Designing Adaptive Organizations

CHAPTER 10
 Learning Objectives
 Discuss the fundamental characteristics of organizing,
including such concepts as work specialization, chain of
command, span of management, and centralization
versus decentralization.
 Describe functional and divisional approaches to
structure.
 Explain the matrix approach to structure and its
application to both domestic and international
organizations.
 Describe the contemporary team and virtual network
structures and why they are being adopted by
organizations.

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 Learning Objectives (contd.)

 Explain why organizations need coordination

across departments and hierarchical levels, and
describe mechanisms for achieving
coordination.
 Identify how structure can be used to achieve
an organization’s strategic goals.
 Illustrate how organization structure can be
designed to fit environmental uncertainty.
 Define production technology (manufacturing,
service, and digital) and explain how it
influences organizational structure.

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 Organizing

 Organization is the deployment of resources to

achieve strategic goals.
 It is reflected in
– Division of labor into specific departments & jobs
– Formal lines of authority
– Mechanisms for coordinating diverse organizational
tasks

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 Organization Structure
Defines how tasks are divided, resources
are deployed, and departments are
coordinated

●Setof formal tasks assigned

●Formal reporting relationships
●The design of systems to ensure effective
coordination of employees across
departments

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 The Organization Chart

Visual representation
Set of formal tasks
Framework for vertical control
Formal reporting relationships

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 Work Specialization
Division of labor concept

Degree to which
 Tasks are subdivided into individual
jobs
 Employees perform only the tasks
relevant to their specialized function
 Jobs tend to be small, but they can be
performed efficiently

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 Chain of Command
 Unbroken
Unbroken line
line of
of authority
authority that
that links
links
all
all persons
persons in
in an
an organization
organization
 Shows
Shows who
who reports
reports to
to whom
whom

 Associated
Associated with
with two
two underlying
underlying
principles
principles
Unity

Unityof
ofCommand
Command
Scalar

Scalar Principle
Principle

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 Authority
Formal and
 Formal and legitimate
legitimate right
right of
of aa manager
manager to
to
make decisions
make decisions andand issue
issue orders
orders
Allocate resources
 Allocate resources toto achieve
achieve organizationally
organizationally
desired outcomes
desired outcomes
Authority is
 Authority is distinguished
distinguished byby three
three
characteristics
characteristics
Authorityisisvested
Authority
 vestedin
inorganizational
organizationalpositions,
positions,not
not
people
people
Authorityisisaccepted
Authority
 acceptedby
bysubordinates
subordinates
 Authority flows down the vertical hierarchy
 Authority flows down the vertical hierarchy

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 Responsibility
Flip side of the authority coin

 The duty to perform the task or activity an

employee has been assigned

 Managers are assigned authority commensurate

with responsibility

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 Accountability

● Mechanism through which authority and

responsibility are brought into alignment
● People are subject to reporting and
justifying task outcomes to those above
them in the chain of command
● Can be built into the organization structure

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 Delegation
●Process managers use to transfer
authority and responsibility

●Organizations encourage
managers to delegate authority to
lowest possible level

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 Line and Staff Authority

 Line Authority = individuals in

management positions have the formal
power to direct and control immediate
subordinates

 Staff Authority = granted to staff

specialists in their area of expertise

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 Span of Management/
Span of Control
 Number of employees who report to a
Number of employees who report to a
supervisor
supervisor
–– Traditional view = seven subordinates per manager
Traditional view = seven subordinates per manager
–– Lean organizations today = 30+ subordinates
Lean organizations today = 30+ subordinates

 Supervisor Involvement
Supervisor Involvement
–– must
mustbebeclosely
closelyinvolved
involvedwith
withsubordinates,
subordinates,the
the
span
spanshould
shouldbe besmall
small
–– need little involvement with subordinates, it can be
need little involvement with subordinates, it can be
large
large

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 Factors Associated With Less Supervisor
Involvement

