2OrganizingThe deployment of organizational resources to achieve strategic goalsDivision of laborLines of authorityCoordinationAll organizations wrestle with structural design and reorganizationOrganizing is important because it follows from strategyStrategy What to doOrganizing How to do itORGANIZING THE VERTICAL STRUCTUREOrganizing is the deployment of organizational resources to achieve strategic goalsIt is important because it follows from strategy.Strategy defines what to do, and organizing defines how to do it.The organizing process leads to the creation of organization structure, which defines how tasks are divided, resources are deployed, and departments are coordinated.
3Organizing the Vertical Structure Organizing Structure Defines:The set of formal tasks assigned to individuals and departmentsFormal reporting relationships including lines of authority, decision responsibility, # of hierarchical levels, span of managers’ controlThe design of the systems to ensure effective coordination across departmentsOrganization structure refers to:Formal tasks assigned to individuals and departments;Formal reporting relationships including lines of authority, decision responsibility, number of hierarchical levels and span of managers' control; andDesign of systems for coordination across departments.
4Sample Organization Chart The organization chart is the visual representation of an organization's structure that portrays the characteristics of vertical structure.It delineates the chain of command,indicates departmental tasks and how they fit together, andprovides order and logic for the organization.
5Organizing ConceptsWork Specialization is the degree to which organizational tasks are subdivided into individual jobs; also called division of laborChain of Command is an unbroken line of authority that links all individuals in the organization and specifies who reports to whom: (1) Unity of Command (2) Scalar PrincipleThere are several important features of the vertical structureWork SpecializationA fundamental principle is that work can be performed more efficiently if employees are allowed to specialize. Work specialization, sometimes called division of labor, is the degree to which organizational tasks are subdivided into separate jobs. Production is efficient because employees perform small, well‑defined tasks.Organizations are moving away from this principle because too much specialization leads to employees being isolated and doing only a single boring job. Many companies are enlarging jobs to provide greater challenges or assigning teams to tasks so employees can rotate among the jobs performed by the team.Chain of CommandThe chain of command is an unbroken line of authority that links all persons in an organization and shows who reports to whom. It is associated with two underlying principles.Unity of command means that each employee is held accountable to only one supervisor.The scalar principle refers to a clearly defined line of authority in the organization that includes all employees.
6Authority, Responsibility, Accountability, and Delegation Authority is the formal and legitimate right of a manager to make decisions, issue orders, and allocate resources to achieve organizational outcomesAuthority is vested in organizational positions, not peopleAuthority flows down the vertical hierarchyAuthority is accepted by subordinatesResponsibilityAccountability is the mechanism through which authority and responsibility are aligned; Sarbanes-Oxley ActDelegation is the process managers use to transfer authority and responsibility down the chainAuthority, Responsibility, and DelegationThe chain of command illustrates the authority structure of the organization. Authority is the formal and legitimate right of a manager to make decisions, issue orders, and allocate resources to achieve organizational outcomes. Authority is distinguished by three characteristics.Authority is vested in organizational positions, not people.Authority flows down the vertical hierarchy. Positions at the top have more formal authority than those at the bottom.Authority is accepted by subordinates. The acceptance theory of authority argues that a manager has authority only if subordinates choose to accept the commands.Responsibility is the duty to perform the task or activity an employee has been assigned. Managers are assigned the authority commensurate with responsibility.Accountability is the mechanism through which authority and responsibility are brought into alignment. Those with authority and responsibility are subject to justifying task outcomes to those above them in the chain of command.Delegation is another concept related to authority; it is the process managers use to transfer authority and responsibility to positions below them in the hierarchy. Organizations encourage managers to delegate authority to the lowest possible level to gain flexibility to meet customer needs and adapt to the environment.Discussion Question #1: Sandra Holt, manager of Electronics Assembly, asked Hector Cruz, her senior technician, to handle things in the department while Sandra worked on the budget. She needed peace and quiet for at least a week to complete her figures. After ten days, Sandra discovered that Hector had hired a senior secretary, not realizing that Sandra had promised interviews to two other people. Evaluate Sandra’s approach to delegation.
