Chapter 7

Organizing as a Management Function

Organizing is a crucial management function that involves arranging people and resources to work together towards a common goal. Henry Mintzberg emphasizes the importance of understanding organizational structures for effective performance. Organizing includes:

Division of labor.
Coordination of results.

Organization structure defines the system of tasks, reporting relationships, and communication linkages within an organization. A well-designed structure allocates tasks and coordinates performance, facilitating the implementation of strategy.

Formal Structures

Formal structures are typically represented through organization charts, which illustrate reporting relationships and work positions within an organization. An organization chart shows:

Division of work: Positions and titles indicate work responsibilities.
Supervisory relationships: Lines show reporting hierarchy.
Communication channels: Lines indicate formal communication flows.
Major subunits: Positions reporting to a common manager.
Levels of management: Vertical layers of management.

Nokia Reorganization: An Example

Nokia's reorganization illustrates how companies adjust their structure to meet changing market conditions. It has undergone several restructurings:

2008: Shifted from customer-based divisions to product-based divisions (phones, software, services).
2010: Focused on three areas: mobile solutions, mobile phones, and markets.

Nokia currently employs a matrix structure with three product divisions: mobile phones, smart devices, and location and commerce, supported by five functional areas. This example shows that organizational structures must adapt to meet changing market conditions.

Informal Structures

Informal structures represent the unofficial working relationships among organizational members. Social network analysis helps identify these informal structures by mapping communication patterns and relationships. Informal structures are crucial during times of change, providing support when formal structures are inadequate. They facilitate informal learning, emotional support, and friendship.

Informal structures can have disadvantages, including susceptibility to rumor, resistance to change, and the diversion of work efforts from important objectives. They can also lead to the exclusion of certain individuals.

Traditional Organization Structures

Traditional organization structures include functional, divisional, and matrix structures. These structures determine how work positions are grouped into formal teams or departments.

Functional Structures

Functional structures group people with similar skills and tasks into formal work units. These structures are common in smaller organizations with few products or services and stable environments. Advantages include:

Economies of scale.
Task assignments consistent with expertise.
High-quality technical problem-solving.
In-depth training and skill development.
Clear career paths within functions.

Disadvantages include difficulties in pinpointing responsibilities and the functional chimneys problem, which is a lack of communication and coordination across functions.

Divisional Structures

Divisional structures group people working on the same product, in the same area, with similar customers, or on the same processes. These are common in complex organizations with diverse operations.

Product Structures: Group jobs focused on a single product or service.
Geographical Structures: Group jobs performed in the same location. Used when there's a need to differentiate products or services in various regions. For example, United Parcel Service expanded worldwide and changed from a product structure to geographical divisions -- the Americas, and Europe/Asia -- to allow each area responsibility for logistics, sales, and other business functions.
Customer Structures: Group jobs serving the same customers or clients to cater to the special needs of different customer groups.
Process Structures: Group jobs that are part of the same processes, creating value for customers.

Advantages and Disadvantages of Divisional Structures

Advantages:

Flexibility in responding to environmental changes.
Improved coordination across functional departments.
Clear responsibility points for product or service delivery.
Expertise focused on specific customers, products, and regions.
Greater ease in changing size.

Disadvantages:

Reduced economies of scale.
Increased costs through duplication of resources.
Unhealthy rivalries between divisions.

Matrix Structures

The matrix structure combines functional and divisional structures using permanent teams that cut across functions to support specific products, projects, or programs. Workers report to two bosses: one within the function and another within the team.

Advantages:

Better cooperation across functions.
Improved decision-making at the team level.
Increased flexibility in operations.
Better customer service.
Improved performance accountability.
Better strategic management.

Disadvantages:

Power struggles.
Task confusion and conflicting priorities.
Time-consuming team meetings.
Potential for "groupitis."
Higher costs due to team leaders.

Horizontal Organization Structures

Horizontal structures aim to improve communication and flexibility by decreasing hierarchy and increasing empowerment.

Team Structures

Team structures use both permanent and temporary teams to solve problems and complete tasks. These are frequently cross-functional teams, composed of members from different areas. They also include project teams, convened for a particular task and disbanded upon completion. For example, Soho VFX utilized timing and teamwork which was essential for success in the animation industry.

Advantages:

Elimination of communication and decision-making difficulties.
Breaking down barriers between departments.
Boosting morale.
Improving decision speed and quality.

Disadvantages:

Conflicting loyalties.
Time management and group process issues.

Network Structures

Network structures operate with a central core linked through networks of relationships with outside contractors and suppliers. For example, a mail-order furniture company may outsource furniture design to a design studio, while contracting with offshore manufacturers and packagers, and partnering with a distribution company.

