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Fundamentals of Organization Structure (Functional, Divisional and…
Fundamentals of Organization Structure
Organizational Design Alternatives
Overall the design of organization structure indicates required work activities, reporting relationships and departmental grouping
Reporting relationships: The chain of command (who reports to who?)
Departmental grouping (see exhibit 4.5)
Multi focused grouping
Horizontal grouping
Divisional grouping
Virtual network grouping
Functional grouping
Required work activities: Departments are created to perform tasks considered important to the company
Organizational Structure
There are three key components in the definition of organizational structure (see exhibit 4.1 for a visual of organizational structure
Organization structure identifies the grouping together of individuals into departments and of departments into the total organization
Organization structure includes the design of systems to ensure effective communication, coordination and integration of efforts across departments
Organization structure designates formal reporting relationships, including the number of levels in the hierarchy and the span of control of managers and supervisors
Functional, Divisional and Geographical Designs
With divisional structure divisions can be organized according to individual products, services, products groups, major projects or programs, divisions, businesses or profit centers (see exhibit 4.8 for strengths and weaknesses)
Each region of the country may have distinct tastes and preferences. Each geographic unit includes all functions required to produce and market products or services in that region
In a functional structure activities are grouped together by common functions from the bottom to the top of the organization (see exhibit 4.6 for the strengths and weaknesses)
By using information systems, teams, direct contact etc. firms can have a functional structure with horizontal linkages
Virtual Network Structure
With a virtual network structure the firm subcontracts many or most of its major processes to separate companies and coordinates their activities from a small headquarters organization (see exhibit 4.15 for strengths and weaknesses)
Applications of Structural Design
An important job of the manager is finding the right balance between vertical control (efficiency and stability) and horizontal coordination (learning, innovation and flexibility), depending on the constantly changing needs of the organization
Symptoms of structural deficiency
Decision making is delayed or lacking in quality
The organization doesn't respond innovatively to a changing environment
Employee performance declines and goals are not being met
Too much conflict is evident
Information-Processing Perspective on Structure
Managers are always looking for the best combi of vertical co trol and horizontal collaboration, centralization and decentralization, taking advantage of communications advances to perfect interaction both vertically and horizontally
Vertical information linkages
Hierarchial referral
Rules and plans
Linkage
Vertical information systems
Horizontal information linkages
Direct contact
Task forces
Information systems
Full-time integrator
Teams
Matrix Structure
To give equal emphasis and attention to product and function, or product and geography, a matrix structure is introduced (see exhibit 4.10 for visual, see exhibit 4.11 for strengths and weaknesses)
Conditions for the matrix
Environmental pressures exists for two or more critical outputs
The environmental domain of the organization is both complex and uncertain
Pressure exists to share scarce resources across product lines
Horizontal Structure
Organizes employees around core processes. Necessary because of an intervention like total quality management or a procedure called re-engineering (redesign of a vertical organization along its horizontal workflows and processes (see exhibit 4.13 for visual, see exhibit 4.14 for strengths and weaknesses)
Characteristics
Process owners have responsibility for each core process in its entirety
The culture is one of openness, trust and collaboration, focused on continuous improvement
Self-directed teams are the bases of organizational design and performance
People on the team are given the skills, tools, motivation, and authority to make decisions central to the team's performance
Boundaries between departments are obliterated
Teams have the freedom to think creatively and respond flexibly to new challenges that arise
Customers drive the horizontal corporation
Hybrid Structure
As a practical matter, many structures in the real world doesn't exist in the pure form. Firms often combine certain structures which best fit with a particular company. This structure is called a hybrid structure