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MGT 517

Unit 4 Lecture

Unit Learning Outcomes

Unit 4

ULO 1. Describe the most common organization structures used today and understand their

strengths and weaknesses

ULO 2. Define the principles of employee involvement and describe its relationship to

performance ULO 3. Discuss and apply the principles of sociotechnical systems work design

Chapter 12 examines techno-structural interventions which are change programs focusing on

the technology and structure of organizations. Interventions aimed at structural design include

moving from more traditional ways of dividing the organization’s overall work, such as

functional, divisional, and matrix structures, to more integrative and flexible forms, such as

process, customer-centric, and network structures. Downsizing seeks to reduce costs and

bureaucracy by decreasing the size of the organization. The personnel reduction can be

accomplished through layoffs, organization redesign, and outsourcing.

Structural Design

Organization structure is concerned with how to divide the overall work into subunits and

how to coordinate these sub-units for task completion. The basic structure is shown in

Figure 12.1. Organization structures should be designed to fit with at least four factors:

(1) the environment, (2) organization size, (3) technology, and (4) organization strategy.

Organizations traditional structure themselves into one of three forms: (1) functional,

task-specialized departments, (2) self-contained divisional units, or (3) matrix structures

which combine both functional specialization and self-containment. Accelerating

environmental changes have encouraged some organizations to utilize more flexible

forms including process structures, customer-centric structures, or network-based

structures.

The Functional Structure

The functional structure is the most widely used one in the world. It is depicted in

Figure 12.2. The organization is usually divided into functional units, such as

marketing, operations, research and development, human resources, and

finance. The functional structure is based on early management theories

involving specialization, line and staff relations, span of control, authority, and

responsibility. Table 12.1 lists the advantages and disadvantages of functional

structures.

The Divisional Structure

The divisional structure represents a fundamentally different way of organizing.

Also known as a product or self-contained unit structure, it groups organizational

activities on the basis of products, services, customers, or geography. A typical

structure is shown in Figure 12.3. Table 12.2 lists the advantages and

disadvantages of the divisional structure.

The Matrix Structure

The matrix structure superimposes a lateral structure that focuses on product or

project coordination on a vertical functional structure as shown in Figure 12.4.

Every matrix organization contains three unique and critical roles: (1) the top

manager who heads and balances the dual chains of command, (2) the matrix

bosses who share subordinates, and (3) a few “two-boss” managers who report

to the two different matrix leaders and manage workers deployed to the specific

product or program. Table 12.3 reveals the advantages and disadvantages of

matrix structures. They are most important when a dual structure is needed due

to outside pressures, when the organization deals with a great deal of

information, and when there are pressures for shared resources.

The Process Structure

A relatively new logic for structuring organizations is to form multidisciplinary

teams around core processes such as product development, order fulfillment,

sales generation, and customer support. This structure is shown in Figure 12.5. It

emphasizes lateral relationships rather than vertical ones. Table 12.4 reveals the

advantages and disadvantages.

The Customer-Centric Structure

The customer-centric structure focuses subunits on the creation of solutions and

the satisfaction of key customers or customer groups. As shown in Figure 12.7,

these customer or market-facing units are supported by other units that develop

new products, manufacture components and products, and manage the supply

chain. Table 12.5 compares product-centric and customer-centric structures.

Table 12.6 shows that customer-centric structures have important strengths and

weaknesses.

The Network Structure

A network structure manages the diverse, complex, and dynamic relationships

among multiple organizations or units, each specializing in a particular business

function or task. These organizations are sometimes called shamrock

organizations, among other nicknames. The network structure is shown in Figure

12.8. There are four basic types of network structures.

• Internal market networks exist when a single organization establishes each subunit as an independent profit center that is allowed to trade in services and resources with each other as well as with the external market.

• Vertical market networks are composed of multiple organizations linked to a focal organization that coordinates the movement of resources from raw materials to end consumer.

• Intermarket networks represent alliances among a variety of organizations in different markets and is exemplified by the Japanese keiretsu, the Korean chaebol, and the Mexican grupos.