7Line and Staff Authority Line departments perform primary business tasks (primary goal & mission) with line authority to direct & control immediate subordinates (decision-making)SalesProductionStaff departments support line departments with staff authority to advise, recommend, & counsel (no decision-making)Human Resources, Labor RelationsAccounting, FinanceResearch, MarketingLine and Staff AuthorityLine departments perform tasks that reflect the organization's primary goal and mission. In a software company, line departments make and sell the product. Line authority means that managers have formal authority to direct and control immediate subordinates.Staff departments include all those who provide specialized skills in support of line departments. The finance department of software firm has staff authority. Staff authority is narrower than line authority and includes the right to advise, recommend, and counsel in the staff specialists' area of expertise.
8Span of Management (Control) The # of employees reporting to a supervisorTall Organizations have more levels and narrow spanFlat Organizations have a wide span and fewer levels: Less supervision/larger spans of controlWork is stable and routineSubordinates perform similar workSubordinates are in one locationHighly trained/require little directionRules and procedures are definedFew planning or nonsupervisory activitiesManager’s preferenceSpan of ManagementThe span of management, or span of control, is the number of employees reporting to a supervisor. This characteristic of structure determines how closely a supervisor can monitor subordinates.Factors that determine the span of management include:Work performed by subordinates is stable and routine; Subordinates perform similar work tasks; Subordinates are concentrated in a single location; Subordinates are trained and need little direction in performing tasks; Rules and procedures defining task activities are available; Support systems and personnel are available for the manager; Little time is required in nonsupervisory activities such as coordination with other departments or planning; Managers' personal preferences favor a large span.
9Reorganization and Span of Management The average span of control used in an organization determines whether the structure is tall or flat.A tall structure has an overall narrow span of management and more levels in the hierarchy.A flat structure has a wide span, is horizontally dispersed, and has fewer hierarchical levels.The trend is toward wider spans of control as a way to facilitate delegation.
10Centralization and Decentralization Centralization – decision authority is located near the top of the organizationDecentralization – decision authority is pushed downward to all levels (Current Trend):uses workers' skills, relieves top managers, has well-informed people make decisions, and permit rapid response3 Factors influencing centralization vs. decentralization:Change and uncertainty decentralizationStrategic fitCrisis centralizationCentralization and DecentralizationCentralization and decentralization pertain to the hierarchical level at which decisions are made.Centralization means decision authority is located near the top of the organization.With decentralization, decision authority is pushed down the chain of command to lower organization levels. The trend is toward decentralization, which uses workers' skills, relieves top managers, has well-informed people make decisions, and permit rapid response. Factors that influence centralization versus decentralization include:Greater change and uncertainty in the environment are usually associated with decentralization. The amount of centralization or decentralization should fit the firm’s strategy. In times of crisis or risk of company failure, authority may be centralized at the top.Discussion Question #8: Experts say that organizations are becoming increasingly decentralized, with authority, decision-making responsibility, and accountability being pushed farther down into the organization. How will this trend affect what will be asked of you as a new manager?
11Departmentalization: Functional Departmentalization: Basis for grouping positions into departments and departments into the total organizationVertical Functional Approach: Grouping of positions into departments based on skills, expertise, work activities, and resource useDEPARTMENTALIZATION Exhibit 10.3Departmentalization is the basis for grouping individuals into departments and departments into the total organization. Managers make choices about how to use the chain of command to group people together to perform their work. Five approaches to structural design reflect different uses of the chain of command in departmentalization.Vertical Functional Approach Exhibit 10.4What It IsFunctional structure is the grouping of positions into departments based on similar skills, expertise, and resource use. People, facilities, and other resources representing a common organizational resource are grouped together into a single department.How It WorksThe major departments under the president are groupings of similar expertise and resources, such as accounting, human resources, production and marketing. Each of the functional departments is concerned with the organization as a whole. The functional structure is a strong vertical design. Information flows up and down the vertical hierarchy, and the chain of command converges at the top.People in a department communicate primarily with others in the same department to coordinate work and accomplish tasks or implement decisions. Managers and employees are compatible because of similar training and expertise.Discussion Question #3: An organizational consultant was heard to say, “Some aspect of functional structure appears in every organization.” Do you agree? Explain.Divisional ApproachThe divisional structure occurs when departments are grouped together based on organizational outputs. Diverse departments are brought together to produce a single organizational output. The divisional structure is sometimes called a product structure, program structure, or self-contained unit structure. Most large corporations have separate divisions that perform different tasks, use different technologies or serve different customers.Divisions are created as self-contained units with separate functional departments for each division. For example, separate engineering departments are created within each division, and each department is similar and focuses on a single product. The primary difference between divisional and functional structures is that the chain of command from each function converges lower in the hierarchy. Differences of opinion would be resolved at the divisional level rather than by the president.Discussion Question #4: The divisional structure is often considered almost the opposite of a functional structure. Do you agree? Briefly explain the major differences in these two approaches to departmentalization.
