Copyright  2008 McGraw-Hill Australia Pty Ltd PPTs t/a Management: A Pacific Rim Focus 5e by Bartol, Tein, Matthews, Sharma Slides prepared by Rob Lawrence, Victoria University (Australia) 10–1 CHAPTER 10 STRATEGIC ORGANISATION DESIGN

Copyright  2008 McGraw-Hill Australia Pty Ltd PPTs t/a Management: A Pacific Rim Focus 5e by Bartol, Tein, Matthews, Sharma Slides prepared by Rob Lawrence, Victoria University (Australia) 10–2 LECTURE OUTLINE Overview: Designing organisation structures Assessing structural alternatives Weighing contingency factors Matching strategy and structure

Copyright  2008 McGraw-Hill Australia Pty Ltd PPTs t/a Management: A Pacific Rim Focus 5e by Bartol, Tein, Matthews, Sharma Slides prepared by Rob Lawrence, Victoria University (Australia) 10–3 DESIGNING ORGANISATION STRUCTURE: OVERVIEW Strategy and structure: which comes first? – Strategy and structure are closely linked with each other. – Mismatches in strategy/structure lead to difficulties. Factors influencing organisation design – Contingency factors: technology, size, environment. – Need to promote innovation: roles, differentiation, transfer processes.

Copyright  2008 McGraw-Hill Australia Pty Ltd PPTs t/a Management: A Pacific Rim Focus 5e by Bartol, Tein, Matthews, Sharma Slides prepared by Rob Lawrence, Victoria University (Australia) 10–4 DESIGNING ORGANISATION STRUCTURE Strategy Contingency factors Technology Size Environment Contingency factors Technology Size Environment Organisation structure Functional Divisional Hybrid Matrix Organisation structure Functional Divisional Hybrid Matrix Structural methods for promoting innovation Roles Reservations Differentiation Transfer processes Structural methods for promoting innovation Roles Reservations Differentiation Transfer processes Organisational goals (efficiency and effectiveness) Organisational goals (efficiency and effectiveness)

Copyright  2008 McGraw-Hill Australia Pty Ltd PPTs t/a Management: A Pacific Rim Focus 5e by Bartol, Tein, Matthews, Sharma Slides prepared by Rob Lawrence, Victoria University (Australia) 10–5 ASSESSING STRUCTURAL ALTERNATIVES Functional structure Structure in which positions are grouped according to their main functional (or specialised) area. CEO Manager, Distribution Manager, Administration Manager, Manufacturing

Copyright  2008 McGraw-Hill Australia Pty Ltd PPTs t/a Management: A Pacific Rim Focus 5e by Bartol, Tein, Matthews, Sharma Slides prepared by Rob Lawrence, Victoria University (Australia) 10–6 ASSESSING STRUCTURAL ALTERNATIVES FUNCTIONAL STRUCTURE: Advantages In-depth expertise development Clear career path within function Efficient use of resources Possible economies of scale Ease of coordination within function Potential technical advantage over competitors

Copyright  2008 McGraw-Hill Australia Pty Ltd PPTs t/a Management: A Pacific Rim Focus 5e by Bartol, Tein, Matthews, Sharma Slides prepared by Rob Lawrence, Victoria University (Australia) 10–7 ASSESSING STRUCTURAL ALTERNATIVES FUNCTIONAL STRUCTURE: Disadvantages Slow response to multifunction problems Decision backlog at top of hierarchy Bottlenecks due to sequential tasks Restricted view of organisation amongst employees Inexact measurement of performance Narrow training for potential managers

Copyright  2008 McGraw-Hill Australia Pty Ltd PPTs t/a Management: A Pacific Rim Focus 5e by Bartol, Tein, Matthews, Sharma Slides prepared by Rob Lawrence, Victoria University (Australia) 10–8 ASSESSING STRUCTURAL ALTERNATIVES Divisional structure: Structure in which positions are grouped according to similarity of products, services, processes, geographic region or markets (customer similarities).

