Chapter Three

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Chapter Three

• Fundamentals of
• Organization Structure

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Class Structure today

• Article analysis example article
• Lecture on organizational structure
• Design and rehearse skits
• Perform skits

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Reminder Next week first article analyses due

• Turnitin.com
• Class ID 1775825
• Password Organization
• Late penalties will be incurred see syllabus
• Example

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Some tips on Article Analyses

• Remember to explain Why
• Use examples, use logic
• Be specific
• In your analyses refer specifically to the
  company
• Whats missing?
• Justify why your choice makes sense
• Remember, spelling, grammar, organization matter!

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A Sample Organization Chart
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Mechanistic Organizations

• In mechanistic organizations
• Tasks are broken down into highly specialized
  parts, and rigidly defined
• Strict hierarchy
• Centralization of knowledge and control of tasks
• A great deal of vertical communication

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Organic Organizations

• In organic organizations
• Employees contribute to common tasks
• Tasks are adjusted and redefined through teamwork
• Few rules, less hierarchy
• Knowledge and control of tasks are located
  anywhere in the organization
• A great deal of horizontal communication
• OT in Action An example of a decentralized
  organization

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Organization DesignEfficiency vs. Learning
Horizontal (Organic) Organization Designed for
Learning

• Horizontal structure is dominant
• Shared tasks, empowerment
• Relaxed hierarchy, few rules
• Horizontal, face-to-face communication
• Many teams and task forces
• Decentralized decision making

Dominant Structural Approach

• Vertical structure is dominant
• Specialized tasks
• Strict hierarchy, many rules
• Vertical communication and reporting systems
• Few teams, task forces or integrators
• Centralized decision making

Vertical (Mechanistic) Organization Designed for
Efficiency
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Purposes of Organization Structure

• Whos in charge?
• Who does what?
• Who communicates with whom?

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Whos In Charge?Control from the Top

• Vertical Information Linkages
• Bureaucracy
• Chain of Command

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Vertical information linkages

• Hierarchical referral
• Rules and plans
• Vertical information systems

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Bureaucracya good thing or a bad thing?

• Weber identified bureaucracy as the most
  efficient possible system of organizing because
  of
• Rules and procedures
• Specialization and division of labor
• Hierarchy of authority
• Technically qualified personnel
• Separate position and incumbent
• Written communications and records

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Some evils of bureaucracy

• Degree of authority vested in those at the top
• Rigidity
• Internally focused
• Disempowering

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Who Does What?

• Departmental groupings
• Functional
• Divisional or product, SBU
• Geographical
• Matrix or multi-focused
• Horizontal
• Each type has strengths and weaknesses

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Strengths and Weaknesses of Functional
Organization Structure

• STRENGTHS
• Allows economies of scale within functional
  departments
• Enables in-depth knowledge and skill development
• Enables organization to accomplish functional
  goals
• Is best with only one or few products

• WEAKNESSES
• Slow response time to environmental changes
• May cause decisions to pile on top, hierarchy
  overload
• Leads to poor horizontal coordination among
  departments
• Results in less innovation
• Involves restricted view of organizational goals

Source Adapted from Robert Duncan, What Is the
Right Organization Structure? Decision Tree
Analysis Provides the Answer, Organizational
Dynamics (Winter 1979) 429.
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Strengths and Weaknesses of Divisional and
Geographic Organization Structures

• STRENGTHS
• Suited to fast change in unstable environment
• Leads to client satisfaction because product
  responsibility and contact points are clear
• Involves high coordination across functions
• Allows units to adapt to differences in products,
  regions, clients
• Best in large organizations with several products
• Decentralizes decision-making

• WEAKNESSES
• Eliminates economies of scale in functional
  departments
• Leads to poor coordination across product
  lines/regions
• Eliminates in-depth competence and technical
  specialization
• Makes integration and standardization across
  product lines difficult

