Chapter 9
Designing Adaptive
Organizations
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MGMT7
Structure and Process
• Organizational structure
• Organizational process
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Organizational Structure
• Organizational Structure
– The vertical and horizontal
configuration of departments,
authority, and jobs within a
company.
• Is concerned with questions such
as, ”Who reports to whom?” and
“Who does what?” and “Where is
the work done?”.
4
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Thomson Reuters
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Organization Chart
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Process View of Microsoft’s Organization
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Organizational Process
• Organizational Process
– The collection of activities that transform inputs into outputs that
customers value.
– Organizational process asks: “How do things get done?”
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Departmentalization
• Functional
• Product
• Customer
• Geographic
• Matrix
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9-1
Departmentalization
• Functional Departmentalization
– Organizes work and workers into separate units
responsible for particular business functions or
areas of expertise. A common functional
structure might have individuals organized into
accounting, sales, marketing, production, and
human resources department.
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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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Departmentalization
• Product Departmentalization
– Organizes work and workers into separate units
responsible for producing particular products
or services.
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Departmentalization
• Customer departmentalization
– Organizes work and workers into separate units
responsible for particular kinds of customers.
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Product Departmentalization: UTC
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9-1
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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9-1
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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9-1
Departmentalization
• Geographic departmentalization
– Organizes work and workers into separate
units responsible for doing business in
particular geographic areas.
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Coca-Cola Enterprises
Territories of Operation
Geographic Departmentalization
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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
Departmentalization
• Matrix Departmentalization
– A hybrid structure in which two or more
forms of departmentalization are used
together.
– The most common matrix combines the
product and functional forms of
departmentalization, but other forms might
be used.
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Matrix Departmentalization: Procter & Gamble
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9-1
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
– The vertical line of authority in an
organization.
– Clarifies who reports to whom.
• Unity of command
– Workers report to only one boss.
– Matrix organizations violate this principle.
9-2
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Authority
• Line authority
– the right to command immediate subordinates
in the chain of command
• Staff authority
– the right to advise but not command others
• Line function
– activity that contributes directly to creating or
selling the company’s products
• Staff function
– does not contribute directly to creating or
selling the company’s products, but instead
supports line activities.`
9-2
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General Staff
Incident
Commander
Public Information
Officer
Command
Staff
Liaison
Officer
Safety
Officer
Operations
Section
Planning
Section
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Logistics
Section
Finance/Admin
Section
General
Staff
Delegation of Authority
Delegation of Authority
The assignment of direct authority and
responsibility to a subordinate to complete
tasks for which the manager is normally
responsible.
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Delegation
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9-2
Authority Versus Power: Power
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How to be a More
Effective Delegator
1.
Trust your staff to be a good job
2.
3.
4.
5.
Avoid seeing perfection
Give effective job instructions
Know your true interests
Follow up on progress.
6.
7.
8.
Praise the efforts of your staff.
Don’t wait to the last minute to delegate.
Ask questions, expect answers, assist employees.
9.
Provide the resources you would provide if doing the
assignment yourself.
10. Delegate to the lowest possible level.
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Degree of Centralization
• Centralization of authority
– primary authority is held by upper management
• Decentralization
– significant authority is found in lower levels of the
organization
• Standardization
– solving problems by applying rules, procedures,
and processes
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9-2
Advantages of Decentralization
• Develops employee capabilities
• Faster decision making
• More satisfied employees and customers
• Better employee performance
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9-2
Job Design
• Specialized Jobs
• Job Rotation, Enlargement, Enrichment
• Job Characteristics Model
Job Specialization
• Job comprises a smaller part of a larger
task
• Jobs are simple, easy to learn
• Low variety, high repetition
• Can lead to low satisfaction, high
absenteeism, and employee turnover
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9-3
Job Rotation, Enlargement,
Enrichment
• Rotation
– periodically moving workers from one
specialized job to another.
• Enlargement
– increasing the number of tasks performed
by a worker
• Enrichment
– adding more tasks and authority to an
employee’s job
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9-3
Job Characteristics Model
 A job redesign approach that seeks to
increase employee motivation
 Factors that increase internal
motivation
 experience work as meaningful
 experience responsibility for work outcomes
 knowledge of results
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Job Characteristics Model
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9-3
Core Job Characteristics
• Skill variety
– The number of different activities performed in a job.
• Task identity
– The degree to which a job, from beginning to end, requires
completion of a whole and identifiable piece of work.
• Task significance
– The degree to which a job is perceived to have a substantial
impact on others inside or outside the organization.
• Autonomy
– The degree to which a job gives workers the discretion,
freedom and independence to decide how and when to
accomplish the work.
• Feedback
– The amount of information the job provides to workers about
their work performance.
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9-3
To Increase Internal Motivation
• Combine tasks
• Form natural work units
• Establish client relationships
• Vertical loading
• Open feedback channels
9-3
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Intraorganizational Processes
The collection of activities that take
place within an organization to
transform inputs into outputs that
customers value.
9-4
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Designing Organizational Processes
• Mechanistic organization
– Characterized by specialized job and
responsibilities; precisely defined unchanging
roles, and a rigid chain of command based on
centralized authority and vertical
communication.
• Organic organization
– Characterized by broadly defined jobs and
responsibility; loosely defined, frequently
changing roles, and decentralized authority
and horizontal communication.
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Reengineering
“the fundamental rethinking and
radical redesign of business
processes to achieve dramatic
improvements in critical,
contemporary measures of
performance, such as cost, quality,
service and speed.”
9-4
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Reengineering
 Managers must ask themselves
 Why do we do what we do?
 Why do we do it the way we do?
 Reengineering changes work by changing task
interdependence, the extent to which collective
action is required to complete an entire piece of
work.
Reengineering and Task Interdependence
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Reengineering and Task
Interdependence
• Reengineering is about achieving quantum
improvements in company performance.
• Reengineering changes an organization’s
orientation from vertical to horizontal.
• Instead of taking orders from upper management,
lower- and middle-level managers and workers take
orders from a customer who is at the beginning and
end of each process. Instead of running independent
functional departments, managers and workers in
different departments take ownership of crossfunctional processes.
• Instead of simplifying work so that it becomes
increasingly specialized, reengineering complicates
work by giving workers increased autonomy and
responsibility for complete processes.
Empowerment
• Empowering workers
– permanently passing decision-making
authority and responsibility from managers
to workers.
• Empowerment
– a feeling of intrinsic motivation, in which
workers perceive their work to have
meaning and perceive themselves to be
competent, having an impact, and capable
of self-determination
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9-4
Interorganizational Processes
A collection of activities that occur among
companies to transform inputs into
outputs that customers value.
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9-5
Modular Organization
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9-5
Modular Organizations
• Modular organizations outsource all
remaining business activities to outside
companies, suppliers, specialists, or
consultants.
– Advantages
• reduced costs
– Disadvantages
• loss of control
• noncore business activities that are outsourced may
become a source of competitive advantage
• suppliers to whom work is outsourced can become
competitors
9-5
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Virtual Organizations
• A virtual organization is part of a network
in which many companies share skills,
costs, capabilities, markets, and customers
with each other.
– 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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