5-10 Page Executive Summary (ESSAY) on Lecture Slides
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Chapter9.pptxChapter 9: Learning Objectives
Describe the building blocks of organizational structure
Explain when a change in structure might be necessary
List the three basic legal forms of business
Describe 3 organizational control systems
Identify the strengths and weaknesses of common management fads
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Building Blocks of Organizational Structure
Building Blocks of Organizational Structure
Creating an Organizational Structure
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Simple Structures
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An Example of a Simple Structure
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Simple Structures
Advantages of simple structure:
Flexibility offered by simple structures encourages employees’ creativity and individualism
Disadvantages of simple structure:
A lack of clear guidance from the top of the organization can create confusion for employees, undermine their motivation, and make them dissatisfied with their jobs
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Creating an Organizational Structure
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Functional Structure
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An Example of a Functional Structure
Functional Structure
Advantages of functional structure:
Each person tends to learn a great deal about their particular function
Tends to create highly-skilled specialists
Grouping everyone that serves a particular function into one department tends to keep costs low and create efficiency
Conflicts are rare
Disadvantages of functional structure:
Executing strategic changes can be very slow when compared to other structures
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Creating an Organizational Structure
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Example of a Multidivisional Structure
Multidivisional Structure
Advantages of multidivisional structure:
Allows a firm to act quickly
Helps an organization to better serve customers’ needs
Disadvantages of multidivisional structure:
Empowering divisions to act quickly can backfire if people in those divisions take actions that do not fit with the company’s overall strategy
They tend to be more costly to operate than functional structures
Creating an Organizational Structure
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Example of a Matrix Structure
Within functional and multidivisional structures, vertical linkages between bosses and subordinates are the most elements. Matrix structures, in contrast, rely heavily on horizontal relationships. In particular, these structures create cross-functional teams that each work on a different project. This offers several benefits: maximizing the organization’s flexibility, enhancing communication across functional lines, and creating a spirit of teamwork and collaboration. A matrix structure can also help develop new managers. In particular, a person without managerial experience can be put in charge of a relatively small project as a test to see whether the person has a talent for leading others.
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Matrix Structure
Advantages of matrix structure:
Maximizing the organization’s flexibility
Enhancing communication across functional lines
Creating a spirit of teamwork and collaboration
Developing new managers
Disadvantages of matrix structure:
Violates the unity of command principle because each employee is assigned multiple bosses
Potential for conflicts to arise among project managers
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Creating an Organizational Structure
Boundaryless organization: An organization that removes the usual barriers between parts of the organization as well as barriers between the organization and others
This term was created by former General Electric CEO Jack Welch
Making progress toward being boundaryless can help an organization become more flexible and responsive
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Removing Barriers for Coordination
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An illustration of how removing barriers can be valuable has its roots in a very unfortunate event. During 2005’s Hurricane Katrina, rescue efforts were hampered by a lack of coordination between responders from the National Guard (who are controlled by state governments) and from active-duty military units (who are controlled by federal authorities). According to one National Guard officer, “It was just like a solid wall was between the two entities.” [6] Efforts were needlessly duplicated in some geographic areas while attention to other areas was delayed or inadequate. For example, poor coordination caused the evacuation of thousands of people from the New Orleans Superdome to be delayed by a full day. The results were immense human suffering and numerous fatalities.
To avoid similar problems from arising in the future, barriers between the National Guard and active-duty military units are being bridged by special military officers called dual-status commanders. These individuals will be empowered to lead both types of units during a disaster recovery effort, helping to ensure that all areas receive the attention they need in a timely manner.
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Example of Boundaryless Structure
Rather than granting formal titles to certain people, leaders with W.L. Gore emerge based on performance and they attract followers to their ideas over time. As one employee noted, “We vote with our feet. If you call a meeting, and people show up, you’re a leader.”
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Eliminating all internal and external barriers is not possible, of course, but making progress toward being boundaryless can help an organization become more flexible and responsive. One example is W.L. Gore, a maker of fabrics, medical implants, industrial sealants, filtration systems, and consumer products. This firm avoids organizational charts, management layers, and supervisors despite having approximately nine thousand employees across thirty countries. Rather than granting formal titles to certain people, leaders with W.L. Gore emerge based on performance and they attract followers to their ideas over time. As one employee noted, “We vote with our feet. If you call a meeting, and people show up, you’re a leader.
http://www.gore.com/en_xx/
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Reasons for Changing an Organization’s Structure
Creating an organizational structure is not a one time activity
Executives must revisit an organization’s structure over time and make changes to it if certain danger signs arise
A structure might need to be adjusted if decisions with the organization are being made too slowly or if the organization is performing poorly.
