Chapter 9
Designing Adaptive
Organizations
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MGMT7
Structure and Process
• Organizational structure
– Who reports to whom?
– Who does what?
– Where is the work done?
• Organizational process
– How do things get done?
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Thomson Reuters
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Process View of Microsoft’s Organization
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Departmentalization
• Functional
• Product
• Customer
• Geographic
• Matrix
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Functional Departmentalization
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9-1
Functional Departmentalization
• Advantages
– allows work done by highly qualified
specialists
– lowers costs by reducing duplication
– makes communication and coordination
easier
• Disadvantages
– cross-department coordination can be
difficult
– may lead to slower decision making
9-1
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Product Departmentalization:
United Technologies Corporation
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Product Departmentalization
• Advantages
– allows people to specialize in one area of
expertise
– makes it easier to assess performance
– makes decision making faster
• Disadvantages
– duplication
– coordination across different product
departments
9-1
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Customer Departmentalization: Swisscom AG
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Customer Departmentalization
• Advantages
– focuses organization on customer needs
– allows companies to specialize products and
services to customer needs
• Disadvantages
– duplication of resources
– workers might please customers but hurt
business
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Geographic Departmentalization: AB InBev
Company
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Geographic Departmentalization
• Advantages
– helps companies respond to different
markets
– reduces costs by locating unique resources
closer to customers
• Disadvantages
– duplication of resources
– difficult to coordinate departments
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9-1
Matrix Departmentalization: Procter & Gamble
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Matrix Departmentalization
• Advantages
– allows companies to efficiently manage large,
complex tasks
– gives much more diverse set of expertise and
experience
• Disadvantages
– requires a high level of duplication
– confusion and conflict between project bosses
– requires much more management skill
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9-1
Chain of Command
• Chain of command
• Unity of command – Assumed!
9-2
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Authority
• Line authority - Command
• Staff authority - Advise
• Line function – Development,
Manufacturing, Marketing
• Staff function – Accounting, Human
Resources, Legal
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Delegation
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Designing Jobs
Job Specialization
• Job comprises a smaller part of a larger
task
• Easy to learn
• Low variety
• High repetition
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Job Rotation, Enlargement,
Enrichment
• Rotation – Move around
– Advantages:
– Disadvantages:
• Enlargement – Several tasks
– Advantages:
– Disadvantages:
• Enrichment – Giving authority
– Advantages:
– Disadvantages:
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Modular Organization - Outsourcing
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9-5
Modular Organizations
• Advantages
– reduced costs
• Disadvantages
– loss of control
– noncore activities that are outsourced may
become source of advantage
– suppliers to whom work is outsourced can
become competitors
9-5
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Virtual Organizations
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Virtual Organizations
• Advantages
– shared costs
– fast and flexible
• Disadvantages
– difficult to control quality of work done by
partners
– requires tremendous managerial skills
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9-5
Modern Shed
<click screenshot for video>
1. Describe how Modern
Shed functions as a
modular organization.
2. What are the
advantages and
disadvantages of
Modern Shed’s
organizational
structure?
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