chapter 06 slides
TRANSCRIPT
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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