1. Last Topics 1-1 1. We looked at business strategies, at the corporate and business level. 2. A Quick Overview of Planning Tools: Emphasis on Assessing the Environment and Allocating Resources with Scheduling & Breakeven Analysis Emphasis on Assessing the Environment and Allocating Resources with Scheduling & Breakeven Analysis 3. We’ve completed the first half of the course and covered the first of the four managerial functions

2. This Week’s Objectives 1-2 1. Understand why and how we organize 2. Look at the six key elements to consider in organizational design 3. Look at the range of theoretical designs (mechanistic vs organic) and what influences the design decisions 4. Look at the resulting organizational structures (traditional vs contemporary designs)

3. Chapter 9 Organizational Structure and Design Chapter 9, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Management, Ninth Canadian Edition Copyright © 2009 Pearson Education Canada 9-3

4. The Question… Who Does What? 1-4

5. What Is an Organization? Recall from Ch. 1: An Organization Defined A deliberate arrangement of people who act together to accomplish some specific purpose Chapter 1, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Management, Ninth Canadian Edition Copyright © 2009 Pearson Education Canada 1-5

6. So, organizing… Chapter 9, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Management, Ninth Canadian Edition Copyright © 2009 Pearson Education Canada 9-6 1. Divides work to be done into specific jobs and departments 2. Assigns tasks and responsibilities associated with individual jobs 3. Coordinates diverse organizational tasks 4. Clusters jobs into units 5. Establishes relationships among individuals, groups, and departments 6. Establishes formal lines of authority 7. Allocates and deploys organizational resources

7. The Result is: Organizational Structure Organizational Structure Organizational Structure The formal arrangement of jobs within an organization The formal arrangement of jobs within an organization Achieved through Organizational Design Achieved through Organizational Design A process involving decisions about six key elements: A process involving decisions about six key elements: 1. Work specialization 2. Departmentalization 3. Chain of command 4. Span of control 5. Centralization and decentralization 6. Formalization Chapter 9, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Management, Ninth Canadian Edition Copyright © 2009 Pearson Education Canada 9-7

8. The Six Elements of Organizational Structure 1-8

9. Work Specialization The degree to which tasks in the organization are divided into separate jobs with each step completed by a different person Overspecialization can result in human diseconomies from boredom, fatigue, stress, poor quality, increased absenteeism, and higher turnover Overspecialization can result in human diseconomies from boredom, fatigue, stress, poor quality, increased absenteeism, and higher turnover Chapter 9, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Management, Ninth Canadian Edition Copyright © 2009 Pearson Education Canada 9-9

10. Departmentalization by Type Functional Functional Functional Grouping jobs by functions performed Grouping jobs by functions performed Product Product Product Grouping jobs by product line Grouping jobs by product line Geographical Geographical Geographical Grouping jobs on the basis of territory or geography Grouping jobs on the basis of territory or geography Process Process Process Grouping jobs on the basis of product or customer flow Customer Customer Customer Grouping jobs by type of customer and needs Chapter 9, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Management, Ninth Canadian Edition Copyright © 2009 Pearson Education Canada 9-10

11. Chain of Command The continuous line of authority that extends from upper levels of an organization to the lowest levels of the organization and clarifies who reports to whom Chapter 9, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Management, Ninth Canadian Edition Copyright © 2009 Pearson Education Canada 9-11

12. Chain of Command Concepts Authority Authority The rights inherent in a managerial position to tell people what to do and to expect them to do it The rights inherent in a managerial position to tell people what to do and to expect them to do it Responsibility Responsibility The obligation or expectation to perform. Responsibility brings with it accountability (the need to report and justify work to manager’s superiors) The obligation or expectation to perform. Responsibility brings with it accountability (the need to report and justify work to manager’s superiors) Unity of Command Unity of Command The concept that a person should have one boss and should report only to that person The concept that a person should have one boss and should report only to that person Delegation Delegation The assignment of authority to another person to carry out specific duties The assignment of authority to another person to carry out specific duties Chapter 9, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Management, Ninth Canadian Edition Copyright © 2009 Pearson Education Canada 9-12

13. Line vs Staff Management Line managers are responsible for the essential activities of the organization, including production and sales. Line managers have the authority to issue orders to those in the chain of command Line managers are responsible for the essential activities of the organization, including production and sales. Line managers have the authority to issue orders to those in the chain of command The president, the production manager, and the sales manager are examples of line managers The president, the production manager, and the sales manager are examples of line managers Staff managers have advisory authority, and cannot issue orders to those in the chain of command (except those in their own department) Staff managers have advisory authority, and cannot issue orders to those in the chain of command (except those in their own department) Chapter 9, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Management, Ninth Canadian Edition Copyright © 2009 Pearson Education Canada 9-13

