organizational design slides are courtesy of professor joe labianca
TRANSCRIPT
Organizational Design
Slides are Courtesy of Professor Joe Labianca
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Organization Charts
Page 3
Example Org Chart: Cox Communications (Metro Newspaper Structure)
Publisher
GM
Finance HR Advertising Controller IT Production
Page 4
What do organization charts tell us?
Basic Information• Who reports to whom• Who has the ultimate official authority to make decisions• Which people are being asked to specialize in what areas
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Types of GroupingsGroupings for specialization happen around two basic types of groups:1. Functional groupings (e.g., Accounting, Human Resources,
Marketing, Nursing)2. Divisional groupings
– Products or Services (e.g., Computer Hardware, Software, IT Consulting Services, Sports Medicine, Plastic Surgery)
– Geographic Areas (e.g., Northern KY, Southern KY, Eastern KY)
– Clientele (e.g., Educational institutions, Government, Corporate; Women’s Clinics, Sports Clinics; High Net Worth Banking)
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Functional vs. Divisional Grouping Structures
Human Resources Sales Accounting
CEOFunctionalStructure
HR Sales Acct
Hardware Software Consulting
CEODivisionalStructure
HR Sales Acct HR Sales Acct
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The Apple-Orange Company Structure (Part One)
• How will you structure your company?– Functional?– Divisional?
• Why do you prefer this structure?– What are the advantages?– What are the disadvantages?
• List the criteria you are considering when making this decision– Are there other pieces of information you wished you
had as you were making the decision? What were they?
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Possible Functional Structure for Apple-Orange
John
Carl
Sales
Salespeople (Apples, Oranges, Pears,
Broccoli, Grapes, Eggplant)
Production Grow & Harvest
Field Workers (Apples, Oranges, Pears,
Broccoli, Grapes, Eggplant)
Research
Researchers (Apples, Oranges, Pears,
Broccoli, Grapes, Eggplant)
Functional StructureStrengths• Enables in-depth knowledge and
skill development within the functional area – (e.g., all researchers can learn
from each other, regardless of what product they are currently researching)
• Allows economies of scale within functional departments– (e.g., might not need as many
workers or managers because of less duplication)
• Very efficient; helps to minimize costs
Weaknesses• Leads to poor horizontal
coordination among departments• Involves restricted view of
organizational goals (functional silo mentality)
• May cause decisions to pile on top, creating overload at top of hierarchy
• Slow response time to environmental changes
• Results in less innovation• Works best when there are few
products• Low in adaptability
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Possible Divisional Structure for Apple-Orange
John
Carl
Apple Division
Salespeople (Apples)
Orange Division
Field Workers (Apples)
Researchers (Apples)
Salespeople (Oranges)
Field Workers (Oranges)
Researchers (Oranges)
Pear DivisionBroccoli Division
Grapes Division
Eggplant Division
Salespeople (Pears)
Field Workers(Pears)
Researchers (Pears)
Salespeople (Broccoli)
Field Workers (Broccoli)
Researchers (Broccoli)
Salespeople (Grapes)
Field Workers (Grapes)
Researchers (Grapes)
Salespeople (Eggplant)
Field Workers (Eggplant)
Researchers (Eggplant)
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Example Divisional Structure: IBM (pre-June 2002)
CEO
Hardware Software Services Global Finance
HR Finance Sales IT
HR Finance Sales ITHR Finance Sales IT
HR Finance Sales IT
Divisional Structure
Strengths • Allows divisions to adapt to
differences in products, geographic regions, and clients
• Decentralizes decision-making
• Suited to fast change in unstable environments
• Best in large organizations with several products
• Highly adaptable
Weaknesses• Leads to poor coordination
across product lines• Eliminates economies of
scale in functional departments
• Restricts in-depth competence and technical specialization in a functional area
• Very inefficient; great deal of duplication
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The Apple-Orange Company Structure (Part Two)
Imagine that you chose the functional grouping in Part OneAs the company continues to grow, the decision is made to diversify into the following products:
• Pears• Eggplant• Grapes• Broccoli
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The Apple-Orange Company Structure (Part Two, continued)
Now place yourself in the role of the Vice-President of Research. What problems do you foresee happening as the number of products proliferates? What will happen to the VP of Sales? The VP of Production?
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The Apple-Orange Company Structure (Part Three)
Now imagine that you chose the divisional grouping in Part One.As the company continues to grow, the decision is made to diversify into the following products:
• Pears• Eggplant• Grapes• Broccoli
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The Apple-Orange Company Structure (Part Three, continued)
What problems do you foresee happening as the number of products proliferates?
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The Organizational Environment’s Role in Determining Structure
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An Organization’s Environment(j)
InternationalSector
(d)Financial
ResourcesSector(e)
MarketSector
(f)Technology
Sector
(g)EconomicConditions
Sector
(a)IndustrySector
(h)Government
Sector
(c)Human Resources
Sector
(b)Raw Materials
Sector
(i)Socio-cultural
Sector
ORGANIZATION
DOMAIN
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Environmental SectorsIndustry Competitors, industry size & competitiveness, related
industries
Market Customers, clients, potential users of products and services
Raw materials Suppliers, manufacturers, real estate, services
Human resources
Labor market, employment agencies, universities, training schools, employees in other companies, unionization, illegal immigration
Financial Stock markets, banks, savings and loans, private investors
Technology Production techniques, science, information technology
General economic condition
Recession, unemployment rate, inflation rate, rate of investment, economics, growth
Government City, state, federal laws and regulations, taxes, services, court system, political processes
Sociocultural Demographics, values, beliefs, education, religion, work ethic, consumer and green movements
International Competition from and acquisition by foreign firms, entry into overseas markets, foreign customs, regulations, exchange rates
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Relationship Between Structure and Environment
• Flexibility• Change• Innovation
• Efficiency• Reliability• Reducing Costs
DivisionalStructure
FunctionalStructure
Simple, Stable Environments Complex, Unstable Environments
DominantStructuralApproach
EnvironmentalUncertainty
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What happens between the extremes?
