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Management Science
10-1SivaRamaKrishna.J (MBA Dept.)
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Organizational Structure
Organizational Architecture
The organizational structure, control
systems, culture, and human resource
management systems that together
determine how
efficiently and
effectivelyorganizational
resources are used.
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Designing Organizational Structure
Organizing
The process by which managers establishworking relationships among employees to
achieve goals. Organizational Structure
Formal system of task and reportingrelationships showing how workers useresources.
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Designing Organizational Structure
Organizational design
The process by which managers create a
specific type of organizational structure and
culture so that a company can operate in
the most efficient and effective way
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Factors Affecting Organizational Structure
Figure 10.1 SivaRamaKrishna.J (MBA Dept.)
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The Organizational Environment
The Organizational Environment
The quicker the environment changes, the
more problems face managers.
Structure must be more flexible (i.e.,
decentralized authority) when environmental
change is rapid.
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The Organizational Environment
Strategy
Different strategies require the use of
different structures.
A differentiation strategy needs a flexible
structure, low cost may need a more
formal structure.
Increased vertical integration ordiversification also requires a more
flexible structure.
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The Organizational Environment
Technology
The combination of skills, knowledge, tools,
equipment, computers and machines used
in the organization.
More complex technology makes it harder
for managers to
regulate theorganization.
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The Organizational Environment
Technology
Technology can be measured by:
Task variety: the number of new
problems a manager encounters.
Task analyzability: the availability ofprogrammed solutions to a manager tosolve problems.
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The Organizational Environment
Human Resources
Highly skilled workers whose jobs require
working in teams usually need a more
flexible structure.
Higher skilled workers (e.g., CPAs and
doctors) often have internalized professional
norms and values.
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The Organizational Environment
Human Resources
Managers must take into account all four
factors (environment, strategy, technology
and human resources) when designing the
structure of the organization.
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The Organizational Environment
The way an organizations structure works
depends on the choices managers
make about:
1. How to group tasks into individual jobs
2. How to group jobs into functions and
divisions
3. How to allocate authority and
coordinate functions and divisions
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Job Design
Job Design
The process by which managers decide
how to divide tasks into specific jobs.
The appropriate division of labor results in
an effective and efficient workforce.
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Question?
What is the process of reducing the tasks
each worker performs?
A. Job simplificationB. Job enlargement
C. Job enrichment
D. Job enhancement
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Job Design
Job Simplification
The process of reducing the tasks each
worker performs.
Too much simplification and boredom
results.
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Job Design
Job Enlargement
Increasing the number of different tasks in a
given job by changing the division of labor
Job Enrichment
Increasing the degree of responsibility a
worker has over a job
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Job Enrichment
1. Empowering workers to experiment to
find new or better ways of doing the job
2. Encouraging workers to develop newskills
3. Allowing workers to decide how to do
the work
4. Allowing workers to monitor and
measure their own performance
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The Job Characteristics Model
Figure 10.2
Source: Adapted from J. R. Hackman and G. R. Oldham,Work Redesign (Reading, MA: Addison-Wesley, 1980).
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Job Characteristics Model
Job Characteristic
Skill variety Employee uses a wide range of skills.
Task identity Worker is involved in all tasks of the job
from beginning to end of the productionprocess
Task significance Worker feels the task is meaningful toorganization.
Autonomy Employee has freedom to schedule tasks
and carry them out.
Feedback Workergets direct information about howwell the job is done.
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Grouping Jobs into Functions
Function
Group of people, working together, who
possess similar skills or use the same kind
of knowledge, tools, or techniques to
perform their jobs
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Grouping Jobs into Functions
Functional Structure
An organizational structure composed of allthe departments that an organization
requires to produce its goods or services.
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Functional Structure
Advantages
Encourages learning from others doing
similar jobs.
Easy for managers to monitor and evaluate
workers.
Allows managers to create the set of
functions they need in order to scan andmonitor the competitive environment
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Functional Structure
Disadvantages
Difficult for departments to communicate
with others.
Preoccupation with own department and
losing sight of organizational goals.
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10-24Figure10.3
The
Functional
Structure of
Pier1
Imports
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Divisional Structures
Divisional Structure
Managers create a series of business units
to produce a specific kind of product for a
specific kind of customer
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10-26Figure 10.4
Product,
Market, andGeographic
Structures
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Types ofDivisional Structures
Product Structure
Managers place each distinct product line or
business in its own self-contained division
Divisional managers have the responsibility
for devising an appropriate business-level
strategy to allow the division to compete
effectively in its industry
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Product Structure
Allows functional managers to specialize
in one product area
Division managers become experts intheir area
Removes need for direct supervision of
division by corporate managers
Divisional management improves the
use of resources
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Types ofDivisional Structures
Geographic Structure
Divisions are broken down by geographic
location
Global geographic structure
Managers locate different divisions in each of
the world regions where the organization
operates. Generally, occurs when managers are
pursuing a multi-domestic strategy
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Types ofDivisional Structures
Global Product Structure
Each product division takes responsibility
for deciding where to manufacture its
products and how to market them in foreign
countries worldwide
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Global Geographic and
Global Product Structures
Figure 10.5 SivaRamaKrishna.J (MBA Dept.)