12Departmentalization: Functional (continued) Advantages:Efficient use of resourcesEconomies of scaleIn-depth skill specialization and developmentTop manager direction & controlDisadvantages:Poor communication across functional departmentsSlow response to external changesLagging innovationDecisions concentrated at top of hierarchy, creating delayFunctional ApproachGrouping employees by common task permits efficient resource use and economies of scale. Departments enhance in‑depth skill specialization and development, and centralized decision making at the top provides unified direction.Disadvantages include barriers that exist across departments resulting in poor communication and coordination and slow response to changes. Innovation and change require involvement of several departments, and decisions pile up at the top of the hierarchy creating delay
13Departmentalization - Divisional Divisional Structure - Grouping based on organizational outputProduct, Program, or SBU-Based DivisionsGeographic or Customer-Based Divisions
14Departmentalization: Divisional (continued) Advantages:Fast response, flexibility in unstable environmentFosters concern for customer needsExcellent coordination across functional departmentsDisadvantages:Duplication of resources across divisionsLess technical depth and specializationPoor coordination across divisionsDivisional ApproachThe organization is flexible and responsive to change because each unit is small and tuned in to its environment. Concern for customer's needs is high and coordination across functional departments is better because employees are grouped and committed to a product.Coordination across divisions is often poor. The organization loses efficiency and economies of scale, and there may be a lack of technical depth and specialization.
1510.5 Geographic-Based Global Org. Structure Geographic or Customer-Based Divisions - group activities by geography or customerGeographic- or Customer-Based DivisionsGrouping company activities by geographic region is an alternative for assigning divisional responsibility. In this structure, all functions in a specific country or region report to the same division manager. The structure focuses company activities on local market conditions; competitive advantage comes from the selling a product adapted to a given country.
1610.6 Dual-Authority in a Matrix Organization Matrix Approach What It IsThe matrix approach combines aspects of both functional and divisional structures simultaneously in the same part of the organization. The matrix has dual lines of authority. The functional hierarchy of authority runs vertically, providing traditional control within functional departments. The divisional hierarchy runs horizontally, providing coordination across departments. The matrix structure provides a formal chain of command for both the functional (vertical) and divisional (horizontal) relationships.How It WorksThe dual lines of authority make the matrix structure unique. The success of the matrix structure depends on the abilities of people in key matrix roles.Two-boss employees report to two supervisors simultaneously and must resolve conflicting demands from the matrix bosses.The matrix boss is the product or functional boss who is responsible for one side of the matrix.The top leader oversees both the product and functional chains of command and is responsible for the entire matrix.Discussion Question #5: Some people argue that the matrix structure should be adopted only as a last resort because the dual chains of command can create more problems than they solve. Discuss. Do you agree or disagree? Why?
17Departmentalization: Matrix Approach Combines functional and divisional approachesAdvantages: Improve coordination and information:More efficient use of resources than single hierarchyFlexibility, adaptability to changing environmentInterdisciplinary cooperation, expertise available to all divisionsDisadvantages: Dual lines of authority (Two-boss employee)Frustration & confusionHigh conflict b/w two sides of the matrixMany meetings, more discussion than actionMatrix ApproachThe matrix can by highly effective in a complex, rapidly changing environment in which flexibility and adaptability are important. Conflict and frequent meetings allow new issues to be raised and resolved. The matrix makes efficient use of human resources because specialists can be transferred from one division to another.Frustration and confusion arising from the dual chain of command can be a significant problem, as can high conflict between the two sides of the matrix, and time lost in meetings. Mangers spend a great deal of time coordinating meetings, taking time away from core work activities
1810.7 Global Matrix Structure Explain the matrix approach to structure and its application to both domestic and international organizations.The matrix structure uses functional and divisional chains of command simultaneously in the same part of the organization. The matrix structure has dual lines of authority. The functional hierarchy of authority runs vertically, and the divisional hierarchy of authority runs laterally. The matrix approach to structure provides a formal chain of command for both the functional and divisional relationships. The matrix structure is typically used when the organization experiences environmental pressure for both a strong functional departmentalization and a divisional departmentalization. Global corporations often use the matrix structure. The problem for global companies is to achieve simultaneous coordination of various products within each country or region and for each product line. The two lines of authority typically are geographic and product, and the matrix provides excellent simultaneous coordination. It is an organizational structure that deliberately violates Fayol’s principle of unity of command.
