Ch6 of Org Behavior by Jones

47
6- Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall 1 Organizat ional Theory, Design, and Change Sixth Edition Gareth R. Jones Chapter 6 Designing Organizational Structure: Specialization and Coordination

Transcript of Ch6 of Org Behavior by Jones

8/10/2019 Ch6 of Org Behavior by Jones

http://slidepdf.com/reader/full/ch6-of-org-behavior-by-jones 1/47

6-Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall 1

Organizational Theory,Design, and Change 

Sixth Edition 

Gareth R. Jones

Chapter 6

Designing

Organizational

Structure:

Specialization and

Coordination

8/10/2019 Ch6 of Org Behavior by Jones

http://slidepdf.com/reader/full/ch6-of-org-behavior-by-jones 2/47

6-Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall 2

Learning Objectives

1. 

Explain why most organizationsinitially have a functional structureand why, over time, problems arise

with this structure that require achange to a more complex structure2.  Distinguish between three kinds of

divisional structures (product,

geographic, and market)

8/10/2019 Ch6 of Org Behavior by Jones

http://slidepdf.com/reader/full/ch6-of-org-behavior-by-jones 3/47

6-Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall 3

Learning Objectives (cont.)

3. 

Discuss how the matrix and productteam structures differ, and why andwhen they are chosen to coordinate

organizational activities4. 

Identify the unique properties ofnetwork structures and the conditionsunder which they are most likely tobe selected as the design of choice

8/10/2019 Ch6 of Org Behavior by Jones

http://slidepdf.com/reader/full/ch6-of-org-behavior-by-jones 4/47

8/10/2019 Ch6 of Org Behavior by Jones

http://slidepdf.com/reader/full/ch6-of-org-behavior-by-jones 5/47

6-Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall 5

Figure 6.1: FunctionalStructure

8/10/2019 Ch6 of Org Behavior by Jones

http://slidepdf.com/reader/full/ch6-of-org-behavior-by-jones 6/47

6-Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall 6

Figure 6-1: FunctionalStructure (cont.)

8/10/2019 Ch6 of Org Behavior by Jones

http://slidepdf.com/reader/full/ch6-of-org-behavior-by-jones 7/476-Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall 7

Functional Structure: Advantages

Provides people with the opportunity tolearn from one another and becomemore specialized and productive

People who are grouped together bycommon skills can supervise oneanother and control each other’s

behavior!

 

People develop norms and values thatallow them to become more effective at

what they do

8/10/2019 Ch6 of Org Behavior by Jones

http://slidepdf.com/reader/full/ch6-of-org-behavior-by-jones 8/476-Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall 8

Control Problems in aFunctional Structure!

 

Communication Problems: as moreorganizational functions develop, each withtheir own hierarchy, they become increasinglydistant from one another

Measurement Problems: information neededto measure the profitability of any functionalgroup is difficult to obtain

! Location Problems: an organization must

balance the need for centralized decisionmaking and the need to decentralize regionaloperations

8/10/2019 Ch6 of Org Behavior by Jones

http://slidepdf.com/reader/full/ch6-of-org-behavior-by-jones 9/476-Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall 9

Control Problems in aFunctional Structure (cont.)

Customer Problems: the ability toidentify and satisfy customer needsmay fall short and sales are lost

Strategic Problems: top managersspend too much time finding ways toimprove coordination that they have

not time to address the longer term

8/10/2019 Ch6 of Org Behavior by Jones

http://slidepdf.com/reader/full/ch6-of-org-behavior-by-jones 10/476-Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall 10

Solving the Control Problem

Managers can solve control problemsby redesigning the functional structureto increase integration between

functions

8/10/2019 Ch6 of Org Behavior by Jones

http://slidepdf.com/reader/full/ch6-of-org-behavior-by-jones 11/476-Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall 11

Figure 6.2: Improving Integration in a FunctionalStructure by Combining Sales and Marketing

8/10/2019 Ch6 of Org Behavior by Jones

http://slidepdf.com/reader/full/ch6-of-org-behavior-by-jones 12/476-Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall 12

From Functional Structure toDivisional Structure

Functional structure is appropriate ifthe organization:!  Limits itself to producing a small number

of similar products!

