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Chapter 7

Chapter 7. Designing Adaptive Organizations. Major Concerns in Organizing. Division of Labor (Differentiation) Coordination (Integration). In Reference to the Organizational Chart, Organizing Involves:. VERTICAL STRUCTURE Coordination from Top to Bottom HORIZONTAL STRUCTURE

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Chapter 7

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  1. Chapter 7 Designing Adaptive Organizations

  2. Major Concerns in Organizing • Division of Labor (Differentiation) • Coordination (Integration)

  3. In Reference to the Organizational Chart, Organizing Involves: VERTICAL STRUCTURE Coordination from Top to Bottom HORIZONTAL STRUCTURE Departmentalization (Who works together?)

  4. Work Specialization • Degree to which tasks are subdivided into individual jobs • A highly specialized job is narrow in scope • Increases efficiency up to a point • With extreme specialization, workers tend to become bored and alienated

  5. Chain of Command The line of authority, shown in the organization chart, that links all persons and shows who reports to whom. CEO VP Marketing VP Production VP Finance

  6. Authority • Managers have authority because of the positions they hold (not who they are) • To be effective, it must be accepted by subordinates. Responsibility • Duty to perform the task an employee has been assigned • Authority should be commensurate with responsibility.

  7. Delegation • Process to transfer authority and responsibility to positions below • Delegation does not reduce responsibility • Benefits both the organization and the individual employee

  8. Common Practice is to: • CENTRALIZE (authority at top) • Accounting • Finance • Human Resources Management • Information Systems • DECENTRALIZE (much delegation) • Production • Marketing

  9. Span of Management • Number of employees reporting to a supervisor • Tradition has recommended a span of management of four to seven subordinates • What is best depends on the situation

  10. Departmentalization Basis for grouping job positions into departments and departments into the total organization. • Internal Operations Oriented • Functional • Network (Virtual) • Output Oriented • Divisional • Product • Geographic • Customer • Team (Cluster) • Combinations • Hybrid (different types at different places in an org.) • Matrix (different types at simultaneous at the same places in an org.)

  11. Advantages: Efficient use of resources Economies of Scale In-depth skill specialization Disadvantages: Poor communication among departments Slow response to external changes Loyalty more to function than customer or the whole organization Functional ApproachDepartments based on similar activities, skills and resource use.

  12. Divisional Approach • Departments are grouped together based on organizational outputs (e.g., product, geography, customer) • Functions (e.g., marketing) are split among the divisions • Its advantages and disadvantages tend to be the opposite of those of the functional approach

  13. Advantages: Quicker changes in an unstable environment More in touch with customers Disadvantages: Duplication Competition for resources among divisions More managers needed Less professional specialization Divisions

  14. Matrix Approach • Functional and divisional chains of command simultaneously • Violates the unity of command concept.

  15. Matrix Structure - Why? • To get the advantages of both Functional and Divisional Structures • Sophisticated technology, fast-changing environment • Diverseproducts and geographical areas

  16. Disadvantages of Matrix • Many meetings to coordinate activities • High conflict between two sides of matrix • Need for extensive human relations training

  17. Team Approach • Cross-functional teams (Clusters)consist of employees from various functional departments • Teams typically have more decision making power than previously held by workers at their levels.

  18. Team Approach • Advantages • Quicker response time • Better morale • Reduced administrative overhead • Disadvantages • Conflict • Time and resources spent on meetings

  19. Network (Virtual) Approach • Organization divides major functions among separate companies brokered by a small headquarters organization • Somewhat like a functional organization.

  20. Network Approach • Advantages • Increases competitiveness, especially of small firms • Flexibility • Reduced Costs • Disadvantages • No hands-on control • Loyalty weakened.

  21. Mechanistic vs. Organic Organizations • Vertical vs. Horizontal Structural Dominance • Rigid vs. Flexible • Specialized Jobs vs. Unspecialized • Boss Control vs. Self-Control • Centralized Decisions vs. Decentralized • Bureaucratic vs. Non-bureaucratic

  22. Departmentalization Types (From most Mechanistic to most Organic) • Functional • Functional with integrators, cross-functional committees, etc. • Matrix • Divisional • Team

  23. When the Mechanistic (Vertical) Approach is most Appropriate: External Environment is: Stable Growth and Innovation Goals are: Few or Nonexistent (Internal Stability) The Organization’s Size is: Large The Life Cycle Stage is: Late The Technology is: Mass Production (or involving low-level skills)

  24. Service Technology • Tends to be more Organic (Horizontal) than manufacturing • Employees have direct contact with customers • Output of the firm is intangible • Production and consumption are simultaneous

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