19Departmentalization: Team Approach Very widespread trend;Horizontal teams coordinate their work, and work directly with customers to accomplish the organization’s goals.Cross-functional teamsPermanent teams:CIA NIAExamples:Project Team, Task Force TeamCommitteeAgencyTeam ApproachWhat It Is:The team approach is probably the most widespread trend in departmentalization. The vertical chain of command is a powerful means of control, but passing all decisions up the hierarchy takes too long and keeps responsibility at the top. Managers can delegate authority, push responsibility to lower levels, and be more flexible and responsive in the competitive global environment.How It WorksCross‑functional teams consist of employees from various functional departments, responsible to meet as a team and resolve mutual problems. Team members report to their functional departments, but also to the team. These teams provide needed horizontal coordination to complement existing functional or divisional structures.Permanent teams are groups of employees brought together in a way similar to a formal department. Emphasis is on horizontal communication and information sharing because representatives from all functions coordinate to complete a specific task. Authority is pushed down to lower levels, and front-line employees are given the freedom to make decisions and take action on their own.With a team-based structure, the entire organization is made up of horizontal teams that coordinate activities and work with customers to accomplish the organization’s goals.Discussion Question #2: Most organizations have been making greater use of teams in recent years. What factors might account for this trend?
20Departmentalization: Team Approach (continued) Advantages:Reduced barriers among dept’s, increased compromise (Flexible)Shorter response time, quicker decisions (Responsive)Allows managers to delegate authority Better morale, enthusiasm from employee involvementDisadvantages:Dual loyalties and conflictTime and resources spent on meetings;Unplanned decentralizationTeam ApproachThe team approach reduces barriers across departments, increases cooperation and compromise, and enables the firm to quickly adapt to requests and changes. Another advantage is better morale and enthusiasm as a result of increased employee involvement.Disadvantages include dual loyalties and conflict, time and resources spent on meetings, and too much decentralization. Team members can often lose sight of the big picture of the organization.
21Departmentalization: Virtual Network Approach (Structure) The Most Recent TrendThe firm subcontracts most of its major functions to separate companiesExtends idea of horizontal coordination and collaboration beyond the boundaries of the organizationPartnershipsAlliancesCould be a loose interconnected groupOutsourcingThe Virtual Network ApproachWhat It IsThe most recent approach to departmentalization extends the idea of horizontal coordination beyond the boundaries of the organization.Outsourcing, which means farming out certain activities, has become a significant trend. Partnerships, and alliances and other collaborative forms are now a leading approach to accomplishing strategic goals.Some organizations take this networking approach to the extreme to create a new kind of structure. The virtual network structure disaggregates major functions to separate companies that are brokered by a small headquarters organization.How It WorksThe organization may be viewed as a central hub surrounded by a network of outsider specialists. Services such as accounting are outsourced to separate organizations that are connected electronically to the central office. Networked computer systems, collaborative software, and the Internet enable organizations to exchange data and information rapidly and seamlessly. Networks allow a company to concentrate on what it does best and contract out other activities to companies with distinctive competence in those areas.In similar networking approach called the modular approach, a manufacturing firm uses outside suppliers to provide large chunks of a product, which are then assembled into a final product by a few workers.Describe the contemporary team and virtual network structures and why they are being adopted by organizations.The implementation of team concepts has been a widespread trend in departmentalization. The vertical chain of command is a powerful means of control, but moving decisions through the hierarchy takes much time and keeps responsibility at the top. The trend is to delegate authority, push responsibility to the lowest possible levels, and create participative teams that engage the commitment of workers. This approach enables organizations to be more flexible and responsive in a competitive global environment. The dynamic network organization is another approach to departmentalization. Using the network structure, the organization divides major functions into separate companies that are brokered by a small headquarters organization. The network approach is revolutionary because it is difficult to answer the question, “Where is the organization?” This organizational approach is especially powerful for international operations.Discussion Question #6: What is the virtual network approach to structure? Is the use of authority and responsibility different compared with other forms of departmentalization? Explain.
