PowerPoint Presentation

16-2-2015Dr. J.P.C. (Coen) RigteringElements of structureIntroduction to Strategy and Organization (ECB1SO)

Presentation | AssumptionsTerminologyKey elements of an organizational structureDifferent types of organizational structuresWhy do certain types of organizational structures evolve?

Topics16-2-20152Introduction to Strategy and OrganizationHiring employees is more efficient than team production (topic 2)Employees (agents) need to be monitored in order to prevent shirking (topic 2)Different types of monitoring (i.e., control) can be used in firms (topic 3)Social controls can sometimes be more efficient than formalized controls (topic 3)

How can we structure a firm?

What have we learned so far16-2-20153Introduction to Strategy and Organization16-2-2015Spreker4Structure and design: terminologyCEOManagerManagerHierarchical relationLine employeeStaff Advise and administration (technostructure):HRAccountingBudgetingEtc.

Span of Control: 2

1

2

4

8

16

EmployeeEmployeeEmployeeEmployeeEmployeeManagerManagerManagerSpan of Control: 5

1

5

25

625

125

Chain of commandTall hierarchyFlat hierarchyDepends on the size of the firmDepends upon the industry / type of tasks that are performed

Matter of choice.When is a structure hierarchical?16-2-20155Introduction to Strategy and Organization16-2-2015Spreker6Structure and design: terminologyCEOPurchasingProductionHR16

SupervisorSupervisorSupervisorSupervisorSupervisorLogisticsSalesMarketingAccountingEmployeeEmployeeEmployeeEmployeeEmployeeMiddle managementTop managementSupervisory managementWorkersOrganization by functionDepartementalization (grouping of jobs)A production manager decides how much to produce each week. For this decision, he needs information on future sales from the sales manager who has the most accurate sales forecast information (asymmetrical information, see topic 1)In reality most production manager make the sales forecast themselves, because:Sales manager are usually too optimisticThe sales manager has an incentive to make an optimistic forecast, in order to reduce the probability of a stock-out

Organization by function16-2-20157Introduction to Strategy and Organization16-2-2015Spreker8Structure and design: terminologyCEONLGermanyHR16

MarketingDistributionProductionSupervisorSalesUSChinaPurchasingAccountingSupervisorSupervisorSupervisorSupervisorSupervisorOrganization by geographical area16-2-2015Spreker9Structure and design: terminologyCEOBusinessConsumerHR16

MarketingLogisticsSalesSupervisorSalesProductionPurchasingMarketingAccountingSupervisorSupervisorSupervisorSupervisorSupervisorOrganization by customer16-2-2015Spreker10Structure and design: terminologyCEOTVVideo gamesHR16

PurchasingLogisticsSalesSupervisorProductionSoundTabletsMarketingAccountingSupervisorSupervisorSupervisorSupervisorSupervisorOrganization by business unit / marketDecentralizationSimple structure (used in SMEs = functional structure)Centralization of power (entrepreneur is in charge)Machine bureaucracy > knowledge intensive, little mistakes (government institutions, financial institutions)Limited decentralizationMachine bureaucracy (production, factories)Strong technostructureDivisionalized firm (large multinationals)Decentralization at division (customer, business unit, or geographical) levelAdhocracy (creative organizations, consultancy)Decentralization

Different types of organizations, different structures (Mintzberg, 1970)16-2-201511Introduction to Strategy and OrganizationThe basic question that is being answered by IT is: what makes organizations so similar?The answer: because of social (institutional) pressures that establish isomorphism (structural similarity) between organizations.Three different forms of isomorphism: Coercive isomorphismNormative isomorphismMimetic isomorphism

Institutionalism in organizational sociology (IT)16-2-201512Introduction to Strategy and Organization16-2-2015Spreker13Regulative approachNormative approachCognitiveApproachForm of isomorphismCoerciveNormativeMimeticBasis of complianceCompliance to regulative rulesSocial obligations or expectationsTaken for grantedExampleBanks who implement new control mechanisms Companies who initiate sustainability programs due to stakeholder pressures Implementing best practicesDifferent types of institutional pressuresGroups within the organizations are not equal to formal work groups, work units or departments.People collectively interpret formal structures and procedures differently given social situations and contextsGroups with goals aligned with those of the organization can facilitate work performance and make the workplace more enjoyable for everyone.Understanding informal groups(Roethlisberger and Dickson, 1939)16-2-201514Introduction to Strategy and OrganizationSee you next week!