OBJECTIVES LEARNING After studying chapter 15 and listening to class lecture,you should be able to: 1. Identify the six key elements that define an organization’s structure. 2. Explain the characteristics of a bureaucracy. 3. Describe a matrix organization. 4. Explain the characteristics of a virtual organization. 5. Summarize why managers want to create boundaryless organizations. 6. Contrast mechanistic and organic structural models. 7. List the factors that favor different organizational structures. 8. Why do structures differ?
What Determines Organizational Structure? To what degree are tasks subdivided into separate jobs? On what basis will jobs be grouped together? To whom do individuals and groups report? How many individuals can a manager efficiently and effectively direct? Where does decision-making authority lie? To what degree will there be rules and regulations to direct employees and managers?
Organizational Chart of a Manufacturing Firm Board Board member member Board Board member member Board Board member member Board Board member member Chief Chief Executive Executive Officer Officer Legal Legal counsel counsel President President V.P V.PSales/ Sales/ Marketing Marketing Industrial Industrial Products Products DirectorDirectorSales Sales Western Western Region Region Industrial Industrial Products Products Sales Sales Manager Manager V.P V.PHuman Human Resources Resources Industrial Consumer Industrial Consumer Products Products Products Products DirectorDirectorDirectorDirectorHuman Sales Human Sales Resources Resources Eastern Eastern Region Region Industrial Industrial Products Products Sales Sales Manager Manager Consumer Consumer Products Products DirectorDirectorHuman Human Resources Resources V.P V.P Production Production Industrial Industrial Products Products DirectorDirectorProduction Production V.P V.PResearch Research and Development and Development Consumer Consumer Industrial Industrial Consumer Consumer Products Products Products Products Products Products DirectorDirectorDirectorDirectorDirectorDirectorProduction R&D Production R&D R&D R&D Western Western Eastern Eastern Region Region Region Region Consumer Consumer Consumer Consumer etc. Products Products etc. etc. etc. etc. etc. etc. etc. Products Products Sales Sales Sales Sales Manager Manager Manager Manager etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc.
A Horizontal Organization Overall Manager Adviser Adviser Adviser Team responsible for core process (e.g., generating and fulfilling orders) Objective: Reduced cycle time Team responsible for core process (e.g., product development) Objective: More new products Team responsible for core process (e.g., flow of materials) Objective: Enhanced product quality
The The Bureaucracy Bureaucracy Strengths – Functional economies of scale – Minimum duplication of personnel and equipment – Enhanced communication – Centralized decision making Weaknesses – Subunit conflicts with organizational goals – Obsessive concern with rules and regulations – Lack of employee discretion to deal with problems
Decentralization: Benefits When Low and When High Low Decentralization (High Centralization) High Decentralization (Low Centralization) Eliminates the additional responsibility not desired by people performing routine jobs Can eliminate levels of management, making a leaner organization Permits crucial decisions to be made by individuals who have the “big picture” Promotes greater opportunities for decisions to be made be people closest to problems Table 12-1
A Matrix Organization Functional authority Project authority President President Farm FarmMachinery Machinery Division Division Production Production department department Legal Legal department department Engineering Engineering department department Accounting Accounting department department Project Project Alpha Alpha manager manager Production Production support support group group Legal Legal support support group group Engineering Engineering support support group group Accounting Accounting support support group group Project Project Beta Beta manager manager Production Production support support group group Legal Legal support support group group Engineering Engineering support support group group Accounting Accounting support support group group Project Project Gamma Gamma manager manager Production Production support support group group Legal Legal support support group group Engineering Engineering support support group group Accounting Accounting support support group group
Mechanistic vs. Organic Designs Structure Dimension Mechanistic Organic Stability Change unlikely Change likely Specialization Many specialists Many generalists Formal rules Rigid rules Considerable flexibility Authority Centralized in a few top people Decentralized, diffused throughout the organization Table 12-2
New New Design Design Options Options Concepts: Concepts: Provides Providesmaximum maximum flexibility flexibilitywhile while concentrating concentratingon onwhat what the theorganization organizationdoes does best. best. Disadvantage Disadvantageisisreduced reduced control controlover overkey keyparts partsof of the thebusiness. business.
What What Is Is Organizational Organizational Structure? Structure? (cont’d) (cont’d) Grouping GroupingActivities ActivitiesBy: By: • • Function Function • • Product Product • • Geography Geography • • Process Process • • Customer Customer
New New Design Design Options Options Characteristics: Characteristics: • •Breaks Breaksdown down departmental departmentalbarriers. barriers. • •Decentralizes Decentralizesdecision decision making to the team making to the teamlevel. level. • •Requires Requiresemployees employeesto to be generalists as well be generalists as wellas as specialists. specialists. • •Creates Createsaa“flexible “flexible bureaucracy.” bureaucracy.”