1. Copyright ©2006 by South-Western, a division of Thomson Learning. All rights reserved 1 CHAPTER FIVE Designing Adaptive Structures

2. Copyright ©2006 by South-Western, a division of Thomson Learning. All rights reserved 2 What Would You Do? You are the new CEO of Microsoft… v Bill Gates is having trouble letting go of Microsoft’s control v You are a micromanager and a control freak What can you and/or Gates do to make the CEO transition easier? What organizational structure best suits Microsoft at this point?

3. Copyright ©2006 by South-Western, a division of Thomson Learning. All rights reserved 3 Designing Organizational Structures After reading the next three sections, you should be able to: 1. describe the departmentalization approach to organizational structure. 2. explain organizational authority. 3. discuss the different methods for job design.

4. Copyright ©2006 by South-Western, a division of Thomson Learning. All rights reserved 4 Departmentalization Customer Geographic Matrix Functional Product 11

5. Copyright ©2006 by South-Western, a division of Thomson Learning. All rights reserved 5 Functional Departmentalization Advertising Agency Sales Accounting Information Systems Information Systems Human Resources Human Resources Print Advertising Print Advertising Art Department Radio Advertising Radio Advertising Creative Department Creative Department

6. Copyright ©2006 by South-Western, a division of Thomson Learning. All rights reserved 6 Advantages Disadvantages Functional Departmentalization v Work done by highly skilled specialists v Lowers costs through reduced duplication v Communication and coordination problems are lessened v Cross-department coordination can be difficult v May lead to slower decision making v Produces managers with narrow experiences 1.1

7. Copyright ©2006 by South-Western, a division of Thomson Learning. All rights reserved 7 Product Departmentalization General Electric Aircraft Engines Consumer Finance Consumer Products Transportation Systems Specialty Materials Medical Systems NBC Insurance Adapted from Exhibit 10.4 (Partial Listing of Products) 1.2

8. Copyright ©2006 by South-Western, a division of Thomson Learning. All rights reserved 8 AdvantagesDisadvantages Product Departmentalization v Managers specialize, but have broader experiences v Easier to assess work- unit performance v Decision-making is faster v Duplication of activities v Difficult to coordinate across departments 1.2

9. Copyright ©2006 by South-Western, a division of Thomson Learning. All rights reserved 9 Customer Departmentalization Classic Cards Air, Car, Hotel Reservations Air, Car, Hotel Reservations Expense Management Solutions Expense Management Solutions Advice & Planning Advice & Planning American Express Corporation Corporation Lifestyle Cards Vacation & Specials Small Businesses Small Businesses Banking Reward Cards Worldwide Travel Offices Worldwide Travel Offices Financial Services Financial Services Brokerage Cards Travel Business Services Business Services Financial Services Financial Services (Partial Listing) Adapted from Exhibit 10.5 1.3

10. Copyright ©2006 by South-Western, a division of Thomson Learning. All rights reserved 10 AdvantagesDisadvantages Customer Departmentalization Focuses on customer needs v Products and services tailored to customer needs v Duplication of resources v Difficult to coordinate across departments v Efforts to please customers may hurt the company 1.3

11. Copyright ©2006 by South-Western, a division of Thomson Learning. All rights reserved 11 Geographic Departmentalization Adapted from Exhibit 10.6Coca-ColaEnterprisesCoca-ColaEnterprises Central North America Group Central North America Group Eastern North America Group Eastern North America Group European Group European Group Western North America Group Western North America Group 1.4

12. Copyright ©2006 by South-Western, a division of Thomson Learning. All rights reserved 12 Advantages Disadvantages Geographic Departmentalization v Responsive to the demands of different market areas v Unique resources located close to the customer v Duplication of resources v Difficult to coordinate across departments 1.4

13. Copyright ©2006 by South-Western, a division of Thomson Learning. All rights reserved 13 Matrix Departmentalization Adapted from Exhibit 10.7 CitiGroup International Western Europe Latin America Central & Eastern Europe Global Corporate & Investment Bank Global Corporate & Investment Bank Global Investment Management Global Consumer Smith Barney Country Managers in Spain, France, Ireland, etc. Country Managers in Spain, France, Ireland, etc. Country Managers in China, Japan, etc. 1.5

