Organizational Architecture

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Organizational Architecture Powered By Docstoc
					   Brickley, Smith, and Zimmerman,
      Managerial Economics and
  Organizational Architecture, 4th ed.



Chapter 11: Organizational
       Architecture
  Organizational Architecture
          learning objectives
Students should be able to
• Define architecture and distinguish
  between markets and organizations
• Identify the determinants of architecture
   The fundamental problem
• Profit maximization may face
  information limitations
  – controlled by many individuals
  – may be costly to transfer
• Individuals may have incompatible
  incentives
• Organizational architecture must
  overcome these limitations
Components of architecture
   “three legs of the stool”
  • Decision-right assignment
    – empowering employees
  • Reward system
    – compensating employees
  • Performance-evaluation system
    – evaluating employees
Determinants of architecture
     Changing architecture
• Benefits of organizational change must
  exceed costs
• Costs
  – direct: resources for design and
    communication
  – indirect: impact on job-specific human
    capital formation
• Organizations are interdependent
  systems, change must be coordinated
          Corporate culture
• Culture is the set of explicit and implicit
  expectations of behavior within the firm
• Communicating culture
  – slogans, rituals, role models
• Architecture shapes employee
  expectations
• Architecture elements are complements
     When architecture fails
• Management is at risk of dismissal
• Firm is at risk of takeover
• Rivals are waiting to take over
    Managerial implications
• Consultant advice should be examined
  closely
  – e.g., employee empowerment may not
    always be appropriate
• Effective benchmarking requires
  architectural awareness

				
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posted:7/30/2012
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