Read Case for Analysis (page 115)

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Read Case for Analysis (page 115)

• Disadvantage to multidivisional structures?
• How did PG horizontally differentiate?
• How did PG vertically differentiate?
• What integrating mechanism did PG use?
• Why did PG centralize control?
• How will PG know if theyve centralized too
  much?

2
Discuss Current Event Homework

• Rio Tinto example
• Due February 20th.

3
Review Ch 4

• Design challenges? Balancing
• Differentiation integration
• HD vs VD.
• Integrating mechanisms
• Centralized decentralized D/M
• Advantages disadvantages to both
• Standardization mutual adjustment
• How do we standardize?
• Contrast mechanistic organic structures
• Level of differentiation, communication, D/M,
  problem solving, integrating mechanisms used,
  individual vs joint specialization, desired
  outcome, ability to change

4
Designing Organizational Structure Authority
Control

• Chapter 5

5
Why Would an Organization Want to Vertically
Differentiate?

• Division of labor specialization (HD) cause
  motivation coordination problems. Why?
• Too specialized (fraction of task)
• Subunit orientation
• It becomes difficult to measure individual
  performance contribution allocate rewards.

6
Vertical Differentiation

• How?
• 1. Increase the number of managers
• 2. Increase the levels of hierarchy
• How does this increase control?
• Direct face-to-face supervision allows managers
  to
• Monitor performance
• Motivate employees
• Lead by example
• Increase on-the-job learning
• Distribute resources rewards based on
  contributions.

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Research shows..

• 1,000 members 4 layers hierarchy
• 3,000 members 7 layers
• 10,000-100,000 members 9-10 layers
• ? Less layers flat organization
• ? More layers tall organization.

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Problems with Tall Hierarchies

• Communication
• Distorted or manipulated. Why?
• Slowed D/M
• Breakdown in control (top to bottom)
• The problem with all that?
• Motivation
• As the number of levels of hierarchy increases,
  the relative difference in authority possessed by
  managers at each level decreases
• A tall organizations managers have less
  authority area of responsibility
• Easier to pass the buck (slows D/M)
• Less motivational to subordinates.

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Continued

• Bureaucratic costs
• Managers are expensive
• Average mid level manager costs 300,000/yr
• As organization grows? of levels of hierarchy
  (managers) increases? BC increase
• Leads to downsizing restructuring. Why?
• What does the average manager want?
• Parkinsons Law
• Work expands to fill time available.

10
Remember

• Be specific on exams!
• Communication motivation BC are not
  good answers
• What about them?

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What is the Ideal Number of Levels?

• Principle of Minimum Chain of Command
• Minimum necessary to achieve goals
• Keep as flat as possible
• Only choose tall hierarchy when close supervision
  control over subordinates is needed. When?
• Value added by manager must outweigh the costs
• ----How can we avoid becoming too tall?

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Span of Control
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What Determines Span of Control?

• 1. Ability of manager to supervise higher
  numbers of subordinates n(n-1)/2
• 2. Complexity of subordinates tasks
• 3. Interrelatedness of subordinates tasks
• ?Organizations design structures (decide on SOC
  number of hierarchal levels) that enable them to
  maintain control.
• This determines the shape of an organization.
• What happens
• ? When SOC too wide?
• When SOC too narrow?

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How Can an Organization Grow w/o Becoming too
Tall?

• Horizontal differentiation
• Split into specialized subunits (functions,
  departments, divisions) each has its own
  hierarchy
• Advantage ?
• Disadvantage ?
• Decentralize authority
• Requires less direct supervision monitoring
• Organization can remain flat/flexible (rapid
  response to E).

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Continued

• 3. Increase span of control
• 4. Standardize work activities
• How?
• Detailed rules, policies, SOPs (formalization)
• Heavy socialization to learn norms/values
• Substitution for direct supervision (makes work
  activities predictable)
• Managers can delegate more responsibility
• Reduces need for managers
• SOC can then be increased.

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Maturation of Organizations

• Growth
• Organic Mechanistic
• Downsize
• Organizations continually redesign structure to
  remain competitive!

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Bureaucracy Tasks authority are distributed in
a way to maximize effectiveness.

• Advantages
• Roles/responsibilities reporting relationships
  clearly defined (reduces role conflict role
  ambiguity)
• Accountability (strict rules chain of command)
• Rules, SOPs, norms control behavior
• Separates person from position (most competent
  wins).

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Bureaucracy

• Disadvantages
• Organization very tall centralized
• D/M slows
• BC increase (Parkinsons Law)
• Increased reliance on rules, policies making
  organization less responsive to customers/SHs
  needs
• Obeying authority rules becomes more important
  than creating value for the org.

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Keep in Mind

• Anytime we redesign the formal organizational
  structure, we disrupt the informal organization
  (informal lines of communication, social
  networks, group dynamics, established norms)
  which can ultimately reduce productivity!!

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How does IT Influence Structure?

• Decentralization of authority (empowered workers
  have access to knowledge information)
• Increased use of teams
• Self-managed teams
• Cross-functional teams
• Temporary (contingent) workers to reduce costs
• 20 of US workforce today
• Software to monitor subordinates work (requires
  less direct supervision)
• Flatter organization!

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The Challenge of Designing Organizations

• Managers need to use the right blend of both
  organic mechanistic structures to take
  advantage of the best aspects of both types of
  structures.
• Case 2 Acme and Omega