14. Copyright ©2006 by South-Western, a division of Thomson Learning. All rights reserved 14 Advantages Disadvantages Matrix Departmentalization v Efficiently manage large, complex tasks v Effectively carry out large, complex tasks v Requires high levels of coordination v Conflict between bosses v Requires high levels of management skills 1.5

15. Copyright ©2006 by South-Western, a division of Thomson Learning. All rights reserved 15 Organizational Authority Delegation of Authority Degree of Centralization Degree of Centralization Chain of Command Line versus Staff Authority 2

16. Copyright ©2006 by South-Western, a division of Thomson Learning. All rights reserved 16 Chain of Command v The vertical line of authority in an organization v Clarifies who reports to whom v Unity of command v workers report to only one boss v matrix organizations violate this principle 2.1

17. Copyright ©2006 by South-Western, a division of Thomson Learning. All rights reserved 17 Line versus Staff Authority v Line authority v the right to command immediate subordinates in the chain of command v an activity that contributes directly to profit generation v Staff authority v the right to advise but not command others v an activity that supports profit generation 2.2

18. Copyright ©2006 by South-Western, a division of Thomson Learning. All rights reserved 18 Delegation of Authority v The assignment of direct authority and responsibility to a subordinate Manager ResponsibilityAuthority Accountability Subordinate Adapted from Exhibit 10.8 2.3

19. Copyright ©2006 by South-Western, a division of Thomson Learning. All rights reserved 19 How to Be a More Effective Delegator Adapted from Exhibit 10.9 1. Trust your staff to be a good job 2. Avoid seeking perfection 3. Give effective job instructions 4. Know your true interests 5. Follow up on progress. 6. Praise the efforts of your staff. 7. Don’t wait to the last minute to delegate. 8. Ask questions, expect answers, assist employees. 9. Provide the resources you would provide if doing assignment yourself. 10. Delegate to the lowest possible level. 2.3

20. Copyright ©2006 by South-Western, a division of Thomson Learning. All rights reserved 20 Degree of Centralization v Centralization of authority v primary authority is held by upper management v Decentralization v significant authority is found in lower levels of the organization v Standardization v solving problems by applying rules, procedures, and processes 2.4

21. Copyright ©2006 by South-Western, a division of Thomson Learning. All rights reserved 21 Job Design Specialized Jobs Job Rotation, Enlargement, Enrichment Job Characteristics Model 3

22. Copyright ©2006 by South-Western, a division of Thomson Learning. All rights reserved 22 Job Specialization v Breaking jobs into small tasks v Jobs are simple, easy to learn, and economical v Can lead to boredom, low satisfaction, high absenteeism, and employee turnover 3.1

23. Copyright ©2006 by South-Western, a division of Thomson Learning. All rights reserved 23 Job Rotation, Enlargement, & Enrichment v Job Rotation v periodically moving workers from one specialized job to another v Job Enlargement v increasing the number of tasks performed by a worker v Job Enrichment v adding more tasks and authority to an employee’s job 3.2

24. Copyright ©2006 by South-Western, a division of Thomson Learning. All rights reserved 24 Job Characteristics Model v A job redesign approach that seeks to increase employee motivation v Emphasizes internal motivation v experience work as meaningful v experience responsibility for work outcomes v knowledge of results 3.3

25. Copyright ©2006 by South-Western, a division of Thomson Learning. All rights reserved 25 Job Redesign Techniques Combining Tasks Forming Natural Work Units Forming Natural Work Units Establishing Client Relationships Vertically Loading the Job Opening Feedback Channels Adapted from Exhibit 10.10 3.3

26. Copyright ©2006 by South-Western, a division of Thomson Learning. All rights reserved 26 Job Characteristics Model Skill Variety Task Identity Task Significance Autonomy Feedback Experience Meaningfulness of Work Experience Responsibility for Outcomes of Work Knowledge of Actual Results of Work Activities High Internal Work Motivation High-quality Work Performance High Satisfaction with Work Low Absenteeism & Turnover Core Job Dimensions Critical Psychological States Personal & Work Outcomes Adapted from Exhibit 10.10 3.3

