Organising-_Chapter_10

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PART FOUR: ORGANISING MANAGEMENT

Introduction to Carlos Ghosn's Challenge

• Date: March 1999, Ghosn receives a call from Louis Schweitzer (CEO of Renault).

  • Objective: Lead a turnaround of Nissan post-Renault’s strategic alliance.

• Nissan's Condition:

  • Loss-making for eight years.

  • Debt: US$11 billion despite Renault's investment.

  • Stagnation in product innovation; outdated models.

  • Internal issues: blame culture, lack of defined responsibilities, poor communication.

Analysis of Structural Design Problems

• Problem: Nissan's issues are largely due to structural design flaws.

  • Urgent need for restructuring authority, accountability to enhance coordination.

  • Successful strategy outcomes rely heavily on effective organisation structure.

• Comparison to Competitors:

  • Toyota's successful operational excellence exacerbated Nissan's challenges.

  • Economic troubles from global crises (2008-10) require adaptability.

Innovative Underpinnings of Structure

• 'No Structure' Structure at Valve Software:

  • Over 300 employees; operates without bosses since 1996.

  • Employees choose their projects, facilitating creativity but posing adjustment issues.

• Emerging Trends:

  • Flattening hierarchies to improve efficiency and adaptability in organisations.

Outsourcing and Contemporary Structures

• Increasing use of outsourcing:

  • Example: WuXi PharmaTech in Shanghai manages drug manufacturing and development for allied firms.

  • Concerns: Economic viability and ethical implications of outsourcing especially in developing countries.

• Virtual Network Organisations: Focused on core business functions, outsourcing all other operations.

Key Concepts in Organising

• Definition of Organising: Deployment of organisational resources for achieving strategic goals.

• Characteristics of Effective Structure:

  • Verticalorganisation structure: Chains of authority and departmental coordination.

  • Coordinating Activities: Illustrated using examples of operational synergies, like those being implemented at PaperlinX for improved cross-functional collaboration.

Fonterra’s Management Structure

• Overview:

  • Largest Business: In New Zealand; significant exporter of dairy products.

  • Cooperative structure owned by farmer suppliers; complex global supply chain.

• Operational Model:

  • Ten subsidiaries: Across various products and geographical locations, creating a robust presence in international markets.

  • Adaptations to regional challenges, for example, product recalls and droughts affecting milk supply.

Organisational Structure Types

Vertical and Horizontal Structures

• Work Specialization: Breaking down tasks into jobs to enhance efficiency.

• Chain of Command: Unbroken lines of authority indicating hierarchy within the organisation.

• Authority: Hierarchical rights of managers to make decisions, allocate resources, and command employees.

• Delegation and Accountability: Importance of matching authority with responsibility and the necessity of clear communication channels to foster accountability.

Tall vs. Flat Structures

• Tall Structures: Characterised by narrow spans of control and multiple layers of hierarchy.

  • Problems: Slowed decision-making and creativity limitations.

• Flat Structures: Fewer levels of hierarchy provide greater accessibility and delegative capabilities.

Centralisation vs. Decentralisation

• Centralisation: Decision-making authority concentrated at the top of the hierarchy.

• Decentralisation: Authority extends to lower levels, fostering quicker responses to market changes.

Formalisation in Contemporary Organisations

• Formalisation: Increasing trend to document roles, procedures, and accountability, balancing between bureaucratic efficiency and operational flexibility.

Departmentalisation Approaches

• Vertical Functional Approach: Departments grouped by similarities in skills.

• Divisional Approach: Departments self-contained around products or geographical regions, fostering autonomy and focused decision-making.

• Matrix Approach: Blends functional and divisional structures creating dual reporting systems.

• Team-Based Approach: Creating teams to manage tasks jointly.

• Network Approach: Central hub contracting specialized roles worldwide, fostering independence across departments.

Advantages and Disadvantages of Functional Structures

1. Advantages:

   • Economies of scale, in-depth skills development, centralized direction, and enhanced problem-solving capacity.

2. Disadvantages:

   • Poor inter-departmental coordination, slowness to innovate, and difficulty in accountability.

Conclusion

• Reassessment of Structures: Importance of clearly defining roles and responsibilities across layers for better organisational health.

• Not just about relegating authority down but ensuring adaptable structures to meet contemporary challenges.

Key Concepts in Organising

1. Organising: The deployment of organisational resources for achieving strategic goals.

   • Characteristics of Effective Structure: Includes vertical organisation structure (chains of authority and departmental coordination) and effective coordinating activities, illustrated by operational synergies in workplace scenarios such as those at PaperlinX for enhanced cross-functional collaboration.

2. Organisational Structure Types:

   • Vertical Structure: Organises based on a chain of command with clear delineation of authority among various levels.

   • Horizontal Structure: Emphasizes less hierarchy, promoting collaboration across departments and empowering employees.

   • Work Specialisation: Breaking down tasks into jobs to enhance efficiency.

   • Chain of Command: Defines unbroken lines of authority indicating hierarchy within the organisation.

   • Authority: The hierarchical rights of managers to make decisions, allocate resources, and command employees.

   • Delegation and Accountability: Emphasizes matching authority with responsibility and the importance of clear communication channels to foster accountability.

3. Tall vs. Flat Structures:

   • Tall Structures: Characterized by narrow spans of control and multiple levels of hierarchy, which can lead to slowed decision-making and limited creativity.

   • Flat Structures: Fewer layers of hierarchy providing greater accessibility and enhanced delegation capabilities.

4. Centralisation vs. Decentralisation:

   • Centralisation: Concentration of decision-making authority at the top levels of the hierarchy.

   • Decentralisation: Extension of authority to lower levels, allowing quicker responses to market changes.

5. Formalisation: The trend towards documenting roles, procedures, and accountability in organisations with the goal of balancing bureaucratic efficiency and operational flexibility.

6. Departmentalisation Approaches:

   • Vertical Functional Approach: Grouping departments by similarities in skills or functions.

   • Divisional Approach: Departments designed to be self-contained around products or regions, enhancing autonomy.

   • Matrix Approach: Merges functional and divisional structures leading to dual reporting systems.

   • Team-Based Approach: Formation of teams to jointly manage tasks.

   • Network Approach: Central hub contracting out specialised roles globally, promoting independence among departments.

7. Advantages and Disadvantages of Functional Structures:

   • Advantages: Include economies of scale, in-depth skills development, centralized direction, and enhanced problem-solving capacity.

   • Disadvantages: Include poor inter-departmental coordination, slowness to innovate, and challenges related to accountability.