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10Managing Organizational

Structure


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10-2 2006 The McGraw-Hill Companies, Inc. All rights reserve.McGraw-Hill!Irwin

Learning Objectives

After studying the chapter you should be able to! "dentify the factors that influence managers#

choice of an organizational structure$

%&plain how managers group tasks into jobsthat are 'otivating and satisfying for e'ployees$ (escribe the types of organizational structures

'anagers can design and e&plain )hy they

choose one structure over another$ %&plain )hy there is a need to both centralized

and decentralized authority$


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Learning Objectives

%&plain why managers must coordinate

and integratebet)een jobs functions and

divisions as an organization gro)s$

%&plain )hy 'anagers )ho see+ ne) )ays

to increase efficiency and effectiveness

are using strategic alliances and net)or+

structures$


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Organizational Structure

Organizational Architecture he organizational structure

control syste's culture and

hu'an resource 'anage'ent

syste's that together

deter'ine ho) efficiently and

effectively organizationalresources are used$


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(esigning Organizational Structure

Organizing he process by )hich 'anagers establish )or+ing

relationships a'ong e'ployees to achieve goals$

Organizational Structure /or'al syste' of tas+ and reporting relationships

sho)ing ho) )or+ers use resources$

Organizational design he process by )hich 'anagers 'a+e specific

choices that result in a particular +ind oforganizational structure$


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/actors Affecting Organizational

Structure

Figure 101


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he Organizational %nviron'ent

he Organizational !nvironment he uic+er the environ'ent changes the

'ore proble's face 'anagers$

Structure 'ust be 'ore fle&ible 3i$e$

decentralized authority4 )hen

environ'ental change is rapid$


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"trategy (ifferent strategies reuire the use of

different structures$A differentiation strategy needs a fle&ible

structure lo) cost 'ay need a 'ore for'al

structure$

"ncreased vertical integration or diversificationalso reuires a 'ore fle&ible structure$


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#echnology he co'bination of s+ills +no)ledge tools

euip'ent co'puters and 'achines used

in the organization$

More co'ple& technology 'a+es it harder

for 'anagers to regulate the organization$


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echnology echnology can be 'easured by!

as+ variety! the nu'ber of ne) proble's a 'anagerencounters$

as+ analyzability! the availability of progra''edsolutions to a 'anager to solve proble's$

7igh tas+ variety and lo) analyzability present'any uniue proble's to 'anagers$/le&ible structure )or+s best in these conditions$

Lo) tas+ variety and high analyzability allo)'anagers to rely on established procedures$


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ypes of echnology

S'all 8atch echnology S'all uantities of one-of-a-+ind products are

produced by the s+ills of the )or+ers )ho )or+

together in s'all groups$Appropriate structure is decentralized and fle&ible$

Mass 9roduction echnology Auto'ated 'achines that are progra''ed to

'a+e high volu'es of standard products$/or'al structure is the best choice for )or+ers )ho 'ust

perfor' repetitive tas+s$


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ypes of echnology

:ontinuous 9rocess echnology otally 'echanized syste's of auto'atic

'achines$

A fle&ible structure is necessary to allo) )or+ers to reactuic+ly to une&pected proble's$

"nfor'ation echnology 3"4 ;no)ledge 'anage'ent

he sharing and integrating of e&pertise )ithin andbet)een functions and divisions through realti'einterconnected " that allo)s for ne) +inds of tas+s and

job reporting relationships$


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$uman %esources 7ighly s+illed )or+ers )hose jobs reuire

)or+ing in tea's usually need a 'ore

fle&ible structure$

7igher s+illed )or+ers 3e$g$ :9A#s and

doctors4 often have internalized

professional nor's$


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$uman %esources Managers 'ust ta+e into account all four

factors 3environ'ent

strategy technology

and hu'an resources4

)hen designing the

structure of theorganization$


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he $ =$ Oldha'

Work Redesign3=eading MA! Addison-?esley 16504$


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>rouping


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Figure10*

#he Functional "tructure of +ier 1 ,mports


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(ivisional Structures

'ivisional "tructure An organizational structure is co'posed of

separate business units )ithin )hich are the

functions that )or+ together to produce a specificproduct for a specific custo'er(ivisions create s'aller 'anageable parts of a fir'$

(ivisions develop a business-level strategy to co'pete$

(ivisions have 'ar+eting finance and other functions$/unctional 'anagers report to divisional 'anagers )ho

then report to corporate 'anage'ent$


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ypes of (ivisional Structures

9roduct Structure :usto'ers are served by self-contained divisions

that handle a specific type of product or service$

Allo)s functional 'anagers to specialize in one productarea

(ivision 'anagers beco'e e&perts in their area

=e'oves need for direct supervision of division by

corporate 'anagers

(ivisional 'anage'ent i'proves the use of resources


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Figure 10-

+roduct. /arket. and eographic "tructures


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eographic "tructure %ach region or a country or area )ith

custo'ers )ith differing needs is served by

a local self-contained division producingproducts that best 'eet those needs$


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lobal geographic structure(ifferent divisions serve each )orld region )hen

