Restructuring Organizations
14-2
Contingencies Influencing Structural Design
Environment
OrganizationSize
TechnologyOrganization
Goals
WorldwideOperationsStructural
Design
Functional Organization
VP Research VP Operations VP Hum anResources
VP M arketing VP Finance
President
14-3
The Functional Form
O Promotes skill specialization
O Reduces duplication of scarce resources and uses resources full time
O Enhances career development for specialists within large departments
O Facilitates communication and performance because superiors share expertise with their subordinates
O Exposes specialists to others within same specialty
14-4
• Emphasizes routine tasks; encourages short time horizons
• Fosters parochial perspectives by managers and limits capacity for top-management positions
• Multiplies interdepartmental dependencies; increases coordination and scheduling difficulties
• Obscures accountability for overall results
Advantages Disadvantages
The Divisional Organization
Chief FinancialOfficer
VP Research
Division M anagerAsia
VP Hum anResources
VP Operations VP Sales andM arketing
Division M anagerNorth Am erica
Division M anagerEurope
Chief ExecutiveOfficer
14-5
The Divisional Form
O Recognizes interdepartmental interdependencies
O Fosters an orientation toward overall outcomes and clients
O Allows diversification and expansion of skills/training
O Ensures accountability by departmental managers and promotes delegation
O Heightens departmental cohesion and involvement in work
14-6
Advantages• May use skills and resource
inefficiently
• Limits career advancement by specialists
• Impedes specialists’ exposure to others within same specialties
• Puts multiple-role demands upon people and creates stress
• May promote departmental objectives as opposed to overall organizational goals
Disadvantages
The Matrix Organization
VP Finance VP Hum an Resources
Program M anagerAircraft
Program M anagerNavigation System s
Program M anagerSpace System s
Senior VPProgram s
VP Research VP Engineering VP M anufacturing VP M arketing
Senior VPOperations
PresidentCEO
14-7
The Matrix Structure
O Makes specialized, functional knowledge available to all projects
O Use people flexiblyO Maintains consistency by
forcing communication between managers
O Recognizes and provides mechanisms for dealing with legitimate, multiple sources of power
O Can adapt to environmental changes 14-
8
Advantages• Can be difficult to implement
• Increases role ambiguity, stress, and anxiety
• Performance is lowered without power balancing between projects and functions
• Makes inconsistent demands and can promote conflict and short-term crisis orientation
• May reward political skills over technical skills
Disadvantages
Characteristics of Process-Based Structures
Processes drive structure Work adds value Teams are fundamental Customers define performance Teams are rewarded for performance Teams are tightly linked to suppliers and
customers Team members are well informed and trained
14-9
The Process-Based Structure
Developing New Products ProcessP rocess O w n er
C ross F u n c tion a l Team M em b ers
Acquiring and Filling Custom er Orders ProcessP rocess O w n er
C ross F u n c tion a l Team M em b ers
Supporting Custom er Usage ProcessP rocess O w n er
C ross F u n c tion a l Team M em b ers
Senior M anagem ent T eamC h a ir an d K ey S u p p ort P rocess O w n ers
14-10
The Process-Based Form
O Focuses resources on customer satisfaction
O Improves speed and efficiency
O Adapts to environmental change rapidly
O Reduces boundaries between departments
O Increases ability to see total work flow
O Enhances employee involvement
O Lowers costs dues to overhead 14-
11
• Can threaten middle managers and staff specialists
• Requires changes in command-and-control mindsets
• Duplicates scarce resources• Requires new skills and
knowledge to manage lateral relationships and teams
• May take longer to make decisions in teams
• Can be ineffective if wrong processes are identified
Advantages Disadvantages
The Network Organization
14-12
DesignerOrganizations
SupplierOrganizations
BrokerOrganization
ProducerOrganizations
DistributorOrganizations
Types of Networks Internal Market Network
Vertical Market Network
Intermarket Network
Opportunity Network
14-13
The Network-Based Form
O Enables highly flexible and adaptive responses
O Creates a “best of the best” firm to focus resources on customer and market needs
O Each organization can leverage a distinctive competency
O Permits rapid global response
O Can produce “synergistic” results
14-14
• Difficulty managing lateral relationships across autonomous organizations
• Difficulty motivating members to relinquish autonomy to join network
• Sustaining membership and benefits can be problematic
• May give partners access to proprietary knowledge and technology
Advantages Disadvantages
The Downsizing Process
O Clarify the organization’s strategyO Assess downsizing options and make
relevant choicesO Implement the changesO Address the needs of survivors and
those who leaveO Follow through with growth plans
14-15
Downsizing TacticsTactic Characteristics Examples
Workforce Reduction
Reduces headcount Short-term focus Fosters transition
Attrition Retirement/buyout Layoffs
Organization
Redesign
Changes organization
Medium-term focus Fosters transition &
transformation
Eliminate functions, layers, products
Merge units Redesign tasks
Systemic
Changes culture Long-term focus Fosters
transformation
Change responsibilities
Foster continuous improvement
Downsizing is normal
14-16
The Reengineering Process
OPrepare the organizationOSpecify the organization’s strategy
and objectivesOFundamentally rethink the way work
gets doneO Identify and analyze core business processesO Define performance objectivesO Design new processes
ORestructure the organization around the new business processes. 14-
17
Characteristics of Reengineered Organizations
Work units change from functional departments to process teams
Jobs change from simple tasks to multidimensional work
People’s roles change from controlled to empowered
The focus of performance measures and compensation shifts from activities to results.
Organization structures change from hierarchical to flat
Managers change from supervisors to coaches; executives change from scorekeepers to leaders
14-18