CHAPTER FIVE Designing Adaptive Structures

1. CHAPTER FIVEDesigning Adaptive Structures

2. What Would You Do? You are the new CEO of Microsoft… • Bill Gates is having troubleletting go of Microsoft’s control • 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?

3. Designing Organizational Structures After reading the next three sections, you should be able to: • describe the departmentalization approach to organizational structure. • explain organizational authority. • discuss the different methods for job design.

4. Functional Product Customer Geographic Matrix Departmentalization 1 1

5. Advertising Agency Sales Information Systems Accounting Human Resources Art Department Print Advertising Creative Department Radio Advertising Functional Departmentalization

6. Work done by highly skilled specialists Lowers costs through reduced duplication Communication and coordination problems are lessened Advantages Disadvantages Functional Departmentalization • Cross-department coordination can be difficult • May lead to slower decision making • Produces managers with narrow experiences 1.1

7. General Electric AircraftEngines Consumer Products ConsumerFinance TransportationSystems MedicalSystems Specialty Materials Insurance NBC Adapted from Exhibit 10.4 Product Departmentalization (Partial Listing of Products) 1.2

8. Managers specialize, but have broader experiences Easier to assess work-unit performance Decision-making is faster Advantages Disadvantages Product Departmentalization • Duplication of activities • Difficult to coordinate across departments 1.2

9. American Express Corporation Cards Travel Business Services Financial Services Classic Cards Air, Car, Hotel Reservations Expense Management Solutions Advice & Planning Lifestyle Cards Vacation &Specials Small Businesses Banking Reward Cards Worldwide Travel Offices Financial Services Brokerage (Partial Listing) Customer Departmentalization Adapted from Exhibit 10.5 1.3

10. Focuses on customer needs Products and services tailored to customer needs Advantages Disadvantages Customer Departmentalization • Duplication of resources • Difficult to coordinate across departments • Efforts to please customers may hurt the company 1.3

11. Coca-Cola Enterprises Central North America Group European Group Western North America Group Eastern North America Group Geographic Departmentalization Adapted from Exhibit 10.6 1.4

12. Responsive to the demands of different market areas Unique resources located close to the customer Advantages Disadvantages Geographic Departmentalization • Duplication of resources • Difficult to coordinate across departments 1.4

13. CitiGroup International WesternEurope Latin America Central &EasternEurope Global Consumer Country Managers in Spain, France, Ireland, etc. Global Corporate &Investment Bank Global InvestmentManagement Country Managers in China, Japan, etc. Smith Barney Adapted from Exhibit 10.7 Matrix Departmentalization 1.5

14. Efficiently manage large, complex tasks Effectively carry out large, complex tasks Advantages Disadvantages Matrix Departmentalization • Requires high levels of coordination • Conflict between bosses • Requires high levels of management skills 1.5

15. Chain ofCommand Line versusStaff Authority Delegationof Authority Degree of Centralization Organizational Authority 2

16. Chain of Command • The vertical line of authority in an organization • Clarifies who reports to whom • Unity of command • workers report to only one boss • matrix organizations violate this principle 2.1

17. Line versus Staff Authority • Line authority • the right to command immediate subordinates in the chain of command • an activity that contributes directly to profit generation • Staff authority • the right to advise but not command others • an activity that supports profit generation 2.2

18. Manager Responsibility Authority Accountability Subordinate Delegation of Authority • The assignment of direct authority and responsibility to a subordinate Adapted from Exhibit 10.8 2.3

19. 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. • Provide the resources you would provide if doing assignment yourself. • Delegate to the lowest possible level. Adapted from Exhibit 10.9 2.3

20. Degree of Centralization • Centralization of authority • primary authority is held by upper management • Decentralization • significant authority is found in lower levels of the organization • Standardization • solving problems by applying rules, procedures, and processes 2.4

21. SpecializedJobs Job Rotation, Enlargement, Enrichment JobCharacteristicsModel Job Design 3

22. Job Specialization • Breaking jobs into small tasks • Jobs are simple, easy to learn, and economical • Can lead to boredom, low satisfaction, high absenteeism, and employee turnover 3.1

23. Job Rotation, Enlargement, & Enrichment • Job Rotation • periodically moving workers from one specialized job to another • Job Enlargement • increasing the number of tasks performed by a worker • Job Enrichment • adding more tasks and authority to an employee’s job 3.2

24. Job Characteristics Model • A job redesign approach that seeks to increase employee motivation • Emphasizes internal motivation • experience work as meaningful • experience responsibility for work outcomes • knowledge of results 3.3

25. Combining Tasks Forming Natural Work Units Establishing ClientRelationships Vertically Loadingthe Job Opening Feedback Channels Job Redesign Techniques Adapted from Exhibit 10.10 3.3

26. Core Job Dimensions Personal & Work Outcomes Critical Psychological States Skill Variety Task Identity Task Significance Experience Meaningfulness of Work High Internal Work Motivation High-quality Work Performance High Satisfaction with Work Low Absenteeism & Turnover Autonomy Experience Responsibility for Outcomes of Work Feedback Knowledge of Actual Results of Work Activities Adapted from Exhibit 10.10 Job Characteristics Model 3.3

27. 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% Skill Variety 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% probability of success 70% What Really Works 3

28. 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 70% What Really Works (cont.) 3

29. 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 69% What Really Works (cont.) 3

30. 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 72% What Really Works (cont.) 3

31. 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 72% What Really Works (cont.) 3

32. Designing Organizational Processes After reading the next two sections, you should be able to: • explain the methods that companies are usingto redesign internal organizational processes(i.e., intraorganizational processes). • describe the methods that companies are using to redesign external organizational processes (i.e., interorganizational processes).

33. Reengineering Empowerment BehavioralInformality Intraorganizational Processes 4

34. Reengineering • The fundamental rethinking and radical redesign of business processes • Intended to achieve dramatic improvements in performance • Change the orientation from vertical to horizontal • Changes task interdependence 4.1

35. Reengineering and Task Interdependence Pooled Interdependence Adapted from Exhibit 10.11 4.1

36. Reengineering and Task Interdependence Sequential Interdependence More Adapted from Exhibit 10.11 4.1

37. Reengineering and Task Interdependence Reciprocal Interdependence Adapted from Exhibit 10.11 4.1

38. EmpoweringWorkers Permanently passing decision-makingauthority and responsibilities frommanagers to workers by giving themthe information and resources they need to make good decisions Empowerment • A feeling of intrinsic motivation • Workers perceive meaning in their work • Employees are capable of self-determination 4.2

39. Behavioral Informality Behavioral Formality Behavioral Informality • Spontaneity • Casualness • Interpersonal familiarity • Routine & regimen • Specific rules • Impersonal attachment 4.3

40. Modular Organizations VirtualOrganizations BoundarylessOrganizations Interorganizational Processes 5

41. Modular Organizations 5.1

42. Advantages Disadvantages Modular Organizations • can cost less to run thantraditional organizations • lets organizations focuson core competencies • loss of control from outsourcing • may reduce their competitive advantage 5.1

43. Virtual Organizations 5.2

44. Advantages Disadvantages Virtual Organizations • let companies share costs • fast and flexible • being the “best” shouldprovide better products • difficult to control the quality of partners • requires tremendous management skills 5.2