MGMT 321 Class 8 Organizing and Organizational Structure

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MGMT 321Class 8Organizing and Organizational
Structure

• Agenda
• Organizing and organizational structure
• Hint This is a good day to
• take careful notes

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Organizing and Organization Design
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Organization Design and Structure

• Key Question
• How can organizations arrange their people,
  tasks, and parts to most effectively and
  efficiently accomplish their mission and goals?

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Evolving Structure of Organizations
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Evolving Structure of Organizations
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Evolving Structure of Organizations
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Evolving Structure of Organizations
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Evolving Structure of Organizations
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Evolving Structure of Organizations

• As organizations grow, they become more complex
• Simple structures evolve into more complex
  structures as people, tasks, and business areas
  are added
• As the environment changes, organizations need to
  consider new structures that adapt to new
  environmental opportunities and challenges

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Evolving Structure of Organizations

• Organization design also is a major way managers
  have to change how the organization operates

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Changing the structure of intercollegiate
athletics

• Perceived Problem
• Intercollegiate athletics arms race is
  spiraling out of control
• Arms Race (e.g., state-of-the-art facilities)
• Rising scholarship costs
• Increasing salaries for coaches
• Title IX compliance
• Isolation of intercollegiate athletics from
  academics

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Changing the structure of intercollegiateathletic
s at Vanderbilt

• The Challenge
• For too long, college athletics has been
  segregated from the core mission of the
  university. As a result, we have created a
  culture, both on this campus and nationally, that
  is disconnected from our students, faculty, and
  other constituents, where responsibility is
  diffuse, the potential for abuse considerable and
  the costs both financial and academic
  unsustainable
• Gordon Gee, President

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Changing the structure of intercollegiateathletic
s at Vanderbilt

• Actions Taken
• Did away with the job of Director of
  Intercollegiate Athletics
• Moved Intercollegiate Athletics into a new Office
  of Student Athletics, Recreation, and Wellness
  that will also oversee club sports and the
  intramural program
• New office headed by Vice Chancellor for Student
  Life and University Affairs

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Changing the structure of intercollegiateathletic
s at Vanderbilt

• Actions Taken (cont.)
• Moved fundraising for athletics to the Office of
  Development and Alumni Relations
• Consolidated management of all sports facilities
  with recreation facilities in a new Office of
  Facilities and Conferences
• Intercollegiate athletics media relations,
  marketing, broadcasting and publications placed
  under the Division of Public Affairs
• Merged intercollegiate athletics financial and
  administrative operations with the Division of
  Student Life and University Affairs

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Changing the structure of intercollegiateathletic
s at Vanderbilt

• Question
• Do you think that changing the organizational
  structure and reporting relationships of
  intercollegiate athletics at Vanderbilt will
  solve the problems President Gee and others have
  noted?
• Why or why not?

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Vanderbilt University Campus
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Structural Change in Organizations

• One of the very first things managers can do to
  implement needed change in organizations
• Can be a powerful lever of change
• e.g., changes reporting relationships, who people
  interact with on a day-to-day basis in doing
  their jobs
• Is unlikely to solve the problems noted by the
  President of Vanderbilt, though
• different cultures
• different accountability
• unilateral disarmament in an arms race is suicide

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Intel Reorganization Old Structure(Wall Street
Journal, January 18, 2005)
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Intel Reorganization New Structure(Wall Street
Journal, January 18, 2005)
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Good Advice about Organizing

• Organize around a purpose finding the right
  organizational structure starts with a mission.
• Rudolph Giuliani
• Former Mayor of New York

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Good Advice about Organizing

• Purpose Organization design
• and structure

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Implications of Giulianis Advice

• Decisions about organizing should only be made
  once the purpose and objectives of the
  organization are known
• The particular organization form that an
  organization adopts must align with and support
  the organizations purpose and objectives

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Implications of Giulianis Advice

• If an organizations design and structure are
  dependent on the goals and strategy of the
  organization (not to mention other things like
  the environment)
• and if different organizations have different
  objectives and operate in different environments
  .
• it follows logically that there is no one best
  way to organize

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Twin Pressures in Organizations

• Differentiation
• How do we arrange the different people and tasks
  of the organization in a coherent way that
  supports the objectives the organization is
  trying to achieve?
• Integration
• How do we achieve coordination among people
  across the different parts of the organization so
  everything is aligned with overall objectives?

