Please read all instructions carefully!

ManagingOrgainzationalDesignandCulturewithnotepages0816.pptx

Home >Information Systems homework help >Please read all instructions carefully!

Management 515

Managing Organizational Structure and Culture

Definitions

Organizational Structure. Control systems, culture, and human resource systems that determine how efficiently and effectively organizational resources are used

Organizing. The process by which managers establish working relationships among employees to achieve goals

Organizational Design. The process by which managers create a specific type of organizational structure so that an organization can operate in the most effective and efficient way

Here are some definitions that are relevant for this presentation.

What Affects Organizational Structure?

Environment

Rules and Regulations

Porter’s Five Forces

Technology

Strategy

Resources

Capital

Human

What affects the structure of an organization? The principle influence is the desire of the owners. Any business endeavor can be conducted under any organizational structure; however, some are more efficient for some types of businesses.

Environment: Companies are always seeking a competitive advantage, but different is not always better. If all of you competitors are using a functional structure, you need to seriously consider the consequences of using another structure. External rules, e.g., local laws and customs, do not usually influence the structure of a business, but it does happen. For example, if you are in an industry where labor unions are common, a functional structure may be the best to accommodate unions. Review Porter’s Five Forces Model.

Technology can also influence an organization’s structure. If the costs of communications are low, management has more flexibility in design. A company might use a geographic divisional structure and locate the divisional elements in the physical location of the customer base. Interaction with other divisions can be accomplished by video teleconference.

The state of automation can also have an influence. For example, if a major capital investment, i.e., an expensive machine, can be easily reconfigured for multiple uses, a product team-oriented structure may make better use of the capital.

Strategy heavily influences design. If the business intent is to manufacture the same item over and over, then a function structure may be best. If the intent is to customize products and fill multiple niches, a project design may be best.

The available resources also influence design. If capital or talent is limited, the business may need to centralize resources, which suggests a functional design. If capital and talent are plentiful, the business may be able to spread resources around and attack multiple markets simultaneously, in which case a division or product structure may be better.

Ideal Structure

Firm’s Objectives

Stability of Environment

Available Technology

National Culture

Workforce Culture

Firm’s Size

Management Approach

Workforce Characteristics

Communication Limitations

Traditions within Firm

Firm’s Strategy

Firm’s Age

Complexity of Work

Industry Standards

It Is Really More Complex Than That

But it really is more complex than that. The firm’s objectives, strategy, size, age, traditions, and management approach have a significant influence, but so do all of these other factors. If the industy standards dictate certain manufacturing processes, those processes can dictate organizational design.

The characteristics of the workforce can also have an influence. Older workforces might be uncomfortable with high-speed, agile structures, whereas millennials find it difficult to work in a highly structured, hierarchical firm. While management should never put the wishes of the workforce ahead of the stakeholders (management can always replace a workforce), it might be prudent to consider the preferences of the workforce, if all other things are equal. A happy workforce is usually a more productive workforce.

Which Design is Best?

No one best design exists

Any business can use any design

Businesses tend to change design as they grow

Functional

Hybrid

Geographic

Matrix

Divisional

Project

Network

Market

Product

Cross Functional

No one best organizational structure exists. As stated earlier, any business can use any structure, but some may be better for the specific firm.

Firms also tend to change structures over time as they grow. A small business with few employees may be very flat with the owner managing all aspects of the firm. As the firm grows, the owner can no longer manage everything. The manager hires assistants and divides management duties in some manner. As the firm gets even bigger, the number of managers grows and the firm’s structure must change.

The three most common structures are functional, divisional, and matrix. A matrix structure can be weak, balanced, or strong.

Strong Matrix Organization Structure

In strong matrix organizations, most of the power and authority lie with the project manager. The project manager has a full time role, has a full time project management administrative staff under him, and he controls the project budget. The strong matrix structure has a lot of the characteristics of a projectized organization. Here, the functional manager will have a very limited role.

Balanced Matrix Organization Structure

In balanced matrix organizations, power and authority are shared between the functional manager and the project managers. Although, the project manager has a full time role, he will have a part time project management administrative staff under him. In this type of structure, both managers control the project budget.

Weak Matrix Organization Structure

In weak matrix organizations, the project manager will have a limited power and authority. He will have a part time role and no administrative staff will report to him. His role will be more like a coordinator or an expediter. Here, the functional manager controls the project budget. A weak matrix organization structure resembles the characteristics of a functional organization structure.

Functional Structure

Here is a simple functional structure.

Functional structures are useful for big companies. Employees within the functional structure are differentiated to perform a specialized set of tasks. For instance, the marketing department would be staffed only with marketers responsible for the marketing of the company's products.

