CHAPTER FIVE Designing Adaptive Structures 1 Copyright 2006

CHAPTER FIVE Designing Adaptive Structures 1 Copyright © 2006 by South-Western, a division of Thomson Learning. All rights reserved

What Would You Do? You are the new CEO of Microsoft… Bill Gates is having trouble letting go of Microsoft’s control v You are a micromanager and a control freak What can you and/or Gates do to make the CEO transition easier? What organizational structure best suits Microsoft at this point? Copyright © 2006 by South-Western, a division of Thomson Learning. All rights reserved v 2

Designing Organizational Structures After reading the next three sections, you should be able to: 1. 2. 3. describe the departmentalization approach to organizational structure. explain organizational authority. discuss the different methods for job design. 3 Copyright © 2006 by South-Western, a division of Thomson Learning. All rights reserved

Departmentalization Functional Customer 1 Product Geographic Matrix 4 Copyright © 2006 by South-Western, a division of Thomson Learning. All rights reserved

Functional Departmentalization Advertising Agency Sales Information Systems Accounting Human Resources Art Department Print Advertising Creative Department Radio Advertising 5 Copyright © 2006 by South-Western, a division of Thomson Learning. All rights reserved

Functional Departmentalization Disadvantages Advantages Work done by highly skilled specialists v Lowers costs through reduced duplication v Communication and coordination problems are v 1. 1 Cross-department coordination can be difficult v May lead to slower decision making v Produces managers with narrow experiences v Copyright © 2006 by South-Western, a division of Thomson Learning. All rights reserved 6

Product Departmentalization General Electric Aircraft Engines Consumer Products Consumer Finance Transportation Systems Medical Systems Specialty Materials Insurance NBC (Partial Listing of Products) 1. 2 7 Copyright © 2006 by South-Western, a division of Thomson Learning. All rights reserved Adapted from Exhibit 10. 4

Product Departmentalization Advantages v v Managers specialize, but have broader experiences Easier to assess work-unit performance Decision-making is Disadvantages Duplication of activities v Difficult to coordinate across departments v 1. 2 v. Copyright © 2006 by South-Western, a division of Thomson Learning. All rights reserved 8

Customer Departmentalization American Express Corporation Cards Travel Classic Cards Air, Car, Hotel Reservations Advice & Planning Expense Management Solutions Lifestyle Cards Vacation & Specials Banking Small Businesses Reward Cards Worldwide Travel Offices Brokerage Financial Services (Partial Listing) 1. 3 Business Services Financial Services Copyright © 2006 by South-Western, a division of Thomson Learning. All rights reserved Adapted from Exhibit 10. 5 9

Customer Departmentalization Advantages Focuses on customer needs v Products and services tailored to customer needs 1. 3 Disadvantages Duplication of resources v Difficult to coordinate across departments v Efforts to please customers may hurt the company v Copyright © 2006 by South-Western, a division of Thomson Learning. All rights reserved 10

Geographic Departmentalization Coca-Cola Enterprises Central North America Group European Group Western North Eastern North America Group 1. 4 Copyright © 2006 by South-Western, a division of Thomson Learning. All rights reserved Adapted from Exhibit 10. 6 11

Geographic Departmentalization Advantages Responsive to the demands of different market areas v Unique resources located close to the customer v 1. 4 Disadvantages Duplication of resources v Difficult to coordinate across departments v Copyright © 2006 by South-Western, a division of Thomson Learning. All rights reserved 12

Matrix Departmentalization Citi. Group International Global Consumer Global Corporate & Investment Bank Global Investment Management Smith Barney 1. 5 Western Europe Latin America Countr y Manag ers in Spain, France, Ireland, etc. Central & Eastern Europe Count ry Mana gers in China, Japan, Adapted etc. from Exhibit 10. 7 13 Copyright © 2006 by South-Western, a division of Thomson Learning. All rights reserved

