Organizations and Structures Module 7 LIS 580 Spring

Organizations and Structures Module 7 LIS 580: Spring 2006 Instructor- Michael Crandall

Roadmap • • • Organizing and organizations Structure of organizations Matrix organizations Networked organizations Learning organizations Challenges in organizations April 18, 2006 LIS 580 - Spring 2006 2

What Is Organizing? • Organizing – Arranging the activities of the enterprise in such a way that they systematically contribute to the enterprise’s goals. G. Dessler, 2003 April 18, 2006 LIS 580 - Spring 2006 3

Depicting the Organization • Organization Chart – A chart that shows the structure of the organization including the title of each manager’s position and, by means of connecting lines, who is accountable to whom and who has authority for each area. G. Dessler, 2003 April 18, 2006 LIS 580 - Spring 2006 4

Organization Chart April 18, 2006 LIS 580 - Spring 2006 5

Organization Design and Structure • Organization design – A process in which managers develop or change their organization’s structure • Work specialization – A component of organization structure that involves having each discrete step of a job done by a different individual rather than having one individual do the whole job Prentice Hall, 2002 April 18, 2006 LIS 580 - Spring 2006 6

Economies of Work Specialization Prentice Hall, 2002 April 18, 2006 LIS 580 - Spring 2006 7

Stages of Organizational Development • Simple structure – An organization that is low in specialization and formalization but high in centralization • Functional structure – An organization in which similar and related occupational specialties are grouped together • Divisional structure – An organization made up of self-contained units Prentice Hall, 2002 April 18, 2006 LIS 580 - Spring 2006 8

Stages of Organizational Development (cont’d) • Matrix structure – An organization in which specialists from functional departments are assigned to work on one or more projects led by a project manager • Team-based structure – An organization that consists entirely of work groups or teams • Boundaryless organization – An organization that is not defined or limited by boundaries or categories imposed by traditional structures Prentice Hall, 2002 April 18, 2006 LIS 580 - Spring 2006 9

Mechanistic and Organic Organizations • Mechanistic organization – The bureaucracy; a structure that is high in specialization, formalization, and centralization • Organic organization – An adhocracy; a structure that is low in specialization, formalization, and centralization • Structure follows strategy Prentice Hall, 2002 April 18, 2006 LIS 580 - Spring 2006 10

Burns and Stalker G. Dessler, 2003 April 18, 2006 LIS 580 - Spring 2006 11

Structure Variables • Principles – – – • Departmentalization Chain of command Span of control Authority Power Responsibility – Functional – Divisional • • Product Customer Geographic Process Prentice Hall, 2002 April 18, 2006 LIS 580 - Spring 2006 12

Organizational Structure: Control • Chain of command – The management principle that no person should report to more than one boss • Span of control – The number of subordinates a manager can direct efficiently and effectively • Authority – The rights inherent in a managerial position to give orders and expect them to be obeyed • Responsibility – An obligation to perform assigned activities • Power – An individual’s capacity to influence decisions Prentice Hall, 2002 April 18, 2006 LIS 580 - Spring 2006 13

Chain of Command Prentice Hall, 2002 April 18, 2006 LIS 580 - Spring 2006 14

Tall And Flat Organizations, And The Span Of Control • Span of Control – The number of subordinates reporting directly to a supervisor. • Wide spans: larger number of direct reports. • Narrow spans: fewer number of direct reports. • Tall vs. Flat Organizations – Tall organizations: more management layers and more hierarchical controls. – Flat organizations: fewer management layer and decision making closer to the customer. G. Dessler, 2003 April 18, 2006 LIS 580 - Spring 2006 15

Spans of Control in Country-Based Organization FIGURE 6– 9 G. Dessler, 2003 April 18, 2006 LIS 580 - Spring 2006 16