27. Copyright ©2006 by South-Western, a division of Thomson Learning. All rights reserved 27 What Really Works What Really Works Task Identity 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% probability of success66% Task Significance 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% probability of success69% Skill Variety 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% probability of success70% Job Satisfaction 3

28. Copyright ©2006 by South-Western, a division of Thomson Learning. All rights reserved 28 What Really Works (cont.) Autonomy 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% probability of success73% Provide Feedback 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% probability of success70% Job Satisfaction 3

29. Copyright ©2006 by South-Western, a division of Thomson Learning. All rights reserved 29 What Really Works (cont.) What Really Works (cont.) 3 Job Satisfaction 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Low Growth Need Strength/Job Satisfaction High Growth Need Strength/Job Satisfaction 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% probability of success69% probability of success84%

30. Copyright ©2006 by South-Western, a division of Thomson Learning. All rights reserved 30 What Really Works (cont.) What Really Works (cont.) Task Identity 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% probability of success63% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% probability of success68% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% probability of success72% Workplace Absenteeism Task Significance Skill Variety 3

31. Copyright ©2006 by South-Western, a division of Thomson Learning. All rights reserved 31 What Really Works (cont.) Autonomy 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% probability of success74% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% probability of success72% Workplace Absenteeism Provide Feedback 3

32. Copyright ©2006 by South-Western, a division of Thomson Learning. All rights reserved 32 Designing Organizational Processes After reading the next two sections, you should be able to: 4. explain the methods that companies are using to redesign internal organizational processes (i.e., intraorganizational processes). 5. describe the methods that companies are using to redesign external organizational processes (i.e., interorganizational processes).

33. Copyright ©2006 by South-Western, a division of Thomson Learning. All rights reserved 33 Intraorganizational Processes Reengineering Empowerment Behavioral Informality 4

34. Copyright ©2006 by South-Western, a division of Thomson Learning. All rights reserved 34 Reengineering v The fundamental rethinking and radical redesign of business processes v Intended to achieve dramatic improvements in performance v Change the orientation from vertical to horizontal v Changes task interdependence 4.1

35. Copyright ©2006 by South-Western, a division of Thomson Learning. All rights reserved 35 Reengineering and Task Interdependence Pooled Interdependence Adapted from Exhibit 10.11 4.1

36. Copyright ©2006 by South-Western, a division of Thomson Learning. All rights reserved 36 Reengineering and Task Interdependence Sequential Interdependence Adapted from Exhibit 10.11 4.1 More

37. Copyright ©2006 by South-Western, a division of Thomson Learning. All rights reserved 37 Reengineering and Task Interdependence Reciprocal Interdependence Adapted from Exhibit 10.11 4.1

38. Copyright ©2006 by South-Western, a division of Thomson Learning. All rights reserved 38 Empowerment v A feeling of intrinsic motivation v Workers perceive meaning in their work v Employees are capable of self-determination Empowering Workers Permanently passing decision-making authority and responsibilities from managers to workers by giving them the information and resources they need to make good decisions 4.2

39. Copyright ©2006 by South-Western, a division of Thomson Learning. All rights reserved 39 Behavioral InformalityBehavioral Formality Behavioral Informality v Spontaneity v Casualness v Interpersonal familiarity familiarity v Routine & regimen v Specific rules v Impersonal attachment 4.3

40. Copyright ©2006 by South-Western, a division of Thomson Learning. All rights reserved 40 Interorganizational Processes Modular Organizations Modular Organizations Virtual Organizations Boundaryless Organizations 5

41. Copyright ©2006 by South-Western, a division of Thomson Learning. All rights reserved 41 Modular Organizations 5.1

42. Copyright ©2006 by South-Western, a division of Thomson Learning. All rights reserved 42 Modular Organizations Advantages Disadvantages v can cost less to run than traditional organizations v lets organizations focus on core competencies v loss of control from outsourcing v may reduce their competitive advantage 5.1

43. Copyright ©2006 by South-Western, a division of Thomson Learning. All rights reserved 43 Virtual Organizations 5.2

44. Copyright ©2006 by South-Western, a division of Thomson Learning. All rights reserved 44 Virtual Organizations Advantages Disadvantages v let companies share costs v fast and flexible v being the “best” should provide better products v difficult to control the quality of partners v requires tremendous management skills 5.2