Global geographic structure: different divisions serve each world region.  For customer needs that vary between regions. Global product structure: Customers in different regions buy similar products so firms keep most functional work at home and set up a division to market product abroad. Irwin/McGraw-Hill ©The McGraw-Hill Companies, Inc., 2000
  18. 18. 8-18 Matrix & Product Teams  Matrix structure: managers group people by function and product teams simultaneously.  Results in a complex network of reporting relationships.  Very flexible and can respond rapidly to change.  Each employee has two bosses which can cause problems.   Functional manager gives different directions than product manager and employee cannot satisfy both. Product Team Structure: no 2-way reporting and the members are permanently assigned to the team and empowered to bring a product to market. Irwin/McGraw-Hill ©The McGraw-Hill Companies, Inc., 2000
  19. 19. 8-19 Figure 8.7a Matrix Structure CEO Func. Managers Team Managers Sales Design Production Product team A Product team B Product Team Product team C = two boss employee Irwin/McGraw-Hill ©The McGraw-Hill Companies, Inc., 2000
  20. 20. 8-20 Figure 8.7b Product Team Structure CEO Func. Managers Sales Manufacturing Design Manufacturing = Product Team Manager Irwin/McGraw-Hill Production Manufacturing = Team member ©The McGraw-Hill Companies, Inc., 2000
  21. 21. 8-21 Hybrid Structures Many large organizations have divisional structures where each manager can select the best structure for that particular division.  One division may use a functional structure, one geographic, and so on. This ability to break a large organization into many smaller ones makes it much easier to manage. Irwin/McGraw-Hill ©The McGraw-Hill Companies, Inc., 2000
  22. 22. 8-22 Coordinating Functions To ensure sufficient coordination between functions, managers delegate authority. Authority: the power vested in the manager to make decisions and use resources.  Hierarchy of authority: describes the relative authority each manager has from top to bottom.  Span of Control: refers to the number of workers a manager manages.  Line authority: managers in the direct chain of command for production of goods or services. Example: Sales  Staff authority: managers in positions that give advice to line managers. Example: Legal  Irwin/McGraw-Hill ©The McGraw-Hill Companies, Inc., 2000
  23. 23. 8-23 Tall & Flat Organizations   Tall structures have many levels of authority relative to the organization’s size.  As levels in the hierarchy increase, communication gets difficult.  The extra levels result in more time being taken to implement decisions.  Communications can also become garbled as it is repeated through the firm. Flat structures have few levels but wide spans of control.  Results in quick communications but can lead to overworked managers. Irwin/McGraw-Hill ©The McGraw-Hill Companies, Inc., 2000
  24. 24. 8-24 Minimum Chain of Command  Managers should carefully evaluate:  Do they have the right number of middle managers?  Can the structure be altered to reduce levels? Centralized  v. Decentralized Decentralized operations puts more authority at lower levels and leads to flat organizations.  Workers must be able to reach decisions.  Divisions and functions can begin to lose sight of organizational goals and focus only on their small area. Irwin/McGraw-Hill ©The McGraw-Hill Companies, Inc., 2000
  25. 25. 8-25 Integrating Mechanisms      Direct contact: get managers from different divisions or functions together to solve mutual problems. Liaison Roles: one manager in each area is responsible for communication with other areas. Task Forces: temporary committees formed across divisions to solve a specific problem. Cross-functional teams: works much like a permanent task force that deals with recurring problems. Matrix structure: already contains many integrating mechanisms. Irwin/McGraw-Hill ©The McGraw-Hill Companies, Inc., 2000
  26. 26. 8-26 Strategic Alliances Strategic alliance: a formal agreement committing two or more firms to exchange resources to produce a good. Network Structure: a whole series of strategic alliances.   Created between suppliers, manufacturers, and distributors.  Toyota and Honda use many such alliances. Network structures allow firms to bring resources together in a boundary-less organization. Irwin/McGraw-Hill ©The McGraw-Hill Companies, Inc., 2000

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