Oc 6440 restructuring organizations

1. Organization Development and Change
Thomas G. Cummings
Christopher G. Worley
Restructuring Organizations

2. Cummings & Worley, 8e
(c)2005 Thomson/South-Western
14-2
Learning Objectives
for Chapter Fourteen
• To understand the basic principles of
technostructural design
• To understand the three basic structural
choices and two advanced structural choices
available to organizations
• To understand the process of downsizing
and reengineering

3. Cummings & Worley, 8e
(c)2005 Thomson/South-Western
14-3
Contingencies Influencing
Structural Design
Environment
Organization
Size
Technology
Organization
Goals
Worldwide
OperationsStructural
Design

4. Cummings & Worley, 8e
(c)2005 Thomson/South-Western
14-4
Functional Organization
V P R e s e a r c h V P O p e r a t i o n s V P H u m a n
R e s o u r c e s
V P M a r k e t i n g V P F i n a n c e
P r e s i d e n t

5. Cummings & Worley, 8e
(c)2005 Thomson/South-Western
14-5
The Functional Form
• Promotes skill specialization
• Reduces duplication of scarce
resources and uses resources
full time
• Enhances career development
for specialists within large
departments
• Facilitates communication and
performance because superiors
share expertise with their
subordinates
• Exposes specialists to others
within same specialty
• Emphasizes routine tasks;
encourages short time horizons
• Fosters parochial perspectives
by managers and limits
capacity for top-management
positions
• Multiplies interdepartmental
dependencies; increases
coordination and scheduling
difficulties
• Obscures accountability for
overall results
Advantages Disadvantages

6. Cummings & Worley, 8e
(c)2005 Thomson/South-Western
14-6
The Divisional Organization
C h i e f F i n a n c i a l
O f f i c e r
V P R e s e a r c h
D i v i s i o n M a n a g e r
A s i a
V P H u m a n
R e s o u r c e s
V P O p e r a t i o n s V P S a l e s a n d
M a r k e t i n g
D i v i s i o n M a n a g e r
N o r t h A m e r i c a
D i v i s i o n M a n a g e r
E u r o p e
C h i e f E x e c u t i v e
O f f i c e r

7. Cummings & Worley, 8e
(c)2005 Thomson/South-Western
14-7
The Divisional Form
• Recognizes interdepartmental
interdependencies
• Fosters an orientation toward
overall outcomes and clients
• Allows diversification and
expansion of skills/training
• Ensures accountability by
departmental managers and
promotes delegation
• Heightens departmental
cohesion and involvement in
work
Advantages
• May use skills and resource
inefficiently
• Limits career advancement by
specialists
• Impedes specialists’ exposure
to others within same
specialties
• Puts multiple-role demands
upon people and creates stress
• May promote departmental
objectives as opposed to
overall organizational goals
Disadvantages

8. Cummings & Worley, 8e
(c)2005 Thomson/South-Western
14-8
V P F i n a n c e V P H u m a n R e s o u r c e s
P r o g r a m M a n a g e r
A i r c r a f t
P r o g r a m M a n a g e r
N a v i g a t i o n S y s t e m s
P r o g r a m M a n a g e r
S p a c e S y s t e m s
S e n i o r V P
P r o g r a m s
V P R e s e a r c h V P E n g i n e e r i n g V P M a n u f a c t u r i n g V P M a r k e t i n g
S e n i o r V P
O p e r a t i o n s
P r e s i d e n t
C E O
The Matrix Organization

9. Cummings & Worley, 8e
(c)2005 Thomson/South-Western
14-9
The Matrix Structure
• Makes specialized, functional
knowledge available to all
projects
• Use people flexibly
• Maintains consistency by
forcing communication
between managers
• Recognizes and provides
mechanisms for dealing with
legitimate, multiple sources of
power
• Can adapt to environmental
changes
Advantages
• Can be difficult to implement
• Increases role ambiguity,
stress, and anxiety
• Performance is lowered
without power balancing
between projects and
functions
• Makes inconsistent demands
and can promote conflict and
short-term crisis orientation
• May reward political skills
over technical skills
Disadvantages

10. Cummings & Worley, 8e
(c)2005 Thomson/South-Western
14-10
Characteristics of
Process-Based Structures
• Processes drive structure
• Work adds value
• Teams are fundamental
• Customers define performance
• Teams are rewarded for performance
• Teams are tightly linked to suppliers and
customers
• Team members are well informed and trained

