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Managing Organizational Structure and Culture

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2 Managing Organizational Structure and Culture
chapter ten Managing Organizational Structure and Culture McGraw-Hill/Irwin Contemporary Management, 5/e Copyright © 2008 The McGraw-Hill Companies, Inc. All rights reserved.

3 Learning Objectives Identify the factors that influence managers’ choice of an organizational structure. Explain how managers group tasks into jobs that are motivating and satisfying for employees. Describe the types of organizational structures managers can design, and explain why they choose one structure over another.

4 Learning Objectives Explain why managers must coordinate jobs, functions, and divisions using the hierarchy of authority and integrating mechanisms List the four sources of organizational culture and differentiate between a strong, adaptive culture and a weak, inert culture

5 Organizational Structure
Organizational Architecture The organizational structure, control systems, culture, and human resource management systems that together determine how efficiently and effectively organizational resources are used.

6 Designing Organizational Structure
Organizing The process by which managers establish working relationships among employees to achieve goals. Organizational Structure Formal system of task and reporting relationships showing how workers use resources.

7 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

8 Factors Affecting Organizational Structure
Figure 10.1

9 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.

10 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 or diversification also requires a more flexible structure.

11 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 the organization.

12 The Organizational Environment
Technology Technology can be measured by: Task variety: the number of new problems a manager encounters. Task analyzability: the availability of programmed solutions to a manager to solve problems. High task variety and low analyzability present many unique problems to managers. Flexible structure works best in these conditions. Low task variety and high analyzability allow managers to rely on established procedures.

13 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., CPA’s and doctors) often have internalized professional norms and values.

14 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.

15 The Organizational Environment
The way an organization’s structure works depends on the choices managers make about: How to group tasks into individual jobs How to group jobs into functions and divisions How to allocate authority and coordinate functions and divisions

16 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.

17 Question? What is the process of reducing the tasks each worker performs? Job simplification Job enlargement Job enrichment Job enhancement The correct answer is “A” – job simplification. See next slide.

18 Job Design Job Simplification
The process of reducing the tasks each worker performs. Too much simplification and boredom results.

19 Job Design Job Enlargement Job Enrichment
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

20 Job Enrichment Empowering workers to experiment to find new or better ways of doing the job Encouraging workers to develop new skills Allowing workers to decide how to do the work Allowing workers to monitor and measure their own performance

21 The Job Characteristics Model
Source: Adapted from J. R. Hackman and G. R. Oldham, Work Redesign (Reading, MA: Addison-Wesley, 1980). Figure 10.2

22 Job Characteristics Model

23 Grouping Jobs into Functions
Group of people, working together, who possess similar skills or use the same kind of knowledge, tools, or techniques to perform their jobs

24 Grouping Jobs into Functions
Functional Structure An organizational structure composed of all the departments that an organization requires to produce its goods or services.

25 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 and monitor the competitive environment

26 Functional Structure Disadvantages
Difficult for departments to communicate with others. Preoccupation with own department and losing sight of organizational goals.

27 The Functional Structure of Pier 1 Imports

28 Divisional Structures
Managers create a series of business units to produce a specific kind of product for a specific kind of customer

29 Product, Market, and Geographic Structures
Figure 10.4

30 Types of Divisional 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

31 Product Structure Allows functional managers to specialize in one product area Division managers become experts in their area Removes need for direct supervision of division by corporate managers Divisional management improves the use of resources

32 Types of Divisional 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

33 Types of Divisional 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

34 Global Geographic and Global Product Structures
Figure 10.5

35 Types of Divisional Structures
Market Structure Groups divisions according to the particular kinds of customers they serve Allows managers to be responsive to the needs of their customers and act flexibly in making decisions in response to customers’ changing needs

36 Matrix Design Structure
Matrix Structure An organizational structure that simultaneously 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 respond rapidly to the need for change. Each employee has two bosses (functional manager and product manager) and possibly cannot satisfy both.

37 Matrix Structure Figure 10.6

38 Discussion Question? Which is the most effective and efficient organizational structure? Matrix structure Divisional structure Market structure Geographic structure There is no one best answer. It depends on a firm’s situation. Students should discuss the best situation for each type.

39 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

40 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.

41 Product Team Structure
Figure 10.6

42 Hybrid Structures Hybrid Structure
The structure of a large organization that has many divisions and simultaneously uses many different organizational structures Managers can select the best structure for a particular division—one division may use a functional structure, another division may have a geographic structure. The ability to break a large organization into smaller units makes it easier to manage.

43 Federated’s Hybrid Structure
Figure 10.7

44 Question? What is the power vested in a manager to make decisions?
Influence Authority Control The correct answer is “C” – authority. See next slide.

45 Coordinating Functions: Allocating Authority
The power vested in a manager to make decisions and use resources to achieve organizational goals by virtue of his position in an organization

46 Coordinating Functions: Allocating Authority
Hierarchy of Authority An organization’s chain of command, specifying the relative authority of each manager. Span of Control: the number of subordinates who report directly to a manager

47 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.

48 The Hierarchy of Authority and Span of Control at McDonald’s Corporation
Figure 10.8

49 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 distorted as it is repeated through the firm. Can become expensive

50 Tall Organizations Figure 10.9

51 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.

52 Flat Organizations Figure 10.9

53 Minimum Chain of Command
Top managers should always construct a hierarchy with the fewest levels of authority necessary to efficiently and effectively use organizational resources

54 Centralization and Decentralization of Authority
Decentralizing authority giving lower-level managers and non-managerial employees the right to make important decisions about how to use organizational resources

55 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

56 Integrating Mechanisms
Figure 10.10

57 Organizational Culture
shared set of beliefs, expectations, values, and norms that influence how members of an organization relate to one another and cooperate to achieve organizational goals

58 Sources of an Organization’s Culture
Figure 10.11

59 Characteristics of Organizational 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

60 Organizational Ethics
moral values, beliefs, and rules that establish the appropriate way for an organization and its members to deal with each other and people outside the organization

61 Employment Relationship
Human resource policies: Can influence how hard employees will work to achieve the organization’s goals, How attached they will be to it Whether or not they will buy into its values and norms

62 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

63 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.

64 Strong, Adaptive Cultures Versus Weak, Inert Cultures
values and norms help an organization to build momentum and to grow and change as needed to achieve its goals and be effective

65 Strong, Adaptive Cultures Versus Weak, Inert Cultures
Those that lead to values and norms that fail to motivate or inspire employees Lead to stagnation and often failure over time

66 Movie Example: Apollo 13 What organizational structure does NASA use to handle a moon launch? Described by Leonard Maltin as “exhilarating story of ill-fated Apollo 13 moon mission, and how the heroic work of Jim Lovell and his crew, combined with the dogged persistence of the NASA team in Houston, averted tragedy. In the launch sequence (Ch 12), the flight director asks the different areas (booster, retro, guidance, surgeon, control, capcom, etc.) for a go/no-go for launch. This shows one way an organization can structure itself to accomplish a mission. After the explosion on board the spacecraft, the different areas are asked for input to solve the problem.

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