Managing Organizational Structure and Culture McGraw-Hill/Irwin Contemporary Management, 5/e Copyright © 2008 The McGraw-Hill Companies, Inc. All rights reserved. chapter ten

10-3 Learning Objectives Identify the factors that influence managers’ choice of an organizational structure. Explain how managers group tasks into jobs that are motivating and satisfying for employees. Describe the types of organizational structures managers can design, and explain why they choose one structure over another.

10-4 Learning Objectives Explain why managers must coordinate jobs, functions, and divisions using the hierarchy of authority and integrating mechanisms List the four sources of organizational culture and differentiate between a strong, adaptive culture and a weak, inert culture

10-5 Organizational Structure Organizational Architecture –The organizational structure, control systems, culture, and human resource management systems that together determine how efficiently and effectively organizational resources are used.

10-6 Designing Organizational Structure Organizing –The process by which managers establish working relationships among employees to achieve goals. Organizational Structure –Formal system of task and reporting relationships showing how workers use resources.

10-7 Designing Organizational Structure Organizational design –The process by which managers create a specific type of organizational structure and culture so that a company can operate in the most efficient and effective way

10-8 Factors Affecting Organizational Structure Figure 10.1

10-9 The Organizational Environment –The quicker the environment changes, the more problems face managers. –Structure must be more flexible (i.e., decentralized authority) when environmental change is rapid.

10-10 The Organizational Environment Strategy –Different strategies require the use of different structures. A differentiation strategy needs a flexible structure, low cost may need a more formal structure. Increased vertical integration or diversification also requires a more flexible structure.

10-11 The Organizational Environment Technology –The combination of skills, knowledge, tools, equipment, computers and machines used in the organization. –More complex technology makes it harder for managers to regulate the organization.

10-12 The Organizational Environment Technology –Technology can be measured by: Task variety: the number of new problems a manager encounters. Task analyzability: the availability of programmed solutions to a manager to solve problems.

10-13 The Organizational Environment Human Resources –Highly skilled workers whose jobs require working in teams usually need a more flexible structure. –Higher skilled workers (e.g., CPA’s and doctors) often have internalized professional norms and values.

10-14 The Organizational Environment Human Resources –Managers must take into account all four factors (environment, strategy, technology and human resources) when designing the structure of the organization.

10-15 The Organizational Environment The way an organization’s structure works depends on the choices managers make about: 1.How to group tasks into individual jobs 2.How to group jobs into functions and divisions 3.How to allocate authority and coordinate functions and divisions

10-16 Job Design –The process by which managers decide how to divide tasks into specific jobs. –The appropriate division of labor results in an effective and efficient workforce.

10-17 Job Design Job Simplification –The process of reducing the tasks each worker performs. Too much simplification and boredom results.

10-18 Job Design Job Enlargement –Increasing the number of different tasks in a given job by changing the division of labor Job Enrichment –Increasing the degree of responsibility a worker has over a job

10-19 Job Enrichment 1.Empowering workers to experiment to find new or better ways of doing the job 2.Encouraging workers to develop new skills 3.Allowing workers to decide how to do the work 4.Allowing workers to monitor and measure their own performance

10-20 The Job Characteristics Model Figure 10.2 Source: Adapted from J. R. Hackman and G. R. Oldham, Work Redesign (Reading, MA: Addison-Wesley, 1980).

10-21 Job Characteristics Model

10-22 Grouping Jobs into Functions Function –Group of people, working together, who possess similar skills or use the same kind of knowledge, tools, or techniques to perform their jobs

10-23 Grouping Jobs into Functions Functional Structure –An organizational structure composed of all the departments that an organization requires to produce its goods or services.

10-24 Functional Structure Advantages –Encourages learning from others doing similar jobs. –Easy for managers to monitor and evaluate workers. –Allows managers to create the set of functions they need in order to scan and monitor the competitive environment

10-25 Functional Structure Disadvantages –Difficult for departments to communicate with others. –Preoccupation with own department and losing sight of organizational goals.

