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Organizational Design

Organizational Design. Slides are Courtesy of Professor Joe Labianca. Organization Charts. Example Org Chart: Cox Communications (Metro Newspaper Structure). Publisher. GM. Finance. HR. Advertising. Controller. IT. Production. What do organization charts tell us?. Basic Information

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Organizational Design

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  1. Organizational Design Slides are Courtesy of Professor Joe Labianca

  2. Organization Charts

  3. Example Org Chart: Cox Communications (Metro Newspaper Structure) Publisher GM Finance HR Advertising Controller IT Production

  4. What do organization charts tell us? Basic Information • Who reports to whom • Who has the ultimate official authority to make decisions • Which people are being asked to specialize in what areas

  5. Types of Groupings Groupings for specialization happen around two basic types of groups: • Functional groupings (e.g., Accounting, Human Resources, Marketing, Nursing) • Divisional groupings • Products or Services (e.g., Computer Hardware, Software, IT Consulting Services, Sports Medicine, Plastic Surgery) • Geographic Areas (e.g., Northern KY, Southern KY, Eastern KY) • Clientele (e.g., Educational institutions, Government, Corporate; Women’s Clinics, Sports Clinics; High Net Worth Banking)

  6. Functional vs. Divisional Grouping Structures Functional Structure CEO Sales Accounting Human Resources Divisional Structure CEO Hardware Software Consulting HR Sales Acct HR Sales Acct HR Sales Acct

  7. The Apple-Orange Company Structure (Part One) • How will you structure your company? • Functional? • Divisional? • Why do you prefer this structure? • What are the advantages? • What are the disadvantages? • List the criteria you are considering when making this decision • Are there other pieces of information you wished you had as you were making the decision? What were they?

  8. John Carl Sales Production Grow & Harvest Research Salespeople (Apples, Oranges, Pears, Broccoli, Grapes, Eggplant) Field Workers (Apples, Oranges, Pears, Broccoli, Grapes, Eggplant) Researchers (Apples, Oranges, Pears, Broccoli, Grapes, Eggplant) Possible Functional Structure for Apple-Orange

  9. Functional Structure Strengths • Enables in-depth knowledge and skill development within the functional area • (e.g., all researchers can learn from each other, regardless of what product they are currently researching) • Allows economies of scale within functional departments • (e.g., might not need as many workers or managers because of less duplication) • Very efficient; helps to minimize costs Weaknesses • Leads to poor horizontal coordination among departments • Involves restricted view of organizational goals (functional silo mentality) • May cause decisions to pile on top, creating overload at top of hierarchy • Slow response time to environmental changes • Results in less innovation • Works best when there are few products • Low in adaptability

  10. John Carl Apple Division Orange Division Pear Division Broccoli Division Grapes Division Eggplant Division Salespeople (Apples) Salespeople (Oranges) Salespeople (Pears) Salespeople (Broccoli) Salespeople (Grapes) Salespeople (Eggplant) Field Workers (Apples) Field Workers (Oranges) Field Workers (Pears) Field Workers (Broccoli) Field Workers (Grapes) Field Workers (Eggplant) Researchers (Apples) Researchers (Oranges) Researchers (Pears) Researchers (Broccoli) Researchers (Grapes) Researchers (Eggplant) Possible Divisional Structure for Apple-Orange

  11. Example Divisional Structure: IBM (pre-June 2002) CEO Software Services Global Finance Hardware HR Finance Sales IT HR Finance Sales IT HR Finance Sales IT HR Finance Sales IT

  12. Divisional Structure Strengths • Allows divisions to adapt to differences in products, geographic regions, and clients • Decentralizes decision-making • Suited to fast change in unstable environments • Best in large organizations with several products • Highly adaptable Weaknesses • Leads to poor coordination across product lines • Eliminates economies of scale in functional departments • Restricts in-depth competence and technical specialization in a functional area • Very inefficient; great deal of duplication

  13. The Apple-Orange Company Structure (Part Two) Imagine that you chose the functional grouping in Part One As the company continues to grow, the decision is made to diversify into the following products: • Pears • Eggplant • Grapes • Broccoli

  14. The Apple-Orange Company Structure (Part Two, continued) Now place yourself in the role of the Vice-President of Research. What problems do you foresee happening as the number of products proliferates? What will happen to the VP of Sales? The VP of Production?

  15. The Apple-Orange Company Structure (Part Three) Now imagine that you chose the divisional grouping in Part One. As the company continues to grow, the decision is made to diversify into the following products: • Pears • Eggplant • Grapes • Broccoli

  16. The Apple-Orange Company Structure (Part Three, continued) What problems do you foresee happening as the number of products proliferates?

