Leadership and Change

1
Leadership and Change

• Topic 4
• Changing Organisational Structures

2
Lecture Structure

• Contingencies and Definition of Organisation
  Structure
• The Rise and Fall of Bureaucratic Structures
• Organisational Design Choices
• From Functional, Divisional Geographical and
  Matrix Designs
• To Horizontal, Hybrid and Network/Modular
  Structures
• Structure Change Issues
• Re-engineering, Downsizing and Empowerment issues
• Structure Change - Rhetoric v Reality
• Extent of change?
• Summary and Conclusions

3
Contingencies and Definition of Organisation
Structure
Source Cummings and Worley (2001 149)
4
Contingencies and Definition of Organisation
Structure

• Formal reporting relationships
• Number of levels in the hierarchy
• Span of control of managers
• Departmentalization
• Grouping of departments into the total
  organization
• Design of systems to ensure effective
  communication, coordination, and integration of
  effort across departments

5
Contingencies and Definition of Organisation
Structure Information Processing and Flow

• Information-processing needs of organisations
  have influences on structure
• Organisational effectiveness linked to fit
  between information processing requirements
• Vertical linkages - control
• Horizontal linkages - coordination and
  collaboration
• The role of Integration

6
Contingencies and Definition of Organisation
Structure

• Formal structure
• that which is planned and agreed upon
• Informal structure
• the spontaneous and flexible ties among
  members, guided by feelings and personal
  interests indispensable for the operation of the
  formal, but too fluid to be entirely contained by
  it.
• (Dalton, 1959 219 quoted on Carnell, 2003)

7
The Rise and Fall of Bureaucratic Structures An
efficient system of Organising?

• Principle of a Bureaucratic Structure
• Based on Rational-legal authority
• Technically qualified personnel
• Specialization and division of labor
• Hierarchy of authority
• Rules and procedures
• Written communications and records

8
The Rise and Fall of Bureaucratic Structures
Advantages and disadvantages

• Advantages
• Ground rules laid down
• Clear understanding of roles and accountability
• Reduced cost of monitoring work of subordinates
• Written rules reduce costs of enforcement
• Stability

• Disadvantages
• Poor control of hierarchy
• Slow decision making
• Members lose sight of their main role create
  value for stakeholders
• Managers prefer status and power to pursuing
  operating efficiency

9
The Rise and Fall of Bureaucratic
StructuresEfficient Performance v The Learning
Organisation Two Organisation Design Approaches
Organizational Change in the Service
of Performance
Source Adapted from David K. Hurst, Crisis and
Renewal Meeting the Challenge of Organizational
Change (Boston, Mass. Harvard Business School)
10
Organisational Design Choices Choosing a Structure

• Required Work Activities
• Departmentalisation
• Reporting Relationships
• Departments must fit into overall hierarchy
• Departmental groupings
• Needed to allow efficient and effective outcomes

11
Organisational Design Choices Functional Structure

• Consolidating human knowledge and skills
  according to specific activities
• Provides depth of expertise
• Importance of information movement across
  functions has changed functional structure
• Strengths and weaknesses?

12
Organisational Design Choices A Typical
Organisation Chart
13
Organisational Design Choices Divisional Structure

• Division subunit consisting of collection of
  functions or departments sharing responsibility
  for producing particular product of service
• Large complex company model
• Strengths and weaknesses?

14
HBOS plc Divisional Structure
HBOS
Strategy and International
Insurance and Investment
Corporate
Retail
Treasury
Source HBOS Website
15
Organisational Design Choices Geographical
Structure Apple Computer
CEO Steve Jobs
Source www.apple.com
16
Organisational Design Choices Matrix Structure

• Multi-focused approach
• Economies of scale important sharing internal
  resources
• Used when co-operation needed between functions
  and products
• Reliant on key roles
• Top leader
• Matrix bosses
• Two-boss employee

17
Organisational Design Choices Dual-Authority
Structure in a Matrix Organization
President
Director
Design
Mfg
Marketing
Procure- ment
of Product
Vice President
Vice President
Vice President
Controller
Operations
Manager
Product
Manager A
Product
Manager B
Product
Manager C
Product
Manager D
18
Strengths and Weaknesses of Matrix Organization
Structure

• STRENGTHS
• Achieves coordination necessary to meet dual
  demands from customers
• Flexible sharing of human resources across
  products
• Suited to complex decisions and frequent changes
  in unstable environment
• Provides opportunity for both functional and
  product skill development
• Best in medium-sized organizations with multiple
  products

• WEAKNESSES
• Causes participants to experience dual authority,
  which can be frustrating and confusing
• Means participants need good interpersonal skills
  and extensive training
• Is time consuming involves frequent meetings and
  conflict resolution sessions
• Will not work unless participants understand it
  and adopt collegial rather than vertical-type
  relationships
• Requires great effort to maintain power balance

Source Adapted from Robert Duncan, What Is the
Right Organization Structure? Decision Tree
Analysis Provides the Answer,Organizational
Dynamics (Winter 1979) 429.
19
Organisational Design Choices Horizontal Structure

• Flatter / short structure
• Communication, teamwork vital for coordination of
  processes
• Decisions made at team level
• Culture implications
• Rising in Importance
• Strengths and weaknesses?