Source Adapted from Robert Duncan, What Is
the Right Organization Structure? Decision Tree
Analysis Provides the Answer, Organizational
Dynamics (Winter 1979) 431.
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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
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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.
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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.
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Some features of the horizontal structure

• 1. Created around cross-functional core
  processes
• 2. Self-directed teams are the basis of org
  design and performance
• 3. Process owners have responsibility for each
  core processthus providing a clear line of
  authority
• 4. People are trained sufficiently to perform a
  variety of jobs and given the authority to make
  pertinent decisions
• 5. Teams are given the freedom to think
  creatively and respond flexibly
• 6. Customers drive the process

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Strengths and Weaknesses of Horizontal Structure

• STRENGTHS
• Flexibility and rapid response to changes in
  customer needs
• Directs the attention of everyone toward the
  production and delivery of value to the customer
• Each employee has a broader view of
  organizational goals
• Promotes a focus on teamwork and
  collaborationcommon commitment to meeting
  objectives
• Improves quality of life for employees by
  offering them the opportunity to share
  responsibility, make decisions, and be
  accountable for outcomes

• WEAKNESSES
• Determining core processes to organize around is
  difficult and time-consuming
• Requires changes in culture, job design,
  management philosophy, and information and reward
  systems
• Traditional managers may balk when they have to
  give up power and authority
• Requires significant training of employees to
  work effectively in a horizontal team environment
• Can limit in-depth skill development

Sources Based on Frank Ostroff, The Horizontal
Organization What the Organization of the
Future Looks Like and How It Delivers Value to
Customers, (New York Oxford University Press,
1999) and Richard L. Daft, Organization Theory
and Design, 6th ed., (Cincinnati, Ohio
South-Western College Publishing, 1998) 253.
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Hybrid structure

• The pure types of structure rarely exist
• Most are hybrids of different kinds
• Common hybrid 1 functional and divisional
• Common hybrid 2 functional and horizontal
• OT in Action an example of a hybrid structure

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Who Communicates With Whom?

• Reporting relationships across departments
  horizontal linkages
• More coordination more costs

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Five Kinds of Horizontal Linkages

• Information Systems
• Direct Contact
• Task Forces
• Full-Time Integrators
• Teams

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What should structure fit with? Relevant
Contingencies
Sources Adapted from Jay R. Galbraith, Competing
with Flexible Lateral Organizations, 2nd ed.
(Reading, Mass. Addison-Wesley, 1994), Ch.1
Jay R. Galbraith, Organization Design (Reading,
Mass. Addison-Wesley, 1977), Ch. 1.
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Symptoms of Structural Deficiency

• Decision making is delayed or lacking in quality
• The organization does not respond innovatively to
  a changing environment
• Too much conflict from departments being at cross
  purposes is evident
• OT in Action An example of a structural
  deficiency

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Mechanistic/Organic Skits

• Each organization must stage one skit (a short
  play) either of an organic or a mechanistic
  organization
• Skits should last no more than five minutes
• Figure out in your how to design, test, and
  perform skits. What type of organization are you
  depicting? What is the central story of the
  skit? How will you depict mechanisticness or
  organicness in a clear but entertaining way?
• Be prepared to perform your skit in front of the
  class
• 3 of you will do mechanistic skits 3 will do
  organic skits
• Best skit in each category gets 0.5 bonus to OT
  in Action presentation
• You will choose which skits are best

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Timelines

• Lecture ends at
• Break until
• Prepare skits until
• At, first organic skit organizations doing
  mechanistic skits watch and vote
• At, first mechanistic skit organizations doing
  organic skits watch and vote
• Room assignments if no objections, same as last
  week and well keep those for the semester

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Order of Skits Be Ready to Go at

• Organic
• Mechanistic

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Next week OT in Action

• Ant Consulting/Bleeding Edge how the
  international context has had a negative impact
  on an organization
• Sixth Sense/LOL Enterprises a buffering role in
  an organization
• The Flock/LEquipe an interorganizational linkage