Chapter 11
Designing Adaptive
Organizations
What Would You Do?
Reengineering at Exide Technologies

Financial losses are increasing



Is currently organized geographically


Company share price is dropping
Company’s debt load is soaring
company managers in each country who
compete with other divisions
What organization scheme should it use to
solve these problems?
2
Learning Objectives
Designing Organizational
Structure
After discussing this section,
you should be able to:
1.
2.
3.
describe the departmentalization approach to
organizational structure.
explain organizational authority.
discuss the different methods for job design.
3
5 Methods of Departmentalization
Functional
Product
Customer
Geographic
Matrix
4
Functional Departmentalization
Advertising Agency
Sales
Information
Systems
Accounting
Human
Resources
Art Department
Print
Advertising
Creative
Department
Radio
Advertising
Adapted from Exhibit 11.3
5
Functional Departmentalization (cont’d)



Advantages
Creates highly skilled
specialists
Lowers costs through
reduced duplication
Communication and
coordination problems
are lessened



Disadvantages
Cross-department
coordination can be
difficult
May lead to slower
decision making
Produces managers
with narrow
experiences
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Product Departmentalization
General Electric
Aircraft Engines
Appliances
Capital Services
Lighting
Technical Products
and Services
NBC Television
Plastics
Power Systems
Industrial Products
& Control Systems
Adapted from Exhibit 11.4
7
Product Departmentalization (cont.)



Advantages
Managers specialize
but have broader
experiences
Easier to assess workunit performance
Decision-making is
faster


Disadvantages
Duplication of activities
Difficult to coordinate
across departments
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Been There, Done That
igus and the Solar System


Business was slow to develop
Began to focus on the customer


“orbit” around their customers
Egalitarian culture and open
communication are key
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Customer Departmentalization
American Express
Corporation
Cards
Travel
Financial
Services
Business
Services
Classic Cards
Air, Car & Hotel
Reservations
Advice &
Planning
Expense
Management
Solutions
Lifestyle Cards
Vacation & Last
Minute Specials
Banking
Small
Businesses
Reward Cards
Worldwide
Travel Offices
Brokerage
Financial
Services
Adapted from Exhibit 11.5
10
Customer Departmentalization
(cont’d)


Advantages
Focuses on customer
needs
Products and services
tailored to specific
customers



Disadvantages
Duplication of activities
Difficult to coordinate
across departments
Efforts to please
customers may hurt the
company
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Geographic Departmentalization
Coca-Cola
Enterprises
Central North
America Group
Western North
America Group
European
Group
Eastern North
America Group
Adapted from Exhibit 11.6
12
Geographic Departmentalization
(cont’d)


Advantages
Responsive to the
demands of different
market areas
Unique resources
located close to the
customer


Disadvantages
Duplication of
resources
Difficult to coordinate
across departments
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Matrix Departmentalization
Pharmacia & Upjohn Headquarters
United States
Europe
Japan
•Research
•Marketing
•Manufacturing
•Research
•Marketing
•Manufacturing
•Research
•Marketing
•Manufacturing
Central Nervous System
Europe
Critical Care
Infectious Diseases
Thrombosis
Metabolic Diseases
Women’s Health
Inflamatory Diseases
United States
Urology
•Research
•Marketing
•Manufacturing
•Research
•Marketing
•Manufacturing
Adapted from Exhibit 11.7
14
Matrix Departmentalization (cont’d)
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
Advantages
Efficiently manage
large, complex tasks
Effectively complete
large, complex tasks



Disadvantages
Requires high levels of
coordination
Conflict between
bosses
Requires high levels of
management skills
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Organizational Authority
Chain of Command
Line Versus Staff Authority
Delegation of Authority
Degree of Centralization
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Chain of Command



The vertical line of authority in an
organization
Clarifies who reports to whom
Unity of command


workers report to only one boss
“violated” by the matrix structure
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Line v. Staff Authority

Line authority - function

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
the right to command immediate subordinates in
the chain of command
an activity that contributes directly to profit
generation
Staff authority - function


the right to advise but not command others
an activity that supports profit generation
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Delegation of Authority

The assignment of direct authority and
responsibility to a subordinate
Responsibility
Manager
Authority
Accountability
Subordinate
Adapted from Exhibit 11.8
19
Degree of Centralization

