Week 12: Environment, Strategy and Structure

Organizational Structure

How an organization divides its labour into specfic tasks and achieves coordination among these tasks

Division of Labour

Labour must be divided because everyone cannot do everything.

Vertical Division of Labour

• Assigning authority for planning and decision-making

• “Who gets to tell whom what to do?”

• Autonomy and Control

• Communication

What are the two most common issues when considering vertical job specialization?

1. Autonomy and control

2. Communication

Autonomy and control

• As the hierarchy increases in its links, managers have less authority over fewer matters.

• As the hierarchy decreases in its links, people further down have more authority (low gns might not want this, but they have more authority). 

Communication

• Slowness, filtering, broken telephone and processed losses  

• The more you fiddle with vertical job specialization, the harder it is to communicate and you're causing it to be slower  

Horizontal Division of Labour

• Groups the basic tasks that must be performed into jobs and then into departments so that the organization can achieve its goals

• Implications for job design and degree of coordiantion

• Differentation

What are the 2 most common consulting issues when it comes to horizontal job specialization?

1. Implication for job

2. Differentiation

Implication for job

Shifting in breadth and depth 

Differentiation

• Silo management 

• Other terms that go here: 

  • The more horizontally divided, the more silos 

  • "I know better than you" = we-they phenomena  

  • Not invented here bias 

    • Our ideas are superior

6 structural elements

1. Job Specialization

2. Department / Differentiation

3. Integration / Coordination

4. Span of Control / Flat versus Tall

5. Formalization

6. Centralization

What are the 6 types of departmentation that I will see in my client organization?

1. Functional Departmentation

2. Product Departmentation

3. Matrix Departmentation

4. Geographic Departmentation

5. Customer Departmentation

6. Hybrid Departmentation

Functional Departmentation (STAR)

Employees with closely related skills and responsibilities are assigned to the same department (i.e., marketing, finance, production, HR etc)

Pros of Functional Departmentation

• Resources can allocated more efficient 

• Everyone is talking the same language 

• I can have socialization and careers based on the area 

Cons of Functional Departmentation

• Silos 

• Lack of integrated mechanisms 

Product Departmentation

Formed based on a particular product, product line or service (i.e., shampoo division)

Pros:

• Can serve customers better

• Independent control over costs and revenues

Cons:

• No sharing across the cuts

• Lots of duplicaition

Matrix Departmentation

Employees remain members of the functional department while also reporting to a product or project manager.

Attempt to capitalize on the strengths of other forms

• Pros

  • People can be moved around as the product flows and dictates

• Cons

  • Conflict about performance because it seemed different from one boss to the next 

  • Reporting disputes 

    • Ie On timing, expectations and KPIs. 

Geographic Departmentation

Relatively self-contained units deliver an organization’s product/services in a specific geographic territory

Pros:

• Shortens communication challenges

• Caters to regional tastes

• Local control to clients and customers

Cons

• Paralllel those for product departmentation

Customer Departmentation

Self-contained units deliver an organization’s products or services to a specific customer group

Pros

• Better service to customers through specialization

Cons

• Economies of scale threat (no sharing)

Hybrid Departmentation

• A mixture of functional, product, geographic, or customer departmentation

• Attempts to capitalize on the strengths of various structures while avoiding the weaknesses of others

What are the 8 most common integrating/coordinating mechanisms used by companies?

1. Direct Supervision

2. Standardization of work processes

3. Standardization of outputs

4. Standardization of skills

5. Mutual Adjustment

6. Liason roles

7. Task forces

8. Integrators

Coordinating Divided Labour

• Timing 

• Communication 

• Feedback across all tasks of a company  

  • How do I get my people to all be on the same page?

Direct Supervision

• Oldest and traditional form of coordinating 

• Designed supervisors/managers to coordinate the work of subordinates

Standardization of work processes 

Some jobs are best coordinated by keeping tasks crystal clear, routine and with lots of rules and regulations 

Standardization of outputs

• Physical and economic standards: Can you tell me a little about your job specifications? 

• Nothing should change. 

• Budget: Tell me about your profit targets and KPIs.

Standardization of skills

• Want to ensure that their skills are standardized and up to standard 

• Large surgical team example 

  • 1-2 surgeons  

  • 1 anesthesiologist 

  • Expert surgeon in his area of specialty  

Mutual Adjustment

•  Under the waterline 

• How can I ensure my team is aligned? 

  • Not formal, pulling employees into the halls to correct them, "Do that again and you'll get fired." 

Liaison Roles

Example: The chief librarian at Mills liaisons with the librarians at thode and Health Sciences Library 

Task forces

Temporary  

• Coming together to solve a problem  

Integrators

• Linking  

• Multiple bodies that you're pulling together  

• Engineer that is an integrator for a biotech firm 

Centralized

Extent to which deicsion making power is localized in a particular part of an organization

Decentralized

Extent to which an organization divides labour vertically, horizontally and geographically

Organic (characteristics)

• Fluid 

• Responsive 

• Flexible 

• Creative 

• Innovative  

Mechanistic (characteristics) 

• Narrow roles 

• Careful planning 

• Predictability 

• Lots of rules and regulations 

• Routine tasks 

• A lot of procedures  

MC QUESTION ON THE FINAL: All of the following descriptors match a mechanistic structure except.... 

