Designing Adaptive Organizations

1
Chapter 7

• Designing Adaptive Organizations

2
Major Concerns in Organizing

• Division of Labor (Differentiation)
• Coordination (Integration)

3
In Reference to the Organizational Chart,
Organizing Involves

• VERTICAL STRUCTURE
• Coordination from Top to Bottom
• HORIZONTAL STRUCTURE
• Departmentalization
• (Who works together?)

4
Work Specialization

• Degree to which tasks are subdivided into
  individual jobs
• A highly specialized job is narrow in scope
• Increases efficiency up to a point
• With extreme specialization, workers tend to
  become bored and alienated

5
Chain of Command

• The line of authority, shown in the organization
  chart, that links all persons and shows who
  reports to whom.

CEO
VP Marketing
VP Production
VP Finance
6
Authority

• Managers have authority because of the positions
  they hold (not who they are)
• To be effective, it must be accepted by
  subordinates.
• Responsibility
• Duty to perform the task an employee has been
  assigned
• Authority should be commensurate with
  responsibility.

7
Delegation

• Process to transfer authority and responsibility
  to positions below
• Delegation does not reduce responsibility
• Benefits both the organization and the individual
  employee

8
Common Practice is to

• CENTRALIZE (authority at top)
• Accounting
• Finance
• Human Resources Management
• Information Systems
• DECENTRALIZE (much delegation)
• Production
• Marketing

9
Span of Management

• Number of employees reporting to a supervisor
• Tradition has recommended a span of management of
  four to seven subordinates
• What is best depends on the situation

10
Departmentalization

• Basis for grouping job positions into departments
  and departments into the total organization.
• Internal Operations Oriented
• Functional
• Network (Virtual)
• Output Oriented
• Divisional
• Product
• Geographic
• Customer
• Team (Cluster)
• Combinations
• Hybrid (different types at different places in
  an org.)
• Matrix (different types at simultaneous at
  the same places in an org.)

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Functional ApproachDepartments based on similar
activities, skills and resource use.

• Advantages
• Efficient use of resources
• Economies of Scale
• In-depth skill specialization

• Disadvantages
• Poor communication among departments
• Slow response to external changes
• Loyalty more to function than customer or the
  whole organization

12
Divisional Approach

• Departments are grouped together based on
  organizational outputs (e.g., product, geography,
  customer)
• Functions (e.g., marketing) are split among the
  divisions
• Its advantages and disadvantages tend to be the
  opposite of those of the functional approach

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Divisions

• Advantages
• Quicker changes in an unstable environment
• More in touch with customers

• Disadvantages
• Duplication
• Competition for resources among divisions
• More managers needed
• Less professional specialization

14
Matrix Approach

• Functional and divisional chains of command
  simultaneously
• Violates the unity of command concept.

15
Matrix Structure - Why?

• To get the advantages of both Functional and
  Divisional Structures
• Sophisticated technology, fast-changing
  environment
• Diverse products and geographical areas

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Disadvantages of Matrix

• Many meetings to coordinate activities
• High conflict between two sides of matrix
• Need for extensive human relations training

17
Team Approach

• Cross-functional teams (Clusters) consist of
  employees from various functional departments
• Teams typically have more decision making power
  than previously held by workers at their levels.

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Team Approach

• Advantages
• Quicker response time
• Better morale
• Reduced administrative overhead
• Disadvantages
• Conflict
• Time and resources spent on meetings

19
Network (Virtual) Approach

• Organization divides major functions among
  separate companies brokered by a small
  headquarters organization
• Somewhat like a functional organization.

20
Network Approach

• Advantages
• Increases competitiveness, especially of small
  firms
• Flexibility
• Reduced Costs
• Disadvantages
• No hands-on control
• Loyalty weakened.

21
Mechanistic vs. Organic Organizations

• Vertical vs. Horizontal Structural Dominance
• Rigid vs. Flexible
• Specialized Jobs vs. Unspecialized
• Boss Control vs. Self-Control
• Centralized Decisions vs. Decentralized
• Bureaucratic vs. Non-bureaucratic

22
Departmentalization Types

• (From most Mechanistic to most Organic)
• Functional
• Functional with integrators, cross-functional
  committees, etc.
• Matrix
• Divisional
• Team

23
When the Mechanistic (Vertical) Approach is most
Appropriate

• External Environment is Stable
• Growth and Innovation Goals are
• Few or Nonexistent (Internal Stability)
• The Organizations Size is Large
• The Life Cycle Stage is Late
• The Technology is Mass Production (or involving
  low-level skills)

24
Service Technology

• Tends to be more Organic (Horizontal) than
  manufacturing
• Employees have direct contact with customers
• Output of the firm is intangible
• Production and consumption are simultaneous