Chapter 11

Designing Adaptive Organizations

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What Would You Do? Reengineering at Exide Technologies Financial losses are increasing

Company share price is dropping Company’s debt load is soaring

Is currently organized geographically company managers in each country who compete with other divisions

What organization scheme should it use to solve these problems?

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After discussing this section, you should be able to:

Learning ObjectivesDesigning Organizational Structure1. describe the departmentalization approach to

organizational structure.2. explain organizational authority.3. discuss the different methods for job design.

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5 Methods of Departmentalization

Functional

Product

Customer

Geographic

Matrix

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Functional Departmentalization

Advertising Agency

Sales

Accounting

InformationSystems

HumanResources

PrintAdvertising

Art Department

RadioAdvertising

Creative Department

Adapted from Exhibit 11.3

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Functional Departmentalization (cont’d)

Advantages Creates highly skilled

specialists Lowers costs through

reduced duplication Communication and

coordination problems are lessened

Disadvantages Cross-department

coordination can be difficult

May lead to slower decision making

Produces managers with narrow experiences

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Product Departmentalization

General Electric

Aircraft Engines Appliances

Capital Services Lighting

NBC TelevisionTechnical Products

and Services

Power SystemsPlastics

Industrial Products& Control Systems

Adapted from Exhibit 11.4

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Product Departmentalization (cont.)

Advantages Managers specialize

but have broader experiences

Easier to assess work-unit performance

Decision-making is faster

Disadvantages Duplication of activities Difficult to coordinate

across departments

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Been There, Done That

Business was slow to develop Began to focus on the customer

“orbit” around their customers Egalitarian culture and open communication are

key

igus and the Solar System

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Customer Departmentalization

Classic Cards Air, Car & HotelReservations

ExpenseManagement

Solutions

Advice &Planning

American ExpressCorporation

Lifestyle Cards Vacation & LastMinute Specials

SmallBusinessesBanking

Reward Cards WorldwideTravel Offices

FinancialServicesBrokerage

Cards TravelBusinessServices

FinancialServices

Adapted from Exhibit 11.5

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Customer Departmentalization (cont’d)

Advantages Focuses on customer

needs Products and services

tailored to specific customers

Disadvantages Duplication of activities Difficult to coordinate

across departments Efforts to please

customers may hurt the company

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Geographic Departmentalization

Coca-ColaEnterprises

Central NorthAmerica Group

Eastern NorthAmerica Group

EuropeanGroup

Western NorthAmerica Group

Adapted from Exhibit 11.6

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Geographic Departmentalization (cont’d)

Advantages Responsive to the

demands of different market areas

Unique resources located close to the customer

Disadvantages Duplication of

resources Difficult to coordinate

across departments

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Matrix DepartmentalizationPharmacia & Upjohn Headquarters

Central Nervous System

Thrombosis

Metabolic Diseases

Infectious Diseases

Women’s Health

Inflamatory Diseases

United StatesUnited States•Research•Marketing•Manufacturing

EuropeEurope•Research•Marketing•Manufacturing

JapanJapan•Research•Marketing•Manufacturing

United StatesUnited StatesUrologyUrology•Research

•Marketing•Manufacturing

EuropeEuropeCritical CareCritical Care

•Research•Marketing

•Manufacturing

Adapted from Exhibit 11.7

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Matrix Departmentalization (cont’d)

Advantages Efficiently manage

large, complex tasks Effectively complete

large, complex tasks

Disadvantages Requires high levels of

coordination Conflict between

bosses Requires high levels of

management skills

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Organizational Authority

Chain of Command

Line Versus Staff Authority

Delegation of Authority

Degree of Centralization

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Chain of Command

The vertical line of authority in an organization

Clarifies who reports to whom Unity of command

workers report to only one boss “violated” by the matrix structure

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Line v. Staff Authority

Line authority - function the right to command immediate subordinates in

the chain of command an activity that contributes directly to profit

generation Staff authority - function

the right to advise but not command others an activity that supports profit generation

