Chapter 10 Designing Adaptive Organizations Effective Management by

What Would You Do? 2 Reengineering at American Express 4 Many recent “missteps” at American Express 4 How should the company be organized? 4 Who should make decisions? Effective Management, by Williams South-Western College Publishing Copyright © 2002

3 Learning Objectives Designing Organizational Structure After discussing this section, you should be able to: ¬ describe the departmentalization approach to organizational structure. explain organizational authority. ® discuss the different methods for job design. Effective Management, by Williams South-Western College Publishing Copyright © 2002

Departmentalization 4 Functional Product Customer Geographic Matrix Effective Management, by Williams South-Western College Publishing

Functional Departmentalization 5 Advertising Agency Sales Information Systems Accounting Human Resources Art Department Print Advertising Adapted from Figure 10. 3 Effective Management, by Williams South-Western College Publishing Copyright © 2002

6 Functional (cont’d) Advantages 4 Creates highly skilled specialists 4 Lowers costs through reduced duplication 4 Communication and coordination problems are lessened Disadvantages 4 Cross-department coordination can be difficult 4 May lead to slower decision making 4 Produces managers with narrow experiences Effective Management, by Williams South-Western College Publishing Copyright © 2002

7 Product Departmentalization General Electric Aircraft Engines Appliances Capital Services Lighting Medical Systems NBC Television Adapted from Figure 10. 4 Effective Management, by Williams South-Western College Publishing Copyright © 2002

8 Product (cont’d) Advantages Disadvantages 4 Managers specialize 4 Duplication of but have broader activities experiences 4 Difficult to coordinate 4 Easier to assess work across departments -unit performance 4 Decision-making is faster Effective Management, by Williams South-Western College Publishing Copyright © 2002

9 Customer Departmentalization American Express Corporation Cards Travel Financial Services Adapted from Figure 10. 5 Shopping Business Services Effective Management, by Williams South-Western College Publishing Copyright © 2002

10 Customer (cont’d) Advantages 4 Focuses on customer needs 4 Products and services tailored to specific customers Disadvantages 4 Duplication of activities 4 Difficult to coordinate across departments 4 Efforts to please customers may hurt the company Effective Management, by Williams South-Western College Publishing Copyright © 2002

Geographic Departmentalization 11 Coca-Cola Enterprises Central North America Group Western North America Group Adapted from Figure 10. 6 European Group Eastern North America Group Effective Management, by Williams South-Western College Publishing Copyright © 2002

12 Geographic (cont’d) Advantages 4 Responsive to the demands of different market areas 4 Unique resources located close to the customer Disadvantages 4 Duplication of resources 4 Difficult to coordinate across departments Effective Management, by Williams South-Western College Publishing Copyright © 2002

Matrix Departmentalization 13 Pharmacia & Upjohn Headquarters United States Europe Japan • Research • Marketing • Manufacturing Thrombosis Metabolic Diseases Women’s Health Opthamology Critical Care Europe Critical Care United States Urology • Research • Marketing • Manufacturing Urology Adapted from Figure 10. 7 Effective Management, by Williams South-Western College Publishing Copyright © 2002

14 Matrix (cont’d) Advantages 4 Efficiently manage large, complex tasks 4 Effectively complete large, complex tasks Disadvantages 4 Requires high levels of coordination 4 Conflict between bosses 4 Requires high levels of management skills Effective Management, by Williams South-Western College Publishing Copyright © 2002

15 Organizational Authority Chain of Command Line Versus Staff Authority Delegation of Authority Degree of Centralization Effective Management, by Williams South-Western College Publishing Copyright © 2002

16 Chain of Command 4 The vertical line of authority in an organization 4 Clarifies who reports to whom 4 Unity of command Tworkers report to only one boss T“violated” by the matrix structure Effective Management, by Williams South-Western College Publishing Copyright © 2002

17 Line v. Staff Authority 4 Line authority - function Tthe right to command immediate subordinates in the chain of command Tan activity that contributes directly to profit generation 4 Staff authority - function Tthe right to advise but not command others Tan activity that supports profit generation Effective Management, by Williams South-Western College Publishing Copyright © 2002

18 Delegation of Authority 4 The assignment of direct authority and responsibility to a subordinate Responsibility Manager Authority Accountability Subordinate Effective Management, by Williams South-Western College Publishing Copyright © 2002

19 Degree of Centralization 4 Centralization of authority Tprimary authority is held by upper management 4 Decentralization Tsignificant authority is found in lower levels of the organization 4 Standardization Tsolving problems by applying rules, procedures, and processes Effective Management, by Williams South-Western College Publishing Copyright © 2002

20 Job Design Job Specialization Job rotation, Enlargement, & Enrichment Job Characteristics Model Effective

Job Specialization 21 4 Breaking jobs into small tasks 4 Jobs are simple, easy to learn, and economical 4 Can lead to boredom, low satisfaction, high absenteeism, and employee turnover Effective Management, by Williams South-Western College Publishing Copyright © 2002