This specialization leads to operational efficiencies where employees become specialists within their own realm of expertise.

Functional structures are often characterized by a large degree of formalization, making each function reliant on standardized ways of operating. We sometimes refer to this formalization as bureaucracy. Decision-making power is often centralized at the top of the hierarchy.

Functional organizational structures are best suited for companies producing standardized goods and services at large volumes and low cost. Functional structures are most effective for companies operating in stable environments, where customers expect a standard range of products with consistency, e.g., taste, fashion, or quality. If the environment becomes more complex and uncertain, the functional structure may not be the best suited structure for the firm, which may need to change structure to be able to cope with new challenges and uncertainties.

Organizational structures such as the divisional or matrix structure could become better for companies operating in more uncertain and complex environments, or for companies offering a broad range of products to different customer segments.

CEO

Staff

Human Resources

Manufacturing

Marketing

Logistics

Research and Development

Functional--Advantages

Personnel organized by function, e.g., finance, manufacturing, marketing

Encourages learning from others in function

Centralizes expertise (mavens and grey beards)

Easier for managers to monitor and evaluate

Allows for economies of scale and work sharing

Allows for tailoring functions to exploit a competitive advantage

Centralization of expertise allow a few experts to provide the expertise for the entire company. These experts handle the complex tasks and train junior employees to handle the less complex tasks. This can be a cost saver for the firm.

Experts encourage organizational learning.

Some believe that centralizing functions makes it easier for managers to motivate the workforce. I disagree with this. I believe that motivation is much more complex. We will look at this topic in another lesson.

The biggest advantage of the functional design is the opportunity to take advantage of economies of scale. In manufacturing, it is almost always more efficient to make large runs instead of many smaller runs. Centralization also allows for work sharing, e.g., when one employee takes a day off, the work can be shifted to someone else to “keep the work moving.”

The workforce is usually managed by a person with experience in the specialty. Managers usually understand and can properly review work.

Workers have the opportunity to move up within their functional areas, which may give them a reason for them to stay long-term. The company gets the advantage of their expertise and company knowledge over time. Employees work with others in their field, which allows for knowledge sharing and lateral job moves to learn new skills.

Finally, centralizing expertise many allow for a company to develop industry experts in a function which may provide for a competitive advantage.

Functional--Disadvantages

Communication between departments tends to be restricted

Bureaucratic: all the way up, then down

Peer-to-peer collaboration is discouraged

Functional goals tend to supersede organizational goals

Functions become “cylinders of excellence”

Weaknesses tend to be cultural, not structural

The most typical problem with a functional organizational structure is however that communication within the company can be rather rigid, making the organization slow and inflexible. Therefore, lateral communication between functions become very important, so that information is disseminated, not only vertically, but also horizontally within the organization.

Functional areas may have difficulties working with other functional areas. There is often a perception that they are competing with other functional areas for resources and a lack of understanding of what other areas do for the company. So, the accounting department may be upset that its request for an additional accountants is denied, while more sales people are hired.

As the company grows larger, the functional areas can become difficult to manage due to their size. They can become almost like small companies on their own, with their own cultures, facilities, and management methods. An” us versus them” culture is common.

Functional areas may become distracted by their own goals and focus on them, rather than on overall company objectives (see Agency Theory). For instance, there may be a desire by the IT department to implement a new, state-of-the-art computer system, but the overall company objectives support investment in new manufacturing machines. Since IT does not see the big picture, this investment may lead to bad feelings.

Divisional Structure

Divisions based on:

Geography

Products

Market

Here is a simple divisional structure. It is a type that groups together those employees who are responsible for a particular product type or market sector. The divisional structure of a firm tends to increase flexibility.

Divisions can be based on products, markets, or geography. For example:

Products: Frozen vegetable, frozen desserts, ice cream.

Markets: Consumer, Business-to-business, Government

Geography: Americas, Asia, Europe

CEO

Executives

Division A

Division B

Division C

Manufacturing

Marketing

Logistics

Research and Development

Manufacturing

Marketing

Logistics

Research and Development

Manufacturing

Marketing

Logistics

Research and Development

Staff

Divisional

A structure of autonomous sub-units, each with a specific customer. Each sub-unit possesses all functional elements

Product

Market, e.g., business, government, consumer

Geographic

Focus on specific customer, product, or market

Allows for specialization

Divisional managers become experts

Eliminates need for direct supervision of division heads

Can improve use of resources

Loses most advantages of functional design

Divisions work well because they allow a team to focus upon a single product or service, with a leadership structure that supports its major strategic objectives. Having its own president or vice president makes it more likely the division will receive the resources it needs from the company. Also, a division's focus allows it to build a common culture and esprit-de-corps that contributes both to higher morale and a better knowledge of the division's portfolio.