23Departmentalization: Virtual Network Advantages:Can draw on expertise worldwideHighly flexible and responsiveReduced overhead costsDisadvantages:Lack of controlWeak boundariesGreater demands on managersWeaker employee loyaltyVirtual Network ApproachThe biggest advantages are flexibility and competitiveness on a global scale, drawing on resources and expertise worldwide. The virtual network structure is the leanest of all because little supervision is required. There may only be two or three levels of hierarchy, if that many, compared with ten or more in traditional firms.Lack of hands-on control is a significant disadvantage. Each partner in the network acts in its own self-interest. Weak and ambiguous boundaries create higher uncertainty and greater demands on managers for defining shared goals, coordinating activities, managing relationships, and keeping people focused. Employee loyalty can weaken; employees may feel concerned that they can be replaced by contract services.
24Risks of Outsourcing (Lee, 2014) Intellectual property (trade secret):Sony (Japanese) outsourced to LG, Samsung (Korean). LG, Samsung learned the Sony technologies (1970s & 80s); Now Samsung & LG are selling more electronics (TV, Phones) than Sony.Transportation costSupply chainQualityEthics, Trust, Customer LoyaltyKathie Lee Gifford (1996)Barbie Doll – Mattel – Lead Paint (2007)Lead Paint Prompts Mattel to Recall 967,000 Toys
25Organizing for Horizontal Coordination Companies need more flexibility than vertical structure can offerMeet fast-shifting environmentBreak down barriers between departments/divisions/teamsNeed integration and coordinationLack of coordination and cooperation can cause information problemsGrowing global challengeChrysler CaseORGANIZING FOR HORIZONTAL COORDINATIONThe Need for CoordinationAs organizations grow and evolve, new positions and departments are added, and senior managers have to find a way to tie all of these departments together. Coordination refers to the quality of collaboration across departments. It is required whether there is a functional, divisional, or team structure.Coordination problems are amplified in the global arena because units differ not only by goals and work activities but by distance, time, culture, and language. Coordination is the outcome of information and cooperation. Managers can design systems and structures to promote horizontal coordination.Explain why organizations need coordination across departments and hierarchical levels, and describe mechanisms for achieving coordination.Coordination refers to the quality of collaboration across departments. It is required whether there is a function, divisional, or team structure. Coordination problems are amplified in the global arena, because units differ not only by goals and work activities but by distance, time, culture, and language. Coordination is the outcome of information and cooperation; managers can design systems and structures to promote horizontal coordination. The vertical structure is flattened, with perhaps only a few senior executives in traditional support functions such as finance or human resources. A task force is a temporary team or committee designed to solve a short-term problem involving several departments. Task force members represent their departments and share information that enables coordination. Companies also set up cross-functional teams for coordination. Companies also use project managers, responsible for coordinating the activities of several departments on a full-time basis for the completion of a specific project. Reengineering is the radical redesign of business processes to achieve dramatic improvements in cost, quality, service, and speed. Because the focus of reengineering is on process rather than function, reengineering generally leads to a shift away from a strong vertical structure.
27Business Process Reengineering (BPR) Business process reengineering, is the radical redesign of business processes to achieve dramatic improvements in cost, quality, service, and speedBPR vs. DownsizingBPR vs. TQMBPR & Information Systems
28Task Forces, Teams, and Project Management Task Force – a temporary team or committee formed to solve a specific short-term problem involving several departmentsProject Manager – person responsible for coordinating activities of several departments for the completion of a specific projectCross-functional Team – furthers horizontal coordination by including members across the organization
30Relational Coordination Frequent, timely, problem-solving communication carried out through [employee] relationships of shared goals, shared knowledge, and mutual respect.
31Structure Follows Strategy Business performance is influenced by structureStrategic goals should drive structure:Differentiation Divisional StructureInnovation & Flexibility Horizontal Team StructureStructure should facilitate strategic goals:FACTORS SHAPING STRUCTUREStructure Follows StrategyPorter’s strategies of differentiation and cost leadership typically require different structural approaches. The divisional structure promotes differentiation because each division can focus on specific products and customers.A simplified continuum illustrates how structural approaches are associated with strategic goals. The terms mechanistic and organic refer to organizations where efficiency is the goal in a stable environment (mechanistic), and organizations where innovation is the goal in a rapidly-changing environment (organic), respectively.The pure functional structure is appropriate for achieving internal efficiency goals, but it does not enable the organization to be flexible or innovative. A horizontal team structure is appropriate when the primary goal is innovation and flexibility. The firm can differentiate itself and respond quickly to change.Other forms of structure represent intermediate steps on the firm’s path to efficiency or innovation. The functional structure with cross-functional teams and project teams provides greater coordination and flexibility than the pure functional structure. The divisional structure promotes differentiation because each division can focus on specific products and customers.
