ch11 : Organizational disgin

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Copyright 2005 by South-Western, a division of Thomson LearningAll rights reserved 1

Chapter 11

Organizational Design


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Learning Objectives

Describe the two fundamentals of organizing.

Explain the five aspects of an organizations

vertical design.

Describe four types of horizontal design.

Describe two methods of integration.


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Fundamentals of Organizing

The organization chart is a diagram that illustrates thereporting lines between units and people within theorganization.

The organization chart conveys four kinds ofinformation:

The boxes represent different units.

The titles in each box show the work performed by thatperson.

Reporting relationships are shown by the lines connectingsuperiors and subordinates.

Levels of the organization are indicated by the number ofvertical layers in the chart


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Organization Chart for Home Depot(adapted from Figure 11.1)

Executive

Vice President,

Chief Financial

Officer

ExecutiveVice President,

Marketing

Executive

Vice President,

Legal

Executive

Vice President,

Human

Resources

ExecutiveVice President,

Merchandising

Executive

Vice President,

Operations

Executive

Vice President,

International

Technology

Vice President,

Investor

Relations

Senior

Vice President,

CustomerService

Senior

Vice President,

Operations

President,

Western

President,

Atlantic

President,

Mexico

Senior

Vice President,

Real Estate

Chairman of

Board and CEO


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Fundamental Concepts of Organizing

Differentiation means that the organization is

composed of units that work on specialized task using

different work methods and requiring employees with

unique competencies. Division of labormeans that the work of the organization is

divided into smaller tasks.

Specialization is the process of identifying particular tasks

and assigning them to departments, teams, or divisions.

Integration means that the various units must be put

back together so that work is coordinated.


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Five Elements of Vertical Design

Hierarchy is a pyramid showingrelationships among levels.

Span of control refers to the number ofemployees directly reporting to a person.

Factors influencing span of control include:1. The competence of both the manager

and the employee.

2. The similarity or dissimilarity of tasksbeing supervised.

3. The incidence of new problems in themanagers department.

4. The extent of clear operating standardsand rules.


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Five Elements of Vertical Design (cont.)

Authority, Responsibility, and Accountability

Authority is the right to make a decision.

Responsibilityis an employees duty to perform

the assigned task.

Accountabilityis the managers expectation that

the employee will accept credit or blame for his

work.


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Delegation is the process of giving authority to a

person (or group or team) to make decisions and act in

certain situations.

Practices useful in effective delegation include: Establish goals and standard

Ensure clarity

Involvement

Expect completed work Provide training

Timely feedback


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Centralization and Decentralization Centralization is the concentration of authority at the

top of an organization or department.

Decentralization is the delegation of authority to lower

level employees or departments. Key factors affecting decision to centralization or

decentralization. Cost of decisions

Uniformity of policy

Competency levels

Control mechanisms

Environmental influences


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Horizontal Organizational Design

Functional Design

Product Design

Geographical Design Network Design


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Functional Design

Function design means grouping managers

and employees according to their areas of

expertise and the resources they use to

perform their jobs.


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Functional Design (cont.)

Potential Benefits

Supports skill specialization

Reduces duplication of

resources & increases

coordination

Enhances career development

& training within functional

area

Allows superiors and

subordinates to share common

expertise

Promotes high-quality technical

decision making

Potential Pitfalls

Inadequate communication

Conflicts over product priorities

Difficulties with interunit

coordination

Focus on departmental rather

than organizational issues and

goals

Develops managers who are

experts in a narrow field


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Copyright 2005 by South-Western, a division of Thomson Learning

All rights reserved 13

Harley-Davidson Organization Chart(adapted from Figure 11.2)

General

Counsel

CEO

Controller Manufacturing

Owners Groups(HOGS)

StrategicPlanning

Engineering HumanResources

Merchandise


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Product Design

Product design means that all functions that

contribute to a product are organized under

one manager.


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Product Design (cont.)

Potential Benefits

Permits fast changes in a

product line

Allows greater product line

visibility

Fosters a concern for customer

demand

Clearly defines responsibilities

for each product line

Develops managers who can

think across functional lines

Potential Pitfalls

Not allowing efficient

utilization of skills and

resources

Not fostering coordination ofactivities across product

Encourages politics and

conflicts in resource allocation

across product lines

Limits career mobility for

personnel outside their own

product lines


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General Dynamics Organization Chart(adapted from Figure 11.3)

Information

Systems &

Technology

Land

Systems

Chairman & ChiefExecutive Officer

Armament

Systems

Ordnance &

Tactical

Systems

Bath

Iron

Works

Electric

Boat

Combat

Systems

Marine

SystemsAerospace

Aviation

Services


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Geographical Design

Geographical design organizes activities

around location.


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Geographical Design (cont.)

Potential Benefits

Has facilities and the equipment

used for production and/or

distribution all in one place,

saving time and costs Able to develop expertise in

solving problems unique to one

location

Gaining an understanding of

customers problems anddesires

Getting production closer to

raw materials and suppliers

Potential Pitfalls

Duplication of functions, to

varying degrees, at each

regional or individual unit

location Conflict between each

location's goals and the

organization's goals

Adds levels of management and

extensive use of rules andregulations to coordinate and

ensure uniformity of quality

among locations


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Starbucks Organization Chart(adapted from Figure 11.4)

President,International

President

CEO

Thailand

VP,

Northwest

VP,

South Central

VP,

Southwest

President,

North America

President, Europe,

Middle East, Africa

President,

Japan

Senior VP,

Coffee

Executive VP,

Chief Financial Officer

Executive VP,

Partner Resources

Executive VP,

Supply Chain & Coffee

Executive VP,

Legal

Australia

United Kingdom


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Network Design

Network design subcontracts some or many

of its operations to other firms and

coordinates them to accomplish specific

goals.


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Network Design (cont.)

Potential Benefits

Ability to gain special

knowledge and skills of others

without having to hire

employees Brings together people with

different insights

Allows managers the flexibility

to work with a wide variety of

different suppliers, customers,and other organizations

Potential Pitfalls

Other organizations may fail to

live up to established deadlines

Managers must constantly

monitor the quality of workprovided by other organizations

Employees in the outsourced

organization may not commit to

the same values and sense of

time urgency to whichemployees in the networked

organization are committed


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DreamWorks SKG Network Design(adapted from Figure 11.5)

Spielberg Katzenberg Geffen

(Films) (Animation) (Music)

ComputerHardware/

Software

Agents

Makeup

Artists

Media

RelationsTalent

Scouts

Actors

Legal

Future

Games

Marketing

Technicians

Costume

Designers


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Organic Versus Mechanistic Organizations(adapted from Table 11.1)

Organic Tasks tend to be interdependent.

Tasks are continually adjusted andredefined through interaction and assituations change.

Generalized roles are accepted.

Network structure of control,authority, and communication.

Communication and decision makingare both vertical and horizontal,

depending on information andexpertise reside.

Communication emphasizes the formof mutual influence and adviceamong all levels.

Mechanistic Tasks are highly specialized.

Tasks tend to remain rigidly definedunless changed by top management.

Specific roles are prescribed for eachemployee.

Hierarchical structure of control,authority, and communication.

Communication and decision makingare primarily vertical, top-town.

Communication emphasizesdirections and decisions issued bysuperiors.


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Integration through Technology

Technology interdependence is the degree of

coordination required between individuals and

units to transform information and raw

materials into goods and services.


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Three Types of Technological Interdependence(adapted from Figure 11.6)

Input Input Input

Output

Pooled interdependence

Input Output

Sequential interdependence

Input Output Input Output

Input Output

Reciprocal interdependence

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ch11 : Organizational disgin