Organizational Structure and Design 2

7/28/2019 Organizational Structure and Design 2

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Organizational structure and design

Defines how task are divided, resources are deployed anddepartments are coordinated.

The set of formal tasks assigned. Formal reporting relationships.

The design of systems to ensure effective co-ordination of employees across department.

Organization structure are describes. How information flows.. How & where decision are made.. How the behavior of people is influenced.


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Firms growth as evolutionary process

single business

Geographic productDiversification diversification

product & geographicdiversification


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Structure evolves in response to changing information processingrequirements.

Structure becomes more complex as information processingrequirement increase.

Information processing requirement change in response to growth (product offering, geography, sales volume etc) .

Traditional logicadd new layers of management to handle increasing

information processing requirements.


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Emerging logic

Use technology and innovative relationship to handle increasinginformation processing requirements.

All organization require some form of org. structure toimplement and manage their strategies. Firms frequently alter their

structure as they grow in size and complexity.

What is organization structure:- An authority system. A communication system. An activities / work system.


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Objectives of org. structure

Need to create division of labour. Ned to integrate these groups to ensure org.

effectiveness.

Dimension of macro structure.


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Vertical differentiation:-CEO

EVP EVP EVP EVP

Sr.VP Sr.VP Sr.VP

VP VP VP VP VP

Ast.VR Ast.VR Ast.VR

Branch mgr. Branch mgr. Branch mgr.

Asst.branch mgr. Asst.branch mgr.


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Horizontal differentiation

CEO

PROD.1 PROD.2 PROD. 3 PROD.4

1.Function wise.2.Geography wise3.Product wise4.Production stage wise.


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HIGH HORIZONTAL DIFFERENTIATION

PRESSURE

FOR GLOBALIZATION & CENTRALIZATION VERTICAL DIFFERENTIATION

SPECIAL DIFFERENTIATION

LOW

PRESSURE FOR LOCAL RESPONSIVENESS & DECENTRALIZATION


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WHAT DETERMINES ORG. STRUCTURE

To what degree are tasks subdivided into separate jobs. On what basis will job be grouped together. To whom do individual and groups report. How many individual can a manager efficiently & effectively directs.

Where does decision making authority be. To what degree will then be rules & regulations to direct employees

and managers.


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Functional org. structure

G.M.

ENGRG. MFG. MKTG. FINANCE PERSONNEL R&D

Process oriented functional structure

Foundry milling screw finished customer billingCosting grinding making heat service accounting

traetment


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Strategic advantages of functional org.structure

Permits centralised control of strategic results. Very well suited for structuring a single business. Structure is linked tightly to strategy by designing key activaties as

functional units .

Promotes in depth functional expertise. Conducive to exploiting learning experience curve effects

associated with functional specialisation. Enhances operational efficiency where tasks are routine and

repitive.


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Strategic disadvantages

Poses problems of functional coordination. Can lead to inter functional rivalary, conflict and empire building. May promote over specialization and narrow management view

points.

hinders development of managers with cross functional experiencebecause the ladder of advancement is up the ranks with in samefunctional area.

Forces profit responsibility to the top. Functional specialist often attach more importance to what is best

for the functional area than to what is best the whole business.


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Geographic org. structure

Chief executive corporate staff finance & accountingpersonnel/ legalmarketing, r& d

G.M. G.M. G.M. G.M.western eastern southern northernregion region region region

personnel

accounting & control

Engineering production marketing


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Strategic advantages

Allows tailoring of strategy to needs of each geographic market. delegates profits/ loss responsibility to lowest strategic level. Improves functional coordination with in the target market. Area units make an excellent training ground for higher level general

managers. Takes advantage of economies of local operations.


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Poses a problem of how much geographic uniformity head quatersshould be allowed.

Greater difficulty in maintaining consistent company image/reputation from area to area when area managers exercise muchstrategic freedom.

Adds another layer of management to run the geographic units. Can result in duplication of staff services at head quarters and distt.

Levels making a relative cost disadvantage.