Types of Organizational Authority • Line authority – The position authority (given and defined by the organization) that entitles a manager to direct the work of operative employees • Staff authority – Positions that have some authority (e. g. , organization policy enforcement) but that are created to support, assist, and advise the holders of line authority Prentice Hall, 2002 April 18, 2006 LIS 580 - Spring 2006 17

Authority Versus Power Prentice Hall, 2002 April 18, 2006 LIS 580 - Spring 2006 18

Types of Power Legitimate Power based on one’s position in the formal hierarchy Coercive Power based on fear Reward Power based on the ability to distribute something that others value Expert Power based on one’s expertise, special skill, or knowledge Referent Power based on identification with a person who has resources or traits April 18, 2006 LIS 580 - Spring 2006 Prentice Hall, 2002 19

Checklist 7. 3 Principles of Delegation þ The manager can delegate authority but cannot delegate responsibility. þ Clarify the assignment. þ Delegate, don’t abdicate. þ Know what to delegate. þ Specify the subordinate’s range of discretion. þ Authority should equal responsibility. þ Make the person accountable for results. þ Beware of backward delegation. G. Dessler, 2003 April 18, 2006 LIS 580 - Spring 2006 20

Departmentalization: Creating Departments • Departmentalization – The process through which an organization’s activities are grouped together and assigned to managers; the organizationwide division of work. G. Dessler, 2003 April 18, 2006 LIS 580 - Spring 2006 21

Departmentalization • Functional – The grouping of activities by functions performed • Product – The grouping of activities by product produced • Customer – The grouping of activities by common customers • Geographic – The grouping of activities by territory • Process – The grouping of activities by work or customer flow April 18, 2006 LIS 580 - Spring 2006 22

Organizing Departments by Function • Functional Departmentalization – A form of organization that groups a company’s activities around essential functions such as manufacturing, sales, or finance. G. Dessler, 2003 April 18, 2006 LIS 580 - Spring 2006 23

Functional Departmentalization FIGURE 6– 1 G. Dessler, 2003 April 18, 2006 LIS 580 - Spring 2006 24

Organizing Departments by Self. Contained Divisions/Purposes • Product Departmentalization – Grouping departments around a firm’s products or services, or each family of products or services; also referred to as a “divisional” organization. • Customer Departmentalization – Self-contained departments are organized to serve the needs of specific groups of customers. G. Dessler, 2003 April 18, 2006 LIS 580 - Spring 2006 25

Divisional Organization for a Pharmaceuticals Company FIGURE 6– 2 G. Dessler, 2003 April 18, 2006 LIS 580 - Spring 2006 26

Customer Departmentalization, Grayson Steel Company FIGURE 6– 3 G. Dessler, 2003 April 18, 2006 LIS 580 - Spring 2006 27

Organizing Departments by Self. Contained Divisions/Purposes (cont’d) • Marketing-channel Departmentalization – Departments focus on particular marketing channels, such as drugstores or grocery stores. • Geographic (Territorial) Departmentalization – Separate departments are established for each of the territories in which the enterprise does business. G. Dessler, 2003 April 18, 2006 LIS 580 - Spring 2006 28

Marketing Channel Departmentalization FIGURE 6– 4 G. Dessler, 2003 April 18, 2006 LIS 580 - Spring 2006 29

Divisional Organizations Facilitate Coordination FIGURE 6– 5 G. Dessler, 2003 April 18, 2006 LIS 580 - Spring 2006 30

Checklist 6. 1 Functional vs. Divisional Organizations þ Functional Organization Advantages 1. 2. 3. 4. It is simple, obvious, and logical. It fosters efficiency. It can simplify executive hiring and training. It can facilitate the top manager’s control. þ Functional Organization Disadvantages 1. It increases the workload on the executive to whom the functional department heads report. 2. It may reduce the firm’s sensitivity to and service to the customer. 3. It produces fewer general managers. G. Dessler, 2003 April 18, 2006 LIS 580 - Spring 2006 31