Copyright  2008 McGraw-Hill Australia Pty Ltd PPTs t/a Management: A Pacific Rim Focus 5e by Bartol, Tein, Matthews, Sharma Slides prepared by Rob Lawrence, Victoria University (Australia) 10–9 ASSESSING STRUCTURAL ALTERNATIVES Main kinds of divisional structure: Product divisions - focus on single product or service Process divisions - group jobs according to process used Geographic divisions - serve different geographic areas Customer divisions - service particular client or customer groups

Copyright  2008 McGraw-Hill Australia Pty Ltd PPTs t/a Management: A Pacific Rim Focus 5e by Bartol, Tein, Matthews, Sharma Slides prepared by Rob Lawrence, Victoria University (Australia) 10–10 ASSESSING STRUCTURAL ALTERNATIVES CEO, Alpha Industries Chief General Manager Copier products Chief General Manager Copier products Chief General Manager Scanner products Chief General Manager Scanner products Chief General Manager Photographic products Chief General Manager Photographic products Chief General Manager Industrial imaging products Chief General Manager Industrial imaging products Chief General Manager Computer Storage products Chief General Manager Computer Storage products Chief General Manager Marine electronic products Chief General Manager Marine electronic products

Copyright  2008 McGraw-Hill Australia Pty Ltd PPTs t/a Management: A Pacific Rim Focus 5e by Bartol, Tein, Matthews, Sharma Slides prepared by Rob Lawrence, Victoria University (Australia) 10–11 ASSESSING STRUCTURAL ALTERNATIVES DIVISIONAL STRUCTURE: Advantages Fast response to environmental change Simplified coordination across functions Simultaneous emphasis on organisational goals Strong customer orientation Accurate measurement of divisional performance Broad training in general management skills

Copyright  2008 McGraw-Hill Australia Pty Ltd PPTs t/a Management: A Pacific Rim Focus 5e by Bartol, Tein, Matthews, Sharma Slides prepared by Rob Lawrence, Victoria University (Australia) 10–12 ASSESSING STRUCTURAL ALTERNATIVES DIVISIONAL STRUCTURE: Disadvantages Resource duplication in each division Reduction of in-depth expertise Competition amongst divisions Limited sharing of expertise between divisions Innovation restricted to each division Neglect of overall goals

Copyright  2008 McGraw-Hill Australia Pty Ltd PPTs t/a Management: A Pacific Rim Focus 5e by Bartol, Tein, Matthews, Sharma Slides prepared by Rob Lawrence, Victoria University (Australia) 10–13 ASSESSING STRUCTURAL ALTERNATIVES Hybrid structure: Form of departmentalisation adopting both functional and divisional structural elements at the same management levels.

Copyright  2008 McGraw-Hill Australia Pty Ltd PPTs t/a Management: A Pacific Rim Focus 5e by Bartol, Tein, Matthews, Sharma Slides prepared by Rob Lawrence, Victoria University (Australia) 10–14 ASSESSING STRUCTURAL ALTERNATIVES HYBRID STRUCTURE: Advantages Alignment of corporate and divisional goals Functional expertise and/or efficiency Adaptability and flexibility in divisions

Copyright  2008 McGraw-Hill Australia Pty Ltd PPTs t/a Management: A Pacific Rim Focus 5e by Bartol, Tein, Matthews, Sharma Slides prepared by Rob Lawrence, Victoria University (Australia) 10–15 ASSESSING STRUCTURAL ALTERNATIVES HYBRID STRUCTURE: Disadvantages Conflicts between corporate departments and divisions Excessive administrative overhead Slow response to exceptional situations

Copyright  2008 McGraw-Hill Australia Pty Ltd PPTs t/a Management: A Pacific Rim Focus 5e by Bartol, Tein, Matthews, Sharma Slides prepared by Rob Lawrence, Victoria University (Australia) 10–16 ASSESSING STRUCTURAL ALTERNATIVES Matrix structure: Structure superimposing a horizontal set of divisional reporting relationships onto a hierarchical functional structure. Appropriate when: Need for a strong focus on both functional and divisional dimensions - e.g. useful for project work. Need to quickly process information and coordinate activities. There is pressure for shared resources.