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S.B.U. type of organization structure

Chief executive officer CORPORATE STAFFR&DFINANCE & CORPORATE ACCOUNTING

MARKETING SERVICESPERSONNEL / LEGAL AFFAIRSPUBLIC RELATION

GP vice president GP vice president GP vice president

SBU-I SBU-II SBU-III

BUSINESS UNIT BUSINESS UNIT BUSINESS UNITDIVISION DIVISION DIVISION


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STRATEGIC ADVANTAGES

Provides a strategically relevant way to organize large numbers of different business units.

Improves coordination between the role and authority of thebusiness with similar strategies ,market and growth opportunities.

Allows strategic planning to be done at the most relevant level within the total enterprise.

Makes the task of strategic review by top executives more objectiveand more effective.

Helps allocate corporate resources to area with greatest growthopportunities.

Promote more cohesiveness among the new initiatives of separatebut related business. Facilitates the coordination of related activities with in an sbu there

helping to capture the benefits of strategic fits in the sbu.


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It is easy for the definition and grouping of business into sbu to bearbitrary that sbu server no other purpose than administrativeconvenience.

Sbu can still be myopic in charting their future direction.

Adds another layer to top management . The role and authority of the ceo , the gp. Vice president and the

business unit manager have to be carefully worked out. unless the sbu head is strong willed, very little strategic coordination

is likely to occur across business units in the sbu.

Performance recognition gets blurred , credit for successful businessunits tend to go to corporate ceo, then to business unit head, last togroup vice president.


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Matrix organizational structure

Chief executive officer

Vice president vice president vice president vice presidentEngineering production purchase adm.

Project A engg. staff production purchase adm.manager

Project B engg. staff production purchase adm.Manager

Project C engg. staff production purchase adm.Manager

Project D engg. staff production purchase adm.manager


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ADVANTAGES

Accomodates a wide variety of project oriented business activity. Good training ground for strategic managers. Maximize efficient use of functional managers. Fasters creativity and multiple sources of diversity.

Broader middle management exposure to strategic issues for thebusiness.


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Disadvantages

Dual accounting can create confusion and contradictory policies. Necessitates tremendous horizontal and vertical coordination. Very complex to manage. Hard to maintain balance between two lines of authority.


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Process for creating an organization structure

Identify the critical activities needed to carry out the orgs strategy. Understand the relationship between these activities (degree of

interdependence). Group the activities into organizational units.

Determine the degree of authority and independence of each of these units.

Provide for coordination between the various units.


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Signs of poor organization structure

Poor forecasting. Not meeting customer needs. Slow response to changes in the environment . Conflicts between individuals or groups.

Poor communication / coordination. Poor decision making decision being made lay the wrong people

or at the wrong level in the hierarchy inadequate information tomake good decision.


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Organization structure

Organizational culture is the underlying values, beliefs and principlethats serves as the foundation for an organization managementsystem.in addition its includes the management practices and behavior that

exemplify and reinforce those basic principles.

A culture is a pattern of basic assumption invented, discovered or developed by a given group as it learns to cope with its problem of external adaptation and internal integration .

That has worked well enough to be considered valid therefore ,to betaught to new members as the correct way to perceive , hunk andfeel in relation to those problems.

Culture once established ,it may resistant to change.>culture is nurtured and sustained through hiring practices.>socialization of new hires.


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Organization culture largely dictates issues like-

Formation of rules. People / team orientation . Task orientation. Work hours and dedication to the company.

Dress code. Ethical standards.


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Function of organization culture

Culture is the social glue that helps hold an organization together byproviding standards for what employees say or do.

Culture provides boundary - defining roles. Culture conveys a sense of identity for org. members. It serves as a sense making and control mechanism that guides

and shapes the attitudes and behavior of employees. Significant components of culture Relationship. Language & communication.

Institutional & legal system Values & value system Time orientation Mind sets or world view.


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5 basic process of organizational culture

Cooperation:-willingness to act.contigencies.intent, goodwill and mutual trust.

. Decision making :-basic assumption & preferences.efficiency & effectiveness.

. Control:- formal procedure & plan control.shared belief & values.

. Communication:-communication & miscommunication.assumption reduces the needs.

guidelines & clue control to interpret massage.. Commitment:-sense of identification.

salary , prestige & sense of worth.

Documents

Organizational Structure and Design 2