Advantages:

Lean and streamlined operations.
Cost competitiveness through reduced overhead.
Ability to outsource specialized functions.
Interesting jobs coordinating network relationships.

Disadvantages:

Complex coordination.
Risk of network breakdown.
Potential loss of control over outsourced activities.

Boundaryless Structures

Boundaryless organizations eliminate internal and external boundaries, combining team and network structures with temporariness. Key requirements include:

Absence of hierarchy.
Empowerment of team members.
Technology utilization.
Acceptance of impermanence.

A virtual organization is an extreme form of a boundaryless structure, operating as a shifting network of alliances engaged as needed.

Organizational Designs & Trends

Organizational design involves choosing and implementing structures to achieve the organization’s mission and objectives. The goal is to achieve a best fit between structures and situational contingencies, including task, technology, environment, and people.

Mechanistic and Organic Designs

Mechanistic Designs

Mechanistic designs are highly bureaucratic, with centralized authority, many rules and procedures, a precise division of labor, narrow spans of control, and formal coordination. An example of a mechanistic design is typically found in fast food restaurants.

Organic Designs

Organic designs use horizontal structures with decentralized authority, fewer rules and procedures, less precise division of labor, wider spans of control, and more personal coordination. These designs are adaptive and encourage worker empowerment and teamwork. For example, technology companies use organic designs to be more flexible.

Trends in Organizational Design

Key trends include:

Fewer Levels of Management: Organizations are cutting unnecessary levels of management and shifting to wider spans of control. For example, Jim Pattison Group prefers few management levels to encourage an entrepreneurial spirit.
More Delegation and Empowerment: Managers are delegating more and empowering people at all levels. For example, managers should assign responsibility by explaining tasks, granting the right to take action, and creating accountability.
Decentralization with Centralization: Information technology facilitates decentralization while maintaining centralized control. Organizational theorist William Ouchi believes our public schools can improve through greater decentralization, where principals have more autonomy to control school budgets and work with their staff, and teacher have more autonomy to solve their own problems.
Reduced Use of Staff: Organizations are reducing staff size to lower costs and increase efficiency.

Job Design

Job design involves arranging work tasks for individuals and groups to enhance satisfaction and performance. Alternatives include job simplification, job rotation and enlargement, and job enrichment.

Job Simplification

Job simplification standardizes work procedures and employs people in highly specialized tasks. Automation is the total mechanization of a job. While Linamar, a Canadian based multinational corporation, uses scientific management principles by standardizing line manufacturing and operational controls, structured and repetitive tasks can cause boredom and alienation.

Job Rotation and Job Enlargement

Job rotation increases task variety by periodically shifting workers between jobs. Job enlargement increases task variety by combining tasks previously done by separate workers. For example, the Coca-Cola Bottling Co. has a rotational management position for highly motivated graduates to test their skills in finance, sales, and supply chain management amongst other fields.

Job Enrichment

Job enrichment expands job content to create more opportunities for satisfaction, increasing job depth by adding work planning and evaluating duties.

Job Characteristics Model: This model states that job satisfaction and performance are influenced by the following core characteristics:

Skill variety
Task identity
Task significance
Autonomy
Feedback from the job itself

These characteristics will not affect all people in the same way. Generally speaking, people who respond most favourably to enriched jobs will have strong higher-order needs and appropriate job knowledge and skills, and will be otherwise satisfied with job context.

Improving Job Characteristics: Those wishing to use job enrichment may incorporate the following to improve the core job characteristics:

Form natural units of work.
Combine tasks.
Establish client relationships.
Open feedback channels.
Practise vertical loading.

Alternative Work Schedules

Alternative work schedules are also able to enhance employee satisfaction. Types include:

Flexible Working Hours: Flexible schedules give employees greater autonomy but they must still meet their work responsibilities. Giving employees flexibility in how they meet non-work obligations may reduce stress and job turnover.
Compressed Workweek: The Public Service Commission in the Yukon offers employees the option of setting aside predetermined days off and leveraging their working hours over a two-week, three-week, or four-week basis.
Job Sharing: Job sharing allows two people to be employed as one, benefitting job sharers and companies alike.
Telecommuting: Telecommuting gives employees the freedom to be their own boss and gives more opportunities for more time to themselves. With telecommuting practices, employees tend to report increased productivity and face fewer distractions at work.
Part-Time Work: Employers like that the flexibility part-time workers offer in controlling labor costs and dealing with cyclical demand. Part-time employment also often offers a solution to long-term unemployment.