14. Span of Control The number of employees who can be effectively and efficiently supervised by a manager Width of span is affected by: Width of span is affected by: Skills and abilities of the manager and the employees Skills and abilities of the manager and the employees Characteristics of the work being done Characteristics of the work being done Similarity of tasks Similarity of tasks Complexity of tasks Complexity of tasks Physical proximity of subordinates Physical proximity of subordinates Standardization of tasks Standardization of tasks Sophistication of the organization’s information system Sophistication of the organization’s information system Strength of the organization’s culture Strength of the organization’s culture Preferred style of the manager Preferred style of the manager Chapter 9, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Management, Ninth Canadian Edition Copyright © 2009 Pearson Education Canada 9-14

15. Exhibit 9.3 Contrasting Spans of Control Chapter 9, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Management, Ninth Canadian Edition Copyright © 2009 Pearson Education Canada 9-15 Assuming Span of 4 Span of 4: Employees: Managers (level 1–6) = 4096 = 1365 Span of 8: Employees: Managers (level 1–4) Assuming Span of 8 1 2 3 4 5 6 7 (Highest) (Lowest) Members at Each Level 1 4 16 64 256 1024 4096 1 8 64 512 4096 Organizational Level = 4096 = 585

16. Centralization vs Decentralization Centralization Centralization The degree to which decision making is concentrated at a single point in the organization The degree to which decision making is concentrated at a single point in the organization Organizations in which top managers make all the decisions and lower-level employees simply carry out those orders Organizations in which top managers make all the decisions and lower-level employees simply carry out those orders Decentralization Decentralization The degree to which lower-level employees provide input or actually make decisions The degree to which lower-level employees provide input or actually make decisions Employee Empowerment Employee Empowerment Increasing the decision-making discretion of employees Increasing the decision-making discretion of employees Chapter 9, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Management, Ninth Canadian Edition Copyright © 2009 Pearson Education Canada 9-16

17. Figure 9.4 Factors that Influence the Amount of Centralization More Centralization More Centralization Environment is stable Environment is stable Lower-level managers are not as capable or experienced at making decisions as upper-level managers Lower-level managers are not as capable or experienced at making decisions as upper-level managers Lower-level managers do not want to have a say in decisions Lower-level managers do not want to have a say in decisions Decisions are significant Decisions are significant Organization is facing a crisis or the risk of company failure Organization is facing a crisis or the risk of company failure Company is large Company is large Effective implementation of company strategies depends on managers retaining say over what happens Effective implementation of company strategies depends on managers retaining say over what happens Chapter 9, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Management, Ninth Canadian Edition Copyright © 2009 Pearson Education Canada 9-17

18. Figure 9.4 Factors that Influence the Amount of Decentralization More Decentralization More Decentralization Environment is complex, uncertain Environment is complex, uncertain Lower-level managers are capable and experienced at making decisions Lower-level managers are capable and experienced at making decisions Lower-level managers want a voice in decisions Lower-level managers want a voice in decisions Decisions are relatively minor Decisions are relatively minor Corporate culture is open to allowing managers to have a say in what happens Corporate culture is open to allowing managers to have a say in what happens Company is geographically dispersed Company is geographically dispersed Effective implementation of company strategies depends on managers having involvement and flexibility to make decisions Effective implementation of company strategies depends on managers having involvement and flexibility to make decisions Chapter 9, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Management, Ninth Canadian Edition Copyright © 2009 Pearson Education Canada 9-18

19. Formalization The degree to which jobs within the organization are standardized and the extent to which employee behaviour is guided by rules and procedures Highly formalized jobs offer little discretion over what is to be done Highly formalized jobs offer little discretion over what is to be done Low formalization means fewer constraints on how employees do their work Low formalization means fewer constraints on how employees do their work Chapter 9, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Management, Ninth Canadian Edition Copyright © 2009 Pearson Education Canada 9-19

20. Organizational Design Decisions 1-20

21. Mechanistic Organization Mechanistic Organization A rigid and tightly controlled structure A rigid and tightly controlled structure High specialization High specialization Rigid departmentalization Rigid departmentalization Narrow spans of control Narrow spans of control High formalization High formalization Limited information network (mostly downward communication) Limited information network (mostly downward communication) Low decision participation by lower-level employees Low decision participation by lower-level employees Organic Organization Organic Organization Highly flexible and adaptable structure Non-standardized jobs Fluid team-based structure Little direct supervision Minimal formal rules Open communication network Empowered employees Chapter 9, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Management, Ninth Canadian Edition Copyright © 2009 Pearson Education Canada 9-21

