To create high performing organizations, managers must design an organizational structure that maximizes the efficient use of resources. This chapter opens by examining the four critical factors that help managers to determine the most appropriate organizational structure. Next, it discusses three components of organizational design: Job design, grouping Jobs into functions and divisions, and the coordination of functions and divisions.
The chapter closes with a discussion of integrating mechanisms and the growing popularity of global strategic alliances and business-to-business network structures. 7-3 LECTURE OUTLINE Management Snapshot (up. 211-212 of text) Alan Manually Transform Ford How Should Managers Organize to Improve…? With Ford’s performance suffering in 2006, its board of directors realized they needed an outsider to change the way Ford operated, and they recruited Alan Manually from Boeing to become its new CEO.
Manually discovered that over the years, Ford had developed a tall hierarchy of managers whose main goal was to protect their turf and avoid any direct blame for its plunging car sales. Manually soon realized that the managers thought the best way to maintain their Jobs was to hoard information, ether than share them. Thus values of secrecy and ambiguity reduced the level of coordination and integration between managers. He issued an order that the detailed statement of costs should be shared between divisions.
He insisted that each of Ford’s divisional presidents should attend weekly meetings with different subordinates to openly discuss all the problems. Manually goal was to create new rules that it was fine to admit mistakes, share information, and find ways to reduce costs. He also emphasized cooperation within divisions. By 2012, Ford had become the highest performing U. S. Carmaker. 7-4 l. Designing Organizational Structure A. Organizing is the process by which managers establish the structure of working relationships among employees to allow them to achieve organizational goals efficiently and effectively. . Organizational structure is the formal system of task and Job reporting relationships that determines how employees use resources to achieve goals. 2. Organizational design is the process by which managers make specific organizing choices about tasks and Job relationships that result in the construction of a particular organizational structure. 3. According to contingency theory, managers sign organizational structures to fit the factors or circumstances that are affecting the company and causing them the most uncertainty. B.
Four factors are important determinants of the type of organizational structure or culture managers select: 1. The Organizational Environment: The more quickly the external environment is changing and the greater the uncertainty within it, the greater the need to speed decision-making and communication so that resources can be obtained. A. In such situations, managers make organizing decisions that result in more flexible structures and entrepreneurial cultures. Therefore, they are keel to decentralized authority, empower lowered employees to make decisions, and encourage values and norms that emphasize change and innovation. . In contrast, if the external environment is relatively stable, uncertainty is low, and resources are readily available, managers make organizing decisions that bring more stability or formality to the organizational structure. They choose values and norms that emphasize obedience and being a team player. Managers in this situation prefer to make decisions with a clearly defined hierarchy of authority, standard operating procedures, and restrictive norms to dude and govern employees’ activities. 7-5 c.
In today’s marketplace, increasing competition is putting pressure on managers to find ways to attract customers and increase 2. Strategy: Different strategies often call for the use of different organizational structures and cultures. A. A differentiation strategy aimed at increasing quality usually succeeds best in a flexible structure with a culture that values innovation. B. In contrast, a low-cost strategy aimed at driving down costs works best in a more formal structure with more conservative norms, which gives managers greater control. C.
At the corporate level, when managers pursue strategy of vertical integration or diversification, a flexible structure is needed to provide sufficient coordination between different business divisions. D. Managers are also challenged to create organizational structures that allow flexibility on a global level. 3. Technology is the combination of skills, knowledge, machines, and computers that are used in the design, production, and distribution of goods and services. A. The more complicated the technology, the greater the need for a more flexible structure that allows managers to respond quickly to unexpected situations. . If technology is routine, a formal structure is ore appropriate because tasks are simple and procedures to produce goods and services have been outlined in advance. C. According to researcher Charles Proper, two factors determine how complicated or neurotic technology is. They are task variety and task inalienability. I. Neurotic technologies are characterized by high task variety and low task 7-6 ii. Routine technologies are characterized by low task variety and high task inalienability. Iii. Examples of neurotic technology are found in the work of scientists in an R&D laboratory who develop new products. V. Examples of routine technology include happily mass production or assembly operations, where workers perform the same task repeatedly and managers identify programmed solutions necessary to perform a task efficiently. 4. Human Resources: The more highly skilled a workforce, and the greater the number of employees who work together in groups or teams, the more likely an organization is to use a flexible, decentralized structure and a professional culture based on values and norms that foster employee autonomy and self-control. A.