Centralization of authority


Decentralization


primary authority is held by upper management
significant authority is found in lower levels of the
organization
Standardization

solving problems by applying rules, procedures,
and processes
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Job Design
Job Specialization
Job Rotation, Enlargement, &
Enrichment
Job Characteristics Model
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Job Specialization



Breaking jobs into small tasks
Jobs are simple, easy to learn, and
economical
Can lead to boredom, low satisfaction, high
absenteeism, and employee turnover
22
Blast From The Past
From Farms to Factories to Telecommuting

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Early work was farm based
or
in “cottage industries”
Industrial revolution led to
factories
and mobility
Technology allows people to again “work” at
home
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Job Rotation, Enlargement, &
Enrichment

Job Rotation


Job Enlargement


periodically moving workers from one specialized
job to another
increasing the number of tasks performed by a
worker
Job Enrichment

adding more tasks and authority to an employee’s
job
24
Job Characteristics Model (JCM)



A job redesign approach that seeks to
increase employee motivation
Emphasizes internal motivation
Redesign work to make it more “interesting”
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JCM (cont’d)
Core Job
Dimensions
Skill Variety
Task Identity
Critical
Psychological
States
Personal
& Work
Outcomes
Experienced
Meaningfulness
of Work
High Internal
Work Motivation
Task Significance
Autonomy
Feedback
Experienced
Responsibility for
Outcomes of Work
Knowledge of
Actual Results of
Work Activities
High-quality
Work Performance
High Satisfaction
with Work
Low Absenteeism
& Turnover
Adapted from Exhibit 11.10
26
Job Redesign Techniques
Combining Tasks
Natural Work Units
Establishing Client
Relationships
Vertical Loading
Opening Feedback
Channels
27
What Really Works?
Making Jobs More Interesting & Motivating
Job Satisfaction
Task Identity
10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Probability of success
66%
Task Significance
10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Probability of success
69%
28
What Really Works? (cont’d)
Making Jobs More Interesting & Motivating
Job Satisfaction
Skill Variety
10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Probability of success
70%
Autonomy
10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Probability of success
73%
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What Really Works? (cont’d)
Making Jobs More Interesting & Motivating
Job Satisfaction
Feedback
10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Probability of success
70%
High Growth Need Strength
10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Probability of success
84%
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What Really Works? (cont’d)
Making Jobs More Interesting & Motivating
Job Satisfaction
Low Growth Need Strength
10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Probability of success
69%
31
What Really Works? (cont’d)
Making Jobs More Interesting & Motivating
Workplace Absenteeism
Task Identity
10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Probability of success
63%
Task Significance
10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Probability of success
68%
32
What Really Works? (cont’d)
Making Jobs More Interesting & Motivating
Workplace Absenteeism
Skill Variety
10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Probability of success
72%
Autonomy
10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Probability of success
74%
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What Really Works? (cont’d)
Making Jobs More Interesting & Motivating
Workplace Absenteeism
Feedback
10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Probability of success
72%
84%
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Learning Objectives
Designing Organizational
Processes
After discussing this section,
you should be able to:
4.
5.
explain the methods that companies are using to
redesign internal organizational processes (i.e.,
intraorganizational processes).
describe the methods that companies are using to
redesign external organizational processes (i.e.,
interorganizational processes).
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Intraorganizational Processes
Reengineering
Empowerment
Behavioral Informality
36
Reengineering



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The fundamental rethinking and radical
redesign of business processes
Intended to achieve dramatic improvements
in performance
Change the orientation from vertical to
horizontal
Changes task interdependence
37
Pooled Interdependence
38
Sequential Interdependence
39
Reciprocal Interdependence
40
Empowerment
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A feeling of intrinsic motivation
Workers perceive meaning in their work
Employees are capable of self-determination
Employees are active rather than passive
41
Behavioral Informality



Behavioral Informality
Spontaneity
Casualness
Interpersonal familiarity

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
Behavioral Formality
Routine & regimen
Specific rules
Impersonal attachment
42
Interorganizational Processes
Modular
Organizations
Virtual
Organizations
Boundaryless
Organizations
43
What Really Happened?
Reengineering at Exide Technologies



Implemented product structure around global
business units
Problems associated with product basis
caused a return to geography structure
Exide is still searching for the proper
organizational structure
44