copyright © 2002 by the mcgraw-hill companies, inc. all rights reserved. 8-8- 1 bateman snell...

Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved.

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Bateman Snell

Management

5thEdition

Competingin theNew Era


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Part ThreeChapter 8 - Organization Structure

Chapter OutlineFundamentals of OrganizingThe Vertical StructureThe Horizontal StructureOrganizational IntegrationLooking Ahead


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Learning ObjectivesLearning Objectives

After studying Chapter 8, you will know: how differentiation and integration influence your

organization’s structure how authority operates the roles of the board of directors and the chief executive

officer how span of control affects structure and managerial

effectiveness how to delegate work effectively the difference between centralized and decentralized

organizations


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Learning Objectives (cont.)Learning Objectives (cont.)

After studying Chapter 8, you will know: how to allocate jobs to work units how to manage the unique challenges of the matrix

organization the nature of important integrative mechanisms


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Fundamentals Of OrganizingFundamentals Of Organizing

Organization chart depicts the positions in the firm and how they are arranged provides a picture of the reporting structure

Differentiation aspect of the organization’s internal environment

division of labor - assignment of different tasks to different people or groups

specialization - process in which different individuals and units perform different tasks

differentiation is high when there are many subunits and many kinds of specialists who think differently


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Fundamentals Of Organizing (cont.)

Fundamentals Of Organizing (cont.)

Integration degree to which differentiated units work together and

coordinate their effortsall the specialized tasks in an organization cannot be performed completely independently

coordination - procedures that link the various parts of the organization to achieve the organization’s overall mission

any job activity that links different work units performs an integrative function

the more a firm is differentiated, the greater the need for integration among the units


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Personnel Finance

Manufacturing Sales

Personnel Finance

Manufacturing Sales

Finance R&D Marketing Personnel

ChemicalProducts

MetalProducts

President

Conventional Organization ChartConventional Organization Chart


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The Vertical StructureThe Vertical Structure

Authority in organizations authority - the legitimate right to make decisions and to tell

other people what to doresides in positions rather than people

in private business enterprises, owners have ultimate authoritytraditionally authority has been the primary means of running an organization


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Authority in organizations (cont.) board of directors - elected by the stockholders to run the

organizationled by a chairperforms three functions

selecting, assessing, rewarding, and perhaps replacing the CEO determining the firm’s strategic direction and reviewing financial

performance assuring ethical, socially responsible, and legal conduct

inside directors - the firm’s top managers who sit on the board outside directors - are likely run other companies

successful boards tend to be active, critical participants in determining company strategies

The Vertical Structure (cont.)The Vertical Structure (cont.)


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Authority in organizations (cont.) chief executive officer (CEO) - occupies the top of the

organizational pyramidauthority officially vested in the board of directors is assigned to the CEO

CEO personally responsible to the board and owners top management team - typically comprised of the CEO,

president, chief operating officer, chief financial officer, and other key executives

frequently meet with the CEO to make important decisions


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The Vertical Structure (cont.)The Vertical Structure (cont.)Hierarchical levels

hierarchy - the authority levels of the organizational pyramidtop management - strategic managers in charge of the entire organization

middle management - in charge of plants or departmentslowest levels - made up of lower management and workers

called the operational level of the organization

trend in U.S. is to reduce the number of hierarchical layersSpan of control

the number of subordinates who report directly to a manager narrow spans produce tall organizations wide spans produce flat organizations


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Capability andsupportiveness

of manager

Similarity of jobsand performance

measures

Ambiguityof work

OptimalSpan ofControl

Subordinatetraining and

access to information

Subordinatepreference for

autonomy

Factors Affecting The Optimal Span Of Control

Factors Affecting The Optimal Span Of Control


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The Vertical Structure (cont.)The Vertical Structure (cont.)Delegation

assignment of authority and responsibility to a subordinate can occur between any two individuals in any type of structure

with regard to any task responsibility - assignment of a task that an employee is

supposed to carry outcommon for people to have more responsibility than authority

accountability - expectation that employees perform a job, take corrective action when necessary, and report upward on the status and quality of their performance

managers remain responsible and accountable for their own actions and those of their subordinates


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Delegation (cont.) advantages of delegation

permits getting work done through othersmanager saves timemanager frees herself/himself to devote energy to other important, higher-level activities

provides subordinate with a more important jobfrom the organization’s perspective, jobs are done more efficiently and cost-effectively


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Schedule checkpoints forReviewing progress

Follow through by discussingProgress at appropriate intervals

Give the subordinate the authority, time, and resources(people, money,equipment) to perform the assignment

Define the goal succinctly

Select the person for the task

Solicit the subordinate’s viewabout suggested approaches

Steps In Effective DelegationSteps In Effective Delegation


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Decentralization result of the delegation of responsibility and authority centralized organization - high-level executives make most

decisions and pass them down to lower levels for implementation

decentralized organization - lower-level managers make important decisions

most U.S. executives understand the importance of decentralizing decision making


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The Horizontal StructureThe Horizontal Structure

Basic concepts departmentalization - subdividing the organization into

smaller subunitsline departments - have responsibility for the principle activities of the firm

deal directly with the organization’s primary goods and services line managers typically have:

substantial authority and power ultimate responsibility for major operating decisions accountability for “bottom-line” results

staff departments - provide specialized support for line units moving toward role focused on strategic support and expert advice


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The Horizontal Structure (cont.)The Horizontal Structure (cont.)

