Principles of Organizational Structure by M2H14i0

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									      Principles of Organizational
                Structure
Organizational structure
• The sum of ways an
  organization divides its labor
  into distinct, coordinated tasks
• Control, coordination, and
  motivation issues


Organizational design
• Assessing the organization’s strategy and environmental
  demands and determining the appropriate organizational
  structure
      Principles of Organizational
                Structure
Organizational charts
• Illustration of relationships
   – Units
   – Lines of authority among
     supervisors and subordinates
• Illustrated by use of labeled
  boxes and connecting lines
• Structure is more complex
  than organizational charts
              Differentiation
Differentiation
• Division of tasks into subtasks that are
  performed by individuals with specialized
  skills
• Two types of differentiation:
  – Task differentiation
  – Cognitive differentiation
                        Integration
Integration
• The extent to which various parts of the organization
   interact, coordinate and cooperate with each other
• Driving forces of integration include:
   – Interdependence: degree to which each unit or each person
     depends on other units or people to accomplish a required task
       • Pooled, sequential, reciprocal
   – Uncertainty: the extent to which future input, process, and output
     factors cannot be forecast accurately
• Integration and coordination can be accomplished
  through rules, goals, and values
              Formalization
Formalization
• The official and defined structures and
  systems in decision making, communication,
  and control in an organization
   – Line of authority – who reports to whom
   – Unity of command – should only have one boss
   – Span of control – number of employees reporting to
     a given supervisor
• The greater the reliance on rules and SOPs
  the more formal the structure
 Tall Organizational Structures




Levels = 4
Span of Control = 3
Total Employees = 40



                         Adapted from Exhibit 7.4
 Flat Organizational Structures




Levels = 3
Span of Control = 7
Total Employees = 57


                         Adapted from Exhibit 7.4
             Informalization

Informal organization
• Consists of the unofficial but influential
  means of communication, decision
  making, and control
• Not noted on organizational charts
• Can vary from company to company and
  country to country
Centralization and Decentralization

Centralized
  organizations
• Restrict decision
  making to fewer
  individuals,            Decentralized
  usually at the top        organizations
  of the                  • Tend to push
  organization              decision-
                            making
                            authority down
                            to the lowest
                            level possible
                  Functional Structure
                                             CEO

                                                                                     Vice President
Vice President              Vice President             Vice President
                                                                                        Human
  Marketing                     Sales                  Manufacturing
                                                                                       Resources



                  Market
                                         East region                Purchasing                        Recruiting
                 Research




             Advertising                 South region                   Operations                     Training




             Promotion                   West Region                    Logistics                Compensation



                                                                                            Adapted from Exhibit 7.6
            Functional Structure

Strengths
• Small- to medium-sized firms with limited product
  diversification
• Specialization of functional knowledge
• Less duplication of functional resources
• Facilitates coordination within functional areas
                       Product Structure
                                               CEO


Vice President               Vice President                Vice President                Vice President
  Product A                    Product B                     Product C                     Product D




                 Marketing                    Marketing                     Marketing                     Marketing




             Operations                       Operations                    Operations                    Operations




                  Sales                         Sales                         Sales                         Sales



                                                                                                Adapted from Exhibit 7.7
             Product Structure

Strengths
• More focus on products and customers
• Easier to evaluate performance of the product
• Product responsiveness to market changes
• Less burden on the top executive in making operating
  decisions
                  Division Structure
                                CEO

 Vice President              Vice President                  Vice President
Medical Systems                Bioscience                       Clinical



              Anesthesia                       Labware                        Vacutainer



              Hypodermic                      Cell Biology                    Diagnostics



                  Infusion                    Immunology                      Consulting



                                                                         Adapted from Exhibit 7.8
             Division Structure

Strengths
• Reduced functional duplication
• Customer focus can increase
• Cross-product coordination is eased
• Cross-regional coordination is often eased
             Customer Structure

                              CEO


Vice President             Vice President               Vice President
    Retail                    Industrial                   Military




