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