22. Mechanistic Vs Organic Organization Chapter 9, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Management, Ninth Canadian Edition Copyright © 2009 Pearson Education Canada 9-22 Mechanistic High Specialization Rigid Departmentalization Clear Chain of Command Narrow Spans of Control Centralization High Formalization Organic Cross-Functional Teams Cross-Hierarchical Teams Free Flow of Information Wide Spans of Control Decentralization Low Formalization

23. Structural Contingency Factors Structural decisions are influenced by: 1. Overall strategy of the organization Organizational structure follows strategy Organizational structure follows strategy 2. Size of the organization Firms change from organic to mechanistic organizations as they grow in size Firms change from organic to mechanistic organizations as they grow in size 3. Technology use by the organization Firms adapt their structure to the technology they use Firms adapt their structure to the technology they use 4. Degree of environmental uncertainty Dynamic environments require organic structures; mechanistic structures need stable environments Dynamic environments require organic structures; mechanistic structures need stable environments Chapter 9, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Management, Ninth Canadian Edition Copyright © 2009 Pearson Education Canada 9-23

24. Strategy and Structure Achievement of strategic goals is facilitated by changes in organizational structure that accommodate and support change Chapter 9, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Management, Ninth Canadian Edition Copyright © 2009 Pearson Education Canada 9-24

25. Different Strategy Frameworks Innovation Innovation Pursuing competitive advantage through meaningful and unique innovations favouring organic structuring Pursuing competitive advantage through meaningful and unique innovations favouring organic structuring Cost minimization Cost minimization Focusing on tightly controlling costs requires a mechanistic structure for the organization Focusing on tightly controlling costs requires a mechanistic structure for the organization Imitation Imitation Minimizing risks and maximizing profitability by copying market leaders requires both organic and mechanistic elements in the organization’s structure Minimizing risks and maximizing profitability by copying market leaders requires both organic and mechanistic elements in the organization’s structure Chapter 9, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Management, Ninth Canadian Edition Copyright © 2009 Pearson Education Canada 9-25

26. Size and Structure As an organization grows larger, its structure tends to change from organic to mechanistic with increased specialization, departmentalization, centralization, and rules and regulations Chapter 9, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Management, Ninth Canadian Edition Copyright © 2009 Pearson Education Canada 9-26

27. Technology and Structure Organizations adapt their structures to their technology Routine technology = mechanistic organizations Routine technology = mechanistic organizations Non–routine technology = organic organizations Non–routine technology = organic organizations Consider Woodward’s work… Consider Woodward’s work… Chapter 9, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Management, Ninth Canadian Edition Copyright © 2009 Pearson Education Canada 9-27

28. Environmental Uncertainty and Structure Mechanistic organizational structures tend to be most effective in stable and simple environments Mechanistic organizational structures tend to be most effective in stable and simple environments The flexibility of organic organizational structures is better suited for dynamic and complex environments The flexibility of organic organizational structures is better suited for dynamic and complex environments Chapter 9, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Management, Ninth Canadian Edition Copyright © 2009 Pearson Education Canada 9-28

29. Organizational Structures 1-29

30. Traditional Organizational Designs Simple Structure Simple Structure Low departmentalization, wide spans of control, centralized authority, little formalization Low departmentalization, wide spans of control, centralized authority, little formalization Functional Structure Functional Structure Departmentalization by function Departmentalization by function Operations, finance, human resources, and product research and development Operations, finance, human resources, and product research and development Divisional Structure Divisional Structure Composed of separate business units or divisions with limited autonomy under the coordination and control of the parent corporation Composed of separate business units or divisions with limited autonomy under the coordination and control of the parent corporation Chapter 9, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Management, Ninth Canadian Edition Copyright © 2009 Pearson Education Canada 9-30

31. Strengths/Weaknesses of Common Traditional Organizational Designs Chapter 9, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Management, Ninth Canadian Edition Copyright © 2009 Pearson Education Canada 9-31

32. Contemporary Organizational Designs Team Structures Team Structures The entire organization is made up of work groups or self-managed teams of empowered employees The entire organization is made up of work groups or self-managed teams of empowered employees Matrix Structures Matrix Structures Specialists for different functional departments are assigned to work on projects led by project managers Specialists for different functional departments are assigned to work on projects led by project managers Matrix participants have two managers Matrix participants have two managers Chapter 9, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Management, Ninth Canadian Edition Copyright © 2009 Pearson Education Canada 9-32

33. Contemporary Organizational Designs (cont.) Project Structures Project Structures Employees work continuously on projects, moving on to another project as each project is completed Employees work continuously on projects, moving on to another project as each project is completed Learning Organization Learning Organization An organization that has developed the capacity to continuously learn, adapt, and change through the practice of knowledge management by employees An organization that has developed the capacity to continuously learn, adapt, and change through the practice of knowledge management by employees Chapter 9, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Management, Ninth Canadian Edition Copyright © 2009 Pearson Education Canada 9-33

