Chapter 09- Executing Strategy through Organizational Design

Division of Labor

A process of splitting up a task into a series of smaller tasks, each of which is performed by a specialist

Organizational Structure

How tasks are assigned and grouped together with formal reporting relationships

• Creating a structure that effectively coordinates a company’s activities increases the company’s likelihood of success

• A structure that does not match well with a company’s needs undermines the company’s chances of prosperity

Organizational Chart

A diagram used by most organizations to depict their structure

Vertical Linkages

tie supervisors and subordinates together

• These linkages show the lines of responsibility through which a supervisor delegates authority to subordinates, oversees their activities, evaluates their performance, and guides them toward improvement when necessary

Unity of Command

principle used by executives when mapping out the vertical linkages in an organizational structure

• This principle states that each person should only report directly to one supervisor in order to avoid confusion

Horizontal Linkages

relationships between equals in an organization

• Often these linkages are called committees, task forces, or teams

• Horizontal linkages are important when close coordination is needed across different segments of an organization

Informal Linkages

unofficial relationships such as personal friendships, rivalries, and politics

Four Organizational Structures

1. Simple Structure

2. Functional Structure

3. Multidivisional Structure

4. Matrix Structures

Simple Structure

an organizational chart is usually not needed

• If the company is a sole proprietorship, one person performs all of the tasks the organization needs to accomplish

• If the company consists of more than one person, tasks tend to be distributed among them in an informal manner rather than each person developing a narrow area of specialization

Functional Structure

employees are divided into departments that each handle activities related to a functional area of business such as marketing, production, human resources, information technology, and customer service

Multidivisional Structure

employees are divided into departments based on product areas and/or geographic regions

Matrix Structures

• rely heavily on horizontal relationships

  • These structures create cross-functional teams that each work on a different project

Boundaryless Organization

One that removes the usual barriers between parts of the organization as well as barriers between the organization and others

• Eliminating all internal and external barriers is not possible, but making progress toward being boundaryless can help an organization become more flexible and responsive

Reasons for Changing an Organization’s Structure

• Executives must revisit an organization’s structure over time and make changes to it if certain danger signs arise

• A structure might need to be adjusted if decisions with the organization are being made too slowly or if the organization is performing poorly

• Sometimes structures become too complex and need to be simplified

Organizational Control Systems

allow executives to track how well the organization is performing, identify areas of concern, then take action to address the concerns

Three Basic Types of Control Systems

1. Output Control

2. Behavioral Control

3. Clan Control

Output Control

A focus on measurable results within an organization

Behavioral Control

A focus on controlling the actions that ultimately lead to results

Clan Control

An informal type of control that relies on shared traditions, expectations, values, and norms to lead people to work toward the good of their organization

Management Fads

• The emergence and disappearance of fads appears to be a predictable aspect of modern society

• A fad arises when some element of popular culture becomes enthusiastically embraced by a group of people

• As with cultural fads, many provocative business ideas go through a life cycle of creating buzz, captivating a group of enthusiastic adherents, and then giving way to the next fad

• Beyond the striking similarities between cultural and business fads, there are also important differences

  • Most cultural fads are harmless, and they rarely create any long-term problems for those who embrace them. In contrast, embracing business fads could lead executives to make bad decisions

Management by Objectives

A process wherein managers and employees work together to create goals. These goals guide employees’ behaviors and serve as the benchmarks for assessing their performance

Quality Circle

A formal group of employees that meets regularly to brainstorm solutions to organizational problems

Sensitvity-Training Groups (T Groups)

Goal was improving clan control- used by many organizations in the 1960s

• This fad involved gatherings of approximately 8 to 15 people openly discussing their emotions, feelings, beliefs, and biases about workplace issues

Organizational Culture

Values and norms that are embraced by an organization that determine how people interact with other organizational members as well as external stakeholders

• later it became clear that organizational culture’s importance was being exaggerated

• Basic themes such as customer service and valuing one’s company are quite useful, but these clan control elements often cannot take the place of holding employees accountable for their performance

Forms of Business

1. Sole Proprietorship

2. Partnership

3. Corporations

Sole Proprietorship

A company that is owned by one person

• From a legal perspective, the company and its owner are considered one and the same

Partnership

Two or more partners share ownership of a company

• A partnership is similar to a sole proprietorship in that the partners are the only beneficiaries of the company’s profits but they are also responsible for any losses and debts

Corporations

Involve the separation of ownership and management. They sell shares of ownership that are publicly traded in stock markets and they are managed by professional executives.

S Corporation

the company’s profits and losses are reported on owners’ personal tax returns in proportion with each owner’s share of the company

Limited Liability Company

Owners are not personally responsible for debts that the LLC accumulates and the LLC can be run in a flexible manner