• Opportunity networks are temporary constellations of organizations brought together to pursue a single purpose.

Network structures typically have the following characteristics.

• Vertical disaggregation which refers to the breaking up of the organization’s business functions into separate organizations performing specialized work.

• Brokers who are process orchestrators who locate and assemble member organizations.

• Coordinating mechanisms which may include informal relationships, contracts, and market mechanisms.

The disadvantages and advantages of network structures are listed in Table

12.7.

Downsizing

Downsizing refers to interactions aimed at reducing the size of the organization. This is

typically accomplished by decreasing the number of employees through layoffs, attrition,

redeployment, or early retirement or by reducing the number of organizational units or

managerial levels through divestiture, outsourcing, reorganization, or delayering.

Application Stages

Table 12.8 explains three downsizing tactics. Successful downsizing

interventions tend to proceed by the following steps.

• Clarify the organization’s strategy (relevant to the downsizing)

• Assess downsizing options and make relevant choices

• Implement the changes

• Address the needs of survivors and those who leave

• Follow through with growth plans

Results of Downsizing

Empirical research on downsizing is mostly negative.

Reengineering

Reengineering is a major transformation and requires the “fundamental rethinking and

radical redesign of business processes necessary to achieve dramatic improvements in

performance.”

Application Stages

The following steps are included in most reengineering efforts.

• Prepare the organization (to understand the need for reengineering)

• Fundamentally rethink the way work gets done

• Restructure the organization around the new business processes

Results from Reengineering

The results vary widely.

Chapter 13: Organizations are increasingly turning to employee involvement (EI) to enhance the

participation, commitment, and productivity of their members. Employee involvement is a broad

term that has been referred to as empowerment, participative management, engagement, and

quality of work life, among other terms. It covers diverse approaches to gaining greater

participation in relevant workplace decisions. The major EI applications discussed in this

chapter are parallel structures, including cooperative union-management projects and quality

circles; total quality management; and high-involvement organizations.

Employee Involvement: What Is It?

EI describes a set of practices and philosophies that started with quality-of-work-life.

Engagement is another related term, which is used to refer to the outcomes of EI

interventions.

A Working Definition of Employee Involvement

EI seeks to increase members’ input into decisions that affect organization

performance and employee well-being. It can be described in terms of four key

elements that promote worker involvement.

• Power. Power includes providing people with enough authority to make work- related decisions covering various issues such as work methods, task assignments, performance outcomes, customer service, and employee selection.

• Information. Timely access to relevant information is vital to making effective decisions.

• Knowledge and skills. EI contributes to organizational effectiveness only to the extent that employees have the requisite skills and knowledge to make good decisions.

• Rewards. Both external and internal rewards can help get people involved in the organization. External rewards might include pay and promotion while internal rewards affect feelings of self-worth and accomplishment.

The Diffusion of Employee Involvement Practices

EI practices have been applied throughout the world.

How Employee Involvement Affects Productivity

Studies have found a consistent relationship between EI practices and measures

of productivity, financial performance, customer satisfaction, labor hours, and

waste rates. Figure 13.1 illustrates how EI facilitates improved productivity.

Figure 13.2 illustrates the secondary effects of EI on productivity through

employee well-being and satisfaction. Further, EI has been shown to aid in

developing organization citizenship behavior (OCB).

Employee Involvement Interventions

Three major EI interventions are parallel structures, total quality management, and high-

involvement organizations. These interventions vary in the amounts of power,

information, knowledge and skills, and rewards that are moved downward through the

organization.

Parallel Structures

Parallel structures involve employees in resolving ill-defined, complex problems

and build adaptability into bureaucratic organizations. Parallel structures are also

called collateral structures, dualistic structures, or shadow structures.

1. Application Stages The steps for implementing quality circle programs are listed below.

• Define the purpose and scope

• Form a steering committee

• Communicate with organization members

• Create forums for employee problem solving

• Address the problems and issues

• Implement and evaluate the changes

2. Results of Parallel Structure Approaches Large-sample evaluations report mixed results but case studies and

anecdotal evidence are positive.