10-26 Figure10.3 The Functional Structure of Pier 1 Imports

10-27 Divisional Structures Divisional Structure –Managers create a series of business units to produce a specific kind of product for a specific kind of customer

10-28 Figure 10.4 Product, Market, and Geographic Structures

10-29 Types of Divisional Structures Product Structure –Managers place each distinct product line or business in its own self-contained division –Divisional managers have the responsibility for devising an appropriate business-level strategy to allow the division to compete effectively in its industry

10-30 Product Structure Allows functional managers to specialize in one product area Division managers become experts in their area Removes need for direct supervision of division by corporate managers Divisional management improves the use of resources

10-31 Types of Divisional Structures Geographic Structure –Divisions are broken down by geographic location Global geographic structure –Managers locate different divisions in each of the world regions where the organization operates. –Generally, occurs when managers are pursuing a multi-domestic strategy

10-32 Types of Divisional Structures Global Product Structure –Each product division takes responsibility for deciding where to manufacture its products and how to market them in foreign countries worldwide

10-33 Global Geographic and Global Product Structures Figure 10.5

10-34 Types of Divisional Structures Market Structure –Groups divisions according to the particular kinds of customers they serve –Allows managers to be responsive to the needs of their customers and act flexibly in making decisions in response to customers’ changing needs

10-35 Matrix Design Structure Matrix Structure –An organizational structure that simultaneously groups people and resources by function and product. Results in a complex network of superior- subordinate reporting relationships. The structure is very flexible and can respond rapidly to the need for change. Each employee has two bosses (functional manager and product manager) and possibly cannot satisfy both.

10-36 Matrix Structure Figure 10.6

10-37 Product Team Design Structure Product Team Structure –Does away with dual reporting relationships and two-boss managers –Functional employees are permanently assigned to a cross-functional team that is empowered to bring a new or redesigned product to work

10-38 Product Team Design Structure Product Team Structure –Cross-functional team is composed of a group of managers from different departments working together to perform organizational tasks.

10-39 Product Team Structure Figure 10.6

10-40 Hybrid Structures Hybrid Structure –The structure of a large organization that has many divisions and simultaneously uses many different organizational structures

10-41 Federated’s Hybrid Structure Figure 10.7

10-42 Coordinating Functions: Allocating Authority Authority –The power vested in a manager to make decisions and use resources to achieve organizational goals by virtue of his position in an organization

10-43 Coordinating Functions: Allocating Authority Hierarchy of Authority –An organization’s chain of command, specifying the relative authority of each manager. Span of Control: the number of subordinates who report directly to a manager

10-44 Allocating Authority Line Manager –Someone in the direct line or chain of command who has formal authority over people and resources Staff Manager –Managers who are functional-area specialists that give advice to line managers.

10-45 Figure 10.8 The Hierarchy of Authority and Span of Control at McDonald’s Corporatio n

10-46 Tall and Flat Organizations Tall structures have many levels of authority and narrow spans of control. –As hierarchy levels increase, communication gets difficult creating delays in the time being taken to implement decisions. –Communications can also become distorted as it is repeated through the firm. –Can become expensive

10-47 Tall Organizations Figure 10.9

10-48 Tall and Flat Organizations Flat structures have fewer levels and wide spans of control. –Structure results in quick communications but can lead to overworked managers.

10-49 Flat Organizations Figure 10.9

10-50 Minimum Chain of Command –Top managers should always construct a hierarchy with the fewest levels of authority necessary to efficiently and effectively use organizational resources

10-51 Centralization and Decentralization of Authority Decentralizing authority –giving lower-level managers and non- managerial employees the right to make important decisions about how to use organizational resources

10-52 Decentralizing Authority Disadvantages –Teams may begin to pursue their own goals at the expense of organizational goals –Can result in a lack of communication among divisions

10-53 Integrating Mechanisms Figure 10.10

10-54 Organizational Culture Organizational culture –shared set of beliefs, expectations, values, and norms that influence how members of an organization relate to one another and cooperate to achieve organizational goals

10-55 Sources of an Organization’s Culture Figure 10.11

10-56 Characteristics of Organizational Members Ultimate source of organizational culture is the people that make up the organization Members become similar over time which may hinder their ability to adapt and respond to changes in the environment

10-57 Organizational Ethics –moral values, beliefs, and rules that establish the appropriate way for an organization and its members to deal with each other and people outside the organization

10-58 Employment Relationship Human resource policies: –Can influence how hard employees will work to achieve the organization’s goals, –How attached they will be to it –Whether or not they will buy into its values and norms

10-59 Organizational Structure In a centralized organization: –people have little autonomy –norms that focus on being cautious, obeying authority, and respecting traditions emerge –predictability and stability are desired goals

10-60 Organizational Structure In a flat, decentralized structure: –people have more freedom to choose and control their own activities –norms that focus on being creative and courageous and taking risks appear –gives rise to a culture in which innovation and flexibility are desired goals.

10-61 Strong, Adaptive Cultures Versus Weak, Inert Cultures Adaptive cultures –values and norms help an organization to build momentum and to grow and change as needed to achieve its goals and be effective

10-62 Strong, Adaptive Cultures Versus Weak, Inert Cultures Inert cultures –Those that lead to values and norms that fail to motivate or inspire employees –Lead to stagnation and often failure over time