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Twin Pressures in OrganizationsA Graphic
Representation

• Differentiation
• Integration

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Each Approach to Organization StructureHas
Unique Advantages and Disadvantages

• Functional organization
• Divisional structure
• Matrix organization
• Hybrid models

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Functional Organization
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Functional Organization

• Advantages
• Simple, obvious, logical
• Fosters efficiency
• Can simplify executive hiring and training
• Can facilitate top management control
• People like to be around others who are similar
  to themselves
• Disadvantages
• Increases the workload of the executive to whom
  functional department heads report
• May reduce sensitivity to the customer
• Produces fewer general managers
• People in different functions are less likely to
  communicate and cooperate with each other

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Divisional Structure
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Divisional Structure

• Organizing around self-contained divisions can be
  done along any number of dimensions
• Products
• Marketing channels
• Customer segments
• Geographic markets

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Divisional Structure

• Advantages
• Product or service gets single-minded attention
  of its own general manager
• Easier to judge performance
• Develops general managers
• Reduces burden on company CEO
• Disadvantages
• Creates duplication of effort
• May diminish top managements control
• Requires managers with general management
  abilities
• Can breed compartmentalization

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Matrix Organization
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Matrix Organization

• Advantages
• Gives employees benefits of belonging to a
  permanent department
• Flexibility to have employees focus on specific
  projects, products, customers
• Disadvantages
• Can cause confusion (e.g., two bosses)
• Power struggles and conflicts (e.g., who is in
  charge?)
• Time consuming (i.e., lots more meetings)
• Excessive overhead

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Hybrid Organizations Front-end,
Back-endHewlett Packards Santa Clara Division
General Manager SCD
Controller
HRM
Front end
Back end
Timing solutions for communications customer
segment
Product generation process
Precision motion control solutions customer
segment
Order fulfillment process
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Reasons for Using a Hybrid Organization Structure

• Hierarchical considerations
• If top level departments are product-based, need
  to nest functional departments within them
• Efficiency
• Instead of multiple production departments within
  customer-segment divisions, can have one
  production department serve the needs of all
  customer segments
• Makes sense given the nature of the business and
  challenges you are facing

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What Determines an Organizations Structure?

• Primary determinant
• Objectives and purpose (Giulianis advice)
• Secondary determinants
• Environment
• Fast-changing environments require more adaptive,
  organic structures that provide flexibility vs.
  rigid structures
• Technology
• Organic structures more often found in unit and
  continuous production processes
• Logic and common sense

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Other Forms of Organizations

• Network-based organizations
• Team-based organizations
• Federal-type organizations
• Virtual organizations
• Learning organizations

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Organizing for Competitive Environments

• Twin pressures in organizations
• Differentiation
• Integration

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Differentiation and Integration

• Whatever approach you take to structuring the
  organization, it will create differences among
  people
• A key management challenge is to create
  integration across organizational boundaries
  (i.e., try to minimize differences that can get
  in the way of performance)

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The Challenge of Integration Homeland Security
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Two Approaches to Achieving Integration

• Coordination
• Boundaryless organization

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Ways to Achieve Coordination in Organizations

• Reporting relationships
• Mutual adjustment (face-to-face interaction)
• Using rules and procedures
• Standardizing (goals, skills, values)
• Divisionalize
• Staff assistants
• Liaisons
• Appoint committees and task forces
• Independent integrators
• Direct supervision use the chain of command

