1. Organizational Design
Slides are Courtesy of Professor Joe Labianca

2. Organization Charts

3. Example Org Chart: Cox Communications (Metro Newspaper Structure)
Publisher GM
Finance HR
Advertising
Controller IT
Production

4. What do organization charts tell us?
Basic Information
Who reports to whom
Who has the ultimate official authority to make decisions
Which people are being asked to specialize in what areas

5. Types of Groupings
Groupings for specialization happen around two basic types of groups:
Functional groupings (e.g., Accounting, Human Resources, Marketing, Nursing)
Divisional groupings
Products or Services (e.g., Computer Hardware, Software, IT Consulting Services, Sports Medicine, Plastic Surgery)
Geographic Areas (e.g., Northern KY, Southern KY, Eastern KY)
Clientele (e.g., Educational institutions, Government, Corporate; Women’s Clinics, Sports Clinics; High Net Worth Banking)

6. Functional vs. Divisional Grouping Structures
CEO
Human Resources
Sales
Accounting
Divisional
Structure
CEO
Hardware
Software
Consulting HR
Sales
Acct HR
Sales
Acct HR
Sales
Acct

7. The Apple-Orange Company Structure (Part One)
How will you structure your company?
Functional?
Divisional?
Why do you prefer this structure?
What are the advantages?
What are the disadvantages?
List the criteria you are considering when making this decision
Are there other pieces of information you wished you had as you were making the decision? What were they?

8. Possible Functional Structure for Apple-Orange
John
Carl
Sales
Salespeople
(Apples, Oranges, Pears, Broccoli, Grapes, Eggplant)
Production
Grow & Harvest
Field Workers
Research
Researchers

9. Functional Structure Strengths
Enables in-depth knowledge and skill development within the functional area
(e.g., all researchers can learn from each other, regardless of what product they are currently researching)
Allows economies of scale within functional departments
(e.g., might not need as many workers or managers because of less duplication)
Very efficient; helps to minimize costs
Weaknesses
Leads to poor horizontal coordination among departments
Involves restricted view of organizational goals (functional silo mentality)
May cause decisions to pile on top, creating overload at top of hierarchy
Slow response time to environmental changes
Results in less innovation
Works best when there are few products
Low in adaptability

10. Possible Divisional Structure for Apple-Orange
John
Carl
Apple Division
Salespeople (Apples)
Orange Division
Field Workers (Apples)
Researchers (Apples)
Salespeople (Oranges)
Field Workers (Oranges)
Researchers (Oranges)
Pear Division
Broccoli
Division
Grapes
Eggplant
Salespeople
(Pears)
Field Workers
Researchers
(Broccoli)
(Grapes)
(Eggplant)

11. Example Divisional Structure: IBM (pre-June 2002)
CEO
Hardware
Software
Services
Global Finance HR
Finance
Sales IT HR
Finance
Sales IT HR
Finance
Sales IT HR
Finance
Sales IT

12. Divisional Structure Strengths
Allows divisions to adapt to differences in products, geographic regions, and clients
Decentralizes decision-making
Suited to fast change in unstable environments
Best in large organizations with several products
Highly adaptable
Weaknesses
Leads to poor coordination across product lines
Eliminates economies of scale in functional departments
Restricts in-depth competence and technical specialization in a functional area
Very inefficient; great deal of duplication

13. The Apple-Orange Company Structure (Part Two)
Imagine that you chose the functional grouping in Part One
As the company continues to grow, the decision is made to diversify into the following products:
Pears
Eggplant
Grapes
Broccoli

14. The Apple-Orange Company Structure (Part Two, continued)
Now place yourself in the role of the Vice-President of Research. What problems do you foresee happening as the number of products proliferates? What will happen to the VP of Sales? The VP of Production?

15. The Apple-Orange Company Structure (Part Three)
Now imagine that you chose the divisional grouping in Part One.
As the company continues to grow, the decision is made to diversify into the following products:
Pears
Eggplant
Grapes
Broccoli

16. The Apple-Orange Company Structure (Part Three, continued)
What problems do you foresee happening as the number of products proliferates?

17. The Organizational Environment’s Role in Determining Structure

18. An Organization’s Environment
International Context
(j)
International
Sector
(a)
Industry
Sector
(i)
Socio-cultural
Sector
DOMAIN
(b)
Raw Materials
Sector
(h)
Government
Sector
(c)
Human Resources
Sector
ORGANIZATION
(g)
Economic
Conditions
Sector
(d)
Financial
Resources
Sector
(f)
Technology
Sector
(e)
Market
Sector