Checklist 6. 1 (cont’d) Functional vs. Divisional Organizations þ Divisional Organization Advantages 1. The product or service gets the single-minded attention of its own general manager and unit, and its customers may get better, more responsive service. 2. It’s easier to judge performance. 3. It develops general managers. 4. It reduces the burden for the company’s CEO. G. Dessler, 2003 April 18, 2006 LIS 580 - Spring 2006 32

Checklist 6. 1 (cont’d) Functional vs. Divisional Organizations þ Divisional Organization Disadvantages 1. It creates duplication of effort. 2. It may diminish top management’s control. 3. It requires more managers with general management abilities. 4. It can breed compartmentalization. G. Dessler, 2003 April 18, 2006 LIS 580 - Spring 2006 33

Creating Matrix Organizations • Matrix Organization – An organization structure in which employees are permanently attached to one department but also simultaneously have ongoing assignments in which they report to project, customer, product, or geographic unit heads. G. Dessler, 2003 April 18, 2006 LIS 580 - Spring 2006 34

Matrix Organization Departmentalization FIGURE 6– 6 G. Dessler, 2003 April 18, 2006 LIS 580 - Spring 2006 35

Matrix Organizations Advantages • Access to expertise. • Stability of permanent department assignments for employees. • Allows for focus on specific projects, products, or customers. Disadvantages • Confusion of command. • Power struggles and conflicts. • Lost time in coordinating. • Excess overhead for managing matrix functions. G. Dessler, 2003 April 18, 2006 LIS 580 - Spring 2006 36

Departmentalization in Practice: A Hybrid • Why mix the types of departmentalization? – Hierarchical considerations • The relationship of top level departments to their subsidiary departments. – Efficiency • Product, customer, and territorial departments tend to result in duplicate sales, manufacturing, and other functional departments. – Common sense • Departmentalizing is still more an art than a science. G. Dessler, 2003 April 18, 2006 LIS 580 - Spring 2006 37

The New Summer Tour Organization FIGURE 6– 8 G. Dessler, 2003 April 18, 2006 LIS 580 - Spring 2006 38

Network-based Organizations • Organizational Network – A system of interconnected or cooperating individuals. • Informal Networks – Communication pathways and relationships between individuals in an organization that do not necessarily conform to the formal chain of command communication networks of an organization. G. Dessler, 2003 April 18, 2006 LIS 580 - Spring 2006 39

Network-based Organizations (cont’d) • Formal Organizational Network – A recognized group of managers or other employees assembled by the CEO and the other senior executive team, drawn from across the company’s functions, business units, geography, and levels. • Electronic Organizational Networks – Networking through technology-supported devices such as e-mail, video-conferencing, and collaborative computing software like Lotus Notes. G. Dessler, 2003 April 18, 2006 LIS 580 - Spring 2006 40

Formal vs. Social Structure Rarely do the communication patterns match the formal structure Cross, Rob. A bird's-eye view: Using social network analysis to improve knowledge creation and sharing. IBM Executive strategy report 04 Jun 2002 http: //www 1. ibm. com/services/us/index. wss/xs/imc/a 1001262 April 18, 2006 LIS 580 - Spring 2006 41

Network-based Organizations (cont’d) • Team-Based Organizations – Team • A group of people committed to a common purpose, set of performance goals, and approach for which they hold themselves mutually accountable. • Horizontal Corporations – A structure that is organized around customeroriented processes performed by multidisciplinary cross-functional teams rather than by formal functional departments. G. Dessler, 2003 April 18, 2006 LIS 580 - Spring 2006 42

The Horizontal Corporation Source: John A. Byrne, “The Horizontal Corporation, ” Business Week, 20 December 1993, p. 80. April 18, 2006 FIGURE 6– 11 G. Dessler, 2003 LIS 580 - Spring 2006 43

