Choosing Organizational Structure Coty Keller St. Joseph’s College

6/22/2016 Organizational Stucture - MGT Coty Keller 2 Agenda Process vs. Structure Alternative structures –Functional Hierarchy –Matrix –Organic network 3 Real world local cases Model for choice Applications

6/22/2016 Organizational Stucture - MGT Coty Keller 3 Process vs. Structure Process –How the product or service gets to customer –Dynamic –Flow chart picture –More contemporary – a key to total quality and re- engineering Structure –Relationships, authority, and lines of communication –Static –Org chart picture –Traditional view of organization

6/22/2016 Organizational Stucture - MGT Coty Keller 4 Structure Alternatives Many Let’s look at three commonly used structures 1.Hierarchy 2.Matrix 3.Loosely coupled organic network Related processes

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6/22/2016 Organizational Stucture - MGT Coty Keller 8 Three Real World Cases Insurance agency Furniture distributor Music R&D Structure Process Quality Teams Outsourcing

6/22/2016 Organizational Stucture - MGT Coty Keller 9 The core principles of quality management 1. Focus on customers and process 2. Participation and teamwork by everyone in the organization 3. Continuous improvement and learning 4. Management by fact 5. Leadership and Strategic planning

6/22/2016 Organizational Stucture - MGT Coty Keller 10 Outsourcing (subcontracting) Special case of cooperative orientation The “make or buy” decision Affects the number of activities under direct control of firm in its internal supply chain: hence impacts ––control ––flexibility Think carefully before outsourcing one’s core business activities Social responsibility issues too

6/22/2016 Organizational Stucture - MGT Coty Keller 11 Insurance Agency Example Stable environment Employees have skills and knowledge limited to their areas Tight communications and chain of command Next three slides show hierarchical organization and details of processes

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6/22/2016 Organizational Stucture - MGT Coty Keller 15 Furniture distributor example Dynamic environment Experienced employees with ability to flex to differing circumstances Matrix organization Each job is handled by a team made up of people from each department Matrix itself shows flow (process)

6/22/2016 Organizational Stucture - MGT Coty Keller 16 Matrix Org – Nickerson Corporation Functional Departments SalesEstimatingInstallationAdmin SvcFinance Upstate NY City Long Island New Jersey Job # 1234

6/22/2016 Organizational Stucture - MGT Coty Keller 17 Matrix organization teamwork Project team concept. The company is organized by functional departments. People in those departments all perform similar duties that are essential to the company’s success. The managers of the departments are responsible for guiding and supporting their people. However, the overriding organizational principle is that of the project team. Each job the company undertakes for a customer is conceived of as a project with a life of its own. For a project to be successful, people from each department must participate effectively. Coordination of the resources of the various departments is the most challenging task of the company’s management team.

6/22/2016 Organizational Stucture - MGT Coty Keller 18 Music R&D firm Uncertain environment – surprises every day Small number of core employees manage large network of subcontractors Next two slides show structure and process

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6/22/2016 Organizational Stucture - MGT Coty Keller 21 Quality, teamwork, outsourcing Insurance Agency Hierarchy Furniture Distributor Matrix Music R&D Loosely coupled organic network Participation in decisions PerhapsMustMust for strategic partners TeamworkPerhapsMustNot built in OutsourcingPerhaps Essential Process orientationPossible but not normally intuitive because of culture Needs emphasis to be successful Core controls process

6/22/2016 Organizational Stucture - MGT Coty Keller 22 Horizontal Organization Traditional organizations and loosely coupled networks can show these elements: –Organize around process –Flatten the organizational hierarchy –Teams manage the organization –Customers drive performance –Management rewards team performance –Teams maintain supplier and customer contact –Training programs for all employees

6/22/2016 Organizational Stucture - MGT Coty Keller 23 Model for selecting structure Purpose of model Determinants –Environment –People Cautions Remember that process supercedes structure

6/22/2016 Organizational Stucture - MGT Coty Keller 24 HierarchyMatrix Organization Loosely Coupled Organic Network Bureaucracy >Sr. Executive Group>X dept teams Maturity and capability of employees Environment: StableComplex & uncertain Model for choice of Organizational Structure Horizontal Organization

6/22/2016 Organizational Stucture - MGT Coty Keller 25 Application – what do do with this Knowledge of Org Design? Assess current structure –Appropriate? –Adapt to strengths or weaknesses –Suggest or lead change Focus on process

6/22/2016 Organizational Stucture - MGT Coty Keller 26 If you could start from scratch, how would you organize your “firm?” Environment Capabilities and empowerment of work force Teamwork Outsourcing Structure and process