19. Environmental Sectors
Industry
Competitors, industry size & competitiveness, related industries
Market
Customers, clients, potential users of products and services
Raw materials
Suppliers, manufacturers, real estate, services
Human resources
Labor market, employment agencies, universities, training schools, employees in other companies, unionization, illegal immigration
Financial
Stock markets, banks, savings and loans, private investors
Technology
Production techniques, science, information technology
General economic condition
Recession, unemployment rate, inflation rate, rate of investment, economics, growth
Government
City, state, federal laws and regulations, taxes, services, court system, political processes
Sociocultural
Demographics, values, beliefs, education, religion, work ethic, consumer and green movements
International
Competition from and acquisition by foreign firms, entry into overseas markets, foreign customs, regulations, exchange rates

20. Relationship Between Structure and Environment
Functional
Structure
Divisional
Structure
Flexibility
Change
Innovation
Dominant
Structural
Approach
Efficiency
Reliability
Reducing Costs
Simple, Stable Environments
Complex, Unstable Environments
Environmental
Uncertainty

21. What happens between the extremes?
Simple, stable environments = functional structures
Complex, unstable environments = divisional structures
Q. What happens when you have a:
simple, but unstable environment (e.g., fashion industry)?
complex, but stable environment (e.g., universities, hospitals)?
Organizations use:
hybrid structures
matrix structures

22. Possible Matrix Structure for Apple-Orange
John
Carl
Apple Division
Salespeople (Apples)
Orange Division
Field Workers (Apples)
Researchers (Apples)
Salespeople (Oranges)
FieldWorkers (Oranges)
Researchers (Oranges)
Pear Division
Broccoli
Division
Grapes
Eggplant
Salespeople
(Pears)
Field Workers
Researchers
(Broccoli)
(Grapes)
(Eggplant)
VP of Sales
VP of
Production
VP of
Research

23. Matrix Structures
Provides opportunity for both functional and product skill development
Flexible sharing of human resources across products, while still promoting efficiency goals
Team-based approach can be useful for satisfying customers’ dual concerns for innovation and cost-savings
Causes employees to experience dual authority (e.g., product manager and functional manager), which can be frustrating and confusing
Meetings, meetings, and more meetings
Is time consuming; involves frequent meetings and conflict resolution sessions
Conflict between division heads and functional dept heads is pushed down onto employees
Will not work unless participants, particularly managers, understand it and adopt collegial rather than vertical-type relationships; often requires adoption of 360 degree reviews
Means employees need good interpersonal skills and extensive training, particularly in conflict resolution
Best in medium-sized organizations with multiple products

24. Possible Hybrid Structure for Apple-Orange
John
Carl
Apple Division
Orange Division
Field Workers (Apples)
Researchers (Apples)
Field Workers (Oranges)
Researchers (Oranges)
Pear Division
Broccoli
Division
Grapes
Eggplant
Field Workers
(Pears)
Researchers
(Broccoli)
(Grapes)
(Eggplant)
Salespeople
(Apples, Oranges,
Pears, Broccoli,
Grapes, Eggplant)

25. Hybrid Structures
Allows organization to balance achieving some adaptability and coordination in product divisions and some efficiency in centralized functional departments
Achieves some degree of coordination both within and between product lines
Leads to conflict between divisions and corporate departments
Has potential to favor the creation of excessive administrative overhead in the corporate departments

26. What is the best organizational structure?
It depends
No way of grouping people is perfect
Every structure has its advantages and disadvantages

27. What determines the choice of structure?
Environmental Uncertainty
Uncertainty is driven by two main factors:
Environmental complexity
the number and similarity of elements (e.g., suppliers, customers, regulators) in the organization’s environment
Environmental dynamism
the rate of change in the elements in the organization’s environment

28. Example of a Hybrid Structure: Sun Petrochemical
President
Functional
Structure
Chief
Counsel
Human
Resources
Director
Technology
Vice
President
Financial
Services
Vice Pres.
Product
Structure
Fuels
Vice
President
Lubricants
Vice
President
Chemicals
Vice
President

29. Matrix Example: Harland Checks’ Functional Matrix
VP Customer Care IT
Milton
Process & Quality
Reporting & Forecasting
HR & Training
Sales & Mktg
Salt Lake City
Atlanta

30. Guidance for Examination on Monday
It will, unfortunately, be closed book
Exam will cover the following topics:
Motivation
Personality and Individual Differences
Organizational Design
You can use translation software
You can use laptop (but no consulting slides or online sources when completing exam)

31. How to Prepare for Exam I
Exam will be in-class on Monday. Questions will all be short essay questions.
You are being asked by your supervisor to provide your informed opinion about how best to identify and manage important individual differences (both visible ones, like gender and age, and less visible ones, like personality) at work. What advice would you provide and why?
You are managing a new team at work and are considering how best to motivate them. Identify any three theories of motivation we have discussed in class and explain how they could be useful to you in both conceiving and defending your approach to motivating your team. Be sure to identify both the potential advantages and disadvantages of each approach.
You have been asked to rethink the appropriate organizational design for your growing company. Which factors will you want to consider in making your decision? Which structure would you pick and why. Be sure to identity the potential advantages and disadvantages of each approach.

32. Resources for Motivation Theories