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Types ofDivisional Structures
Market Structure
Groups divisions according to the particularkinds of customers they serve
Allows managers to be responsive to theneeds of their customers and act flexibly inmaking decisions in response to customerschanging needs
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Matrix Design Structure
Matrix Structure
An organizational structure thatsimultaneously groups people and
resources by function and product. Results in a complex network of superior-
subordinate reporting relationships.
The structure is very flexible and can respondrapidly to the need for change.
Each employee has two bosses (functionalmanager and product manager) and possiblycannot satisfy both.
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Matrix Structure
Figur
e 10.6SivaRamaKrishna.J (MBA Dept.)
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Discussion Question?
Which is the most effective and efficient
organizational structure?
A. Matrix structureB. Divisional structure
C. Market structure
D. Geographic structure
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Product Team Design Structure
Product Team Structure Does away with dual reporting relationships
and two-boss managers
Functional employees are permanently
assigned to a cross-functional team that is
empowered to bring a new or redesigned
product to work
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Product Team Design Structure
Product Team Structure Cross-functional team is composed of a
group of managers from different
departments working together to perform
organizational tasks.
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Product Team Structure
Figure 10.6SivaRamaKrishna.J (MBA Dept.)
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Hybrid Structures
Hybrid Structure
The structure of a large organization thathas many divisions and simultaneously
uses many different organizationalstructures
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Federateds Hybrid Structure
Figure 10.7SivaRamaKrishna.J (MBA Dept.)
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Question?
What is the power vested in a manager to
make decisions?
A. PowerB. Influence
C. Authority
D. Control
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Coordinating Functions:
Allocating Authority
Authority
The power vested in a manager to make
decisions and use resources to achieve
organizational goals by virtue of his positionin an organization
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Coordinating Functions:
Allocating Authority
Hierarchy of Authority
An organizations chain of command,
specifying the relative authority of each
manager.
Span of Control: the number of
subordinates who report directly to a
manager
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Allocating Authority
Line Manager
Someone in the direct line or chain of
command who has formal authority over
people and resources
Staff Manager
Managers who are functional-area
specialists that give advice to line
managers.
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10-45Figur
e 10.8
The
Hierarchy
of Authority
and Spanof Control
at
McDonalds
Corporation
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Tall and Flat Organizations
Tall structures have many levels of
authority and narrow spans of control.
As hierarchy levels increase,
communication gets difficult creating delays
in the time being taken to implement
decisions.
Communications can also become distortedas it is repeated through the firm.
Can become expensive
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Tall Organizations
Figure 10.9 SivaRamaKrishna.J (MBA Dept.)
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Tall and Flat Organizations
Flat structures have fewer levels and
wide spans of control.
Structure results in quick communications
but can lead to overworked managers.
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Flat Organizations
Figure 10.9SivaRamaKrishna.J (MBA Dept.)
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Minimum Chain of Command
Minimum Chain of Command
Top managers should always construct a
hierarchy with the fewest levels of authority
necessary to efficiently and effectively useorganizational resources
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Centralization and Decentralization of
Authority
Decentralizing authority
giving lower-level managers and non-
managerial employees the right to make
important decisions about how to useorganizational resources
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Decentralizing Authority
Disadvantages
Teams may begin to pursue their own goals
at the expense of organizational goals
Can result in a lack of communication
among divisions
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Integrating Mechanisms
Figure 10.10SivaRamaKrishna.J (MBA Dept.)
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Organizational Culture
Organizational culture
shared set of beliefs, expectations, values,
and norms that influence how members of
an organization relate to one another andcooperate to achieve organizational goals
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Sources of an Organizations Culture
Figure 10.11SivaRamaKrishna.J (MBA Dept.)
Ch t i ti f O i ti l
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Characteristics ofOrganizational
Members
Ultimate source of organizational culture
is the people that make up the
organization
Members become similar over time
which may hinder their ability to adapt
and respond to changes in the
environment
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Organizational Ethics
Organizational Ethics
moral values, beliefs, and rules that
establish the appropriate way for an
organization and its members to deal witheach other and people outside the
organization
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Employment Relationship
Human resource policies:
Can influence how hard employees will
work to achieve the organizations goals,
How attached they will be to it
Whether or not they will buy into its values
and norms
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Organizational Structure
In a centralized organization:
people have little autonomy
norms that focus on being cautious, obeying
authority, and respecting traditions emerge
predictability and stability are desired goals
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Organizational Structure
In a flat, decentralized structure:
people have more freedom to choose and
control their own activities
norms that focus on being creative and
courageous and taking risks appear
gives rise to a culture in which innovation
and flexibility are desired goals.
SivaRamaKrishna.J (MBA Dept.)
St Ad ti C lt V
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Strong, Adaptive Cultures Versus
Weak, Inert Cultures
Adaptive cultures
values and norms help an organization to
build momentum and to grow and change
as needed to achieveits goals and be
effective
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St Ad ti C lt V
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Strong, Adaptive Cultures Versus
Weak, Inert Cultures
Inert cultures
Those that lead to values and norms that
fail to motivate or inspire employees
Lead to stagnation and often failure over
time
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