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United States Intelligence Community Old
Structure
President National Security Council
Director of Central Intelligence (CIA)
Air Force
Army
CIA
Coast Guard
Defense Intelligence Agency
Dept. of Energy
Homeland Security
Dept of State
Dept. of Treasury
FBI
Marine Corps
National Recon Office
National Security Agency
Navy
National Geospatial Intell. Agency
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United States Intelligence Community New
Structure
President National Security Council
Director of Intelligence
Air Force
Army
CIA
Coast Guard
Defense Intelligence Agency
Dept. of Energy
Homeland Security
Dept of State
Dept. of Treasury
FBI
Marine Corps
National Recon. Office
National Security Agency
Navy
National Geospatial Intell. Agency
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The Boundaryless Organization

• Efforts to minimize inevitable pressures toward
  differentiation to achieve greater integration
• Integration involves the movement of information,
  people, and ideas across boundaries
• Boundarylessness is an aspiration that can
  never be fully achieved (borders and
  differentiation will always exist to some degree)

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Boundaries in Organizations

• Vertical
• Layers within an organization that differentiate
  status, authority, and power defines the
  hierarchy
• Horizontal
• Boundaries that exist between functions, product
  lines, units
• External
• Boundaries between the company and the outside
  world, including suppliers, customers, and
  government agencies
• Geographic
• Boundaries that can exist when companies operate
  in different countries and geographic regions

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Some ways to make boundaries more permeable

• Vertical
• Reduce the number of levels in the hierarchy
• Reduce status differentials
• Horizontal
• Organize around processes
• External
• Bring customers and suppliers in during product
  design stage
• Geographic
• Joint venture with a foreign company

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The Boundaryless Organization at GERetailer
Financial Services

• Private Label (circa 1980)
• Part of GE Capital
• Provided private label credit card services to
  major retail chains
• In business for 50 years but only had a 3 market
  share
• Assumption that private label credit cards would
  disappear
• Mediocre performer in a declining market
• Welch tried to sell business but couldnt
• Business given to David Ekedahl to run -- he was
  told to keep it alive as long as possible without
  losing money

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The Boundaryless Organization at GERetailer
Financial Services

• Retailer Financial Services (circa 1990)
• World leader in private label credit card
  services with 26 market share
• Major clients include Macys, IKEA, Exxon, Home
  Depot, Disney
• 9th largest issuer of bank cards
• One of largest businesses in GE Capital in terms
  of employment
• 150 million in profits

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The Boundaryless Organization at GERetailer
Financial Services The Turnaround

• Redefined the business
• Who was the customer? (retailer vs. credit card
  holder)
• Redefined horizontal boundaries
• Reorganized around process of getting credit card
  operation up and running
• Brought systems people into organization to work
  along side marketing, customer service, and
  finance people
• Created cross-functional teams
• Process of setting up operations for customer
  that used to take 8 weeks now done in 1 week

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The Boundaryless Organization at GERetailer
Financial Services The Turnaround

• Redefining vertical boundaries
• Set up a hybrid organization model
• Operations involved in managing specific
  customers decentralized to field offices
• Operations requiring consistency and control
  across customers centralized at corporate
• Field offices organized around self-managing
  teams, eliminating managers
• Team members cross-trained across functions with
  responsibility for hiring/firing and policing
  performance against agreed upon standards

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The Boundaryless Organization at GERetailer
Financial Services The Turnaround

• Crossing geographic boundaries
• GE acquired credit card operations of a major UK
  retailer
• Because retailer had under-utilized processing
  capabilities, acquired additional credit card
  operations across Europe
• Recreated regional office model successful in US
  across countries in Europe with a small central
  staff

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Is the LCB a boundaryless organization?

• How is the LCB organized?
• How could the LCB be more effectively organized?