                 Small                       Domestic                     Army




                 Midsize                    International                 Navy



                                                                     Adapted from Exhibit 7.9
            Customer Structure

Strengths
• In-depth understanding of specific customers
• Responsiveness to changes in customer
  preferences and needs
• Responsiveness to moves by competitors to
  better serve customers
             Geographical/Regional
                  Structure
                                      CEO




Vice President   Vice President   Vice President   Vice President      Vice President
North America       Europe        Southeast Asia   Latin America           Africa




                                                                Adapted from Exhibit 7.10
        Geographical/Regional
             Structure
Strengths:
• Facilitates local responsiveness
• Develops in-depth knowledge of specific
  regions/countries
• Creates accountability by region
• Facilitates cross-functional coordination within regions
       Matrix Structure

                           CEO


         Health   Beauty     Cleaning      Food

 NA

 AP

EMEA

 LA

                                        Adapted from Exhibit 7.11
             Matrix Structure

Strengths
• Information flow
• Decision quality
• Suited to a changing and complicated business
  environment
• Flexible use of human resources
         Mixed (or Hybrid) Structure
                                             CEO


                    Vice President
Vice President                          Vice President       Vice President            Vice President
                       Human
   Finance                               Operations            Product A                 Product B
                      Resources



            Marketing           Recruiting          Purchasing                Retail               Education




           Accounting            Training          Manufacturing          Industrial              Government




             Treasury         Compensation           Logistics




                                                                                       Adapted from Exhibit 7.12
       Mixed (or Hybrid) Structure
                 (cont.)
                                          CEO

Vice President           Vice President           Vice President           Vice President
North America            Latin America             Asia/Pacific                EMEA



            Marketing                Marketing                Marketing                  Marketing



           Operations                Operations               Operations                 Operations



                 Sales                    Sales                    Sales                    Sales



                                                                                 Adapted from Exhibit 7.12
        Networked Structures

Formal or informal relationships among units or
  organizations (along the firm’s value chain)

 • Low-networked:
   – Quantity and magnitude of externally networked
     activities is limited
 • High-networked:
   – Larger quantity and magnitude of externally
     networked activities
             Outsourced Structure

                   Outsourced to EDS



Support
Activities




                   Primary Activities
                                        Adapted from Exhibit 7.13
Network Structure
Designing Organizations: Environmental
     Complexity and Dynamism
     Simple            Low uncertainty      Moderate uncertainty

                 Low demands placed         Low demands placed
                     on structure to        on structure for broad
               facilitate extent or speed   coordination, high for
                     of coordination        speed of coordination


                 Moderate Uncertainty          High uncertainty

                High demands placed         High demands placed
               on structure to facilitate      on structure to
                  extent or speed of        facilitate both extent
              coordination, low demand          and speed of
                       on speed                  coordination
    Complex
              Static                                          Dynamic

                                                      Adapted from Exhibit 7.15
      Designing Organizations:
      Organizational Strategy
• Structure needs to fit strategy as well as
  environment
• No hard and fast rules for fitting structure
  to strategy
• Structure must enable strategy and and
  strategy implementation



                                     Adapted from Exhibit 7.16
International Strategy and
         Structure


 High
           Geographic             Matrix
Foreign
 Sales      Structure            Structure


  Low
          International          Worldwide
Foreign
 Sales      Division          Product Division


          Low International    High International
          Product Diversity    Product Diversity

                                       Adapted from Exhibit 7.16
      International Strategy and
               Structure
• Evolution of international Strategy and Structure
  – Export Departments
  – International Divisions
  – Advanced Global Structures
     • Geographic, product, customer, division, global matrix
• Organizing to Think Globally and Act Locally
  – Global efficiencies vs. Local responsiveness
• Integrating and Coordinating Mechanisms
  – Direct Contact
  – Liaisons
  – Teams (cross-functional)                         Adapted from Exhibit 7.16

								
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