20
Organisational Design Choices A Horizontal
Structure
Sources Based on Frank Ostroff, The Horizontal
Organization, (New York Oxford University Press,
1999) John A. Byrne, The Horizontal
Corporation, Business Week, December 20, 1993,
76-81 and Thomas A. Stewart, The Search for the
Organization of Tomorrow, Fortune, May 19, 1992,
92-98.
21
Organisational Design Choices Hybrid Structure

• Using strengths from other designs
• Combine elements of functional and divisional or
  product organization at the same level of the
  hierarchy (See Sun Petroleum)
• Combine functional and horizontal design (Ford)
• Realistic scenario in many organisations today?

22
Organisational Design Choices Hybrid
StructurePart 1. Sun Petrochemical Products
President
Technology Vice President
Financial Services Vice Pres.
Human Resources Director
Chief Counsel
Chemicals Vice President
Lubricants Vice President
Fuels Vice President
Sources Based on Linda S. Ackerman, Transition
Management An In-Depth Look at Managing
Complex Change, Organizational Dynamics (Summer
1982) 46-66 and Frank Ostroff, The Horizontal
Organization, (New York Oxford University
Press, 1999), Fig. 2.1, 34.
23
Organisational Design Choices Hybrid
StructurePart 2. Ford Customer Service Division
Vice President and General Manager
Functional Structure
Human Resources
Strategy and Communication
Finance
Director and Process Owner
Teams
Teams
Parts Supply / Logistics Group
Director and Process Owner
Horizontal Structure
Teams
Teams
Vehicle Service Group
Director and Process Owner
Teams
Technical Support Group
Sources Based on Linda S. Ackerman, Transition
Management An In-Depth Look at Managing Complex
Change, Organizational Dynamics (Summer 1982)
46-66 and Frank Ostroff, The Horizontal
Organization, (New York Oxford University
Press, 1999), Fig. 2.1, 34.
24
Organisational Design Choices Modular and Network
Structures

• Networked based structure manages the
  diverse, complex, and dynamic relationships among
  multiple organisations or units, each
  specialising in a particular business function or
  task (quoted in Cummings and Worley, 2001 157)
• Four main types
• Internal Market Network
• Subunits as profit centres or business within
  the business (e.g. ABB)
• Vertical Market Network
• Multiple organisations linked to focal
  co-ordinating organisation (e.g. Nike)
• Inter-market / Dynamic loosely coupled network
• Alliances among organisations in different
  markets (e.g. Keiretsu)
• Virtual Organisation / Opportunity Network
• Temporary constellation of organisations pursuing
  a single goal

25
Organisational Design Choices Modular and Network
Organizational Structures
Call CentreFirm(India)
ProductDevelopmentFirm(France)
CoreFirm(Canada)
Public Relations Firm(U.S.A.)
Manufacturing(Malaysia)
AccountingFirm(Canada)
26
Organisational Design ChoicesNetworked structure

• Disadvantages
• Managing lateral relations across autonomous
  organisations is difficult
• Motivating member to give up autonomy to join the
  network
• Sustaining membership and benefits of remaining
  in network
• Need to share proprietary knowledge / technology
  with others

• Advantages
• Enables high flexibility
• Creates best of the best organisation focussing
  resources on customer and market needs
• Each organisation levers core competency
• Permits rapid global expansion
• Can produce synergistic results

27
Structural Change Issues Downsizing, Delayering
and Empowerment

• Downsizing
• The process by which managers streamline the
  organisation hierarchy and lay off managers and
  workers to reduce bureaucratic costs (Jones,
  2004 320)
• Dangers of Downsizing?
• Effective Downsizing (see Mirabal and DeYoung,
  2005)
• Clarify strategy and communicate effectively
• Assess downsizing options
• Helping the downsized
• Helping the survivors Avoiding Survivors
  Syndrome (Ebadan and Winstanley, 1997)

