11-1 Organizational Structure Prepared By:- Pritam Kumar (Electrical B 3 rd Sem) Enrollment No:

11-2 Traditional Organizational Structures Organizational structure refers to the formalized arrangement of interaction between and responsibility for the tasks, people, and resources in an organization It is most often seen as a chart, often a pyramidal chart, with positions or titles and roles in cascading fashion

11-3 Division of Labor Remains the fundamental organizational structuring philosophy

11-4 Organizational Structure Division of labor and patterns of coordination, communication, workflow, and formal power that direct organizational activities. Division of labor –Subdivision of work into separate jobs assigned to different people –Potentially increases work efficiency –Necessary as company grows and work becomes more complex

11-5 Coordinating Work Activities 1.Informal communication –Sharing information, forming common mental models –Allows flexibility –Vital in no routine and ambiguous situations –Easiest in small firms –Applied in team-based structures –Includes integrator roles

11-6 Coordinating Work Activities 2.Formal hierarchy Direct supervision Assigns formal (legitimate) power to manage others Coordination strategy for departmentalization 3.Standardization a) Standardized processes (e.g., job descriptions) b) Standardized outputs (e.g., sales targets) c) Standardized skills (e.g., training)

11-7 Winthrop Organization Chart February 20, 2007

11-8Organizational Structure Elements Span of Control Centralization Department- alization Formalization Elements of Organizational Structure

11-9 Span of Control Number of people directly reporting to the next level –Assumes coordination through direct supervision Wider span of control possible with other coordinating mechanisms present

11-10 Formal decision making authority is held by a few people, usually at the top Centralization Decision making authority is dispersed throughout the organization Decentralization Centralization and Decentralization

11-11 Formalization The degree to which organizations standardize behavior through rules, procedures, formal training, and related mechanisms. Formalization increases as firms get older, larger, and more regulated Problems –Reduces organizational flexibility –May undermine work efficiency –Job dissatisfaction and work stress

11-12 Departmentalization 1.Establishes chain of command (supervision structure) 2.Creates common mental models, measures of performance, etc 3.Encourages staff to coordinate through informal communication

11-13 Traditional Structures Simple Functional Divisional Matrix Product-Team

11-14 Organizes employees around outputs, clients, or geographic areas Divisional Structure CEO ConsumerProductsLightingProducts MedicalSystems

11-15 Divisional Structure A divisional organizational structure is one in which a set of relatively autonomous units, or divisions, are governed by a central corporate office but where each operating division has its own functional specialists who provide products or services different from those of other divisions This expedites decision making in response to varied competitive environments The division usually is given profit responsibility

11-16 Divisional Structure A division is self-contained and consists of a collections of functions which work to produce a product. It also utilizes a plan to compete and operate as a separate business or profit center. Example of divisional structure would be an automobile company which utilizes a divisional structure. The company would have one division for trucks, another for SUVS, and another for cars. The divisions may also have their own departments such as marketing, sales, and engineering.

11-17 Divisional Structures Dynamics Different forms of divisional structure –Geographic structure –Product structure –Client structure Best form depends on environment Movement away from geographic form –Less need for local representation –Reduced geographic variation –More global clients

11-18 Evaluating Divisional Structures Benefits –Building block structure -- accommodates growth –Better coordination in diverse markets Limitations –Duplication, inefficient use of resources –Specializations are dispersed, creating silos of knowledge

11-19 Multidivisional (M-Form) Structures Cooperative M-Form related divisions/SBUs (concentrically diverse) therefore sharing of information & best practices is mandated by the corporate level more complex structure Competitive M-Form Unrelated divisions/SBUs (conglomerately diverse) therefore no forced sharing of information & techniques; divisions operate autonomously holding company model Simpler structure

11-20 Competitive M-Form Competitive in what way?

11-21 Divisional Organization Structure

11-22 Strategic Business Unit The strategic business unit (SBU) is an adaptation of the divisional structure whereby various divisions or parts of divisions are grouped together based on some common strategic elements, usually linked to distinct product/market differences The advantages and disadvantages of the SBU form are very similar to those identified for divisional structures

11-23 Holding Company Structure A final form of the divisional organization is the holding company structure, where the corporate entity is a broad collection of often unrelated businesses (more conglomerately diverse) and divisions such that it (the corporate entity) acts as financial overseer “holding” the ownership interest in the various parts of the company but has little direct managerial involvement

11-24 Efforts to Improve Traditional Structures Redefine the role of corporate headquarters from control to support and coordination Balance the demands for control/differentiation with the need for coordination/integration Restructure to emphasize and support strategically critical activities Reengineer strategic business processes Downsize and self-manage

11-25 Creating Agile, Virtual Organizations Virtual organization: a temporary network of independent companies—suppliers, customers, subcontractors, even competitors—linked primarily by information technology to share skills, access to markets, and costs An agile organization is one that identifies a set of business capabilities (core competencies from VC analysis) central to high-profitability operations and then builds a virtual organization around those capabilities

11-26 Outsourcing—Creating a Modular Organization Outsourcing is simply obtaining work previously done by employees inside the companies from sources outside the company A modular organization provides products or services using different, self-contained specialists or companies brought together—outsourced—to contribute their primary or support activity to result in a successful outcome Business process outsourcing (BPO) is the most rapidly growing segment of the outsourcing services industry worldwide (esp. HR and MIS)

11-27 Divisional Structure Merits & Demerits

11-28 Merits Divisions allow a team to focus upon a single product or service, with a leadership structure that supports its major strategic objectives. Also, a division's focus allows it to build a common culture that contributes both to higher morale and a better knowledge of the division's portfolio. This is far preferable to having its product or service dispersed among multiple departments through the organization.

11-29 Another advantage of using divisional structure is that it is more efficient in coordinating work between different divisions, and there is more flexibility to respond when there is a change in the market. When divisional structure is utilized more specialization can occur within the groups. When using divisional structures that are organized by either markets or geographic areas they generally have similar function and are located in different regions or markets. This allows business decisions and activities coordinated locally.

11-30 Demerits A divisional structure also has weaknesses. A company comprised of competing divisions may allow office politics instead of sound strategic thinking to affect its view on such matters as allocation of company resources. Also, divisions can bring compartmentalization that can lead to incompatibilities. For example, Microsoft's business- software division developed the Social Connector in Microsoft Office Outlook They were unable to integrate Microsoft SharePoint and Windows Live until months after Social Connector could interface with MySpace and LinkedIn. Some experts suggested that Microsoft's divisional structure contributed to a situation where its own products were incompatible across internal business units.

11-31 Demerits Alternatives Large organizations that want the focus of a division could instead spin off into a free- standing subsidiary. Smaller organizations can work through major projects via dedicated departments or ad-hoc cross- functional work teams.

11-32 Technology and Structure Technology refers to mechanisms or processes by which an organization turns out its product or service Two contingencies: –Variability -- the number of exceptions to standard procedure that tend to occur. –Analyzability -- the predictability or difficulty of the required work

11-33 Organizational Strategy Structure follows strategy –Strategy points to the environments in which the organization will operate –Leaders decide which structure to apply Differentiation strategy –Providing unique products or attracting clients who want customization Cost leadership strategy –Maximize productivity in order to offer competitive pricing

11-34 Making It Work To be successful, divisions must be well managed. Executive leadership is the single most important determinant of success for a company using a divisional structure. In addition, the executives should have a solid grasp of resource use. Having a shared pool of centrally-managed resources like administrative support or office equipment can reduce costs and organizational complexity.