A divisional structure also has weaknesses. A company consisting of competing divisions may encourage office politics instead of sound strategic thinking. One division may act to undermine another. Divisions can bring specialization that can lead to incompatibilities. For example, Microsoft's business-software division developed Social Connector in Microsoft Office Outlook 2010 which was incompatible with SharePoint and Windows Live. The divisional structure may have contributed to a situation where products were incompatible across internal business units.

Matrix Structure

The matrix organization is a blend of the projectized and the functional organization structures. The authority of a functional manager flows vertically downwards, and the authority of the project manager flows sideways.

CEO

Products

Marketing

Logistics

Research and Development

Manufacturing

Product A

Product B

Product C

Product D

Matrix

A structure that simultaneously groups people and resources by function and product

The structure is very flexible and can respond rapidly to need for change

Each employee has two bosses

Can complicate performance evaluations (critical in pay for performance systems)

Employees can play one boss against another

Since these authorities flow downward and sideways, this structure is called the matrix organization structure. In a matrix organization, employees may report to two bosses, the first boss will be the functional manager and the other can be a project manager.

In a matrix structure, the knowledge, skill, or talent of an employee is shared between the functional department and project management team.

Working in a matrix organization can be challenging because you have a confusing role and you may have to report to two bosses. To avoid confusion and work efficiently in a matrix organization, you must be clear on your role and responsibilities and the work priorities.

The matrix organization structure exists in large and multi-project organizations where they can relocate employees whenever and wherever their services are needed. The matrix structure has the flexibility of relocating the organization’s talent. The employees are considered to be shared resources among the projects and functional units.

Product Team

Function

One

Function

Two

Function

Three

Function

Four

Function

Five

Function

Six

Product

Team

One

Product

Team

Two

Product

Team

Three

Production

A form of a divisional structure

Sometimes called a project team

A product team is a form of a matrix, except the employees are permanently assigned and report to the product team hierarchy. This eliminates dual reporting.

The disadvantage of this structure becomes evident when a project or product is finished. The firm must reassign the employees to another project or let them go. Keeping all employees becomes a constant challenge for management. New work must be phased properly to minimize unproductive time.

Definitions

Authority. Formal power to hold people accountable for their actions and to make business decisions

Hierarchy of Authority. The relative authority of each manager along the organizations hierarchy

Span of Control. The number of subordinates who report directly to a manager

Line manager. Someone with direct authority over resources or people

Staff Manager. Someone with functional expertise who advise line managers

Here are some more definitions.

Hierarchy

Tall: Three to Seven Levels

Flat: Two to Three Levels

No hard and fast rule exists. Look at two books on management and you will likely get two different answers.

In general, a tall firm is more than three levels. A flat form is three or fewer.

Flat forms usually have better communication, but we are limited by “span of control.” Each manager has a limit on the number of employees that can be effectively managed. Every manager is different, but that limit for most people is around seven. So any firm with more than 200 employees “must” have more than three levels.

As firms get taller, communication tends to be less effective. If a firm has internal policies that restrict peer-to-peer communication, messages must flow up the chain and then down the chain. Messages can become garbled, take longer to be transmitted, and are subject to filtering my management.

In very strict organizations, one branch of the tree is not allowed to communicate with another branch. This limit of communication can be unhealthy for a firm.

Authority

Centralized. Power is concentrated in one or a few individuals at the top of the hierarchy

Decentralized. Power is delegated to lower level managerial and non-managerial employees

Power. Authority to make decisions about the use or organizational resources

Responsibility. A duty or obligation to satisfactorily perform or complete a task that one must fulfill, and which has a consequent penalty for failure.

Here are some more definitions.

It is important to note that responsibility must be commensurate with authority. If you think about it, responsibility is something that we generally take on voluntarily. One might argue that parenthood imposes responsibility, but the responsibility in your job is voluntary because you can always quit your job. We get into trouble when the responsibility we accept is not paired with the same level of authority.

This happens often in project teams. Management says the project manager is “responsible” for the cost, schedule, and performance of the project, but withholds the authority to do certain things, e.g., spend money to affect schedule or performance. When these mismatches occur, trouble is almost certain.

With decentralized authority--

--Teams may begin to pursue their own goals at the expense of the larger organization.

--Can result in a lack of communication among divisions.

--May lack benefits of coordination.

Look up AGENCY THEORY. The discussion in Wikipedia is adequate.

Integrating Mechanisms

Simple

Complex

Liaisons

Task forces

Cross Functional Teams

Integrating elements

As firms get bigger, integrating mechanisms becomes necessary for effective performance.