  Produces those products in one or a fewlocations

!  Sells them to only one general type of

client or customer

8/10/2019 Ch6 of Org Behavior by Jones

http://slidepdf.com/reader/full/ch6-of-org-behavior-by-jones 13/476-Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall 13

From Functional Structure toDivisional Structure (cont.)

 As organizations grow, they producemore products and serve many differenttypes of customers

 A new structure is needed that will!  Increase manager’s control of individual

subunits

!  Integrate the operation of the wholecompany and ensure subunits are meetingorganizational goals

8/10/2019 Ch6 of Org Behavior by Jones

http://slidepdf.com/reader/full/ch6-of-org-behavior-by-jones 14/476-Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall

Differentiation and Integration

This more complex structure is basedon:

Increasing vertical differentiation

!  Increasing horizontal differentiation

Increasing integration

14

8/10/2019 Ch6 of Org Behavior by Jones

http://slidepdf.com/reader/full/ch6-of-org-behavior-by-jones 15/476-Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall 15

Figure 6.3: Differentiation and Integration:How Organizations Increase Control OverTheir Activities

8/10/2019 Ch6 of Org Behavior by Jones

http://slidepdf.com/reader/full/ch6-of-org-behavior-by-jones 16/476-Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall 16

Figure 6.3: Differentiationand Integration (cont.)

8/10/2019 Ch6 of Org Behavior by Jones

http://slidepdf.com/reader/full/ch6-of-org-behavior-by-jones 17/476-Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall 17

Moving to aDivisional Structure!

 

Organizations most commonly adopt thedivisional structure to solve control problemsthat arise with too many products, regions, orcustomers

The type of divisional structure depends onthe problem to be solved

! Divisional structure creates smaller, more

manageable subunits and takes the form!

  Product structure

!  Geographic structure

!  Market structure

8/10/2019 Ch6 of Org Behavior by Jones

http://slidepdf.com/reader/full/ch6-of-org-behavior-by-jones 18/47

8/10/2019 Ch6 of Org Behavior by Jones

http://slidepdf.com/reader/full/ch6-of-org-behavior-by-jones 19/476-Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall 19

Product Structure (cont.)

Product division structure: a structure inwhich a centralized set of support functionsservice the needs of a number of different

product lines! Each product division uses the services of

the central support function

! Support function is divided into product-

oriented teams who focus on the needs ofone particular product division

8/10/2019 Ch6 of Org Behavior by Jones

http://slidepdf.com/reader/full/ch6-of-org-behavior-by-jones 20/476-Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall 20

Figure 6.4: Product DivisionStructure

8/10/2019 Ch6 of Org Behavior by Jones

http://slidepdf.com/reader/full/ch6-of-org-behavior-by-jones 21/476-Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall 21

Figure 6.5: Assignment of Product-OrientedFunctional Teams to Individual Divisions

8/10/2019 Ch6 of Org Behavior by Jones

http://slidepdf.com/reader/full/ch6-of-org-behavior-by-jones 22/47

6-Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall 22

Product Structure (cont.)

Multidivisional structure: structure inwhich support functions are placed independent self-contained divisions with

its own set of support functions!

 

Corporate headquarters staff: responsible for overseeing the activities

of the managers heading each division!  Allows a company to operate in many

different businesses

Fi 6 6 M ltidi i i l

8/10/2019 Ch6 of Org Behavior by Jones

http://slidepdf.com/reader/full/ch6-of-org-behavior-by-jones 23/47

6-Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall 23

Figure 6.6: MultidivisionalStructure

Ad t f

8/10/2019 Ch6 of Org Behavior by Jones

http://slidepdf.com/reader/full/ch6-of-org-behavior-by-jones 24/47

6-Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall 24

 Advantages of aMultidivisional Structure

Increased organizational effectiveness:clear division of labor betweencorporate and divisional managers

generally increases organizationaleffectiveness

Increased control: extra control can

encourage the stronger pursuit ofinternal organizational efficiency bydivisional managers

Ad t f M ltidi i i l

8/10/2019 Ch6 of Org Behavior by Jones

http://slidepdf.com/reader/full/ch6-of-org-behavior-by-jones 25/47

6-Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall 25

 Advantages of a MultidivisionalStructure (cont.)