32Factors Affecting Organization Structure (Nader & Tushman, 1997) Source: David A. Nadler and Michael L. Tushman, with Mark B. Nadler. Competing by Design: The Power of Organizational Architecture (New YorK: Oxford University Press, 1997), p. 54.Research Question: “How do managers know whether to design a structure that emphasizes the formal, vertical hierarchy or one with an emphasis on horizontal communication and collaboration?”Nader & Tushman (1997) illustrates that forces affecting organization structure come from both outside and inside the organization.External strategic needs, such as environmental conditions, strategic direction, and organizational goals, create top-down pressure for designing the organization in such a way as to fit the environment and accomplish strategic goals.Structural decisions also take into consideration pressures from the bottom-up – that is from the technology and work processes that are performed to produce the organization’s products and services.
33Relationship of Structural Approach to Strategy A simplified continuum illustrates how structural approaches are associated with strategic goals.The terms mechanistic and organic refer to organizations where efficiency is the goal in a stable environment (mechanistic),and organizations where innovation is the goal in a rapidly-changing environment (organic), respectively.A mechanistic, vertical structure is appropriate for a cost leadership strategy, which typically occurs in a stable environment.An organic, horizontal approach is needed for a differentiation strategy and when the organization needs flexibility to cope with an uncertain environment.Identify how structure can be used to achieve an organization’s strategic goals.Structure depends on a variety of contingencies. The right structure is “designed to fit” the contingency factors of strategy, environment, and technology. These three areas are changing for organizations, creating a need for stronger horizontal coordination. Two strategies proposed by Porter are differentiation and cost leadership; these strategies require different structural approaches. The pure functional structure is appropriate for achieving internal efficiency goals. The vertical functional structure uses task specialization and a chain of command. It does not enable the organization to be flexible or innovative. Horizontal teams are appropriate when the primary goal is innovation and flexibility. The firm can differentiate itself and respond quickly to change. Other forms of structure represent intermediate steps on the firm’s path to efficiency or innovation. The functional structure with cross-functional teams and project teams provides greater coordination and flexibility than the pure functional structure. The divisional structure promotes differentiation because each division can focus on specific products and customers.
34Structure Fits the Technology Knowledge, tools, techniques, and activities should match production activitiesManufacturing firms can be categorized according to (Woodward, 1965):Small-batch and unit productionLarge-batch and mass productionContinuous process productionThe technical complexity of each type of firm differsStructure Fits the TechnologyTechnology includes the knowledge, tools, techniques, and activities used to transform organizational inputs into outputs.Woodward’s Manufacturing Technology (Woodward, 1965)Small-batch and unit production. Small-batch production firms produce goods in batches of one or a few product products designed to customer specification. Examples include custom clothing, special-order machine tools, space capsules, satellites, and submarines.Large-batch and mass production. Mass production technology is distinguished by standardized production runs in which a large volume of products is produced and all customers receive identical products. Examples include automobiles, tobacco products, and textiles.Continuous process production. In continuous process production, the entire work flow is mechanized in a sophisticated and complex form of production technology. The process runs continuously and therefore has no starting or stopping. Examples include chemical plants, distilleries, petroleum refineries, and nuclear power plants.NEW MANAGER SELF-TEST: AUTHORITY ROLE MODELSOrganizations’ structures are based on authority. New managers’ expectations about authority are often based on experiences with their first authority figures and role models—Mom and Dad. This exercise helps students understand their authority role models, and hence their expectations for authority when they become managers. Authoritarian expectations typically would fit in a traditional structure with fixed rules and a clear hierarchy of authority (mechanistic organization characteristics). Flexible authority expectations typically would fit with horizontal organizing such as managing teams, projects, and reengineering (organic organization characteristics). Permissive expectations may be insufficient to enforce accountability under any structure.Service TechnologyService organizations include consulting companies, law firms, brokerage houses, airlines, hotels, advertising companies, amusement parks, and educational organizations. Service technology also characterizes departments such as legal, human resources, finance, and market research in large corporations. Service technology involves:Intangible output. Services are perishable and, unlike physical products, cannot be stored in inventory.Direct contact with customers. Employees and customers interact directly to provide and purchase the service. Production and consumption are simultaneous.Digital TechnologyDigital technology is characterized by use of the Internet and other digital processes to conduct or support business online. Like service firms, organizations based on digital technology tend to be flexible and decentralized. Digital technology is driving the move toward horizontal forms that link customers, suppliers, and partners into the organizational network. It encourages boundarylessness, where information and work activities flow freely among various organizational participants.