Flexible structures, characterized by decentralized authority and empowered employees, are well suited to the needs of highly killed people. B. Similarly, when people work in teams, they must be allowed to interact freely and develop norms to guide their own work interactions, which is also possible in a flexible organizational structure. C. The way an organization’s structure works depends on the organizing choices managers make about three issues: I. How to group tasks into individual Jobs it. How to group Jobs into functions and divisions iii.
How to allocate authority and coordinate or integrate functions, and divisions. 7-7 II. Grouping Tasks into Jobs: Job Design A. The first step in organizational design is Job design, he process by which managers decide how to divide 1. The result of the Job design process is a division of labor among employees. Establishing an appropriate division of labor among employees is vital to increasing efficiency and effectiveness. 2. When deciding how to assign tasks to individual jobs, managers must be careful not to oversimplify jobs.
Job simplification is the process of reducing the number of tasks that each worker performs. Too much Job simplification may reduce efficiency rather than increase it, if workers become bored and unhappy. B. Job Enlargement and Job Enrichment 1 . Job enlargement is increasing the number of vision of labor. By increasing the range of tasks performed by a worker, managers hope to reduce boredom and increase motivation to perform. 2. Job enrichment is increasing the degree of responsibility a worker has over a Job by: a. Empowering workers to experiment to find new or better ways of doing the Job, b. Encouraging workers to develop new skills, c. Allowing workers to decide how to do the work and giving them the responsibility for deciding how to respond to unexpected situations d. Allowing workers to monitor and measure their own performance. 3. By enriching an employee’s Job, managers are expecting the employee’s level of involvement in their work to increase, thereby increasing productivity. 4. Managers who make design choices that increase job enrichment and Job enlargement are likely to increase the degree to which workers behave 7-8 flexibly rather than mechanically. 5.
Narrow, specialized Jobs lead people to behave in predictable ways. In contrast, workers who perform a variety of tasks and who are encouraged to discover new and better ways to perform their Jobs C. The Job Characteristics Model: J. R. Hickman and G. R. Oldie’s Job characteristics model explains how managers can make Jobs more interesting and titivating. According to Hickman and Lolled, every job has five characteristics that determine how motivating the Job is: 1 . Skill variety is the extent to which a Job requires an employee to use a wide range of different skills, abilities, or knowledge. 2.
Task identity is the extent to which a Job requires a worker to perform all the tasks necessary to complete the Job, from the beginning to the end of the production process. 3. Task significance is the degree to which a worker feels his or her Job is meaningful because of its effect on people outside the organization. 4. Autonomy is the degree to which a Job gives an employee the freedom and discretion needed to schedule different tasks and decide how to carry them out. 5. Feedback is the extent to which actually doing a job provides a worker with clear and direct information regarding how well he or she has performed the Job. . The five Job characteristics affect an employee’s motivation by affecting three critical psychological states: a. Feeling that one’s work is meaningful b. Feeling responsible for work outcomes, and c. Feeling responsible for knowing how those outcomes affect others. 7-9 Ill. Grouping Jobs into Functions and Divisions: A. After task allocation, the next organizing decision is owe to group Jobs together to best match the needs of the organization’s environment, strategy, technology, and human resources. 1 . Most top-management teams group Jobs into departments and develop a functional structure. Visional structure or a matrix or product team B. Functional Structure: A function is a group of people, working together, who possess similar skills or use the same knowledge, tools, or techniques to perform their Jobs. A functional structure is a structure composed of all the departments that an organization requires to produce its goods or services. 1 . The advantages of grouping Jobs according to function are: . When people who perform similar Jobs are grouped together, they can learn from observing one another. B.
When people who perform similar Jobs are grouped together, it is easier for managers to monitor and evaluate their performance. C. The functional structure allows managers to create the set of functions they need to scan and monitor the competitive environment. 2. As an organization grows, the functional structure may become less efficient and effective for the following reasons: a. Managers in different functions may find it more difficult to communicate and coordinate with one another. B. Functional managers may become so reoccupied with supervising their own specific departments that they lose sight of organizational goals. -10 C. Divisional Structures: Product, Market, and Geographic: As the problems associated with growth and diversification increase over time, most managers of large organizations choose a divisional structure and create a series of business units, each of which produces a specific kind of product for a specific kind of customer. Each division is a collection of functions or departments that work together to produce the product. There are three different forms of divisional structure: product structure, geographic structure, and market