Checklist 6. 2 Building Horizontal Organizations þ þ Make responsibilities overlap. Design individual jobs as broadly as possible, and keep the number of job titles to a minimum. Base rewards on unit performance to emphasize the importance of working together. Change the physical layout to promote collective responsibility. Let people see each other’s work. Redesign work procedures, provide computer terminals, use the e-mail network, and make sure managers are available. G. Dessler, 2003 April 18, 2006 LIS 580 - Spring 2006 44

How to Create a Horizontal Corporation Source: Reprinted from the December 20, 1993, issue of Business Week by special permission. Copyright © 1993 by the Mc. Graw-Hill Companies, Inc. April 18, 2006 LIS 580 - Spring 2006 FIGURE 6– 12 G. Dessler, 2003 45

Other Organization Types • Federal Organization – An organization in which power is distributed between a central unit and a number of constituents, but the central unit’s authority is intentionally limited. • Virtual Organization – A temporary network of independent companies that use information technology to share skills, reduce costs, and provide access to one another’s markets. – Its success depends on each of the individual firms’ responsibility and self-interest to accomplish the network’s purpose. G. Dessler, 2003 April 18, 2006 LIS 580 - Spring 2006 46

Effect of Technology on Structure G. Dessler, 2003 April 18, 2006 LIS 580 - Spring 2006 47

When Organizing: Always Keep Your Goals in Mind • Business environments are in a constant state of change. • An organization’s strategy must be adapted to changes in its competitive environment. • Structure follows strategy. – Strategic change creates the need for restructuring the organization to acquire new and different knowledge, skills and abilities. G. Dessler, 2003 April 18, 2006 LIS 580 - Spring 2006 48

Checklist 7. 1 What Determines Organization Structure þ Environment. Fast-changing environments require organic structures; slowly changing environments favor mechanistic structures. þ Technology. Unit and continuous production processes favor organic structures. Mass production processes favor mechanistic structures. þ Goals. Ask, “What are the main goals we want to achieve via this organization? ” þ Pros and cons. Each approach to departmentalization has pros and cons. þ Logic and common sense. G. Dessler, 2003 April 18, 2006 LIS 580 - Spring 2006 49

What Are Learning Organizations? 1. Adopt an organic, networked organizational form. 2. Encourage their employees to learn and to confront their assumptions 3. Have employees who share a common vision 4. Have the capacity • • to adapt to unforeseen situations to learn from their own experiences to shift their shared mindsets to change more quickly, broadly, and deeply than ever before. G. Dessler, 2003 April 18, 2006 LIS 580 - Spring 2006 50

Organizational Learning as a Dynamic Process Crossan, Lane, & White (1999) April 18, 2006 LIS 580 - Spring 2006 51

Abolishing Organizational Boundaries • Boundaryless Organization – An organization in which management strips away the “walls” which typically separate organizational functions and hierarchical levels, through the widespread use of teams, networks, and similar structural mechanisms. G. Dessler, 2003 April 18, 2006 LIS 580 - Spring 2006 52

The Four Organizational Boundaries That Matter Source: Reprinted by permission of Harvard Business Review. “The Four Organizational Boundaries that Matter, ” from “The New Boundaries of the Boundaryless Company, ” by Larry Hirschorn and Thomas Gilmore, May–June 1992. Copyright © 1992 by the President and Fellows of Harvard College. All rights reserved. April 18, 2006 LIS 580 - Spring 2006 FIGURE 0– 3 G. Dessler, 2003 53

Managing Learning Organizations • How to Streamline Organizational Decision Making – Downsize – Reduce management layers – Establish miniunits • How to Cultivate Employees’ Personal Mastery – Provide continuous learning opportunities. – Foster inquiry and dialogue. – Establish mechanisms to ensure that the organization is continuously aware of and can interact with its environment. G. Dessler, 2003 April 18, 2006 LIS 580 - Spring 2006 54

