1. Organizing

2. Today Chapter – Organizing 2

3. 3 Planning Ahead — Study Questions  What is organizing as a management function?  What are the major types of organization structures?  What are the new developments in organization structures?  What organizing trends are changing the workplace?  What are the contingencies in organizational design?

4. 4 Study Question 1: What is organizing as a management function?  Organizing and organization structure  Organizing The process of arranging people and other resources to work together to accomplish a goal.  Organization structure The system of tasks, workflows, reporting relationships, and communication channels that link together diverse individuals and groups.

5. 5 Study Question 1: What is organizing as a management function?  Formal structures   The structure of the organization in its official state.  An organization chart is a diagram describing reporting relationships and the formal arrangement of work positions within an organization.  An organization chart identifies the following aspects of formal structure: The division of work. Supervisory relationships. Communication channels. Major subunits. Levels of management.

6. 6 Task – Tent Company Let’s do this in your team Design and present a “new” company Asking for financial support from “backers” 45 people in the organization Show that your organizational structure is sound Go PS each of you has to be ‘named’ in the company!

7. 7 Issues Size, Technology, Goals & Strategy, Environment, Culture Differentiation Integration Formalization Centralization Mechanistic / Organic Simple, Functional, Divisional, Matrix, Horizontal, Parallel, Network, Cellular, Form follows Function Strategy informs Structure

8. 8 Goals and Strategy EnvironmentSize Culture Technology Structure 1.Formalization 2.Specialization 3.Hierarchy of Authority 4.Centralization 5.Professionalism 6.Personnel Ratios Big Picture

9. 9 What did you come up with? Similar / different? Sound? Would you invest in this company?

10. 10 Importance of Chapter – A tale of Two Companies! Dell versus Apple

11. 11 Dell History 1984Michael Dell founds Dell Computer Corporation 1987 Dell is first computer systems company to offer next-day, on-site product service 1988 Dell conducts initial public offering of company stock,3.5 million shares at $8.50 each 1992 Dell included for first time among Fortune 500 2000 Company sales via Internet reach $50 million per day. For the first time, Dell is No. 1 in worldwide workstation shipments 2001 For the first time, Dell ranks No. 1 in global market share Dell, recognized by Fortune magazine as America's most admired company and No. 3 globally

12. 12 Apple History April 1, 1976, Apple Computer born 1980 Apple III released, organization has several thousand employees, sells computers abroad 1983 Jobs courts John Sculley (Pepsi-Cola) 1985 Jobs & Sculley argue / Jobs resigned 1990 market saturated with PC-clones – Apple in financial trouble 1995 Apple has $1 billion dollars in backorders--and did not have the parts to build them. 1996 Apple posted a $740 million first quarter loss 1997 Jobs is back at helm / Apple will sell over net Apple is spearheading the digital music revolution with its iPod portable music players and iTunes online music store.

13. 13 Finances

14. 14 Question Why has Dell been so successful and Apple so troubled?

15. 15 Finances: now A=$113 D=private $13.56 (65 high)

16. 16 Question Why has Dell been so successful and Apple so troubled? Why has Apple been so successful and Dell’s success slowing down? http://www.youtube.com/watch?v=p8Z-DIAthbM&mode=related&searchhttp://www.youtube.com/watch?v=p8Z-DIAthbM&mode=related&search=

17. 17 The BIG Picture of Organization Direction, Design, and Effectiveness CEO, Top Management Team External Environment Opportunities Threats Uncertainty Resource Availability Internal Situation Strengths Weaknesses Distinctive Competence Leadership Style Past Performance Strategic Direction Organization Design Effectiveness Outcomes Define mission, official goals Select operational goals, competitive strategies Resources Efficiency Goal attainment Competing values Structural Form learning vs. efficiency Information and control systems Production technology Human resource policies, incentives Organizational culture Interorganizational linkages

18. 18 Study Question 1: What is organizing as a management function?  Informal structures   A “shadow” organization made up of the unofficial, but often critical, working relationships between organization members.  Potential advantages of informal structures: Helping people accomplish their work. Overcoming limits of formal structure. Gaining access to interpersonal networks. Informal learning.

19. 19 Study Question 1: What is organizing as a management function?  Informal structures (cont.)   Potential disadvantages of informal structures: May work against best interests of entire organization. Susceptibility to rumour. May carry inaccurate information. May breed resistance to change. Diversion of work efforts from important objectives. Feeling of alienation by outsiders.