11. Cummings & Worley, 8e
(c)2005 Thomson/South-Western
14-11
The Process-Based Structure
D e v e l o p i n g N e w P r o d u c t s P r o c e s s
P r o c e s s O w n e r
C r o s s F u n c t io n a l T e a m M e m b e r s
A c q u i r i n g a n d F i l l i n g C u s t o m e r O r d e r s P r o c e s s
P r o c e s s O w n e r
C r o s s F u n c t io n a l T e a m M e m b e r s
S u p p o r t i n g C u s t o m e r U s a g e P r o c e s s
P r o c e s s O w n e r
C r o s s F u n c t io n a l T e a m M e m b e r s
S e n i o r M a n a g e m e n t T e a m
C h a ir a n d K e y S u p p o r t P r o c e s s O w n e r s

12. Cummings & Worley, 8e
(c)2005 Thomson/South-Western
14-12
The Process-Based Form
• Focuses resources on
customer satisfaction
• Improves speed and efficiency
• Adapts to environmental
change rapidly
• Reduces boundaries between
departments
• Increases ability to see total
work flow
• Enhances employee
involvement
• Lowers costs dues to overhead
• Can threaten middle managers
and staff specialists
• Requires changes in
command-and-control
mindsets
• Duplicates scarce resources
• Requires new skills and
knowledge to manage lateral
relationships and teams
• May take longer to make
decisions in teams
• Can be ineffective if wrong
processes are identified
Advantages Disadvantages

13. Cummings & Worley, 8e
(c)2005 Thomson/South-Western
14-13
The Network Organization
Designer
Organizations
Supplier
Organizations
Broker
Organization
Producer
Organizations
Distributor
Organizations

14. Cummings & Worley, 8e
(c)2005 Thomson/South-Western
14-14
Types of Networks
• Internal Market Network
• Vertical Market Network
• Intermarket Network
• Opportunity Network

15. Cummings & Worley, 8e
(c)2005 Thomson/South-Western
14-15
The Network-Based Form
• Enables highly flexible and
adaptive responses
• Creates a “best of the best”
firm to focus resources on
customer and market needs
• Each organization can
leverage a distinctive
competency
• Permits rapid global
response
• Can produce “synergistic”
results
• Difficulty managing lateral
relationships across
autonomous organizations
• Difficulty motivating
members to relinquish
autonomy to join network
• Sustaining membership and
benefits can be problematic
• May give partners access to
proprietary knowledge and
technology
Advantages Disadvantages

16. Cummings & Worley, 8e
(c)2005 Thomson/South-Western
14-16
The Downsizing Process
• Clarify the organization’s strategy
• Assess downsizing options and make
relevant choices
• Implement the changes
• Address the needs of survivors and those
who leave
• Follow through with growth plans

17. Cummings & Worley, 8e
(c)2005 Thomson/South-Western
14-17
Downsizing Tactics
Tactic Characteristics Examples
Workforce
Reduction
• Reduces headcount
• Short-term focus
• Fosters transition
• Attrition
• Retirement/buyout
• Layoffs
Organization
Redesign
• Changes
organization
• Medium-term focus
• Fosters transition &
transformation
• Eliminate functions,
layers, products
• Merge units
• Redesign tasks
Systemic
• Changes culture
• Long-term focus
• Fosters
transformation
• Change
responsibilities
• Foster continuous
improvement
• Downsizing is normal

18. Cummings & Worley, 8e
(c)2005 Thomson/South-Western
14-18
The Reengineering Process
• Prepare the organization
• Specify the organization’s strategy and
objectives
• Fundamentally rethink the way work gets done
– Identify and analyze core business processes
– Define performance objectives
– Design new processes
• Restructure the organization around the new
business processes.

19. Cummings & Worley, 8e
(c)2005 Thomson/South-Western
14-19
Characteristics of
Reengineered Organizations
• Work units change from functional departments to process
teams
• Jobs change from simple tasks to multidimensional work
• People’s roles change from controlled to empowered
• The focus of performance measures and compensation
shifts from activities to results.
• Organization structures change from hierarchical to flat
• Managers change from supervisors to coaches; executives
change from scorekeepers to leaders