Chapter 10 Managing Organizational Structure Leanne Powers MHR301 From McGraw-Hill Irwin Contemporary Management

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. Organizational design –The process by which managers make specific choices that result in a particular kind of organizational structure.

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.

Formal or Flexible? More flexible structureMore formal structure Rapidly-changing environment Stable environment More complex (or non- routine) technology Less-complex technology used in task environment Higher task varietyHigher task analyzability Small batch or continuous- process production Mass-production More highly-skilled workforce More entry-level or semiskilled workforce Strategic necessity (differentiation strategy) Strategic necessity (low- cost strategy) More vertical integration or global expansion Less vertical integration; fewer global operations

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

Job Design Job Enlargement –Increasing the number of tasks for a given job to reduce boredom. Job Enrichment –Increasing the degree of responsibility a worker has over a job can lead to increased worker involvement.

Job Characteristics Model Job characteristics Skill varietyEmployee uses a wide range of skills Task identityWorker is involved in all tasks of the job from beginning to end of the production process Task significanceWorker feels the task is meaningful to organization. AutonomyEmployee has freedom to schedule tasks and carry them out. FeedbackWorker gets direct information about how well the job is done.

Functional Structure An organizational structure composed of all the departments that an organization requires to produce its goods or services. –Advantages Encourages learning from others doing similar jobs. Easy for managers to monitor and evaluate workers. –Possible Disadvantages Difficult for departments to communicate with others. Preoccupation with own department and losing sight of organizational goals.

Divisional Structures An organizational structure composed of separate business units within which are the functions that work together to produce a specific product for a specific customer Divisions create smaller, manageable parts of a firm. Divisions develop a business-level strategy to compete. Divisions have marketing, finance, and other functions. Functional managers report to divisional managers who then report to corporate management.

Types of Divisional Structures Product structure –Divisions by the product group or category Market structure –Divisions by type of customer Geographic structure –Global or regional divisions

Divisional Structures

Matrix Design 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 may not be able to satisfy both.

Product Team Design Structure The members are permanently assigned to the team and empowered to bring a product to market. Avoids problems of two-way communication and the conflicting demands of functional and product team bosses. Cross-functional team is composed of a group of managers from different departments working together to perform organizational tasks.

Product Team Design Structure

Hybrid Structures The structure of a large organization that has many divisions an simultaneously uses many different organizational structures Managers can select the best structure for a particular division—one division may use a functional structure, another division may have a geographic structure. The ability to break a large organization into smaller units makes it easier to manage.

Strategic Alliances Strategic Alliance –An agreement in which managers pool or share firm’s resources and know-how with a foreign company and the two firms share in the rewards and risks of starting a new venture. Network Structure: –A series of strategic alliances that an organization creates with suppliers, manufacturers, and distributors to produce and market a product. –Network structures allow firms to bring resources together in a boundary-less organization.

B2B Network Structures and IT Boundaryless Organization –An organization whose members are linked by computers, faxes, computer- aided design systems, and video- conferencing and who, rarely, if ever, see one another face-to-face. Knowledge Management System –A company-specific virtual information system that allows workers to share their knowledge and expertise and find others to help solve problems.