28
Structural Change Issues Downsizing, Delayering
and Empowerment

• Empowerment
• Upside of Organisational Restructuring (Kanter,
  1983)
• Promoting corporate entrepreneurship
• More sceptical view from other authors
• HRM practices (flatter structures, team working,
  autonomy on shopfloor) mean more control of
  employees (Sewell and Wilkinson, 1992 Sewell,
  2001)
• Middle managers becoming more depowered (Holden
  and Roberts, 2004)

29
Structural Change Issues Rhetoric v Reality

• Extent of change?
• Increased flexibility only at margins (Casey
  et al, 1997)
• Core and Periphery workforce a gross
  oversimplification (Hyman, 1991)
• New organisational forms exaggerated (Amin
  and Robbins, 1990)
• Complexities of change in Education sector
  (Powell, 2002)
• Confusion about extent of change in structures
  (Asch and Salaman, 2002)

30
Structural Change Issues Rhetoric v Reality

• Ogbonna and Harris (2003) leisure organisation
  case study Evidence of changing structure
• Less formalisation decentralised decision
  making lack of hierarchical arrangement high
  degree of empowerment (organic wheel of
  fortune)
• Perceived benefits of change
• Turnover and Profits increase with new structure
• Qualitatively greater flexibility, teamwork and
  community-focused responsiveness throughout
  organisation,
• But
• Influence of informal organisation political
  nature of organisations many variables affect
  performance
• More empowered employees imposed self control
• Increased stress levels

31
Summary and Conclusions

• Many different design types
• Finding pure forms of each unrealistic and
  Organisation Charts can only ever be guidelines
• Importance of Horizontal and Vertical integration
  critical
• Vertical control - goals of efficiency and
  stability
• Horizontal coordination - learning, innovation,
  and flexibility
• Structural Inefficiency
• Poor decision making Organisation response
  Conflict
• Continuing and Evolving Debate surrounding
  structural change

32
The Relationship of Structure to Organisations
Need for Efficiency vs. Learning
Horizontal Structure
Matrix Structure
Divisional Structure
Functional with cross-functional teams,
integrators
Functional Structure
Modular Structure

• Horizontal
• Coordination
• Learning
• Innovation
• Flexibility

Dominant Structural Approach

• Vertical
• Control
• Efficiency
• Stability
• Reliability

33
References and Reading

• Amin, A. and Robbins, K. (1990) The re-emergence
  of Regional Economies? The mythical Geography of
  Flexible Accumulation, Environment and Planning
  D Society and Space, 8 7-34.
• Asch, D. and Salaman, G. (2002) The Challenge of
  Change, European Business Journal, 14 (3)
  133-145
• Carnell, C.A. (2003) Managing Change in
  Organisations (4th Edition), Harlow Financial
  Times/Prentice Hall
• Casey, B., Metcalf, H. and Millward, N. (1997)
  Employers use of Flexible Labour, London Policy
  Studies Institute
• Cummings, T and Worley, C. (2001) Essentials of
  Organization Development and Change, Ohio
  Thompson Leaning
• Edaban, G. and Winstanely, D. (1997) Downsizing,
  delayering and careers The survivors
  perspective, Human Resource Management, 7(1)
  79-91.
• Holden, L. and Roberts, I. (2004) The depowerment
  of European middle managers Challenges and
  uncertainties, Journal of Managerial Psychology,
  19(3) 269-286.
• Hyman, R. (1991) Plus ca Change? The Theory of
  Production and Production Theory, in Pollert, A.
  (ed) Farewell to Flexibility? Oxford Blackwell.
• Jones, G.J. (2001) Organizational Theory Text
  and Cases, Prentice Hall, New Jersey.
• Kanter, R. M. (1983) The Change Masters,
  London Unwin.
• Mirabal,N. and DeYoung, R. (2005) Downsizing as
  a Strategic Intervention Journal of American
  Academy of Business, 6 (1) 39-46
• Ogbonna, E. and Harris, L. (2003) Innovative
  organizational structures and performance A case
  study of structural transformation to "groovy
  community centers, Journal of Organizational
  Change Management, 16 (5) 512- 544
• Powell, L (2002) Shedding a tier Flattening
  organisational structures and employee
  empowerment The International Journal of
  Education Management, 16 (1) 54-60
• Sewell, G. and Wilkinson, B. (1992) Empowerment
  or Emasculation? Shop floor Surveillance in a
  Total Quality Organisation, in, Blyton, P. and
  Turnbull, P. Reassessing Human Resource
  Management, London Sage.
• Sewell, G. (2001) What goes around comes around
  inventing a mythology of teamwork and
  empowerment, Journal of Applied Behavioral
  Science, 37 (1) 70-89.