Total Quality Management

Total quality management (TQM) represents a long-term effort to orient all of an

organization’s activities around the concept of quality. Quality is achieved when

organizational processes reliably produce products and services that meet or exceed

customer expectations. TQM is also referred to as continuous process improvement,

continuous quality, lean, and Six Sigma. The key principles of TQM were developed by

W. Edwards Deming and Joseph Juran. TQM increases workers’ knowledge and skills

through extensive training, provides relevant information to employees, pushes decision-

making power downward in the organization and ties rewards to performance. Table

13.1 lists Deming’s quality guidelines including 14 points and 7 deadly sins.

1. Application Stages

TQM is typically implemented in five major steps.

• Gain long-term senior management commitment

• Train members in quality methods

• Start quality improvement projects

• Measure progress

• Reward accomplishment

2. Results of Total Quality Management

Rigorous evaluation is difficult.

High-Involvement Organizations

High-involvement organizations (HIOs) are created by using high-involvement

work practices to create situations that support high-level of employee

participation.

1. Features of High-Involvement Organizations Table 13.2 presents a list of compatible design elements characterizing High-

Involvement Organizations (HIOs).

• Flat, lean organizational structure

• Job designs that include high levels of employee discretion, task variety, and meaningful feedback

• Open information systems that are tied to jobs or work teams

• Career systems that provide different tracks for advancement and counseling to help people choose appropriate paths

• Selection of employees for HIOs use realistic job preview

• Training employees for the necessary knowledge and skills to participate effectively in decision making

• Reward systems related to skill acquisition, gain sharing, and fringe benefits

• Personnel policies that encourage employment stability

• Physical layouts that support team structures

2. Application Factors There is no universally accepted approach to implementing the HI features

noted here.

3. Results of High-Involvement Organizations

Results of HIOs generally support its positive effects.

Chapter 14: Work design means creating jobs and work groups that generate high levels of

employee fulfillment and productivity. The chapter examines three approaches to work design.

The engineering approach focuses on efficiency and simplification, and results in traditional job

and work-group designs. Traditional jobs involve relatively routine and repetitive forms of work.

Job enrichment involves designing jobs with high levels of meaning, discretion, and knowledge

of results. Self-managed teams rely on social and technical aspects of work systems. The

chapter describes each of these work design approaches and then presents a contingency

framework for integrating the approaches.

The Engineering Approach

The engineering approach is the oldest and most prevalent approach to designing work.

It produces two kinds of work design: traditional jobs and traditional work design. It

remains an important work design intervention because its immediate cost savings and

efficiency can easily be measured, selection costs are low, and training costs are

minimized.

The Motivational Approach

The motivational approach, based mostly on the work of Herzberg and of Hackman and

Oldham, is the classic job enrichment model. Herzberg’s two-factory theory of motivation

proposed that certain attributes of work such as meaningfulness, responsibility, and

recognition serve as motivation to increase job performance and satisfaction. Other

attributes called hygiene factors, including factors like working conditions and pay, do

not motivate but rather prevent dissatisfaction. Hackman and Oldham developed a

model of job design that included five core dimensions which affect job outcomes. The

five core dimensions include skill variety, task identity, task significance, autonomy, and

feedback.

The Core Dimensions of Jobs

Figure 14.1 summarizes the Hackman and Oldham model of job design.

1. Skill Variety, Task Identity, and Task Significance These three core job characteristics influence the extent to which work is

perceived as meaningful. Skill variety refers to the number and types of skills

used to perform a particular task. The more tasks a person performs, the

more meaningful the job becomes. Task identity describes the extent to

which an individual performs a whole piece of work. Task significance

represents the impact that the work has on others. Experienced

meaningfulness is expressed as an average of these three dimensions.

2. Autonomy Autonomy refers to the amount of independence, freedom, and discretion that

the employee has to schedule and perform tasks.