• Tall 

• Specialized  

• Centralized  

• Flat (this is the answer, since its NOT) 

What are the 5 most contemporary structures? (final exam question)

1. Network organization

2. Virtual organization

3. Modular organization

4. Holacracy

5. Ambiextrous Organization

Network organization

Liaisons between specialist organizations

Virtual organization

A network of continually evolving independent organizations that share skills, costs and access to one another’s markets

Modular organization

An organization that performs a few core functions and outsources non-core functions to specialists

Holacracy

A flat decentralized structure made up of self-managing teams called circled, in which employees have multiple roles and responsibilities

Ambidextrous Organization

An organization that can simultaneously exploit current competencies and explore emerging opportunities

Closed systems perspective

• Not paying attention to the environment 

1. Think you and your organization are contained. 

2. Belief that the organization can successfully function unaffected by what's going on around them 

3. Have an inaccurate depiction of reality.

   • The real environment is not in their perception. 

Open systems perspective

The environment has power around me, which ends up affecting me. 

• Humility 

• Healthy ego 

• That input changes; I need to take action.

Components of the External Environment (6+1)

• The economy

• Customers

• Suppliers

• Competitors

• Social / Political Factors

• Technology

• Interest groups

6+1: The Economy

An organization would respond differently based on how the economy is doing: 

• If there is an economic recession/slump, a company may have to downsize. 

• If there is an economic expansion, a company may raise prices.

6+1: Customers

• Respond to customer needs and wants

  • If an organization notices that customers are demanding a specific product, it's in the organization's best interest to cater to its customers. 

• Can build customer loyalty

6+1: Competition

If an organization detects that there is increased competition, they had better respond fast!

6+1: Supplier

• Shortage = automatically costs go up  

• Surplus = costs must go down  

6+1: Social / Political

• Social

  • Responding to employees’ needs beyond the organization

    • if there's a dramatic increase in single employees, they may subsidize daycare/build an in-house

• Political 

  • Legislation, I better behave based on government policies.

6+1: Technology.

Gap in my tech vs gap being used in industry by competitors and associated members

6+1: Interest Groups (beneficiates)

• Individuals who provide interest and investment based on how an organization is managed.

  • They do this through beneficences (generous donations).

  • When beneficence go up, resource dependency goes down

  • When beneficence goes down, resource dependency goes up! 

Resource Dependency

The dependency of organizations on environmental inputs, (such as capital and raw materials), and outputs (such as customers)

Principal of loose coupling

When an organization responds inconsistently to a predictable environment. 

• This often happens when a leader is arrogant, ignorant, or maybe just not well-informed. 

Environmental Uncertainty

A condition that exists when the external environment is vague, difficult to diagnose and unpredictable

What makes an organization’s environment uncertain?

• Rate of change/stability (dynamic vs static)

• Complexity (simple vs complex)

Duncan’s model

Shows that environmental uncertainty depends on complexity and rate of change.

(1) Simple + stable  

When an environment has a small number of external elements and the elements are similar 

• I.e., a water supplier where all elements remain consistent 

(2) Complex + Stable 

When an environment has a large number of external elements and these elements are different but overall also consistent 

• I.e., universities are a good example 

(3) Simple + Unstable 

Which is an environment with a small number of external elements, but things are in constant change. 

• Ie Clothing firms  

(4) Complex + Unstable 

Which is the craziest of all environments, since there are more external elements and everything is in constant change. 

• i.e., an airline firm 

The 3 categories of strategies

1. Anticipation

2. Negociation

3. Control

Anticipation

(Def.) You are trying to stay ahead of the power

• Scanning 

  • Collecting data about an environment and its possible actions

• Monitoring  

  • Staying on it 

  • Don't lose the momentum

• Forecasting 

  • Predict 

  • Depicting future actions of the environment using statistical data analytics, statistical thinking and design  

Negotiation

Decision-making analysis often involves a third party.

• Lobbying 

  • Organizations are making a case for coping with dependencies.

• Interlocking directorates 

  • Having influential people serve on 2 or more boards (legal) in the same industry to provide policy input

    • Bob is a worker for an oil exploration company and a gas retailer; he is influential throughout the chain

• Public relations activities / establishing legitimacy  

  • These activities are all about building your reputation/image and legitimacy 

Control (very aggresive)

Contracts and buffers 

• Control = the more aggressive, the most dominant, the heavier the decision-making 

• Vertical and horizontal integration 

  • Vertical 

    • Acquiring/merging with a supplier to guarantee resource availability 

  • Horizontal 

    • Entering a totally different market to diversify risk

   

• Mergers and acquisitions 

  • To merge = Join 

  • To purchase = Acquisition   

• Strategic alliances 

  • Actively cooperative relationships between legally separate organizations  

• Joint ventures 

  • Two or more organizations ally to create a brand new entity. 

____ explains why power doesn’t always work (also a mc question on the final) 

Slack

Sample Question: When work tasks are routine, coordination of labour through ____ often substitutes for direct supervision 

Standardization of work processes