Organization Development and Change

Chapter Fourteen:
Restructuring Organizations

Thomas G. Cummings
Christopher G. Worley
 Learning Objectives
for Chapter Fourteen
• To understand the basic principles of
technostructural design
• To understand the three basic structural
choices and two advanced structural choices
available to organizations
• To understand the process of downsizing
and reengineering
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 Contingencies Influencing
Structural Design
Environment

Organization Worldwide
Size Structural Operations
Design

Organization
Technology Goals

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 Functional Organization

President

V P Research V P Operations V P Hum an V P M arketing V P Finance

Resources

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 The Functional Form
Advantages Disadvantages
• Promotes skill specialization • Emphasizes routine tasks;
• Reduces duplication of scarce encourages short time horizons
resources and uses resources • Fosters parochial perspectives
full time
by managers and limits capacity
• Enhances career development for top-management positions
for specialists within large
departments • Multiplies interdepartmental
• Facilitates communication and dependencies; increases
performance because superiors coordination and scheduling
share expertise with their difficulties
subordinates
• Obscures accountability for
• Exposes specialists to others overall results
within same specialty
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The Divisional Organization
Chief Ex ecutive
Officer

Chief Financial VP Research

Officer

Division M anager Division M anager Division M anager

Asia North Am erica E urope

VP Hum an V P Operations V P Sa les and

Resource s M arketing

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 The Divisional Form
Advantages
• Recognizes interdepartmental
interdependencies
• Fosters an orientation toward
overall outcomes and clients
• Allows diversification and
expansion of skills/training
• Ensures accountability by
departmental managers and
promotes delegation
• Heightens departmental
cohesion and involvement in
work
Disadvantages
• May use skills and resource
inefficiently
• Limits career advancement by
specialists
• Impedes specialists’ exposure
to others within same
specialties
• Puts multiple-role demands
upon people and creates stress
• May promote departmental
objectives as opposed to
overall organizational goals

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 The Matrix Organization
President
CE O

V P Finance V P Hum an R esourc es

S enior V P S enior V P
Progra m s Opera tions

V P R esea rch V P E ngineering V P M anufacturing V P M arke ting

Program M anager
Airc ra ft

Program M anager
N avigation S ystem s

Program M anager
S pac e S ystem s

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 The Matrix Structure
Advantages
• Makes specialized, functional
knowledge available to all
projects
• Use people flexibly
• Maintains consistency by
forcing communication
between managers
• Recognizes and provides
mechanisms for dealing with
legitimate, multiple sources of
power
• Can adapt to environmental
changes
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Disadvantages
• Can be difficult to implement
• Increases role ambiguity,
stress, and anxiety
• Performance is lowered
without power balancing
between projects and
functions
• Makes inconsistent demands
and can promote conflict and
short-term crisis orientation
• May reward political skills
over technical skills
14-9
 Characteristics of
Process-Based Structures
 Processes drive structure
 Work adds value
 Teams are fundamental
 Customers define performance
 Teams are rewarded for performance
 Teams are tightly linked to suppliers and
customers
 Team members are well informed and trained
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The Process-Based Structure
S enior M anagem ent T eam
C h air an d K e y S u p p o rt P roc e s s O w n e rs

Developing New Products Process

P roc es s O w n er
C ros s F u n c tion al Tea m M em b ers

Acquiring and Filling Custom er Orders Process

P roc es s O w n er
C ros s F u n c tion al Tea m M em b ers

S upporting Custom er Usage Process

P roc es s O w n er
C ros s F u n c tion al Tea m M em b ers

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 The Process-Based Form
Advantages Disadvantages
• Focuses resources on • Can threaten middle managers
customer satisfaction and staff specialists
• Improves speed and efficiency • Requires changes in
• Adapts to environmental command-and-control
change rapidly mindsets
• Reduces boundaries between • Duplicates scarce resources
departments • Requires new skills and
• Increases ability to see total knowledge to manage lateral
work flow relationships and teams
• Enhances employee • May take longer to make
involvement decisions in teams
• Lowers costs dues to overhead • Can be ineffective if wrong
processes are identified
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 The Network Organization
Designer Producer
Organizations Organizations

Broker
Organization

Supplier Distributor
Organizations Organizations

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 Types of Networks
 Internal Market Network
 Vertical Market Network
 Intermarket Network
 Opportunity Network

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 The Network-Based Form
Advantages
• Enables highly flexible and
adaptive responses
• Creates a “best of the best”
firm to focus resources on
customer and market needs
• Each organization can
leverage a distinctive
competency
• Permits rapid global
response
• Can produce “synergistic”
results
Disadvantages
• Difficulty managing lateral
relationships across
autonomous organizations
• Difficulty motivating
members to relinquish
autonomy to join network
• Sustaining membership and
benefits can be problematic
• May give partners access to
proprietary knowledge and
technology

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 The Downsizing Process

• Clarify the organization’s strategy

• Assess downsizing options and make
relevant choices
• Implement the changes
• Address the needs of survivors and those
who leave
• Follow through with growth plans
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 Downsizing Tactics
Tactic Characteristics Examples
 Reduces headcount  Attrition
Workforce  Short-term focus  Retirement/buyout
Reduction  Fosters transition  Layoffs

 Changes  Eliminate functions,

Organization organization layers, products
Redesign  Medium-term focus  Merge units
 Fosters transition &  Redesign tasks
transformation

 Changes culture  Change

Systemic  Long-term focus responsibilities
 Fosters  Foster continuous
transformation improvement
 Downsizing is normal

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 The Reengineering Process
• Prepare the organization
• Specify the organization’s strategy and
objectives
• Fundamentally rethink the way work gets done
– Identify and analyze core business processes
– Define performance objectives
– Design new processes
• Restructure the organization around the new
business processes.
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 Characteristics of
Reengineered Organizations
 Work units change from functional departments to process
teams
 Jobs change from simple tasks to multidimensional work
 People’s roles change from controlled to empowered
 The focus of performance measures and compensation
shifts from activities to results.
 Organization structures change from hierarchical to flat
 Managers change from supervisors to coaches; executives
change from scorekeepers to leaders
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