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Delegation of Authority The assignment of direct authority and

responsibility to a subordinate

Manager

Subordinate

ResponsibilityResponsibility AuthorityAuthority

AccountabilityAccountability

Adapted from Exhibit 11.8

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Degree of Centralization

Centralization of authority primary authority is held by upper management

Decentralization significant authority is found in lower levels of the

organization Standardization

solving problems by applying rules, procedures, and processes

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Job Design

Job Specialization

Job Rotation, Enlargement, &Enrichment

Job Characteristics Model

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Job Specialization

Breaking jobs into small tasks Jobs are simple, easy to learn, and

economical Can lead to boredom, low satisfaction, high

absenteeism, and employee turnover

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Blast From The PastFrom Farms to Factories to Telecommuting Early work was farm based

or in “cottage industries” Industrial revolution led to factories and

mobility Technology allows people to again “work” at

home

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Job Rotation, Enlargement, & Enrichment Job Rotation

periodically moving workers from one specialized job to another

Job Enlargement increasing the number of tasks performed by a

worker Job Enrichment

adding more tasks and authority to an employee’s job

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Job Characteristics Model (JCM) A job redesign approach that seeks to

increase employee motivation Emphasizes internal motivation Redesign work to make it more “interesting”

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JCM (cont’d)

Skill Variety

Task Identity

Task Significance

Autonomy

Feedback

ExperiencedMeaningfulness

of Work

ExperiencedResponsibility for

Outcomes of Work

Knowledge ofActual Results ofWork Activities

High InternalWork Motivation

High-qualityWork Performance

High Satisfactionwith Work

Low Absenteeism& Turnover

Core Job Dimensions

CriticalPsychological

States

Personal & Work

Outcomes

Adapted from Exhibit 11.10

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Job Redesign Techniques

Combining TasksCombining Tasks

Natural Work UnitsNatural Work Units

Establishing ClientRelationships

Establishing ClientRelationships

Vertical LoadingVertical Loading

Opening FeedbackChannels

Opening FeedbackChannels

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What Really Works?Making Jobs More Interesting & Motivating

Task Identity

10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Probability of success 66%

Probability of success 69%

Task Significance

Job SatisfactionJob Satisfaction

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What Really Works? (cont’d)Making Jobs More Interesting & Motivating

Skill Variety

10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Probability of success 70%

Probability of success 73%

Autonomy

Job SatisfactionJob Satisfaction

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What Really Works? (cont’d)Making Jobs More Interesting & Motivating

Feedback10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Probability of success 70%

Probability of success 84%

High Growth Need Strength

Job SatisfactionJob Satisfaction

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What Really Works? (cont’d)

Making Jobs More Interesting & Motivating

10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Probability of success 69%

Low Growth Need Strength

Job SatisfactionJob Satisfaction

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What Really Works? (cont’d)Making Jobs More Interesting & Motivating

Task Identity

10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Probability of success 63%

Probability of success 68%

Task Significance

Workplace AbsenteeismWorkplace Absenteeism

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What Really Works? (cont’d)Making Jobs More Interesting & Motivating

Skill Variety

10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Probability of success 72%

Probability of success 74%

Autonomy

Workplace AbsenteeismWorkplace Absenteeism

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What Really Works? (cont’d)Making Jobs More Interesting & Motivating

Feedback10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Probability of success 72%

84%

Workplace AbsenteeismWorkplace Absenteeism

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After discussing this section, you should be able to:

Learning ObjectivesDesigning Organizational Processes

4. explain the methods that companies are using to redesign internal organizational processes (i.e., intraorganizational processes).

5. describe the methods that companies are using to redesign external organizational processes (i.e., interorganizational processes).

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Intraorganizational Processes

Reengineering

Empowerment

Behavioral Informality

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Reengineering

The fundamental rethinking and radical redesign of business processes

Intended to achieve dramatic improvements in performance

Change the orientation from vertical to horizontal

Changes task interdependence

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Pooled Interdependence

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Sequential Interdependence

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Reciprocal Interdependence

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Empowerment

A feeling of intrinsic motivation Workers perceive meaning in their work Employees are capable of self-determination Employees are active rather than passive

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Behavioral Informality

Behavioral Informality Spontaneity Casualness Interpersonal familiarity

Behavioral Formality Routine & regimen Specific rules Impersonal attachment

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Interorganizational Processes

ModularModularOrganizationsOrganizations

VirtualVirtualOrganizationsOrganizations

BoundarylessBoundarylessOrganizationsOrganizations

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What Really Happened? Reengineering at Exide Technologies Implemented product structure around global

business units Problems associated with product basis caused a

return to geography structure Exide is still searching for the proper

organizational structure