Profitable growth: when each division isits own profit center, individualprofitability can be clearly evaluated

Internal labor market: the most abledivisional managers are promoted tobecome corporate managers

Fig e 6 7 M ltidi isional St ct e in

8/10/2019 Ch6 of Org Behavior by Jones

http://slidepdf.com/reader/full/ch6-of-org-behavior-by-jones 26/47

6-Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall 26

Figure 6.7: Multidivisional Structure inWhich Each Division Has a DifferentStructure

Di d t f

8/10/2019 Ch6 of Org Behavior by Jones

http://slidepdf.com/reader/full/ch6-of-org-behavior-by-jones 27/47

6-Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall 27

Disadvantages of aMultidivisional Structure

Managing the corporate-divisionalrelationship: finding the balancebetween centralization anddecentralization

Coordination problems betweendivisions: divisions start competing forresources and rivalry preventscooperation

Di d t f

8/10/2019 Ch6 of Org Behavior by Jones

http://slidepdf.com/reader/full/ch6-of-org-behavior-by-jones 28/47

6-Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall 28

Disadvantages of aMultidivisional Structure (cont.)

Transfer pricing: problems between divisionsoften revolve around the transfer price, i.e.,the price at which one division sells a productor information about innovations to another

division! Bureaucratic costs: multidivisional structures

are very expensive to operate

! Communication problems: tall hierarchies tend

to have communication problems, particularlythe distortion of information

8/10/2019 Ch6 of Org Behavior by Jones

http://slidepdf.com/reader/full/ch6-of-org-behavior-by-jones 29/47

6-Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall 29

Product Structure

Product team structure: specialistsfrom the support functions are createdthat specialize in the needs of particularkind of product!  Focus on the needs of one product (or client) or a

few related products

Each team is a self-contained division

headed by a product team manager

Fig e 6 8 P od ct Team

8/10/2019 Ch6 of Org Behavior by Jones

http://slidepdf.com/reader/full/ch6-of-org-behavior-by-jones 30/47

6-Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall 30

Figure 6.8: Product TeamStructure

Divisional Structure II:

8/10/2019 Ch6 of Org Behavior by Jones

http://slidepdf.com/reader/full/ch6-of-org-behavior-by-jones 31/47

6-Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall 31

Divisional Structure II:Geographic Structure

When the control problems thatcompanies experience are a function ofgeography, a geographic divisional

structure is appropriate!

 

 Allows the organization to adjust itsstructure to align its core competenceswith the needs of customers indifferent geographic regions

 Allows some functions to becentralized and others decentralized

8/10/2019 Ch6 of Org Behavior by Jones

http://slidepdf.com/reader/full/ch6-of-org-behavior-by-jones 32/47

6-Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall 32

Figure 6.9: Geographic Structure

Divisional Structure III:

8/10/2019 Ch6 of Org Behavior by Jones

http://slidepdf.com/reader/full/ch6-of-org-behavior-by-jones 33/47

6-Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall 33

Divisional Structure III:Market Structure

 A market structure aligns functionalskills and activities with the needs ofdifferent customer groups

Each customer group has a differentmarketing focus, and the job of eachgroup is to develop products to suit

the needs of its specific customers!

 

Each customer group makes use ofcentralized support function

8/10/2019 Ch6 of Org Behavior by Jones

http://slidepdf.com/reader/full/ch6-of-org-behavior-by-jones 34/47

6-Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall 34

Figure 6.11: Market Structure

8/10/2019 Ch6 of Org Behavior by Jones

http://slidepdf.com/reader/full/ch6-of-org-behavior-by-jones 35/47

6-Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall 35

Matrix Structure

Matrix structure: an organizational designthat groups people and resources in two wayssimultaneously, by function and product

!  A matrix is a rectangular grid that shows a

vertical flow of functional responsibility and ahorizontal flow of product responsibility! The members of the team are called two-

boss employees because they report to twosuperiors: the product team manager and the

functional manager! The team is the building block and principal

coordination and integration mechanism

8/10/2019 Ch6 of Org Behavior by Jones

http://slidepdf.com/reader/full/ch6-of-org-behavior-by-jones 36/47

6-Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall 36

Figure 6.12: Matrix Structure

8/10/2019 Ch6 of Org Behavior by Jones

http://slidepdf.com/reader/full/ch6-of-org-behavior-by-jones 37/47

Disadvantages of a

8/10/2019 Ch6 of Org Behavior by Jones

http://slidepdf.com/reader/full/ch6-of-org-behavior-by-jones 38/47

6-Copyright © 2010 Pearson Education, Inc. Publishing as Prentice HallCopyright 2010 Prentice Hall 38