'anagers find different proble's or de'ands

across the globe$>enerally occurs

)hen 'anagers are

pursuing a

'ulti-do'esticstrategy

> >


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>lobal >eographic and

>lobal 9roduct Structures

Figure 10


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/arket 2Customer3 "tructure %ach +ind of custo'er is served by a self-

contained division

>lobal 'ar+et 3custo'er4 structure:usto'ers in different regions buy si'ilar

products so fir's can locate 'anufacturingfacilities and product distribution net)or+s )here

they decide is best$/ir's pursuing a global strategy )ill use this

type of structure$


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Matri& (esign Structure

Matri& Structure An organizational structure that si'ultaneously

groups people and resources by function and

product$=esults in a co'ple& net)or+ of superior-subordinate

reporting relationships$

he structure is very fle&ible and can respond rapidly to

the need for change$

%ach e'ployee has t)o bosses 3functional 'anager and

product 'anager4 and possibly cannot satisfy both$


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Matri& Structure

Figure 104


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9roduct ea' (esign Structure

+roduct #eam "tructure he 'e'bers are per'anently assigned to the

tea' and e'po)ered to bring a product to 'ar+et$

Avoids proble's of t)o-)ay co''unication andthe conflicting de'ands of functional and product

tea' bosses$

:ross-functional tea' is co'posed of a group of

'anagers fro' different depart'ents )or+ingtogether to perfor' organizational tas+s$


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9roduct ea' Structure

Figure 104


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7ybrid Structures

$ybrid "tructure he structure of a large organization that has

'any divisions and si'ultaneously uses

'any different organizational structuresManagers can select the best structure for a

particular division@one division 'ay use a

functional structure another division 'ay have ageographic structure$

he ability to brea+ a large organization into

s'aller units 'a+es it easier to 'anage$


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arget#s 7ybrid Structure

Figure 105

:oordinating /unctions!


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:oordinating /unctions!

Allocating Authority

Authority he po)er to hold people accountable for their

actions and to 'a+e decisions concerning the use

of organizational resources$

$ierarchy of Authority An organization#s chain of co''and specifying

the relative authority of each 'anager$Span of :ontrol! refers to the nu'ber of )or+ers a

'anager 'anages$


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Allocating Authority

"pan of Control he nu'ber of subordinates that report directly to a

'anager

6ine /anager

Managers in the direct chain of co''and )ho have

authority over people and resources lo)er do)n$

9ri'arily responsible for the production of goods or

services$

"taff /anager

Managers )ho are functional-area specialists that give

advice to line 'anagers$

#he $ierarchy of Authority and "pan of Control at


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Figure 107

#he $ierarchy of Authority and "pan of Control at

/c'onald8s Corporation


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all and /lat Organizations

all structures have 'any levels of authority andnarro) spans of control$ As hierarchy levels increase co''unication gets

difficult creating delays in the ti'e being ta+en to

i'ple'ent decisions$ :o''unications can also beco'e garbled as it is

repeated through the fir'$

/lat structures have fe)er levels and )ide spans

of control$ Structure results in uic+ co''unications but can lead

to over)or+ed 'anagers$


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/lat Organizations

Figure 1010


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all Organizations

Figure 1010


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Organizational Structure

Managers should carefully evaluate! (o the organization have the right nu'ber of

'iddle 'anagers

:an the structure be altered to reduce levels:entralized and (ecentralized of Authority

(ecentralization puts 'ore authority at lo)er levels

and leads to flatter organizations$?or+s best in dyna'ic highly co'petitive environ'ent$

Stable environ'ent favor centralization of authority$

" i M h i


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"ntegrating Mechanis's

Figure 1011

/ f " t ti M h i


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/or's of "ntegrating Mechanis's

Figure 101(

St t i Alli


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Strategic Alliances

"trategic Alliance An agree'ent in )hich 'anagers pool or share fir'#s

resources and +no)-ho) )ith a foreign co'pany andthe t)o fir's share in the re)ards and ris+s of

starting a ne) venture$9etwork "tructure!

A series of strategic alliances that an organizationcreates )ith suppliers 'anufacturers and

distributors to produce and 'ar+et a product$ Bet)or+ structures allo) fir's to bring resources

together in a boundary-less organization$

828 B t + St t d "


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828 Bet)or+ Structures and "

:oundaryless Organization An organization )hose 'e'bers are lin+ed by

co'puters fa&es co'puter-aided design syste's

and video-conferencing and )ho rarely if ever

see one another face-to-face$

;nowledge /anagement "ystem A co'pany-specific virtual infor'ation syste' that

allo)s )or+ers to share their +no)ledge ande&pertise and find others to help solve proble's$

Source!

828 B t + St t d "


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828 Bet)or+ Structures and "

:usiness to :usiness 2:(: 3 networkA group of organizations that join together

and use " to lin+ the'selves to potential

global suppliers to increase efficiency andeffectiveness$

Source!

M i % l A ll 1*


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Movie %&a'ple! Apollo 1*

?hat organizationalstructure does

BASA use

to handle a 'oonlaunch