  17. The Organizational Environment’s Role in Determining Structure

  18. An Organization’s Environment International Context (j) International Sector (a) Industry Sector (i) Socio-cultural Sector (b) Raw Materials Sector DOMAIN (h) Government Sector (c) Human Resources Sector ORGANIZATION (g) Economic Conditions Sector (d) Financial Resources Sector (f) Technology Sector (e) Market Sector

  19. Environmental Sectors

  20. Relationship Between Structure and Environment Functional Structure Divisional Structure • Flexibility • Change • Innovation Dominant Structural Approach • Efficiency • Reliability • Reducing Costs Simple, Stable Environments Complex, Unstable Environments Environmental Uncertainty

  21. What happens between the extremes? • Simple, stable environments = functional structures • Complex, unstable environments = divisional structures Q. What happens when you have a: • simple, but unstable environment (e.g., fashion industry)? • complex, but stable environment (e.g., universities, hospitals)? • Organizations use: • hybrid structures • matrix structures

  22. John Carl Apple Division Orange Division Pear Division Broccoli Division Grapes Division Eggplant Division Salespeople (Apples) Salespeople (Oranges) Salespeople (Pears) Salespeople (Broccoli) Salespeople (Grapes) Salespeople (Eggplant) Field Workers (Apples) FieldWorkers (Oranges) Field Workers (Pears) Field Workers (Broccoli) Field Workers (Grapes) Field Workers (Eggplant) Researchers (Apples) Researchers (Oranges) Researchers (Pears) Researchers (Broccoli) Researchers (Grapes) Researchers (Eggplant) Possible Matrix Structure for Apple-Orange VP of Sales VP of Production VP of Research

  23. Matrix Structures • Provides opportunity for both functional and product skill development • Flexible sharing of human resources across products, while still promoting efficiency goals • Team-based approach can be useful for satisfying customers’ dual concerns for innovation and cost-savings • Causes employees to experience dual authority (e.g., product manager and functional manager), which can be frustrating and confusing • Meetings, meetings, and more meetings • Is time consuming; involves frequent meetings and conflict resolution sessions • Conflict between division heads and functional dept heads is pushed down onto employees • Will not work unless participants, particularly managers, understand it and adopt collegial rather than vertical-type relationships; often requires adoption of 360 degree reviews • Means employees need good interpersonal skills and extensive training, particularly in conflict resolution • Best in medium-sized organizations with multiple products

  24. John Carl Salespeople (Apples, Oranges, Pears, Broccoli, Grapes, Eggplant) Apple Division Orange Division Pear Division Broccoli Division Grapes Division Eggplant Division Field Workers (Apples) Field Workers (Oranges) Field Workers (Pears) Field Workers (Broccoli) Field Workers (Grapes) Field Workers (Eggplant) Researchers (Apples) Researchers (Oranges) Researchers (Pears) Researchers (Broccoli) Researchers (Grapes) Researchers (Eggplant) Possible Hybrid Structure for Apple-Orange

  25. Hybrid Structures • Allows organization to balance achieving some adaptability and coordination in product divisions and some efficiency in centralized functional departments • Achieves some degree of coordination both within and between product lines • Leads to conflict between divisions and corporate departments • Has potential to favor the creation of excessive administrative overhead in the corporate departments

  26. What is the best organizational structure? • It depends • No way of grouping people is perfect • Every structure has its advantages and disadvantages

  27. What determines the choice of structure? Environmental Uncertainty Uncertainty is driven by two main factors: • Environmental complexity • the number and similarity of elements (e.g., suppliers, customers, regulators) in the organization’s environment • Environmental dynamism • the rate of change in the elements in the organization’s environment

  28. Functional Structure Product Structure Example of a Hybrid Structure: Sun Petrochemical President Chief Counsel Human Resources Director Technology Vice President Financial Services Vice Pres. Fuels Vice President Lubricants Vice President Chemicals Vice President

  29. VP Customer Care Atlanta Salt Lake City Milton IT Process & Quality Reporting & Forecasting HR & Training Sales & Mktg Matrix Example: Harland Checks’ Functional Matrix

  30. Guidance for Examination on Monday • It will, unfortunately, be closed book • Exam will cover the following topics: • Motivation • Personality and Individual Differences • Organizational Design • You can use translation software • You can use laptop (but no consulting slides or online sources when completing exam)

  31. How to Prepare for Exam I • Exam will be in-class on Monday. Questions will all be short essay questions. • You are being asked by your supervisor to provide your informed opinion about how best to identify and manage important individual differences (both visible ones, like gender and age, and less visible ones, like personality) at work. What advice would you provide and why? • You are managing a new team at work and are considering how best to motivate them. Identify any three theories of motivation we have discussed in class and explain how they could be useful to you in both conceiving and defending your approach to motivating your team. Be sure to identify both the potential advantages and disadvantages of each approach. • You have been asked to rethink the appropriate organizational design for your growing company. Which factors will you want to consider in making your decision? Which structure would you pick and why. Be sure to identity the potential advantages and disadvantages of each approach.

  32. Resources for Motivation Theories https://www.goldsmithibs.com/resources/free/Motivation/notes/Summary%20-%20Motivation.pdf

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