Sub-elements of firms often exchange liaisons. These are common in government, e.g., the military will exchange liaison officer when forces from two nations are present in the same area of operations.

A business example might be the manufacturing and marketing departments exchanging one person each to give each department a better understanding of their home departments.

Task forces are small project-like teams with the charter to quickly solve some problem. The task force comprises experts from all affected elements. Once the problem is solved, the task force disbands.

Cross-functional teams are similar to task forces, except they address more enduring issues. For example, a firm might have a cross functional team that looks at employee hiring and retention. While this is usually an HR responsibility, the team might act as an advisor board to HR. The team would bring knowledge to the hiring process that would not usually exist, if HR conducted hiring alone.

Other integrating mechanisms exist for larger organizations, but we will not address them at this time.

Organizational Culture

Culture. “A pattern of basic assumptions—invented, discovered, or developed by a given group as it learns to cope with its problems of external adaptation and internal integration—that has worked well enough to be considered valid and, therefore, to be taught to new members as the correct way to perceive, think, and feel in relation to these problems” *

Ethics. Moral values, beliefs, and rules that establish the appropriate way for an organization and its members to deal with others inside and outside of the organization

Culture

Org

Ethics

Org

Structure

Members

HR Policies

* Edgar Schein, “Organizational Culture and Leadership,” 4th ed. (New York, Jossey Bass, 2010), p. 10.

The source of culture is the people. How do you change the culture? The only certain way is to fire everyone and hire a new workforce.

Management must understand the culture of the firm. People do things for reasons. We all act in our enlightened self interest. A manager cannot expect an employee to do something that would cause harm to the employee.

Members of a firm tend to develop similar views over time which may hinder their ability to adapt and respond to changes in the environment.

Employment Relationship

Can influence how well employees perform

Contributes to organizational loyalty

Influences acceptance of values and norms

HR Policies can influence:

Interpersonal policies

Hiring

Pay policy (lagging, matching, leading)

Dress codes

What policies do you face at work?

The basic code of the employer-employee relationship is the employee’s handbook. A wise firm will explain all of the policies and what is expected of the employees.

Two reasons exist for firms to have an employee handbook: 1) to ensure the employee knows the rules and 2) to defend itself in the event of a lawsuit.

What policies do you have at your work? Do you have a formal dress code? Are employees allowed to date each other. Can a manager date an employee (I hope not).

Pay policy: A firm may choose to adopt a leading (paying more than the market average), matching, or lagging (paying less than the market average) pay policy. If the firm wants to attract the best and the brightest, it will likely adopt a leading policy. If the work is non-complex and the labor force exceeds the demand for jobs, a firm might adopt a lagging policy. This would same the firm money in the short run.

In the long run, all firms tend to regress to a matching policy.

The Design Process

Start with the mission and desired outcomes

Identify individual tasks (work breakdown structure)

Associate tasks with job roles (job design)

Organize job roles into logical groupings

Decide how you want to allocate authority

Decide what coordinating mechanisms you want to use

Choose

If you were to design a firm from start, these are the steps you would generally take.

Job Design

The process by which managers decide how to divide task into specific jobs

An appropriate division of labor results in an effective and efficient workforce

A specific job role should be viewed through the lens of complexity, not quantity

Simplification. Reducing complexity of tasks to meet available workforce

Enlargement. Increasing the number or changing the complexity of tasks

Enrichment. Increasing the degree of responsibility

Responsibility: authority, power, influence, status

Note that pay rate is based on complexity of the work, not the quantity of the work.

Paths to Job Enrichment

Granting workers permission to find new or better ways of doing a job

Encouraging the development of new skills

Delegating task decision authority

Allow self-monitoring and self-measuring

Champion continuous process improvement

Cross training

Firms may find that to retain employees, the firm must give the employees opportunities to grow. One approach is through job enrichment.

The topic of job satisfaction will be addressed in the lecture on motivation.

Cautions

Simplification. Boredom

Enlargement. Overloading

Enrichment

Self inflated opinions

New titles without commensurate increases in complexity

Training does not meet a legitimate business need

If jobs are too simple, employees get bored and may leave.

If you pile too much work on one person, same thing. Again, pay is based on complexity, not volume. If you have more work, hire more people.

Some cautions about job enrichment.

--People tend to think they are more capable than they actually are. These self-inflated opinions may lead to job dissatisfaction. Management can do little to debunk these self-inflated opinions, but you must be aware of them.

--Tricks do not work. New titles without changes in responsibility to do not work to motivate workers.

--Training may be a good way to satisfy the workers’ desire for self improvement, but if the training does not meet a legitimate business purpose, it is difficult to argue the cost.