Sometimes structures become too complex and need to be simplified
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Creating Organizational Control Systems
Organizational control systems: Allow executives to track how well the organization is performing, identify areas of concern, and then take action to address the concerns
Three basic types of control systems are available to executives:
Output
Behavioral
Clan
Different organizations emphasize different types of control, but most organizations use a mix of all three types
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In addition to creating an appropriate organizational structure, effectively executing strategy depends on the skillful use of organizational control systems. Executives create strategies to try to achieve their organization’s vision, mission, and goals. Organizational control systems allow executives to track how well the organization is performing, identify areas of concern, and then take action to address the concerns. Three basic types of control systems are available to executives: (1) output control, (2) behavioral control, and (3) clan control. Different organizations emphasize different types of control, but most organizations use a mix of all three types.
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Creating Organizational Control Systems
Output control: Control that focuses on measurable results within an organization
Behavioral control: Control that focuses on controlling the actions that ultimately lead to results
Clan control: Informal type of control that relies on shared traditions, expectations, values, and norms to lead people to work toward the good of their organization
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Output Control
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Output control focuses on measurable results within an organization. Examples from the business world include the number of hits a website receives per day, the number of microwave ovens an assembly line produces per week, and the number of vehicles a car salesman sells per month (Figure 9.6 "Output Controls"). In each of these cases, executives must decide what level of performance is acceptable, communicate expectations to the relevant employees, track whether performance meets expectations, and then make any needed changes. In an ironic example, a group of post office workers in Pensacola, Florida, were once disappointed to learn that their paychecks had been lost—by the US Postal Service! The corrective action was simple: they started receiving their pay via direct deposit rather than through the mail.
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Behavioral Control
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While output control focuses on results, behavioral control focuses on controlling the actions that ultimately lead to results. In particular, various rules and procedures are used to standardize or to dictate behavior. In most states, for example, signs are posted in restaurant bathrooms reminding employees that they must wash their hands before returning to work. The dress codes that are enforced within many organizations are another example of behavioral control. To try to prevent employee theft, many firms have a rule that requires checks to be signed by two people. And in a somewhat bizarre example, some automobile factories dictate to workers how many minutes they can spend in restrooms during their work shift.
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Clan Control
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Instead of measuring results (as in outcome control) or dictating behavior (as in behavioral control), clan control is an informal type of control. Specifically, clan control relies on shared traditions, expectations, values, and norms to lead people to work toward the good of their organization (Figure 9.8 "Clan Controls"). Clan control is often used heavily in settings where creativity is vital, such as many high-tech businesses. In these companies, output is tough to dictate, and many rules are not appropriate. The creativity of a research scientist would be likely to be stifled, for example, if she were given a quota of patents that she must meet each year (output control) or if a strict dress code were enforced (behavioral control).
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Clan Control
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As part of the team-building effort at Google, new employees are known as Noogles and are given a propeller hat to wear.
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Management fads
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The history of fads allows us to make certain predictions about today’s hot ideas, such as empowerment, “good to great,” and viral marketing. Executives who distill and act on basic lessons from these fads are likely to enjoy performance improvements. Empowerment, for example, builds on important research findings regarding employees—many workers have important insights to offer to their firms, and these workers become more engaged in their jobs when executives take their insights seriously. Relying too heavily on a fad, however, seldom turns out well.
Just as executives in the 1980s could not treat In Search of Excellence as a recipe for success, today’s executives should avoid treating James Collins’s 2001 best-selling book Good to Great: Why Some Companies Make the Leap…and Others Don’t as a detailed blueprint for running their companies. Overall, executives should understand that management fads usually contain a core truth that can help organizations improve but that a balance of output, behavioral, and clan control is needed within most organizations. As legendary author Jack Kerouac noted, “Great things are not accomplished by those who yield to trends and fads and popular opinion.”
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Legal Forms of Business
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Chapter 9: Key Takeaways
Leaders of firms, ranging from the smallest sole proprietorship to the largest global corporation, must make decisions about the delegation of authority and responsibility when organizing activities within their firms.
Deciding how to best divide labor to increase efficiency and effectiveness is often the starting point for more complex decisions that lead to the creation of formal organizational charts.
To execute strategy effectively, managers also depend on the skillful use of organizational control systems that involve output, behavioral, and clan controls.
Executives need to avoid letting their firms become “out of control” by being skeptical of management fads.
The legal form a business takes is an important decision with implications for a firm’s organizational structure.
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