20. 20 Study Question 2: What are the major types of organization structures?  Functional structures  Divisional structures  Matrix structure  Horizontal structures  Network structures  Boundaryless organizations

21. 21 Study Question 2: What are the major types of organization structures?  Functional structures  People with similar skills and performing similar tasks are grouped together into formal work units.  Members work in their functional areas of expertise.  Are not limited to businesses.  Work well for small organizations producing few products or services.

22. 22 Study Question 2: What are the major types of organization structures?  Potential advantages of functional structures:  Economies of scale.  Task assignments consistent with expertise and training.  High-quality technical problem solving,  In-depth training and skill development.  Clear career paths within functions.  Potential disadvantages of functional structures:  Difficulties in pinpointing responsibilities.  Functional chimneys problem.  Sense of cooperation and common purpose break down.  Narrow view of performance objectives.  Excessive upward referral of decisions.

23. 23 Study Question 2: What are the major types of organization structures?  Divisional structures  Group together people who work on the same product or process, serve similar customers, and/or are located in the same area or geographical region.  Common in complex organizations.  Avoid problems associated with functional structures.

24. 24 Study Question 2: What are the major types of organization structures?  Potential advantages of divisional structures:  More flexibility in responding to environmental changes.  Improved coordination.  Clear points of responsibility.  Expertise focused on specific customers, products, and regions.  Greater ease in restructuring.  Potential disadvantages of divisional structures:  Duplication of resources and efforts across divisions.  Competition and poor coordination across divisions.  Emphasis on divisional goals at expense of organizational goals.

25. 25 Study Question 2: What are the major types of organization structures?  Types of divisional structures and how they group job and activities:  Product structures focus on a single product or service. (Insurance)  Geographical structures focus on the same location or geographical region. (Ontario)  Customer structures focus on the same customers or clients. (RICH)  Process structures focus on the same processes. (Computer chips)

26. 26 Study Question 2: What are the major types of organization structures?  Matrix structure  Combines functional and divisional structures to gain advantages and minimize disadvantages of each.  Used in: Manufacturing Service industries Professional fields Non-profit sector Multi-national corporations

27. 27 Study Question 2: What are the major types of organization structures?  Potential advantages of matrix structures:  Better cooperation across functions.  Improved decision making.  Increased flexibility in restructuring.  Better customer service.  Better performance accountability.  Improved strategic management.  Potential disadvantages of matrix structures:  Two-boss system is susceptible to power struggles.  Two-boss system can create task confusion and conflict in work priorities.  Team meetings are time consuming.  Team may develop “groupitis.”  Increased costs due to adding team leers to structure.

28. 28 Study Question 3: What are the new developments in organization structures?  Guidelines for horizontal structures:  Focus the organization around processes, not functions.  Put people in charge of core processes.  Decrease hierarchy and increase the use of teams.  Empower people to make decisions critical to performance.  Utilize information technology.  Emphasize multiskilling and multiple competencies.  Teach people how to work in partnership with others.  Build a culture of openness, collaboration, and performance commitment.

29. 29 Study Question 3: What are the new developments in organization structures?  Team structures  Extensively use permanent and temporary teams to solve problems, complete special projects, and accomplish day-to-day tasks.  Often use cross-functional teams.

30. 30 Study Question 3: What are the new developments in organization structures?  Potential advantages of team structures:  Eliminates difficulties with communication and decision making.  Eliminates barriers between operating departments.  Improved morale.  Greater sense of involvement and identification.  Increased enthusiasm for work.  Improved quality and speed of decision making.

31. 31 Study Question 3: What are the new developments in organization structures?  Potential disadvantages of team structures:  Conflicting loyalties among members.  Excessive time spent in meetings.  Effective use of time depends on quality of interpersonal relations, group dynamics, and team management.

32. 32 Study Question 3: What are the new developments in organization structures?  Network structures  A central core that is linked through networks of relationships with outside contractors and suppliers of essential services.  Own only core components and use strategic alliances or outsourcing to provide other components.

33. 33 Study Question 3: What are the new developments in organization structures?  Potential advantages of network structures:  Firms can operate with fewer full-time employees and less complex internal systems.  Reduced overhead costs and increased operating efficiency.  Permits operations across great distances.

34. 34 Study Question 3: What are the new developments in organization structures?  Potential disadvantages of network structures:  Control and coordination problems may arise from network complexity.  Potential loss of control over outsourced activities.  Potential lack of loyalty among infrequently used contractors.  Excessively aggressive outsourcing can be dangerous.