Matrix Departmentalization Disadvantages Advantages Efficiently manage large, complex tasks v Effectively carry out large, complex tasks v 1. 5 Requires high levels of coordination v Conflict between bosses v Requires high levels of management skills v 14 Copyright © 2006 by South-Western, a division of Thomson Learning. All rights reserved

Organizational Authority 2 Chain of Command Line versus Staff Authority Delegation of Authority Degree of Centralization 15 Copyright © 2006 by South-Western, a division of Thomson Learning. All rights reserved

Chain of Command The vertical line of authority in an organization v Clarifies who reports to whom v Unity of command v workers report to only one boss v matrix organizations violate this principle v 2. 1 Copyright © 2006 by South-Western, a division of Thomson Learning. All rights reserved 16

Line versus Staff Authority v Line authority the right to command immediate subordinates in the chain of command v an activity that contributes directly to profit generation v v Staff authority the right to advise but not command others v an activity that supports profit generation v 2. 2 Copyright © 2006 by South-Western, a division of Thomson Learning. All rights reserved 17

Delegation of Authority The assignment of direct authority and responsibility to a subordinate Manager Responsibility Authority v Accountability Subordinate 2. 3 Copyright © 2006 by South-Western, a division of Thomson Learning. All rights reserved Adapted from Exhibit 10. 8 18

How to Be a More Effective Delegator Trust your staff to be a good job Avoid seeking perfection Give effective job instructions Know your true interests Follow up on progress. Praise the efforts of your staff. Don’t wait to the last minute to delegate. Ask questions, expect answers, assist employees. 9. Provide the resources you would provide if doing assignment yourself. 10. Delegate to the lowest possible level. 1. 2. 3. 4. 5. 6. 7. 8. 2. 3 Copyright © 2006 by South-Western, a division of Thomson Learning. All rights reserved Adapted from Exhibit 10. 9 19

Degree of Centralization v Centralization of authority v v Decentralization v v significant authority is found in lower levels of the organization Standardization v 2. 4 primary authority is held by upper management solving problems by applying rules, procedures, and processes Copyright © 2006 by South-Western, a division of Thomson Learning. All rights reserved 20

Job Design Specialized Jobs 3 Job Rotation, Enlargement, Enrichment Job Characteristics Model 21 Copyright © 2006 by South-Western, a division of Thomson Learning. All rights reserved

Job Specialization Breaking jobs into small tasks v Jobs are simple, easy to learn, and economical v Can lead to boredom, low satisfaction, high absenteeism, and employee turnover v 3. 1 Copyright © 2006 by South-Western, a division of Thomson Learning. All rights reserved 22

Job Rotation, Enlargement, & Enrichment v Job Rotation v v Job Enlargement v v increasing the number of tasks performed by a worker Job Enrichment v 3. 2 periodically moving workers from one specialized job to another adding more tasks and authority to Copyright © 2006 by South-Western, a division of Thomson Learning. All rights reserved 23

Job Characteristics Model A job redesign approach that seeks to increase employee motivation v Emphasizes internal motivation v experience work as meaningful v experience responsibility for work outcomes v knowledge of results v 3. 3 Copyright © 2006 by South-Western, a division of Thomson Learning. All rights reserved 24

Job Redesign Techniques Combining Tasks Forming Natural Work Units Establishing Client Relationships Vertically Loading the Job Opening Feedback Channels 3. 3 Adapted from Exhibit 10. 10 25 Copyright © 2006 by South-Western, a division of Thomson Learning. All rights reserved

Job Characteristics Model Core Job Dimensions Skill Variety Task Identity Critical Psychological States Experience Meaningfulness of Work Task Significance Autonomy Feedback 3. 3 Experience Responsibility for Outcomes of Work Knowledge of Actual Results of Work Activities Copyright © 2006 by South-Western, a division of Thomson Learning. All rights reserved Personal & Work Outcomes High Internal Work Motivation High-quality Work Performance High Satisfaction with Work Low Absenteeism & Turnover Adapted from Exhibit 10. 10 26

