2. 8-2 Irwin/McGraw-Hill The McGraw-Hill Companies, Inc., 2000
Designing Organizational Structure Organizing: the process by which
managers establish working relationships among employees to achieve
goals. Organizational Structure: formal system of task &
reporting relationships showing how workers use resources.
Organizational design: managers make specific choices resulting in
a given organizational structure. Successful organizational design
depends on the organizations unique situation.
3. 8-3 Irwin/McGraw-Hill The McGraw-Hill Companies, Inc., 2000
Factors Affecting Organizational Design Environment Strategy Human
Resources Technology Determine design or organizational structure
Determine design or organizational structure Figure 8.1
4. 8-4 Irwin/McGraw-Hill The McGraw-Hill Companies, Inc., 2000
Determinants of Structure The environment: The quicker the
environment changes, the more problems face managers. Structure
must be more flexible when environmental change is rapid. Usually
need to decentralize authority. Strategy: Different strategies
require the use of different structures. A differentiation strategy
needs a flexible structure, low cost may need a more formal
structure. Increased vertical integration or diversification also
requires a more flexible structure.
5. 8-5 Irwin/McGraw-Hill The McGraw-Hill Companies, Inc., 2000
Determinants of Structure Technology: The combination of skills,
knowledge, tools, equipment, computers and machines used in the
organization. More complex technology makes it harder for managers
to regulate the organization. Technology can be measured by: Task
Variety: new problems a manager encounters. Task Analyzability:
programmed solutions available to a manager to solve problems. High
task variety and low analyzability present many unique problems to
managers. Flexible structure works best in these conditions. Low
task variety and high analyzability allow managers to rely on
6. 8-6 Irwin/McGraw-Hill The McGraw-Hill Companies, Inc., 2000
Technology & People Small Batch Technology: produces small
quantities of one-of-a-kind products. Based on the skills of the
workers who need a flexible structure. Mass Production Technology:
automated machines make high volumes of standard products. Workers
perform repetitive tasks so a formal structure works well.
Continuous Process Technology: totally mechanized systems of
automatic machines. Workers must watch for unexpected problems and
react quickly. A flexible structure is needed here.
7. 8-7 Irwin/McGraw-Hill The McGraw-Hill Companies, Inc., 2000
Determinants of Structure Human Resources: the final factor
affecting organizational structure. Higher skilled workers who need
to work in teams usually need a more flexible structure. Higher
skilled workers often have professional norms (CPAs, physicians).
Managers must take into account all four factors (environment,
strategy, technology and human resources) when designing the
structure of the organization.
8. 8-8 Irwin/McGraw-Hill The McGraw-Hill Companies, Inc., 2000
Job Design Job Design: group tasks into specific jobs. Results in a
division of labor between workers that is effective and efficient.
Job simplification: reduction of the tasks each worker performs.
Too much and boredom results. Job enlargement: increase tasks for a
given job to reduce boredom. Job enrichment: increases the degree
of responsibility a worker has over a job. can lead to increased
9. 8-9 Irwin/McGraw-Hill The McGraw-Hill Companies, Inc., 2000
Job Characteristics Model Skill Variety Task Identity Task
Significance Skill Variety Task Identity Task Significance
AutonomyAutonomy FeedbackFeedback Meaningfulness of work
Meaningfulness of work ResponsibilityResponsibility for Workfor
Work OutcomesOutcomes ResponsibilityResponsibility for Workfor Work
OutcomesOutcomes Knowledge ofKnowledge of results ofresults of
workwork Knowledge ofKnowledge of results ofresults of workwork
High:High: MotivationMotivation PerformancePerformance
SatisfactionSatisfaction High:High: MotivationMotivation
PerformancePerformance SatisfactionSatisfaction Figure 8.2
10. 8-10 Irwin/McGraw-Hill The McGraw-Hill Companies, Inc.,
2000 Job Characteristics Model Jobs have five characteristics
describing extent of: Skill variety: employee uses a wide range of
skills Task identity: worker involved in all tasks of job from
beginning to end of the production process Task significance:
worker feels the task is meaningful to organization. Autonomy:
employee has freedom to schedule tasks and carry them out.
Feedback: worker gets direct information about how well the job is
done. These affect the motivation, satisfaction and performance of
11. 8-11 Irwin/McGraw-Hill The McGraw-Hill Companies, Inc.,
2000 Grouping Jobs into Functions Once tasks are grouped into jobs,
managers must decide how to group jobs together. Function: people
working together with similar skills, tools or techniques to
perform their jobs. Functional structure consists of departments
such as marketing, production, and finance. Workers can learn from
others doing similar tasks. Easy for managers to monitor and
evaluate workers. Hard for one department to communicate with
others. Managers can become preoccupied with their department and
forget the firm ProsProsProsPros ConsConsConsCons
12. 8-12 Irwin/McGraw-Hill The McGraw-Hill Companies, Inc.,
2000 A Sample of Pier 1s Functional Structure V . P . T a x V . P .
C o n t r o lle r V . P . M I S D ir e c t o r C o r p . P la n n
in g E x e c . V . P . F in a n c e & A d m in . S e n io r V .