35. 35 Study Question 3: What are the new developments in organization structures?  Deadly sins of outsourcing:  Outsourcing activities that are part of the core.  Outsourcing to untrustworthy vendors.  Not having good contracts with the vendor.  Overlooking impact on existing employees.  Not maintaining oversight; losing control to vendors.  Overlooking hidden costs of managing contracts.  Failing to anticipate need to change vendors, cease outsourcing.

36. 36 Study Question 3: What are the new developments in organization structures?  Boundaryless organizations  Eliminate internal boundaries among subsystems and external boundaries with the external environment.  A combination of team and network structures, with the addition of “temporariness.”  Key requirements: Absence of hierarchy. Empowerment of team members. Technology utilization. Acceptance of impermanence.

37. 37 Study Question 3: What are the new developments in organization structures?  Boundaryless organizations (cont.)  Encourage creativity, quality, timeliness, flexibility, and efficiency.  Knowledge sharing is both a goal and essential component.  Virtual organization. A special form of boundaryless organization. Operates in a shifting network of external alliances that are engaged as needed, using IT and the Internet.

38. 38 Study Question 4: What organizing trends are changing the workplace?  Contemporary organizing trends include:  Shorter chains of command.  Less unity of command.  Wider spans of control.  More delegation and empowerment.  Decentralization with centralization.  Reduced use of staff.

39. 39 Study Question 4: What organizing trends are changing the workplace?  Shorter chains of command  The line of authority that vertically links all persons with successively higher levels of management.  Organizing trend: Organizations are being “streamlined” by cutting unnecessary levels of management. Flatter structures are viewed as a competitive advantage.

40. 40 Study Question 4: What organizing trends are changing the workplace?  Less unity of command  Each person in an organization should report to one and only one supervisor.  Organizing trend: Organizations are using more cross-functional teams, task forces, and horizontal structures. Organizations are becoming more customer conscious. Employees often find themselves working for more than one boss.

41. 41 Study Question 4: What organizing trends are changing the workplace?  Wider spans of control  The number of persons directly reporting to a manager.  Organizing trend: Many organizations are shifting to wider spans of control as levels of management are eliminated. Managers have responsibility for a larger number of subordinates who operate with less direct supervision.

42. 42 Study Question 4: What organizing trends are changing the workplace?  More delegation and empowerment  Delegation is the process of entrusting work to others by giving them the right to make decisions and take action.  The manager assigns responsibility, grants authority to act, and creates accountability.  Authority should be commensurate with responsibility.

43. 43 Study Question 4: What organizing trends are changing the workplace?  Guidelines for effective delegation:  Carefully choose the person to whom you delegate.  Define the responsibility; make the assignment clear.  Agree on performance objectives and standards.  Agree on a performance timetable.  Give authority; allow the other person to act independently.  Show trust in the other person.  Provide performance support.  Give performance feedback  Recognize and reinforce progress.  Help when things go wrong.  Don’t forget your accountability for performance results.

44. 44 Study Question 4: What organizing trends are changing the workplace?  More delegation and empowerment (cont.)  A common management failure is unwillingness to delegate.  Delegation leads to empowerment.  Organizing trend: Managers are delegating more and finding more ways to empower people at all levels.

45. 45 Study Question 4: What organizing trends are changing the workplace?  Decentralization with centralization  Centralization is the concentration of authority for making most decisions at the top levels of the organization.  Decentralization is the dispersion of authority to make decisions throughout all levels of the organization.

46. 46 Study Question 4: What organizing trends are changing the workplace?  Decentralization with centralization (cont.)  Centralization and decentralization not an “either/or” choice.  Organizing trend: Delegation, empowerment, and horizontal structures contribute to more decentralization in organizations. Advances in information technology allow for the retention of centralized control.

47. 47 Study Question 4: What organizing trends are changing the workplace?  Reduced use of staff  Specialized staff People who perform a technical service or provide special problem-solving expertise to other parts of the organization.  Personal staff People working in “assistant-to” positions that provide special support to higher-level managers.

48. 48 Study Question 4: What organizing trends are changing the workplace?  Reduced use of staff (cont.)  Line and staff managers may disagree over staff authority. Advisory Authority. Functional authority.  No one best solution for dividing line-staff responsibilities.  Organizing trend: Organizations are reducing staff size. Organizations are seeking increased operating efficiency by employing fewer staff personnel and smaller staff units.

49. Next Day Cpt. 6: Planning Processes; Cpt. 7: Strategy Read Case 7 (page 222); Be prepared to discuss questions 1, 2, and 3! 49