34. Boundary-less Organization Boundary-less Organization A flexible and an unstructured organizational design that is intended to break down external barriers between the organization and its customers and suppliers A flexible and an unstructured organizational design that is intended to break down external barriers between the organization and its customers and suppliers Removes internal (horizontal) boundaries: Removes internal (horizontal) boundaries: Eliminates the chain of command Eliminates the chain of command Has limitless spans of control Has limitless spans of control Uses empowered teams rather than departments Uses empowered teams rather than departments Eliminates external boundaries: Eliminates external boundaries: Uses virtual, network, and modular organizational structures to get closer to stakeholders Uses virtual, network, and modular organizational structures to get closer to stakeholders Chapter 9, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Management, Ninth Canadian Edition Copyright © 2009 Pearson Education Canada 9-34 Contemporary Organizational Designs (cont.)

35. Examples of Removing Boundaries Virtual Organization Virtual Organization An organization that consists of a small core of full-time employees and that temporarily hires specialists to work on opportunities that arise An organization that consists of a small core of full-time employees and that temporarily hires specialists to work on opportunities that arise Network Organization Network Organization A small core organization that outsources its major business functions (e.g., manufacturing) in order to concentrate on what it does best A small core organization that outsources its major business functions (e.g., manufacturing) in order to concentrate on what it does best Modular Organization Modular Organization A manufacturing organization that uses outside suppliers to provide product components for its final assembly operations A manufacturing organization that uses outside suppliers to provide product components for its final assembly operations Chapter 9, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Management, Ninth Canadian Edition Copyright © 2009 Pearson Education Canada 9-35

36. Contemporary Organizational Designs Chapter 9, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Management, Ninth Canadian Edition Copyright © 2009 Pearson Education Canada 9-36

37. This Week’s Summary 1. Why do we organize and how is it done? 2. Looked at the six key elements to consider in organizational design 3. Looked at mechanistic vs organic designs and structural contingency factors 4. Considered the difference between traditional and contemporary designs 1-37

38. Exhibit 9.2 Functional Departmentalization Chapter 9, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Management, Ninth Canadian Edition Copyright © 2009 Pearson Education Canada 9-38 Plant Manager Manager, Manufacturing Manager, Human Resources Manager, Accounting Manager, Engineering Manager, Purchasing + Efficiencies from putting together similar specialties and people with common skills, knowledge, and orientations + Coordination within functional area + In-depth specialization – Poor communication across functional areas – Limited view of organizational goals Return

39. Exhibit 9.2 Geographical Departmentalization Chapter 9, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Management, Ninth Canadian Edition Copyright © 2009 Pearson Education Canada 9-39 Vice President for Sales Sales Director, Central Region Sales Director, Prairies Region Sales Director, Western Region Sales Director, Eastern Region + More effective and efficient handling of specific regional issues that arise + Serve needs of unique geographic markets better – Duplication of functions – Can feel isolated from other organizational areas Return

40. Exhibit 9.2 Product Departmentalization Chapter 9, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Management, Ninth Canadian Edition Copyright © 2009 Pearson Education Canada 9-40 +Allows specialization in particular products and services +Managers can become experts in their industry +Closer to customers –Duplication of functions –Limited view of organizational goals Source: Bombardier Annual Report. Bombardier, Ltd. Industrial Equipment Division Recreational and Utility Vehicles Sector Mass Transit SectorRail Products Sector Rail and Diesel Products Division Bombardier–Rotax (Gunskirchen) Recreational Products Division Logistic Equipment Division Mass Transit Division Bombardier–Rotax (Vienna) Return

41. Exhibit 9.2 Process Departmentalization Chapter 9, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Management, Ninth Canadian Edition Copyright © 2009 Pearson Education Canada 9-41 +More efficient flow of work activities –Can only be used with certain types of products Plant Superintendent Sawing Department Manager Planing and Milling Department Manager Assembling Department Manager Lacquering and Sanding Department Manager Finishing Department Manager Inspection and Shipping Department Manager Return

42. Exhibit 9.2 Customer Departmentalization Chapter 9, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Management, Ninth Canadian Edition Copyright © 2009 Pearson Education Canada 9-42 + Customers’ needs and problems can be met by specialists – Duplication of functions – Limited view of organizational goals Director of Sales Manager, Wholesale Accounts Manager, Retail Accounts Manager, Government Accounts Return

43. Exhibit 9.6 Woodward’s Findings on Technology, Structure, and Effectiveness Return