Ch03 - 25 Feb 14

Chapter three

3-1 Chapter ThreeFundamentals ofOrganization Structure2000South-Western College PublishingCincinnati, OhioDaft, Organization Theory and Design 7/e

Organization StructureOrganization structure:Designates formal reporting relationships, including the number of levels in the hierarchy and the span of control of managers and supervisors;Identifies the grouping together of individuals into departments, and departments into the total organization; andIncludes the design of systems to ensure effective communication, coordination, and integration of efforts across departments.

2000South-Western College PublishingCincinnati, OhioDaft, Organization Theory and Design 7/e

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A Sample Organization Chart


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The Relationship of Organization Design to Efficiency vs. Learning OutcomesHorizontal OrganizationDesigned for LearningVertical OrganizationDesigned for EfficiencyDominantStructuralApproachHorizontal structure is dominant Shared tasks, empowerment Relaxed hierarchy, few rules Horizontal, face-to-face communication Many teams and task forces Decentralized decision making

Vertical structure is dominant Specialized tasks Strict hierarchy, many rules Vertical communication and reporting systems Few teams, task forces or integrators Centralized decision making

Information LinkagesVerticalHierarchicalRules and regulations; andVertical information systemHorizontalInformation systems;Direct contact;Task force (generally temporary);Full time integrator (full time specifically for coordination purposes); andTeams (cross-functional teams; permanent task forces)2000South-Western College PublishingCincinnati, OhioDaft, Organization Theory and Design 7/e

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Ladder of Mechanisms for Horizontal Linkage and CoordinationHIGHLOWLOWInformation SystemsDirect ContactTask ForcesFull-time IntegratorsTeamsAmount of HorizontalCoordination RequiredCost of Coordination in Time and Human ResourcesH IGH2000South-Western College PublishingCincinnati, OhioDaft, Organization Theory and Design 7/e

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Project Manager Locationin the StructurePresidentFinanceDepartmentFinancialAccountant

BudgetAnalyst

ManagementAccountant

EngineeringDepartment

ProductDesigner

Draftsperson

ElectricalDesigner

MarketingDepartment

MarketResearcher

AdvertisingSpecialist

MarketPlanner

PurchasingDepartment

Buyer

Buyer

Buyer

Project ManagerNewProduct BProject ManagerNewProduct AProject ManagerNewProduct C2000South-Western College PublishingCincinnati, OhioDaft, Organization Theory and Design 7/e

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Teams Used for Horizontal Coordination at Rodney Hunt CompanyWater Control Equip.Chief EngineerEngineering Vice PresCustomer Service, Purchasing, Production ManagerFoundry General SupervisorManufacturing Vice PresMachine Shop General SupervisorShipping and YardSupervisorWater Control Equip. Sales ManagerMarketing Vice Pres.Textile MachineryExport ManagerAdvertising ManagerTextile MachineryChief EngineerStainless Steel General SupervisorTextile MachineryDomestic Sales ManagerPresidentWater Control Product TeamTextile Product TeamDepartmental Grouping OptionsFunctionalDivisionalMulti-focusedHorizontalVirtual network2000South-Western College PublishingCincinnati, OhioDaft, Organization Theory and Design 7/e

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Structural Design Options for Grouping Employees into Departments

EngineeringMarketingManufacturingCEOFunctionalGroupingDivisionalGroupingSource: Adapted from David Nadler and Michael Tushman,Strategic Organization Design (Glenview, Ill.: Scott Foresman, 1988), 68.2000South-Western College PublishingCincinnati, OhioDaft, Organization Theory and Design 7/e

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Strengths and Weaknesses of Functional Organization StructureSTRENGTHS:Allows economies of scale within functional departmentsEnables in-depth knowledge and skill developmentEnables organization to accomplish functional goalsIs best with only one or few products

WEAKNESSES:Slow response time to environmental changesMay cause decisions to pile on top, hierarchy overloadLeads to poor horizontal coordination among departmentsResults in less innovationInvolves restricted view of organizational goalsSource: Adapted from Robert Duncan, What Is the Right Organization Structure? Decision Tree Analysis Provides the Answer, Organizational Dynamics (Winter 1979): 429.2000South-Western College PublishingCincinnati, OhioDaft, Organization Theory and Design 7/e