Copyright  2008 McGraw-Hill Australia Pty Ltd PPTs t/a Management: A Pacific Rim Focus 5e by Bartol, Tein, Matthews, Sharma Slides prepared by Rob Lawrence, Victoria University (Australia) 10–17 Assessing Structural Alternatives GM, Transport GM, Sales GM, HRM GM, Finance Manager, Business A Manager, Business B Manager, Business C Manager, Business D Manager, Business E Transport, Business A Transport, Business B Transport, Business C Transport, Business D Transport, Business E Sales, Business A Sales, Business B Sales, Business C Sales, Business D Sales, Business E HRM, Business A HRM, Business C HRM, Business D HRM, Business E Finance, Business A Finance, Business B Finance, Business C Finance, Business D Finance, Business E HRM, Business B

Copyright  2008 McGraw-Hill Australia Pty Ltd PPTs t/a Management: A Pacific Rim Focus 5e by Bartol, Tein, Matthews, Sharma Slides prepared by Rob Lawrence, Victoria University (Australia) 10–18 ASSESSING STRUCTURAL ALTERNATIVES MATRIX STRUCTURE: Advantages Decentralised decision-making Strong product coordination Improved environmental monitoring Flexible use of human resources Efficient use of support systems Fast response to change

Copyright  2008 McGraw-Hill Australia Pty Ltd PPTs t/a Management: A Pacific Rim Focus 5e by Bartol, Tein, Matthews, Sharma Slides prepared by Rob Lawrence, Victoria University (Australia) 10–19 ASSESSING STRUCTURAL ALTERNATIVES MATRIX STRUCTURE: Disadvantages High administrative costs Confusion over authority & responsibility (potential) Excessive focus on internal relations Overemphasis on group decision-making Slow response to change

Copyright  2008 McGraw-Hill Australia Pty Ltd PPTs t/a Management: A Pacific Rim Focus 5e by Bartol, Tein, Matthews, Sharma Slides prepared by Rob Lawrence, Victoria University (Australia) 10–20 ASSESSING STRUCTURAL ALTERNATIVES Emerging structures: Product team structure Type of departmentalisation where people are organised into permanent cross-functional teams Boundaryless organisation Removal of vertical, horizontal, external and geographic boundaries - remove restrictions of formal structures Knowledge management organisation Cross-functional teams organised into knowledge groups made up of knowledge teams - sharing of information and learning

Copyright  2008 McGraw-Hill Australia Pty Ltd PPTs t/a Management: A Pacific Rim Focus 5e by Bartol, Tein, Matthews, Sharma Slides prepared by Rob Lawrence, Victoria University (Australia) 10–21 ASSESSING STRUCTURAL ALTERNATIVES Emerging structures continued: Learning organisation structure A systems approach to learning, flat management, flexibility and adaptability Networked structure Form of organising where many functions are contracted out to other independent firms and coordinated by use of information technology networks to operate as if they were within a single corporation.

Copyright  2008 McGraw-Hill Australia Pty Ltd PPTs t/a Management: A Pacific Rim Focus 5e by Bartol, Tein, Matthews, Sharma Slides prepared by Rob Lawrence, Victoria University (Australia) 10–22 WEIGHING CONTINGENCY FACTORS No “ideal” structure. The best structure for an organisation depends on contingency factors such as: Technology Size Environment

Copyright  2008 McGraw-Hill Australia Pty Ltd PPTs t/a Management: A Pacific Rim Focus 5e by Bartol, Tein, Matthews, Sharma Slides prepared by Rob Lawrence, Victoria University (Australia) 10–23 WEIGHING CONTINGENCY FACTORS Technology: Technological complexity (Joan Woodward, 1958/1965) – Unit and small batch production – Large batch and mass production – Continuous process production

Copyright  2008 McGraw-Hill Australia Pty Ltd PPTs t/a Management: A Pacific Rim Focus 5e by Bartol, Tein, Matthews, Sharma Slides prepared by Rob Lawrence, Victoria University (Australia) 10–24 WEIGHING CONTINGENCY FACTORS Technology: Technological interdependence (Thompson) – Pooled interdependence – Sequential interdependence – Reciprocal interdependence