Disadvantages of aMatrix Structure

Matrix lacks a control structure that leadsemployees to develop stable expectations ofone another

! The lack of a clearly defined hierarchy of

authority can also lead to conflict betweenfunctions and product teams over the use ofresources

! People are likely to experience a vacuum of

authority and responsibility!  People then create their own informal

organization to provide themselves with somesense of structure and stability

The M ltidi isional

8/10/2019 Ch6 of Org Behavior by Jones

http://slidepdf.com/reader/full/ch6-of-org-behavior-by-jones 39/47

6-Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall 39

The MultidivisionalMatrix Structure

Multidivisional matrix structure: astructure that provides for moreintegration between corporate and

divisional managers and betweendivisional managers

Makes it easier for top executives from

divisions and corporate headquartersto cooperate and jointly coordinateorganizational activities

Figure 6 13: Multidivisional

8/10/2019 Ch6 of Org Behavior by Jones

http://slidepdf.com/reader/full/ch6-of-org-behavior-by-jones 40/47

6-Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall 40

Figure 6.13: MultidivisionalMatrix Structure

8/10/2019 Ch6 of Org Behavior by Jones

http://slidepdf.com/reader/full/ch6-of-org-behavior-by-jones 41/47

6-Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall

Hybrid Structure

Hybrid structure: large complexorganizations that have many divisionsmake use of many different structures

Each product division’s managerselects the structure (functional,product, geographic) that best meets

the needs of their particularenvironment and strategy

41

8/10/2019 Ch6 of Org Behavior by Jones

http://slidepdf.com/reader/full/ch6-of-org-behavior-by-jones 42/47

6-Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall 42

Network Structure

Network structure: a cluster of differentorganizations whose actions are coordinatedby contracts and agreements rather thanthrough a formal hierarchy of authority

 Very complex as companies form agreementswith many suppliers, manufacturers, anddistributors

Such agreements are necessary as theorganization outsources many of the valuecreation activities involved in production andmarketing goods and services

8/10/2019 Ch6 of Org Behavior by Jones

http://slidepdf.com/reader/full/ch6-of-org-behavior-by-jones 43/47

Disadvantages of Network

8/10/2019 Ch6 of Org Behavior by Jones

http://slidepdf.com/reader/full/ch6-of-org-behavior-by-jones 44/47

6-Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall 44

Disadvantages of NetworkStructures

 A considerable level of mutualadjustment is needed to allow thegroups to interact so that they canlearn from one another and constantlyimprove the product

 Ability to control a complex value-creation process is difficult because

managers lack the means to effectivelycoordinate and motivate the variousnetwork partners

The Boundaryless

8/10/2019 Ch6 of Org Behavior by Jones

http://slidepdf.com/reader/full/ch6-of-org-behavior-by-jones 45/47

6-Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall 45

The BoundarylessOrganization

Boundaryless organization: composed of people who are linked bycomputers, faxes, CAD systems, and

video conferencing!

 

The use of outsourcing and thedevelopment of network organization

are increasing rapidly as organizationsrecognize the many opportunities theyoffer to reduce costs and increase

flexibility

8/10/2019 Ch6 of Org Behavior by Jones

http://slidepdf.com/reader/full/ch6-of-org-behavior-by-jones 46/47

6-Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall 46

E-commerce

E-commerce: trade that takes placebetween companies, and between companiesand individual customers, using IT and theInternet

Business-to-business (B2B): trade thattakes place between companies that links andcoordinates their value chains!  B2B marketplace: industry-specific trading

network connecting buyers and sellers! Business-to-customer (B2C): trade that

takes place between a company and itsnetwork of individual customers using IT and

the Internet

Figure 6 15: Types of

8/10/2019 Ch6 of Org Behavior by Jones

http://slidepdf.com/reader/full/ch6-of-org-behavior-by-jones 47/47

Figure 6.15: Types ofE-Commerce