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Strengths and Weaknesses of Divisional Organization StructureSTRENGTHS:Suited to fast change in unstable environmentLeads to client satisfaction because product responsibility and contact points are clearInvolves high coordination across functionsAllows units to adapt to differences in products, regions, clientsBest in large organizations with several productsDecentralizes decision-makingWEAKNESSES:Eliminates economies of scale in functional departmentsLeads to poor coordination across product linesEliminates in-depth competence and technical specializationMakes integration and standardization across product lines difficultSource: Adapted from Robert Duncan, What Is theRight Organization Structure? Decision Tree AnalysisProvides the Answer, Organizational Dynamics(Winter 1979): 431.Break3-13 2000South-Western College PublishingCincinnati, OhioDaft, Organization Theory and Design 7/e


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Reorganization from Functional Structure to Divisional Structure at Info-TechR&DManufacturingAccountingMarketingInfo-TechPresidentFunctionalStructure

DivisionalStructure2000South-Western College PublishingCincinnati, OhioDaft, Organization Theory and Design 7/e

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Structural Design Options for Grouping Employees (Continued)Multi-focusedGroupingCEOManufacturingMarketingProductDivision 2ProductDivision 1Source: Adapted from David Nadler and Michael Tushman, Strategic Organization Design (Glenview, Ill.: Scott Foresman, 1988), 68.2000South-Western College PublishingCincinnati, OhioDaft, Organization Theory and Design 7/e

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Structural Design Options for Grouping Employees (Continued)HorizontalGroupingCEOFinanceHuman ResourcesCoreProcess 2CoreProcess 1Source: Adapted from David Nadler and Michael Tushman,Strategic Organization Design (Glenview, Ill.: Scott Foresman, 1988), 68.2000South-Western College PublishingCincinnati, OhioDaft, Organization Theory and Design 7/e

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Geographical Structurefor Apple ComputerCEOSteve JobsAppleEuropeApplePacificFranceAppleProductsFar EastJapanAustraliaAppleAmericasCanadaLatin America/CaribbeanSalesService andMarketingto RegionsSource: www.apple.com2000South-Western College PublishingCincinnati, OhioDaft, Organization Theory and Design 7/e

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ProductManager AProductManager BProductManager CProductManager DDirectorof ProductOperationsDesignVice PresidentMfgVicePresidentMarketingVice PresidentControllerProcure-mentManagerPresidentDual-Authority Structure in a Matrix Organization2000South-Western College PublishingCincinnati, OhioDaft, Organization Theory and Design 7/e

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STRENGTHS:Achieves coordination necessary to meet dual demands from customersFlexible sharing of human resources across productsSuited to complex decisions and frequent changes in unstable environmentProvides opportunity for both functional and product skill developmentBest in medium-sized organizations with multiple products

WEAKNESSES:Causes participants to experience dual authority, which can be frustrating and confusingMeans participants need good interpersonal skills and extensive trainingIs time consuming; involves frequent meetings and conflict resolution sessionsWill not work unless participants understand it and adopt collegial rather than vertical-type relationshipsRequires great effort to maintain power balanceStrengths and Weaknesses of Matrix Organization StructureSource: Adapted from Robert Duncan, What Is the RightOrganization Structure? Decision Tree Analysis Provides theAnswer,Organizational Dynamics (Winter 1979): 429.2000South-Western College PublishingCincinnati, OhioDaft, Organization Theory and Design 7/e

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Matrix Structure forWorldwide Steel CompanyPresidentIndustrialRelationsVice PresidentMfg.ServicesVice PresidentFinanceVice PresidentMarketingVice President Mfg.Vice President MetallurgyVice President Field SalesVice President Open DieBusiness Mgr. Ring ProductsBusiness Mgr. Wheels & AxlesBusiness Mgr. SteelmakingBusiness Mgr.Vertical FunctionsHorizontal Functions2000South-Western College PublishingCincinnati, OhioDaft, Organization Theory and Design 7/e

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A Horizontal Structure(Employees organized around core processes)Team3Team2Team1TopManagementTeamTeam3Team2Team1CustomerCustomerProcessOwnerProcessOwner Testing Product Planning Research Market AnalysisNew Product Development Process Distrib. Material Flow Purchasing AnalysisProcurement and Logistics ProcessSources: Based on Frank Ostroff,The Horizontal Organization, (New York:Oxford University Press, 1999); John A. Byrne,The Horizontal Corporation, Business Week, December 20, 1993, 76-81; and Thomas A. Stewart,The Search for the Organization of Tomorrow,Fortune, May 19, 1992, 92-98.2000South-Western College PublishingCincinnati, OhioDaft, Organization Theory and Design 7/e