Job Rotation, Enlargement, & Enrichment 22 4 Rotation Tperiodically moving workers from one specialized job to another 4 Enlargement Tincreasing the number of tasks performed by a worker 4 Enrichment Tadding more tasks and authority to an employee’s job Effective Management, by Williams South-Western College Publishing Copyright © 2002

Job Characteristics Model (JCM) 23 4 A job redesign approach that seeks to increase employee motivation 4 Emphasizes internal motivation 4 Redesign work to make it more “interesting” Effective Management, by Williams South-Western College Publishing Copyright © 2002

24 JCM (cont’d) Core Job Dimensions Skill Variety Task Identity Task Significance Critical Psychological States Experienced Meaningfulness of Work Autonomy Experienced Responsibility for Outcomes of Work Feedback Knowledge of Actual Results of Work Activities Adapted From Figure 10. 9 Personal & Work Outcomes High Internal Work Motivation High-quality Work Performance High Satisfaction with Work Low Absenteeism & Turnover Effective Management, by Williams South-Western College Publishing Copyright © 2002

25 Job Redesign Techniques Combing Tasks Natural Work Units Establishing Client Relationships Vertical Loading Opening Feedback Channels Effective Management, by Williams South-Western College Publishing Copyright © 2002

26 What Really Works? Making Jobs More Interesting & Motivating Job Satisfaction Task Identity 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Probability of success 66% Task Significance 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Probability of success 69% Effective Management, by Williams South-Western College Publishing Copyright © 2002

What Really Works? (cont’d) 27 Making Jobs More Interesting & Motivating Job Satisfaction Skill Variety 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Probability of success 70% Autonomy 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Probability of success 73% Effective Management, by Williams South-Western College Publishing Copyright © 2002

What Really Works? (cont’d) 28 Making Jobs More Interesting & Motivating Job Satisfaction Feedback 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Probability of success 70% High Growth Need Strength 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Probability of success 84% Effective Management, by Williams South-Western College Publishing Copyright © 2002

What Really Works? (cont’d) 29 Making Jobs More Interesting & Motivating Job Satisfaction Low Growth Need Strength 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Probability of success 69% Effective Management, by Williams South-Western College Publishing Copyright © 2002

What Really Works? (cont’d) 30 Making Jobs More Interesting & Motivating Workplace Absenteeism Task Identity 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Probability of success 63% Task Significance 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Probability of success 68% Effective Management, by Williams South-Western College Publishing Copyright © 2002

What Really Works? (cont’d) 31 Making Jobs More Interesting & Motivating Workplace Absenteeism Skill Variety 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Probability of success 72% Autonomy 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Probability of success 74% Effective Management, by Williams South-Western College Publishing Copyright © 2002

What Really Works? (cont’d) 32 Making Jobs More Interesting & Motivating Workplace Absenteeism Feedback 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Probability of success 72% 84% Effective Management, by Williams South-Western College Publishing Copyright © 2002

33 Learning Objectives Designing Organizational Processes After discussing this section, you should be able to: ¯ explain the methods that companies are using to redesign internal organizational processes (i. e. , intraorganizational processes). ° describe the methods that companies are using to redesign external organizational processes (i. e. , interorganizational processes). Effective Management, by Williams South-Western College Publishing Copyright © 2002

Intraorganizational Processes 34 Reengineering Empowerment Behavioral Informality Effective Management, by Williams South-Western College Publishing

35 Reengineering 4 The fundamental rethinking and radical redesign of business processes 4 Intended to achieve dramatic improvements in performance 4 Change the orientation from vertical to horizontal 4 Changes task interdependence Effective Management, by Williams South-Western College Publishing Copyright © 2002

Pooled Interdependence 36 Effective Management, by Williams South-Western College Publishing Copyright © 2002

Sequential Interdependence 37 Effective Management, by Williams South-Western College Publishing Copyright © 2002

Reciprocal Interdependence 38 Effective Management, by Williams South-Western College Publishing Copyright © 2002

39 Empowerment 4 A feeling of intrinsic motivation 4 Workers perceive meaning in their work 4 Employees are capable of selfdetermination 4 Employees are active rather than passive Effective Management, by Williams South-Western College Publishing Copyright © 2002

40 Behavioral Informality 4 Spontaneity 4 Casualness 4 Interpersonal familiarity Behavioral Formality 4 Routine & regimen 4 Specific rules 4 Impersonal attachment Effective Management, by Williams South-Western College Publishing Copyright © 2002

41 Interorganizational Process Virtual Organizations Modular Organizations Boundaryless Organizations Effective Management, by Williams South-Western

What Really Happened? 42 Reengineering at American Express 4 Used customer departmentalization 4 Decentralization, except “back offices” were centralized 4 Now a modular organization Effective Management, by Williams South-Western College Publishing Copyright © 2002