• Simple, stable environments = functional structures• Complex, unstable environments = divisional structures
Q. What happens when you have a:• simple, but unstable environment (e.g., fashion industry)?• complex, but stable environment (e.g., universities, hospitals)?
A. Organizations use:• hybrid structures• matrix structures
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Possible Matrix Structure for Apple-Orange
John
Carl
Apple Division
Salespeople (Apples)
Orange Division
Field Workers (Apples)
Researchers (Apples)
Salespeople (Oranges)
FieldWorkers (Oranges)
Researchers (Oranges)
Pear DivisionBroccoli Division
Grapes Division
Eggplant Division
Salespeople (Pears)
Field Workers(Pears)
Researchers (Pears)
Salespeople (Broccoli)
Field Workers (Broccoli)
Researchers (Broccoli)
Salespeople (Grapes)
Field Workers (Grapes)
Researchers (Grapes)
Salespeople (Eggplant)
Field Workers (Eggplant)
Researchers (Eggplant)
VP of Sales
VP of Production
VP of Research
Matrix Structures• Provides opportunity for
both functional and product skill development
• Flexible sharing of human resources across products, while still promoting efficiency goals
• Team-based approach can be useful for satisfying customers’ dual concerns for innovation and cost-savings
• Causes employees to experience dual authority (e.g., product manager and functional manager), which can be frustrating and confusing
• Meetings, meetings, and more meetings– Is time consuming; involves frequent
meetings and conflict resolution sessions• Conflict between division heads and functional
dept heads is pushed down onto employees• Will not work unless participants, particularly
managers, understand it and adopt collegial rather than vertical-type relationships; often requires adoption of 360 degree reviews
• Means employees need good interpersonal skills and extensive training, particularly in conflict resolution
• Best in medium-sized organizations with multiple products
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Possible Hybrid Structure for Apple-Orange
John
Carl
Apple DivisionOrange Division
Field Workers (Apples)
Researchers (Apples)
Field Workers (Oranges)
Researchers (Oranges)
Pear DivisionBroccoli Division
Grapes Division
Eggplant Division
Field Workers(Pears)
Researchers (Pears)
Field Workers (Broccoli)
Researchers (Broccoli)
Field Workers (Grapes)
Researchers (Grapes)
Field Workers (Eggplant)
Researchers (Eggplant)
Salespeople (Apples, Oranges, Pears, Broccoli,
Grapes, Eggplant)
Hybrid Structures
• Allows organization to balance achieving some adaptability and coordination in product divisions and some efficiency in centralized functional departments
• Achieves some degree of coordination both within and between product lines
• Leads to conflict between divisions and corporate departments
• Has potential to favor the creation of excessive administrative overhead in the corporate departments
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What is the best organizational structure?
• It depends• No way of grouping people is perfect• Every structure has its advantages and
disadvantages
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What determines the choice of structure?
Environmental Uncertainty
Uncertainty is driven by two main factors:1. Environmental complexity
• the number and similarity of elements (e.g., suppliers, customers, regulators) in the organization’s environment
2. Environmental dynamism
• the rate of change in the elements in the organization’s environment
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Example of a Hybrid Structure: Sun Petrochemical
FunctionalStructure
President
TechnologyVice
President
FinancialServices
Vice Pres.
HumanResourcesDirector
ChiefCounsel
ChemicalsVice
President
LubricantsVice
President
FuelsVice
President
ProductStructure
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Matrix Example: Harland Checks’ Functional MatrixVP Customer Care
IT
Milton
Process & Quality
Reporting & Forecasting
HR & Training
Sales & Mktg
Salt Lake CityAtlanta
Guidance for Examination on Monday
• It will, unfortunately, be closed book• Exam will cover the following topics:– Motivation– Personality and Individual Differences– Organizational Design
• You can use translation software• You can use laptop (but no consulting slides or
online sources when completing exam)
How to Prepare for Exam I• Exam will be in-class on Monday. Questions will all be short essay
questions.– You are being asked by your supervisor to provide your informed opinion
about how best to identify and manage important individual differences (both visible ones, like gender and age, and less visible ones, like personality) at work. What advice would you provide and why?
– You are managing a new team at work and are considering how best to motivate them. Identify any three theories of motivation we have discussed in class and explain how they could be useful to you in both conceiving and defending your approach to motivating your team. Be sure to identify both the potential advantages and disadvantages of each approach.
– You have been asked to rethink the appropriate organizational design for your growing company. Which factors will you want to consider in making your decision? Which structure would you pick and why. Be sure to identity the potential advantages and disadvantages of each approach.
Resources for Motivation Theories
https://www.goldsmithibs.com/resources/free/Motivation/notes/Summary%20-%20Motivation.pdf