3. Feedback from the Work Itself This dimension represents the information that workers receive about the

effectiveness of their work.

Individual Differences

Individual differences such as worker knowledge, growth needs, and satisfaction

can all moderate the relationships among the core dimensions, psychological

states, and outcomes.

Application Stages

The basic steps for job enrichment include the following list of tasks.

1. Making a Thorough Diagnosis Make a diagnosis of the job (possibly using the Job Diagnostic Survey) as

illustrated in Figure 14.2.

2. Forming Natural Work Units Doing so with interrelated task activities.

3. Combining Tasks To form new and larger tasks.

4. Establishing Client Relationships For workers such that feedback is possible and jobs seem more meaningful.

5. Vertical Loading Loading of the job to decrease the gap between doing the job and controlling

the job.

6. Opening Feedback Channels

Barriers to Job Enrichment

There are obstacles to significant job restructuring. These four organizational

systems constrain the implementation of job enrichment.

• Technical systems limit job enrichment by constraining the number of ways a job can be changed.

• Human resource systems can constrain job enrichment by creating formalized job descriptions that are rigidly defined and limit flexibility in changing people’s job duties.

• Control systems including budgets, production reports, and accounting practices can limit the complexity and challenge of jobs within the system.

• Supervisory systems determine to a large extent the amount of autonomy and feedback that subordinates can experience.

Results of Job Enrichment

The results of research on job enrichment suggest that people in enriched jobs

are more satisfied and motivated than those in unenriched jobs.

The Sociotechnical Systems Approach

Conceptual Background

Sociotechnical systems theory (STS) interventions are almost synonymous with

work design and employee involvement. It is based on two fundamental

premises: (1) that an organization or work unit is a combined, social-plus-

technical system, and (2) that this system is open in relation to its environment.

1. Sociotechnical System The first assumption suggests that whenever humans are organized to

perform tasks, a joint system is operating—a sociotechnical system. This

system consists of two independent but related parts: (1) the social part, and

(2) the technical part. This means that the system will produce two kinds of

outcomes: (1) products and (2) psychological consequences.

2. Environmental Relationship The second major premise is that systems are open to their environments.

The environment provides the necessary inputs of energy, raw materials, and

information.

Self-Managed Work Teams

The most prevalent application of STS is self-managed work teams. These

teams are responsible for a complete product or service or a major part of a

production process. The teams control member behavior and make decisions

about task assignments and work methods. Figure 14.3 illustrates a model of

self-managed work teams. Team functioning is affected by team task design,

team process interventions, and organizational support systems.

1. Team Task Design

2. Team Process Interventions

3. Organization Support Systems

Application Stages

STS applications generally proceed in six steps.

• Sanctioning the design effort

• Diagnosing the work system

• Generating appropriate design

• Specifying support systems

• Implementing and evaluating the work designs

• Continuing to change and improvement

Results of Self-Managed Teams

Most research shows favorable results.

Designing Work for Technical and Personal Needs

The focus of these systems on efficient performance tends to downplay the needs of the

employees. A contingency framework is provided that suggests that the three

perspectives can be integrated.

Technical Factors

Two key dimensions can affect change: (1) technical interdependence and (2)

technical uncertainty. Technical interdependence is the extent to which

cooperation among workers is required to produce a product. Technical

uncertainty is the amount of information processing and decision-making

employees must do to complete a task. Figure 14.4 shows the different types of

work designs that are most effective by showing these two characteristics in a

2*2 (high/low) matrix.

Personal-Need Factors

Two types of personal needs can influence the kinds of work designs that are

most effective: social needs and growth needs. Social needs include the desire

for significant social relationships. Growth needs include the desire for personal

accomplishment, learning, and development. Figure 14.5 shows the different

types of work designs that are effective for the combinations of social and growth

needs.

Meeting Both Technical and Personal Needs

Jointly satisfying technical and personal needs to achieve work-design success is

likely to occur only in limited circumstances.