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Strengths and Weaknesses of Horizontal StructureSTRENGTHS:Flexibility and rapid response to changes in customer needsDirects the attention of everyone toward the production and delivery of value to the customerEach employee has a broader view of organizational goalsPromotes a focus on teamwork and collaborationcommon commitment to meeting objectivesImproves quality of life for employees by offering them the opportunity to share responsibility, make decisions, and be accountable for outcomes WEAKNESSES:Determining core processed to organize around is difficult and time-consumingRequires changes in culture, job design, management philosophy, and information and reward systemsTraditional managers may balk when they have to give up power and authorityRequires significant training of employees to work effectively in a horizontal team environmentCan limit in-depth skill developmentSources: Based on Frank Ostroff, The Horizontal Organization: What the Organization of the Future Looks Like and How It Delivers Value to Customers, (New York: Oxford University Press, 1999);and Richard L. Daft, Organization Theory and Design, 6th ed.,(Cincinnati, Ohio: South-Western College Publishing, 1998) 253. 2000South-Western College PublishingCincinnati, OhioDaft, Organization Theory and Design 7/e

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FunctionalStructureHybrid StructurePart 1. Sun Petrochemical ProductsPresidentTechnologyVicePresidentFinancialServicesVice Pres.HumanResourcesDirectorChiefCounselChemicalsVicePresidentLubricantsVicePresidentFuelsVicePresidentProductStructureSources: Based on Linda S. Ackerman, Transition Management: An In-Depth Look at Managing Complex Change, Organizational Dynamics (Summer 1982): 46-66;and Frank Ostroff, The Horizontal Organization, (New York: Oxford University Press, 1999), Fig. 2.1, 34.2000South-Western College PublishingCincinnati, OhioDaft, Organization Theory and Design 7/e

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Hybrid StructurePart 2. Ford Customer Service DivisionDirector andProcess OwnerDirector andProcess OwnerSources: Based on Linda S. Ackerman, Transition Management:An In-Depth Look at Managing Complex Change, Organizational Dynamics(Summer 1982): 46-66; and Frank Ostroff, The Horizontal Organization, (New York: Oxford University Press, 1999), Fig. 2.1, 34.HumanResourcesStrategy andCommunicationFinanceVice President andGeneral ManagerTeamsTeamsDirector andProcess OwnerTeamsTechnical Support GroupVehicle Service and Programs GroupParts Supply / Logistics GroupFunctionalStructureHorizontal StructureTeamsTeams2000South-Western College PublishingCincinnati, OhioDaft, Organization Theory and Design 7/e

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Organization Contextual Variables that Influence StructureStructure(learning vs. efficiency)EnvironmentChapters 4, 5CultureChapter 9SizeChapter 8Strategy,GoalsChapter 2TechnologyChapters 6,7Sources: Adapted from Jay R. Galbraith,Competing with Flexible Lateral Organizations, 2nd ed. (Reading, Mass.: Addison-Wesley, 1994), Ch.1; Jay R. Galbraith, Organization Design (Reading, Mass.: Addison-Wesley, 1977), Ch. 1. 2000South-Western College PublishingCincinnati, OhioDaft, Organization Theory and Design 7/e

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The Relationship of Structure to Organizations Need for Efficiency vs. LearningHorizontalStructureDominantStructuralApproachHorizontal: Coordination Change Learning Innovation Flexibility

Vertical: Control Efficiency Stability Reliability

MatrixStructureDivisionalStructureFunctional withcross-functionalteams, integratorsFunctionalStructure2000South-Western College PublishingCincinnati, OhioDaft, Organization Theory and Design 7/e

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Symptoms of Structural DeficiencyDecision making is delayed or lacking in qualityThe organization does not respond innovatively to a changing environmentToo much conflict from departments being at cross purposes is evident2000South-Western College PublishingCincinnati, OhioDaft, Organization Theory and Design 7/e

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WorkbookActivityOrganization Chart

Documents

Ch03 - 25 Feb 14