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LCB Organization Structure Circa 2004
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Challenge of Organizing the LCB

• Four major components
• Functional
• Departments Programs Centers Support
• Accounting Undergraduate Warsaw External
• Decision Sciences Major Lundquist Affairs
• Finance Minor Securities Career Center
• Management Masters Sustainable Technology
• Marketing MBA Supply Operations
• Macc Chain
• Ph.D Leadership

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Perceived Problems with the LCB Structure

• Departments dominate
• Faculty identify with their department
  (functional area of specialization) but not with
  the college, academic programs, or centers
• Limited cooperation or coordination across
  departments
• Academic programs and centers receive less
  attention from faculty and may have limited
  influence in curriculum decisions, which are
  controlled by the faculty

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Deans Proposed Organization Structure
Exper.
ExRel
Operations
Academic
Actg DSC FINL MGMT MKTG UG MAcc MBA PhD
LCE Warsaw Securities Supply Chain Career Services
Leader Ctr.
Dev Corp Rel Alumni Pubs
Budget Planning Facilities Technology
Research
Business Partners
OEMBA Ex Educ.
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Deans Proposed Organization Structure

• Governance
• Academic Council
• Ensures delivery of academic component
• Dean, ADAA, ADP, Dept. Heads, Program Directors
• Experiential Council
• Ensures delivery of experiential component
• Dean, ADAA, ADP, ADER, Center Directors, Row
  Academics, Career Services, Leadership Center

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Deans Proposed Structure

• How do you evaluate the proposed organizational
  and governance structure for the LCB?
• Does it adequately address the problems the dean
  perceived when he arrived?

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Evolving LCBs Structure (?)
Dean Associate Deans
Academic Council
Exper. Council
AD External Relations
Departments Programs
External Relations
Operations
Lundquist Entrepreneur Center
Warsaw Sports Marketing Center
Leadership Center/Other Centers
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Reinforcing the Proposed Academic Structure

• Assignment of space in the building
• How would you assign faculty to office space?
• Human resource management policies
• What could be done to change using human resource
  management policies to encourage greater
  integration across departments and identification
  with a center?
• Hiring policies
• Reward systems
• Promotion and tenure policies

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Organizational Reporting Relationships Have Both
Substantive and Symbolic Aspects

• Who should the UO Director of Intercollegiate
  Athletics report to on this campus?

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Organizational Reporting Relationships Have Both
Substantive and Symbolic Aspects
President
General Counsel
Senior Vice President and Provost
Vice President for Administration
Vice President for Advancement
Director of Intercollegiate Athletics
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Proposed Reporting Relationship
President
General Counsel
Senior Vice President and Provost
Vice President for Finance
Vice President for Advancement
Director of Intercollegiate Athletics
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Why Would the Faculty Object to this Reporting
Relationship

• The faculty object to everything, why not this?
• Symbolically, it elevates Intercollegiate
  Athletics to the same level as academics
• Less obvious The President doesnt have the time
  to provide adequate supervision but people dont
  trust the general counsel (staff) to supervise
  the Director of Intercollegiate Athletics (line
  manager)

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The Potential Compromise Solution
President
General Counsel
Retired Vice President for Administration (.25
FTE)
Senior Vice President and Provost
Vice President for Finance
Vice President for Advancement
Director of Intercollegiate Athletics
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How its is working in practice
President
General Counsel
Retired Vice President for Administration (.25
FTE)
Senior Vice President and Provost
Vice President for Finance
Vice President for Advancement
Director of Intercollegiate Athletics
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Key Take-Aways

• Organization structure should follow strategy and
  goals
• The organizations structure should align the
  different parts of the organization to accomplish
  the organizations goals
• There is no one best way to organize
• Organization structure is fluid and changes
  because of changes in organizations goals and
  environment, and in response to other changes

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Next Class

• Tuesday Management Clinic
• Case The cost center that paid its way
• Thursday May 4th
• Second Midterm Exam

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Exam Review
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In-Class Assignment

• You are free to use your own notes (but not the
  notes of others) in answering the questions on
  the in-class assignment
• This should be an individual effort and you
  should not collaborate in answering the questions
• Please be concise, clear, and to the point in
  answering the questions
• Feel free to use bullet points and/or lists if
  we have to hunt for your answer in a long
  paragraph, your answer is harder to find