Functional organization jobs (and departments) are specialized and grouped

according to business functions and the skills they requiree.g., production, marketing, R&D, human resources, and finance

at the most basic level, functional structure is organized around the company’s value chain

value chain - sequence of activities that flow from raw materials to the delivery of a product or service

common in both large and small organizations may be most appropriate in rather simple, stable

environments


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Functional organization (cont.) advantages of functional structure include:

economies of scale can be realizedeffective environmental monitoringperformance standards are better maintainedgreater opportunity for specialized training and in-depth skill development

technical specialists are relatively free of administrative workdecision making and lines of communication are simple and clearly understood



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The Horizontal Structure (cont.)The Horizontal Structure (cont.)Functional organization (cont.)

disadvantages of functional structurepeople may care more about their own function than about company as a whole

may lose focus on overall product quality and customer satisfaction

managers do not develop knowledge of the other areas of the business

become specialists, not generalistsconflicts arise among functions and communications suffer accordingly

high differentiation may create barriers to coordination across functions


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Support activities

Primary activities

Generic Value Chain And Functional Structure

Generic Value Chain And Functional Structure

Margin

Margin

Service

Firm infrastructure

Human resource management

Technology development

Procurement

Inboundlogistics

Operations MarketingAnd sales

Outboundlogistics


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ProcurementHuman

resources

Informationtechnology

services

Inboundlogistics

OperationsOutboundlogistics

MarketingAnd sales

Service

President

Line departments

Staff departments

Functional StructureFunctional Structure


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Divisional organization units grouped around products, customers, or geographic

regions groups all functions into a single division

duplicates each function across all of the divisions separate divisions may act almost as separate businesses work autonomously to achieve the goals of the organization several ways to create divisional structure


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Divisional organization (cont.) product divisions - all functions that contribute to a given

product are organized under one manageradvantages

information needs are managed more easily people have full-time commitment to a particular product line task responsibilities are clear people receive broader training flexibility of structure better suits it for unstable environments

disadvantages difficult to coordinate across product lines managers may not acquire depth of functional knowledge duplication of effort is expensive



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Apparel Intimate Brands SupportBusinesses

CEO (Les Wexner)

Victoria’s Secret

Bath & BodyWorks

White BarnCandle Co.

Lane Bryant

New York & Co.

Lerner New York

Express

Limited Stores

Structure

Express

Limited Stores

Design Services

Real Estate

Store Planning

DistributionServices

Brand &Creative Services

TechnologyServices

limitedthe

Product Divisions At The limitedProduct Divisions At The limited


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Divisional organization (cont.) customer and geographical divisions

build divisions around customer or geographical distinctionsadvantages

can focus on customer needs can provide faster and better service

disadvantage duplication of activities across many customer groups and

geographic areas is expensive


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Generalmanagers for:

New YorkPhiladelphia

Boston


ClevelandChicagoSt. Louis


RaleighAtlantaOrlando


SeattleSan FranciscoLos Angeles


DallasHouston

Albuquerque

Northeastregionalmanager

Midwestregionalmanager

Southeastregionalmanager

Pacificregionalmanager

ChairmanCEO

Southwestregionalmanager

Geographical OrganizationGeographical Organization


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Matrix organization hybrid form of organization dual reporting relationships in which some managers report

to two superiorsone functional and one product

advantageshigher degree of flexibility and adaptability

disadvantagesviolation of the unity of command principle

reporting to two superiors can create confusion


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Productiongroup

Two-bossmanager

Engineeringgroup

Two-bossmanager

Personnelgroup

Two-bossmanager

Accountinggroup

Two-bossmanager

Matrix Organizational StructureMatrix Organizational Structure

Productiongroup

Two-bossmanager

Engineeringgroup

Two-bossmanager

Personnelgroup

Two-bossmanager

Accountinggroup

Two-bossmanager

Accounting

ProjectManager

A

ProjectManager

B

Projectmanagement

Production

ChairmanCEO

Engineering PersonnelFunctionalmanagers


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Matrix organization (cont.) matrix survival skills - depend on position in the matrix

the matrix diamond illustrates needed skills matrix form today - resurgence based on:

pressures to consolidate costs and be faster to market need for coordination across countries in global business

understanding of the matrix has increased matrix is not a structure, but a process

relationships allow information to flow through the organization

norms, values, and attitudes shape how people think


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Top ExecutiveNeeds to balance powerand emphasis betweenfunctions and divisions

“2-Boss” Manager/EmployeeMust learn how to respond to twoSuperiors and prioritize multiple

demands

Functional ManagerMust collaborate andmanage conflicts with

product/division manager

Product ManagerMust collaborate andmanage conflicts with

functional manager

The Matrix DiamondThe Matrix Diamond


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Organizational IntegrationOrganizational Integration

Coordination by standardization standardization - establishing common rules and procedures

that apply uniformly to everyoneconstrains actionsintegrates various units by regulating what people do

formalization - reliance on rules and regulations to promote conformance

should apply to most (if not all) situationsmost applicable in relatively stable and unchanging circumstances


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Organization Integration (cont.)Organization Integration (cont.)

Coordination by plan interdependent units are required to meet deadlines and

objectives that contribute to a common goal does not require a high degree of stability and routinization

units free to modify their actions as long as they are able to meet deadlines and targets required for working with others

Coordination by mutual adjustment involves feedback and discussion to jointly determine how to

approach problems and devise mutually agreeable solutions allows for flexible coordination to deal with novel problems costly from the standpoint of time

copyright © 2002 by the mcgraw-hill companies, inc. all rights reserved. 8-8- 1 bateman snell...

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