Challenges in Organization • Merging separate organizations with different structures • Changing an existing organization to meet external or internal changes in conditions • Conflicts between departments or groups • Interdependence between organizational units • Centralization vs. decentralization April 18, 2006 LIS 580 - Spring 2006 55

Part of the “Independent Integrator” Challenge Facing the Homeland Security Director Source: Alison Mitchell, “Disputes Erupt over Ridges Needs for His Job, ” New York Times, 9 November 2001, p. B 7. April 18, 2006 LIS 580 - Spring 2006 FIGURE 7– 5 G. Dessler, 2003 56

Methods for Achieving Coordination • Mutual Adjustment – Achieving coordination through face-to-face interpersonal interaction. • Use Rules and Procedures • Standardize • Exercise Direct Supervision: Use the Chain of Command • Divisionalize • Appoint Staff Assistants • Appoint Liaisons • Appoint Committees • Organize Independent Integrators – An individual or a group that coordinates the activities of several interdependent departments, but is independent of them. G. Dessler, 2003 April 18, 2006 LIS 580 - Spring 2006 57

Managing Organizational Conflict • Line–Staff Conflict – Disagreements between a line manager and the staff manager who is giving him or her advice. • How to Organize to Reduce Interunit Conflict – Appeal to power and the chain of command – Reduce interdependence – Exchange personnel G. Dessler, 2003 April 18, 2006 LIS 580 - Spring 2006 58

Types of Interdependence Source: Based on James Thompson, Organizations in Action (New York: Mc. Graw-Hill, 1967), Chapter 2. April 18, 2006 LIS 580 - Spring 2006 FIGURE 7– 6 G. Dessler, 2003 59

Centralization and Decentralization • Centralization – A function of how much decision-making authority is pushed down to lower levels in an organization; the more centralized an organization, the higher the level at which decisions are made • Decentralization – The pushing down of decision-making authority to the lowest levels of an organization Prentice Hall, 2002 April 18, 2006 LIS 580 - Spring 2006 60

Decentralize? • Decentralized Organization – Organizational authority for most departmental decisions is delegated to the department heads. – Control for major companywide decisions is maintained at the headquarters office. • Decentralization Rules: – Decentralize decisions that affect only one division or area and that would take a long time for upper management to make. – Centralize decisions that could adversely affect the entire firm and that upper management can fairly quickly and easily. G. Dessler, 2003 April 18, 2006 LIS 580 - Spring 2006 61

Problems With Size • “There is a fairly common perception that large organizations tend to behave much less “intelligently” than their size suggests. They often lose the decisiveness seen in small groups and may seem "stupid" to people within them who work with ideas and knowledge. ” • “There appears to be a fundamental upper limit on the average per capita decision rate that an organization can sustain, depending inversely on the organization's entropy. If the limit is broached, impaired productivity among knowledge managers may result and large organizations may be disadvantaged when performing knowledge-intensive tasks that require efficient use of intellectual capital. ” Janow, R. Shannon “Entropy and Productivity: Why Big Organizations Can Seem Stupid”. Analytic Solutions Group, LLC. 2/28/2004 http: //physics. njit. edu/~janow/Paper 20040228 njit. pdf April 18, 2006 LIS 580 - Spring 2006 62

Hammer vs. Deming • What tradeoffs did Deming and Hammer make in their approaches to designing organizations? • Did you notice who was given power in Deming’s approach vs. Hammer? • What is driving NYNEX to make changes in their organization structure? • What component of the organization is hardest to change? • Do you see the same issues arising in the “War at Work” article? April 18, 2006 LIS 580 - Spring 2006 63

Next Time • Managing People – Read Chapter 9 (not 8!!) and the articles • Discussion group questions: – How can relations be improved between Stanley and the reference librarians? – How, without simply complaining about Stanley, can you persuade Joanna to listen to the reference department’s perspective? – Who defines the responsibilities of each department, and how can you, as an interested party, help accomplish this? April 18, 2006 LIS 580 - Spring 2006 64