3510.14 Manufacturing Technology and Organization Structure (Woodward, 1965) Joan Woodward, Industrial Organizations: Theory & Practice (London: Oxford University Press, 1965).Define production technology (manufacturing, service, and digital) and explain how it influences organization structure.Technology includes the knowledge, tools, techniques, and activities used to transform organizational inputs into outputs. Joan Woodward described three types of manufacturing technology.Small-batch and unit production. Small-batch production firms produce goods in batches of one or a few product products designed to customer specification. Examples include custom clothing, special-order machine tools, space capsules, satellites, and submarines.Large-batch and mass production. Mass production technology is distinguished by standardized production runs in which a large volume of products is produced and all customers receive identical products. Examples include automobiles, tobacco products, and textiles.Continuous process production. In continuous process production, the entire work flow is mechanized in a sophisticated and complex form of production technology. The process runs continuously and therefore has no starting or stopping. Examples include chemical plants, distilleries, petroleum refineries, and nuclear power plants.Service organizations include consulting companies, law firms, brokerage houses, airlines, hotels, advertising companies, amusement parks, and educational organizations. Service technology also characterizes departments such as legal, human resources, finance, and market research in large corporations. Service technology involves:intangible output—services are perishable and, unlike physical products, cannot be stored in inventory; anddirect contact with customers—employees and customers interact directly to provide and purchase the service. Production and consumption are simultaneous.Digital technology is characterized by use of the Internet and other digital processes to conduct or support business online. Like service firms, organizations based on digital technology tend to be flexible and decentralized. Digital technology is driving the move toward horizontal forms that link customers, suppliers, and partners into the organizational network. It encourages boundarylessness, where information and work activities flow freely among various organizational participants.
36Review QuestionsDiscuss the fundamental characteristics of organizing, including such concepts as work specialization, chain of command, span of management, and centralization versus decentralization.Describe functional and divisional approaches to structure.Explain the matrix approach to structure and its application to both domestic and international organizations.Describe the contemporary team and virtual network structures and why they are being adopted by organizations. Explain why organizations need coordination across departments and hierarchical levels, and describe mechanisms for achieving coordination.Identify how structure can be used to achieve an organization’s strategic goals.Define production technology (manufacturing, service, and digital) and explain how it influences organization structure.
37Review Questions (continued) Explain briefly Authority in managementExplain briefly Responsibility in management.Explain briefly Accountability in management.Delegation sometimes cause more problems. Explain briefly when delegation become most effective.In classical management theory, a manager is most effective when the span of management is less than 7. Does the theory still apply to today’s business environment? Explain briefly why or why not.Explain the major difference between Tall Structure and Flat Structure, in term of the span of management.Explain the major difference between Tall Structure and Flat Structure, in term of the organizational efficiency.
38Review Questions (continued) Explain briefly BPR.Explain briefly the major difference between BPR & Downsizing.Explain briefly the major difference between BPR & TQM.Explain briefly why BPR has something to do with Information Systems.
39Review Questions (continued) What are advantages & disadvantages of Functional Approach?What are advantages & disadvantages of Divisional Approach?What are advantages & disadvantages of Matrix Approach?What are advantages & disadvantages of Team Approach?What are advantages & disadvantages of Virtual Network Approach?During WWII, General Patton, General MacArthur were considered most brilliant commanders in the U.S. Army, but General Eisenhower was chosen to be a supreme commander to lead Allied Forces. Explain the major reason, from the managerial perspectives.
40Review Questions (continued) Explain briefly the risk of outsourcing your business operations in a case of SONY and LG.Explain briefly the risk of outsourcing your business operations in terms of supply chain.Explain briefly the quality risk of outsourcing your business operations.Explain briefly the ethics issue of outsourcing your business operations, using an example of Kathie Lee Gifford case (1996).Explain briefly what problem Lee Iacocca, a new CEO of Chrysler found out, in term of organizational structure in early 1980s.Explain briefly why Chrysler needed coordination in the 1980s.