 Work
Workisisstable
stableand
androutine
routine
 Subordinates
Subordinatesperform
performsimilar
similarwork
worktasks
tasks
 Subordinates
Subordinatesare areconcentrated
concentratedin inaasingle
single location
location
 Subordinates
Subordinatesare arehighly
highly trained
trained
 Rules
Rulesand andprocedure
proceduredefining
definingtask
taskactivities
activitiesare
are
available
available
 Support
Support systems
systemsandandpersonnel
personnelare areavailable
availableforfor the
the
manager
manager
 Little
Littletime
timeisisrequired
requiredin
innonsupervisory
nonsupervisoryactivities
activities
 Managers’
Managers’preferences
preferencesandandstyles
stylesfavor
favoraalarge
largespan
span

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 Tall versus Flat Structure
 Span of Control used in an organization
determines whether the structure is tall or flat
 Tall structure has a narrow span and more
hierarchical levels
 Flat structure has a wide span, is horizontally
dispersed and fewer hierarchical levels
 The trend has been toward wider spans of
control

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 Centralization versus Decentralization

 Centralization means that decision

authority is located near the top of the
organization.
 Decentralization means decision
authority is pushed downward to lower
organizational levels.

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 Departmentalization
The basis on which individuals are grouped into departments

 Vertical functional structure. People are grouped

together in departments by common skills.
 Divisional structure. Grouped together based on a
common product, program, or geographical region.
 Matrix structure. Functional and divisional chains of
command. Some employees report to two bosses.
 Team-based structure. Created to accomplish
specific tasks.

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 Virtual Network Structure

 An organizational structure that

disaggregates major functions to
separate companies that are brokered
by a small headquarters organization.

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 Five Approaches to Structural Design
Exhibit 10.3

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 Five Approaches to Structural Design
Slide 2

Exhibit 10.3

daft ch10 insert1.CLP

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 Vertical Functional Approach
 Grouping of positions into departments
based on similar skills, expertise, and
resource use
● Information flows up and down
● Chain of command converges at the top
● Managers and employees are compatible
because of similar training and expertise
● Rules and procedures governing duties and
responsibilities

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 Divisional Structure Advantages
 Efficient use of resources
 Skill specialization development
 Top management control
 Excellent coordination
 Quality technical problem solving

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 Divisional Structure Disadvantages

 Poor communications
 Slow response to external changes
 Decisions concentrated at top
 Pin pointing responsibility is difficult
 Limited view of organizational goals by employees

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 Matrix Advantages
 More efficient use of resources than single hierarchy
 Adaptable to changing environment
 Development of both general and specialists
management skills
 Expertise available to all divisions
 Enlarged tasks for employees

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 Dual Authority Structure in a Matrix Organization
Exhibit 10.6

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 Matrix Disadvantages

 Dual chain of command

 High conflict between two sides of matrix
 Many meetings to coordinate activities
 Need for human relations training
 Power domination by one side of matrix

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 Team Advantages
 Same advantages as functional structure
 Reduced barriers among departments
 Quicker response time
 Better morale
 Reduced administrative overhead

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 Team Disadvantages

 Dual loyalties and conflict

 Time and resources spent on
meetings
 Unplanned decentralization

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 Virtual Network Approach Advantages

 Can draw on expertise worldwide

 Work force flexibility
 Reduced administrative overhead

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 Network Approach Disadvantages
 Lack of control, weak boundaries
 Greater demands on managers
 Employee loyalty weakened

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 Task Forces, Teams, Project
Management

 Task Force = temporary team/committee

designed to solve a short-term problem
involving several departments

 Project Manager = responsible for

coordinating activities of several
departments on a full-time basis for the
completion of a specific project

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 Reengineering
 Radical redesign of business processes
to achieve dramatic improvements in
cost, quality, service, and speed
 Process = organized group of related
tasks and activities that work together to
transform inputs into outputs and create
value

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 Factors Shaping Structure

Exhibit 10.13

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