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2. Designing Organizational Structure
Chapter 7
Designing Organizational Structure

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
Explain why managers must coordinate and integrate between jobs, functions, and divisions as an organization grows

4. Question?
What is the process managers use to establish the structure of working relationships among employees to achieve goals?
Leading
Organizing
Controlling
Planning
The correct answer is “B” – organizing. See slide 7-6.

5. Designing Organizational Structure
Organizing
The process by which managers establish the structure of working relationships among employees to achieve goals

6. Designing Organizational Structure
Formal system of task and reporting relationships that coordinates and motivates organizational members so that they work together to achieve organizational goals

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

8. Factors Affecting Organizational Structure
Figure 7.1

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. 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

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

12. 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

13. Question?
What is increasing the degree of responsibility a worker has over a job?
Job Design
Job Simplification
Job Enlargement
Job Enrichment
The correct answer is “D” – job enrichment. See slide 7-20.

14. Job Design Job Design Job Simplification
The process by which managers decide how to divide tasks into specific jobs
Job Simplification
The process of reducing the number of tasks that each worker performs

15. Job Design Job Enlargement Job Enrichment
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

16. The Job Characteristics Model
Figure 7.2

17. Job Characteristics Model

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

19. Grouping Jobs into Functions
Advantages
Encourages learning from others doing similar jobs
Easy for managers to monitor and evaluate workers
Disadvantages
Difficult for departments to communicate with others
Preoccupation with own department and losing sight of organizational goals

20. The Functional Structure of Pier 1 Imports
Figure 7.3

21. 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

22. Types of Divisional Structures
Product Structure
Each product line or business is handled by a self-contained division

23. Product Structure Advantages
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

24. Product, Market, and Geographic Structures
Figure 7.4

25. Types of Divisional Structures
Geographic Structure
Each region of a country or area of the world is served by a self-contained division

26. Types of Divisional Structures
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

27. Types of Divisional Structures
Global Product Structure
Each product division, not the country or regional managers, takes responsibility for deciding where to manufacture its products and how to market them in foreign countries

28. Global Geographic and Global Product Structures
Figure 7.5

29. Types of Divisional Structures
Market Structure
Each kind of customer is served by a self-contained division
Also called customer structure

30. Matrix Design Structure
Matrix Structure
An organizational structure that simultaneously groups people and resources by function and product

31. Matrix Design Structure
The matrix 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

32. Matrix Structure
Figure 7.6

33. Product Team Design Structure
Product Team Structure
Members are permanently assigned to a cross-functional team and report only to the product team manager or to one of his subordinates
Cross-functional team – group of managers brought together from different departments to perform organizational tasks

34. Product Team Structure
Figure 7.6

35. Hybrid Structures Hybrid Structure
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.

36. Federated’s Hybrid Structure
Figure 7.7

37. Coordinating Functions and Divisions
Authority
The power to hold people accountable for their actions and to make decisions concerning the use of organizational resources
Hierarchy of Authority
An organization’s chain of command, specifying the relative authority of each manager

38. Allocating Authority Span of Control Line Manager Staff Manager
The number of subordinates that report directly to a manager
Line Manager
Managers in the direct chain of command who have formal authority over people and resources lower down
Staff Manager
Managers who manage a specialist function

39. The Hierarchy of Authority and Span of Control at McDonald’s Corporation
Figure 7.8

40. Tall and Flat Organizations
Tall structures have many levels of authority and narrow spans of control
Flat structures have fewer levels and wide spans of control

41. Flat Organizations
Figure 7.9

42. Tall Organizations
Figure 7.9

43. Types of Integrating Mechanisms
Organizing tools that managers can use to increase communication and coordination among functions and divisions

44. Discussion Question?
Which of these is an example of an integrating mechanism?
Direct Contact
Liaison roles
Task Forces
Cross-functional Teams
All of the above
E. All of the above is the correct answer. All are examples of integrating mechanisms. Students may discuss examples of how each mechanism can help organizational communications. Also discuss how the lack of these mechanisms can inhibit effectiveness in a dynamic environment, such as natural disasters or downturns in the business cycle.

45. Integrating Mechanisms
Figure 7.10

46. Forms of Integrating Mechanisms
Figure 7.11

47. 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.

48. Strategic Alliances 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

49. Strategic Alliances Outsource
To use outside suppliers and manufacturers to produce goods and services

50. Strategic Alliances 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

51. Strategic Alliances 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.

52. B2B Network Structures and IT
Business to Business (B2B ) network
A group of organizations that join together and use IT to link themselves to potential global suppliers to increase efficiency and effectiveness.

53. Video Case: GM Global research Network
How is technology influencing organizational structure at GM?
What other factors should managers at GM consider when selecting a structure?
Video Summary: Top managers at GM realized that their company was too self-contained and that to increase its competitiveness, a change was needed in the company’s business model. It therefore restructured GM so that a global team environment could be created. By building an extensive network of engineers that allows it to tap into R&D expertise around the globe, GM expects to attain the level of innovation required to differentiate itself from its competitors.
Questions:
1. How is technology influencing organizational structure at GM? What other factors should managers at GM consider when selecting a structure?
Global competition has forced GM to increase its focus on innovation, and thus advanced technology. To accommodate this need, a more flexible structure that would allow GM to leverage the technical capabilities of its employees worldwide was required. Management realized that it needed to work with the best researchers, no matter where they were located. The new structure allowed for global teams composed of employees focused on innovation and comfortable interacting with team members from a variety of cultures. Technology, human resources, strategy and the level of turbulence in the external environment should be considering by managers seeking to design the best organizational structure for their company.
What organizational structures do you equate with GM’s old model of research? Which structures do you equate with the new model?
GM’s old research model was probably built around a traditional, functional structure in which all employees with technology backgrounds and skills were clustered into a single unit within the organization and worked together in a single location. The new business model is probably hybrid, using a geographic structure that encompasses virtual product teams.
What tips would you offer managers at GM as they move from the old structure to the new structure?
A major change in organizational structure generally requires a shift in organizational culture, for which employees must be prepared. The new structure will force a change in how decision making occurs within the organization and how employees relate and communicate with each other.

54. Movie Example: Apollo 13
What organizational structure does NASA use to handle a moon launch?
Described by Leonard Maltin as “exhilarating story of ill-fated Apollo 13 moon mission, and how the heroic work of Jim Lovell and his crew, combined with the dogged persistence of the NASA team in Houston, averted tragedy. In the launch sequence (Ch 12), the flight director asks the different areas (booster, retro, guidance, surgeon, control, capcom, etc.) for a go/no-go for launch. This shows one way an organization can structure itself to accomplish a mission. After the explosion on board the spacecraft, the different areas are asked for input to solve the problem.
Overview
This clip is an example of an organization’s functional structure. Gene Kranz (Ed Harris) goes around the room to get a go/no go for launch. Students may discuss whether this is the best way to organize a lunar mission.
Discussion Questions
What are the different departments involved in making the launch happen?
Booster, Retro, Guidance, Surgeon, E.E.Com, GNC, TELMU, Control, Procedures, INCO, F.A.O., Network, and Recovery
How are these departments organized?
The departments are organized by function