What Really Works Job Satisfaction Task 10% 20% 30% 40% 50%Identity 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% Skill Variety 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% probability of success 3 70% 27 Copyright © 2006 by South-Western, a division of Thomson Learning. All rights reserved

What Really Works (cont. ) Job Satisfaction Autonomy 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% probability of success 73% Provide Feedback 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% probability of success 3 70% 28 Copyright © 2006 by South-Western, a division of Thomson Learning. All rights reserved

What Really Works (cont. ) Job Satisfaction High Growth Need Strength/Job Satisfaction 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% probability of success 84% Low Growth Need Strength/Job Satisfaction 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% probability of success 3 69% 29 Copyright © 2006 by South-Western, a division of Thomson Learning. All rights reserved

What Really Works (cont. ) 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% Skill Variety 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% probability of success 3 72% 30 Copyright © 2006 by South-Western, a division of Thomson Learning. All rights reserved

What Really Works (cont. ) Workplace Absenteeism Autonomy 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% probability of success 74% Provide Feedback 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% probability of success 3 72% 31 Copyright © 2006 by South-Western, a division of Thomson Learning. All rights reserved

Designing Organizational Processes After reading the next two sections, you should be able to: 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). Copyright © 2006 by South-Western, a division of Thomson Learning. All rights reserved 4. 32

Intraorganizational Processes Reengineering Empowerment 4 Behavioral Informality 33 Copyright © 2006 by South-Western, a division of Thomson Learning. All rights reserved

Reengineering The fundamental rethinking and radical redesign of business processes v Intended to achieve dramatic improvements in performance v Change the orientation from vertical to horizontal v Changes task interdependence v 4. 1 Copyright © 2006 by South-Western, a division of Thomson Learning. All rights reserved 34

Reengineering and Task Interdependence Pooled Interdependence Adapted from Exhibit 10. 11 4. 1 Copyright © 2006 by South-Western, a division of Thomson Learning. All rights reserved 35

Reengineering and Task Interdependence Sequential Interdependence Adapted from Exhibit 10. 11 4. 1 Copyright © 2006 by South-Western, a division of Thomson Learning. All rights reserved More 36

Reengineering and Task Interdependence Reciprocal Interdependence Adapted from Exhibit 10. 11 4. 1 Copyright © 2006 by South-Western, a division of Thomson Learning. All rights reserved 37

Empowerment Empowering Workers v v v 4. 2 Permanently passing decision-making authority and responsibilities from managers to workers by giving them the information and resources they need to make good decisions A feeling of intrinsic motivation Workers perceive meaning in their work Employees are capable of self-determination 38 Copyright © 2006 by South-Western, a division of Thomson Learning. All rights reserved

Behavioral Informality Spontaneity v Casualness v Interpersonal familiarity v 4. 3 Behavioral Formality v v v Routine & regimen Specific rules Impersonal attachment 39 Copyright © 2006 by South-Western, a division of Thomson Learning. All rights reserved

Interorganizational Processes Modular Virtual Boundaryless Organizations 5 40 Copyright © 2006 by South-Western, a division of Thomson Learning. All rights reserved

Modular Organizations 5. 1 41 Copyright © 2006 by South-Western, a division of Thomson Learning. All rights reserved

Modular Organizations Advantages Disadvantages can cost less to run v loss of control from than traditional outsourcing organizations v may reduce their v lets organizations competitive focus advantage on core competencies v 5. 1 42 Copyright © 2006 by South-Western, a division of Thomson Learning. All rights reserved

Virtual Organizations 5. 2 43 Copyright © 2006 by South-Western, a division of Thomson Learning. All rights reserved

Virtual Organizations Advantages let companies share costs v fast and flexible v being the “best” should provide better products v 5. 2 Disadvantages difficult to control the quality of partners v requires tremendous management skills v 44 Copyright © 2006 by South-Western, a division of Thomson Learning. All rights reserved