P . S t o r e s D ir e c t o r T r a n s p o r t a t io n V . P . D
is t r ib u t io n S e n io r V . P . L o g is t ic s C la r k J o
h n s o n C E O Figure 8.3
13. 8-13 Irwin/McGraw-Hill The McGraw-Hill Companies, Inc.,
2000 Divisional Structures A division is a collection of functions
working together to produce a product. Divisions create smaller,
manageable parts of a firm. Divisions develop a business-level
strategy to compete. A division has marketing, finance, and other
functions. Functional managers report to divisional managers who
then report to corporate management. Product structure: divisions
created according to the type of product or service. Geographic
structure: divisions based on the area of a country or world
served. Market structure: divisions based on the types of customers
14. 8-14 Irwin/McGraw-Hill The McGraw-Hill Companies, Inc.,
2000 Product Structure W a s h i n g M a c h i n e D i v i s i o n
L i g h t i n g D i v i s i o n T e l e v i s i o n D i v i s i o n
C o r p o r a t e M a n a g e r s C E O C o r p o r a t i o n
15. 8-15 Irwin/McGraw-Hill The McGraw-Hill Companies, Inc.,
2000 Geographic Structure N o r t h e r n R e g i o n W e s t e r n
R e g i o n S o u t h e r n R e g i o n E a s t e r n R e g i o n C
o r p o r a t e M a n a g e r s C E O C o r p o r a t i o n Figure
16. 8-16 Irwin/McGraw-Hill The McGraw-Hill Companies, Inc.,
2000 Market Structure L a r g e B u s i n e s s C u s t o m e r s S
m a l l B u s i n e s s C u s t o m e r s E d u c a t i o n a l I n
s t i t u t i o n s I n d i v i d u a l C u s t o m e r s C o r p o
r a t e M a n a g e r s C E O C o r p o r a t i o n Figure
17. 8-17 Irwin/McGraw-Hill The McGraw-Hill Companies, Inc.,
2000 Global Structures When managers find different problems or
demands across the globe, global solutions are needed. Global
geographic structure: different divisions serve each world region.
For customer needs that vary between regions. Global product
structure: Customers in different regions buy similar products so
firms keep most functional work at home and set up a division to
market product abroad.
18. 8-18 Irwin/McGraw-Hill The McGraw-Hill Companies, Inc.,
2000 Matrix & Product Teams Matrix structure: managers group
people by function and product teams simultaneously. Results in a
complex network of reporting relationships. Very flexible and can
respond rapidly to change. Each employee has two bosses which can
cause problems. Functional manager gives different directions than
product manager and employee cannot satisfy both. Product Team
Structure: no 2-way reporting and the members are permanently
assigned to the team and empowered to bring a product to
19. 8-19 Irwin/McGraw-Hill The McGraw-Hill Companies, Inc.,
2000 Matrix Structure Figure 8.7a CEOCEO Func.Func.
ManagersManagers SalesSales DesignDesign ProductionProduction
ProductProduct team Ateam A ProductProduct team Bteam B
ProductProduct team Cteam C Product Team = two boss employee
20. 8-20 Irwin/McGraw-Hill The McGraw-Hill Companies, Inc.,
2000 Product Team Structure CEOCEO Func.Func. ManagersManagers
SalesSales DesignDesign ProductionProduction Manufacturing
Manufacturing Manufacturing = Product Team Manager = Team member
21. 8-21 Irwin/McGraw-Hill The McGraw-Hill Companies, Inc.,
2000 Hybrid Structures Many large organizations have divisional
structures where each manager can select the best structure for
that particular division. One division may use a functional
structure, one geographic, and so on. This ability to break a large
organization into many smaller ones makes it much easier to
22. 8-22 Irwin/McGraw-Hill The McGraw-Hill Companies, Inc.,
2000 Coordinating Functions To ensure sufficient coordination
between functions, managers delegate authority. Authority: the
power vested in the manager to make decisions and use resources.
Hierarchy of authority: describes the relative authority each
manager has from top to bottom. Span of Control: refers to the
number of workers a manager manages. Line authority: managers in
the direct chain of command for production of goods or services.
Example: Sales Staff authority: managers in positions that give
advice to line managers. Example: Legal
23. 8-23 Irwin/McGraw-Hill The McGraw-Hill Companies, Inc.,
2000 Tall & Flat Organizations Tall structures have many levels
of authority relative to the organizations size. As levels in the
hierarchy increase, communication gets difficult. The extra levels
result in more time being taken to implement decisions.
Communications can also become garbled as it is repeated through
the firm. Flat structures have few levels but wide spans of
control. Results in quick communications but can lead to overworked
24. 8-24 Irwin/McGraw-Hill The McGraw-Hill Companies, Inc.,
2000 Minimum Chain of Command Managers should carefully evaluate:
Do they have the right number of middle managers? Can the structure
be altered to reduce levels? Centralized v. Decentralized
Decentralized operations puts more authority at lower levels and
leads to flat organizations. Workers must be able to reach
decisions. Divisions and functions can begin to lose sight of
organizational goals and focus only on their small area.
25. 8-25 Irwin/McGraw-Hill The McGraw-Hill Companies, Inc.,
2000 Integrating Mechanisms Direct contact: get managers from
different divisions or functions together to solve mutual problems.
Liaison Roles: one manager in each area is responsible for
communication with other areas. Task Forces: temporary committees
formed across divisions to solve a specific problem.
Cross-functional teams: works much like a permanent task force that
deals with recurring problems. Matrix structure: already contains
many integrating mechanisms.
26. 8-26 Irwin/McGraw-Hill The McGraw-Hill Companies, Inc.,
2000 Strategic Alliances Strategic alliance: a formal agreement
committing two or more firms to exchange resources to produce a
good. Network Structure: a whole series of strategic alliances.
Created between suppliers, manufacturers, and distributors. Toyota
and Honda use many such alliances. Network structures allow firms
to bring resources together in a boundary-less organization.