Copyright  2008 McGraw-Hill Australia Pty Ltd PPTs t/a Management: A Pacific Rim Focus 5e by Bartol, Tein, Matthews, Sharma Slides prepared by Rob Lawrence, Victoria University (Australia) 10–25 WEIGHING CONTINGENCY FACTORS Size effects on structure With growth: more departments, shift from functional to divisional form With growth: more departments, shift from functional to divisional form With growth: more staff positions to help senior management With growth: more staff positions to help senior management With growth: tendency to decentralise (enabled by formalisation, rules) With growth: tendency to decentralise (enabled by formalisation, rules) With growth: additional rules and regulations (formalisation) With growth: additional rules and regulations (formalisation)

Copyright  2008 McGraw-Hill Australia Pty Ltd PPTs t/a Management: A Pacific Rim Focus 5e by Bartol, Tein, Matthews, Sharma Slides prepared by Rob Lawrence, Victoria University (Australia) 10–26 WEIGHING CONTINGENCY FACTORS: Environment Stable environments, mechanistic narrow tasks prescribed tasks hierarchical control decision-making levels communication vertical instructions by superiors loyalty to organisation obedience to superiors Unstable/uncertain environments, organic general tasks, subject to continuous negotiation network control decision making rests with those with knowledge communication across and between levels ‘supervision’ is information and advice commitment to organisational goals, possession of expertise

Copyright  2008 McGraw-Hill Australia Pty Ltd PPTs t/a Management: A Pacific Rim Focus 5e by Bartol, Tein, Matthews, Sharma Slides prepared by Rob Lawrence, Victoria University (Australia) 10–27 MATCHING STRUCTURE & STRATEGY Managers must match strategy and structure to achieve effectiveness: Niche differentiation: narrow target market Niche differentiation: narrow target market Cost leadership: organisational efficiency, lower prices Cost leadership: organisational efficiency, lower prices Market differentiation: advertising, prestige pricing & market segmentation Market differentiation: advertising, prestige pricing & market segmentation Innovative differentiation: complex product or service innovations Innovative differentiation: complex product or service innovations

Copyright  2008 McGraw-Hill Australia Pty Ltd PPTs t/a Management: A Pacific Rim Focus 5e by Bartol, Tein, Matthews, Sharma Slides prepared by Rob Lawrence, Victoria University (Australia) 10–28 PROMOTING INNOVATION Structure’s ability to support strategy can be enhanced by using structural means to encourage innovation. Innovation is critical to various differentiation strategies.

Copyright  2008 McGraw-Hill Australia Pty Ltd PPTs t/a Management: A Pacific Rim Focus 5e by Bartol, Tein, Matthews, Sharma Slides prepared by Rob Lawrence, Victoria University (Australia) 10–29 PROMOTING INNOVATION Four major means of using organisation structure to facilitate innovation are: Vital roles Idea champion, sponsor, orchestrator Reservations Organisation units devoted to the generation of innovative ideas Differential paradox Separating the innovation process increases new ideas, but decreases the chance of implementation Transfer process The difficulty of translating ideas into products/services

Copyright  2008 McGraw-Hill Australia Pty Ltd PPTs t/a Management: A Pacific Rim Focus 5e by Bartol, Tein, Matthews, Sharma Slides prepared by Rob Lawrence, Victoria University (Australia) 10–30 PROMOTING INNOVATION Organisations of the future: Boundaryless Vertical, horizontal, external, geographic Adaptive Quick to change, learn and respond Collaborative Internally and externally, to build capabilities Applying Internet and E-commerce technology For communications and transactions

Copyright  2008 McGraw-Hill Australia Pty Ltd PPTs t/a Management: A Pacific Rim Focus 5e by Bartol, Tein, Matthews, Sharma Slides prepared by Rob Lawrence, Victoria University (Australia) 10–31 LECTURE SUMMARY Overview: structure to support strategy, influenced by contingency factors Assessing structural alternatives – Functional, divisional, hybrid, matrix, emerging structures – Advantages and disadvantages Weighing contingency factors – Technology, size, environment

Copyright  2008 McGraw-Hill Australia Pty Ltd PPTs t/a Management: A Pacific Rim Focus 5e by Bartol, Tein, Matthews, Sharma Slides prepared by Rob Lawrence, Victoria University (Australia) 10–32 LECTURE SUMMARY Continued Matching strategy and structure – Structure must match chosen strategy for effectiveness - some matches are much more effective than others. Promoting innovation – Structure may enhance innovation. – Key factors: vital roles, reservations, differential paradox, transfer process.