chapter 06 slides

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Organization Structure andManagement Systems

Evolution of the corporation

Principles of organizational design

The role of hierarchy: bureaucratic

control vs. modular integration Alternative structural forms

Management systems

OUTLINE


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Evolution of the Modern Corporation

The businessenvironment

Organizationalconsequences

Strategicchanges

Late19th

century

Early

19thcentury

Early20thcentury

Local markets Firms specialized & Small firms.

Transport slow focused on local Simple manage-Limited mechanization markets ment structures

Introduction of Geographical and Functional struct-railroads, telegraph vertical expansion ures. Line/staffindustrialization separation. Accou-

nting systems

Excess capacity in Product & Development ofdistribution. Growth multinational multidivisionalof financial institut- diversification corporation

ions & world trade


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Board of Directors

President Executive Committee

Financial

Staff

Legal

Department

General

Advisory Staff

GM Acceptance

Corporation

ChevroletDivision

SheridanDivision

CanadianDivision

OldsmobileDivision

GM TruckDivision

GM ExportCompany

CadillacDivision

BuickDivision

Inter-company

PartsDivision

OaklandDivision

SamsonTractorDivision

ScrippsBoothCorp.

Source: A.P. Sloan, My Years with General Motors, Orbit Publishing, 1972, p. 57.

General Motors Organization Structure, 1921


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The Basic Tasks of Organization

THE ORGANIZATIONAL CHALLENGE:

to design structure & systems that: Permit specialization

Facilitate coordination by grouping individuals & linkgroups with systems of communication, decisionmaking, & control

Create incentives to align individual & firm goals

Achieving high levels of productivity requires SPECIALIZATION

Specialization by individuals necessitates COORDINATION

For coordination to be effective requires COOPERATION

But goals of employees == goals of ownersTHE AGENCY PROBLEM


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(a) Self Organizing Team:

10 interactions

(b) Hierarchy:

4 interactions

Hierarchy Economizes on Coordination


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Tightly-coupled, integratedsystem: Change in any partof the system requiressystem-wide adaptation

Loose-coupled, modularhierarchy: partially-autonomous modules linkedby standardized interfacespermits decentralizedadaptation and innovation

Hierarchy of Loosely-CoupledModules Allows Flexible Adaptation


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Webers Principles of Bureaucracy

Rational-legal authority

Specialization of labor

Hierarchical structure Coordination and control through rules

and standard operating procedures

Standardization employment practices

Separation of jobs and people

Formalization of administrative acts,decisions and rules


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Mechanistic and Organic Forms

FEATURE MECHANISTIC ORGANIC

Task definition Rigid & highly specialized Flexible; lessspecialized

Coordination Rules & directives Mutual adjustment.l& control imposed from the top Cultural control

Communication Mainly vertical Horizontal & vertical

Commitment To immediate superior To the organization & its& loyalty goals & values

Environmental Stable with low tech- Dynamic, ambiguous,context nological uncertainty technologically

uncertain


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Designing the Hierarchy: The Basis for DefiningOrganizational Units and their Relationships

Units may be defined on the basis of Common Tasks, Products,Geographical Proximity, or Process/Function

Critical issue: Intensity of CoordinationEmployees with the greatest

interdependence should be grouped into same organizational unit.

Additional criteria: Economies of Scale, Economies of Utilization,Learning, Standardization of Control Systems


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Board of Directors

PresidentsCouncil Corporate Functions

NorthAmericanOperations

DelphiAutomotiveSystems

InternationalOperations

GMAcceptanceCorporation

HughesElectronics

Midsize&LuxuryCarGroup

SmallCarGroup

GMPowerTrainGroup

VehicleSales, &MarketingGroup

Development& TechnicalCooperationGroup

GM Europe

Asian &

PacificOperations

LatinAmerican,African, &Middle EastOperation

General Motors Organization Structure, 1997


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Corporate Executive OfficeChairman & CEO

Corporate Staff

Finance Business R&D Human LegalDevelopment Resources

GE AircraftEngines

GE Trans-portation

GEIndustrialSystems

GEPlastics

GEAppliances

GESupply

GE PowerSystems

GE MedicalSystems

GELighting

GESpecialtyMaterials

NBC GECapital

26 businesses organized into 5 segments:Consumer Mid-market Specialized Specialty EquipmentServices Financing Financing Insurance Management

Service Divisions


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Mobil Corporation, 1997

Board of Directors

CEO

Executive Office

NorthAmericaM&R

Technology

WorldwideChemicals

NorthAmerica

Europe& CIS Africa &MiddleEast

Asia/Pacific

NewExploration

SouthAmerica

WorldwideLNG & IPP

Support ServicesCorporate Center

Shipping


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Royal Dutch/Shell Group, 1994: A Matrix Structure


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Corporate

GuidelinesDraft

Business

Plans

Discuss

with

Corporate

Revised

Business

Plans

Corporate

Plan

Forecasts/

Scenarios/Planning

assumptions

Approval

by

Board

Annual

Performance

Targets

Performance

Review

Capex

Budget

The Generic Strategic Planning Cycle

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