Ch. 7: Designing Organizational Structure

MGT 201

Organizing

the process by which managers establish the structure of working relationships among employees to allow them to achieve organizational goals efficiently and effectively.

Organizational Structure

the formal system of task and job reporting relationships that determines how employees use resources to achieve org. goals.

Organizational Design

the process by which managers create a specific type of org. structure and culture so a company can operate in the most efficient and effective way.

Contingency Theory

the idea that organizational structure and design should depend on various internal and external factors, allowing for flexibility and adaptation to specific circumstances. Managers design org. structures to fit the factors/circumstances that are affecting the company the most and causing them the most uncertainty.

Four determining factors of the type of organizational structure/organizing method managers select

the nature of the org. env.

the type of strategy the org. pursues

the technology (particularly information tech.) the org. uses

the characteristics of the org. human resources

Stable external env, readily available resources, low uncertainty

Less coordination and communication among people and functions are needed to obtain resources; managers can make organizing choices that bring more stability or formality to the organizational structure and can establish values and norms that emphasize obedience and being a team player. (More mechanistic form of organizing)

Rapidly changing external env, greater uncertainty

There are greater problems facing managers in trying to gain access to scarce resources. To speed decision making and communication and make it easier to obtain resources, managers typically make organizing choices that result in more flexible structures and entrepreneurial cultures. (Decentralized authority, empowered lower-level employees to make important operating decisions, and encourage values and norms that emphasize change and innovation) (more organic organization)

Technology

the combination of skills, knowledge, machines, and computers that are used to design, make, and distribute goods and services.

More complicated tech=

more difficult to regulate/control because more unexpected events can occur. Creates a greater need for a flexible structure and progressive culture

Routine technology=

Formal structure because tasks are simple and the steps needed to produce goods and services have been worked out in advance.

Two factors that determine how complicated or non-routine technology is:

Task variety and task analyzability

Task Variety

the number of new or unexpected problems or situations that a person or function encounters in performing tasks or jobs.

Tack Analyzability

the degree to which programmed solutions are available to people or functions to solve the problems they encounter

Non-routine/complicated technologies

high task variety and low task analyzability; requires non-programmed decision making

Routine Technologies

low task variety and high task analyzability; problems are easily resolved through programmed decision making

Flexible Structures

characterized by decentralized authority and empowered employees, well suited to the needs of highly skilled people.

Job Design

the process by which managers decide how to divide into specific jobs the tasks that have to be performed to provide customers with goods and services.

Job Simplification

the process of reducing the number of tasks that each worker performs.

Job Enlargement

increasing the number of different tasks in a given job by changing the division of labor

Job Enrichment

increasing the degree of responsibility a worker has over a job by 1) empowering workers to experiment to find new/better ways of doing the job, 2) encouraging workers to develop new skills, 3) allowing workers to decide how to do the work and giving them the responsibility for deciding how to respond to unexpected situations, and 4) allowing workers to monitor and measure their own performance.

Job Characteristics Model

J.R. Hackman and G.R. Oldham created a model of job design that explains in detail how managers can make jobs more interesting and motivating. It also describes the likely personal and organizational outcome that will result from enriched and enlarged jobs.

Five Characteristics that determine how motivating the job is:

Skill Variety, Task identity, Task significance, autonomy, and feedback

Skill Variety

the extent to which a job requires that an employee use a wide range of different skills, abilities, or knowledge. Ex) Skill variety required is higher for a scientist than a food server.

Task Identity

the extent to which a job requires that a worker perform all the tasks necessary to complete the job, from the beginning to end of production process. Ex) a carpenter who makes a custom desk has a higher task identity than one person on an assembly line.

Task Significance

the degree to which a worker feels their job is meaningful b/c of its effect on people inside the organization, such as coworkers, or on people outside the organization, such as customers. Ex) a teacher who sees the effect of their efforts in a well educated and well adjusted student has high task significance.

Autonomy

Degree to which a job gives an employee the freedom and discretion needed to schedule different tasks and decide how to carry them out. Ex) Salespeople who have to plan their schedules and decide how to allocate their time among different customers have relatively high autonomy compared to assembly-line workers whose actions are determined by the speed of the production line.

Feedback

The extent to which actually doing a job provides a worker with clear and direct information about how well they have performer the job. Ex) an air traffic controller whose mistakes may result in a midair collision receives immediate feedback on job performance vs a person who compiles statistics for a business magazine

Function

a group of people, working together, who possess similar skills or use the same kind of knowledge, tools, or techniques to perform their jobs.

Functional Structure

an organizational structure composed of all the departments that an organization requires to produce its goods or services.

Divisional Structure

an organizational structure composed of separate business units within which are the functions that work together to produce a specific product for a specific customer.

Division

A collection of functions or departments that work together to produce the product.

Three Forms of Divisional Structure

Product Structure, geographic structure, market structure

Product Structure

When managers organize divisions according to the type of good or service they provide; if managers decide to diversify into new industries or to expand their range of products, they commonly design a product structure; managers place each distinct product line/business in its own self-contained division and give divisional managers the responsibility of devising an appropriate business-level strategy.

Geographic Structure

an organizational structure in which each region of a country or area of the world is served by self-contained division; gives regional managers the flexibility they need to choose the range of products that best meet the needs of regional customers.

Global Geographic Structure

managers locate different division in each of the world regions where the organization operates

Global Product structure

Each product division, not the country and regional managers, takes responsibility for deciding where to manufacture its products and how to market them in countries worldwide

Market Structure

An organizational structure in which each kind of customer is served by a self-contained division; also called customer structure; lets managers be responsive to the needs of their customers and allows them to act flexibly in making decisions in response to customers’ changing needs.

The most flexible kinds of organizational structure:

Matrix Structure, Product Team Structure

Matrix Structure

An organizational structure that simultaneously groups people and resources by function and by product; when grouped by functions, it allows them to learn from one another and become more skilled/productive; when grouped by product teams, members of different functions work together to develop a specific product.

Functional Boss

One of two managers in a product team; assigns individuals to a team and evaluates their performance from a functional perspective

Boss of the product team

One of two managers in a product team; evaluates employee performance on the product team

Product Team Structure

An organizational structure in which employees are permanently assigned to a cross-functional team and report only to the product team manager or to one of his or her direct reports; differs from matrix structure because 1) it does away with dual reporting relationships and two-boss employees, and 2) functional employees are permanently assigned to a cross-functional team that is empowered to bring a new or redesigned product to market

Cross-functional team

a group of managers brought together from different departments to perform organizational tasks; causes the artificial boundaries between departments to disappear, and a narrow focus on departmental goals is replaced with a general interest in working together to achieve organizational goals.

Strategic Alliance

a formal agreement that commits two or more companies to exchange or share their resources in order to produce and market a product; typically formed b/c companies share similar interests and believe they can benefit from cooperation

B2B Network Structure

a series of global strategic alliances that an organization creates with suppliers, manufacturers, and distributors to produce and market a product.

Outsource

to use outside suppliers and manufactures to produce goods and services

Boundaryless Organization

an organization whose members are linked by computers, mobile and virtual technology, computer-aided design systems, videoconferencing, and cloud computing, and who rarely, if ever, see one another face-to-face.

Knowledge Management System

A company-specific virtual information system that systematizes the knowledge of its employees and facilitates the sharing and integration of their expertise.