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BADM 310 – Exam 2 Study Guide 03/29/
Organizational Structure
Specialization & Coordination Organizational Structure: The formal framework by which job tasks are divided, grouped, and coordinated. o Two pillars: Specialization : Dividing the work up Includes jobs and departmentalization Coordination : Keeping everyone working in sync Includes horizontal & vertical mechanisms Relationship between level of specialization & amount of coordination required. Structural choices are enormously consequential Structure determines which customers, products and regions a firm can address and how well they do so An individual’s location in the structure fundamentally shapes their goals, perceptions, attributions & interests Organizational Structure is one of the “big levers” Job Design: Historical Problems with Job Design o Historically, trend was to simplify jobs (Taylorism) to increase mechanical efficiency.
o Human diseconomies arose. Jobs became boring, stressful, fatiguing, and were associated with high turnover, absenteeism, and poor quality (i.e., Chaplin). Enlargement & Enrichment o Led to: Comprehensive assessments of job design on employee productivity, motivation and satisfaction. Job Characteristics Model 5 core characteristics of jobs o Key outcomes (productivity, motivation, & satisfaction) Skill Variety - requiring a variety of activities/skills/talents Task Identity - leading to a whole, identifiable piece of work Task Significance - having substantial impact on others Autonomy - allowing substantial freedom, independence, and discretion in scheduling and performing the work Feedback - providing clear information about job performance These make jobs more intrinsically motivating
Pros: Specialize in product/service More focus, expertise, responsiveness Cons: Duplication of functions Usual suspects Customer Departmentalization o Group similar CUSTOMERS together Pros: Specialize around a customer More focus, expertise, responsiveness Cons: Duplication of functions Usual suspects Regional Departmentalization o Group similar PLACES together Pros: Specialize in region More focus, expertise, responsiveness Local Presence Cons: Duplication of functions Usual suspects Pros and cons of alternatives to functional departmentalization Pros: o Focus, Expertise, Responsiveness: Each specializes around a specific source of complexity in the environment: products, customers, places Cons: o Resource duplication o Lower functional specialization 4 lawyers example o As always, people tend to identify with departmental rather than organizational goals Principles for choosing types of departments & structures:
Balance efficiency & effectiveness o Management Strives For: Low resource waste (high efficiency) High goal attainment (high effectiveness Ask: Can functional departmentalization be effective? o It’s the first choice to consider because it avoids duplicating resources*. o But in more complex environments – that is when products, customers and/or regions differ on important dimensions – functional departmentalization can lose effectiveness. In complex environments, “Mirror the complexity” of environment o If you sell lots of different kinds of products, that dimension of your environment is complex; organize by product o If you sell to several very different types of customers, organize by customer o If you sell in countries with very different business practices, laws, cultures, organize by region. o The asterisk: regional can => cost savings too Look for complexity Organization Structure Functional Structure: groups similar jobs together into a series of departments, each headed by a manager
o Each division has a full complement of functions (e.g., R&D, marketing, sales, production, human resources, finance) o Corporate (Headquarters) unit primarily allocates resources and evaluates performance Used when organizations faces too much complexity for functional structure to cope. Many different products, or many regions (countries) or very different customers (e.g., gov’t, large business, consumer). Advantage: o Each division specializes on a specific product, region or customer, and so performs better o More focused, customized (thus effective) strategies o More responsive = better meets market needs. Disadvantages: o Resources are duplicated across divisions For example, separate manufacturing plants instead of larger, more efficient ones o Divisions find it tough to cooperate with other div’ns o Divisions and their leaders often compete with each other Incentives for cooperation are weak; the whole idea is to focus on your business, not the broader welfare of the entire organization
Structure II (Coordination and Design)
Coordination keeps things in sync Job descriptions
Managers (Hierarchy) Task Forces (Integrating Mechanism) The paradoxical twist: More specialization => more coordination Types of Coordination Within-Job Coordination o Formalization o Professional Standards Vertically: Up and down the organization o Hierarchy & Authority o Chain of Command o Span of Control o Centralization / Decentralization Horizontal: Across departments o Integrating Mechanisms Formalization: The degree to which jobs are guided by standardized rules & procedures.
Unity of command - a person should report to only one manager Hierarchy is powerful but inherently limited Managers don’t have time or knowledge to make all decisions “Silos” – hierarchies lead to vertical information flows o Reports of the death of hierarchy are greatly exaggerated Span of Control: the number of direct subordinates a manager has 1
Different Features of Hierarchies:
Span of Control
Span of control: Thenumber of direct subordinates a manager has
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“Narrow” Span of 4
Individual Workers =6 4
Managers (levels 1 -3) =
#of levels: 4 (“tall”)
“Wide” Span of 8
Individual Workers =
Managers (levels 1 -2) = 9
Total #of levels: 3 (“flat”)
# of people at this level
Consequences (pros and cons) of narrow vs. wide span of control (or tall vs. flat structures) Narrow span of control = TALL structures: Within department: High control and coordination by manager.
Across the organization: “Silos” to the max Wide span of control = FLAT structures: Within department: Less control and coordination by manager o Relies on effective empowerment of workers Across the organization: Flat organization => quicker communications, decision-making and implementation o Fewer managers => Lower overhead costs The trend is strongly to flatter organizations Centralization / Decentralization When centralized or decentralized approach is appropriate (key criteria from slide)
Factors That Influence the Amount of
Centralization and Decentralization
Know the
boxed ones
Effective implementation of company strategies does not depend on lower level managers having a say in decisions
Common integrating mechanisms
Forms of Integrating Mechanisms
Organizational Design
Con: Difficult to maintain consistency, gain efficiencies of scale o Emphasizes mutual adjustment and professional expertise, rather than formalization. o Investments in knowledge management Boundaryless organization Increase effectiveness (flexibility, efficiency, innovation) by reducing force of structural boundaries in organizations Remove Vertical Boundaries: through participative decision- making, wide spans of control, flatter orgs. Remove Horizontal (silo) Boundaries: through cross-functional teams, by organizing work around processes instead of functional departments. Remove External Boundaries: For example, form strategic alliances to break down barriers between the company and its customers and suppliers.
Operations Management
Management of the Transformation Process that converts resources such as labor & raw materials into goods & services that are sold to customers: Running Factories Delivering Services Processing Information Distribution & Logistics After-Sale Service o Every organization has a transformation process(es) Manufacturing organization - produces physical goods Service organization – “” nonphysical outputs (services) Indeed, every department has a transformation process
Operations Management as a System
Performance feedback
Cultural influences
Environmental Factors
Political influences Market influences
Inputs
Managers Workers Equipment Facilities Materials Money Energy Information
Transformations Outputs
Goods Services Waste Information Other 2
Customer contact
Reasons for strategic importance Strong operations management can improve productivity and build competitive advantage: o Strong operations mgmt leads to high productivity (efficiency) = outputs divided by inputs (e.g., cars per worker/shift). o Strong operations mgmt can also leads to higher effectivenes Responsiveness to customers Higher quality. Global competitiveness depends on operations management: o During the post WWII-years, operations management stagnated as sales and finance became the most important function at many large U.S. firms
Core Features of TQM
Exhibit 2.
= Defect Prevention
“Cost of Quality” = the further into a transformation process before a defect is found, the more costly it is to correct “Quality is Free” = Improving quality reduces production costs Quality Circles : Groups of employees who meet regularly to discuss ways to increase quality ISO 9000 – A series of international quality management standards that set uniform guidelines for processes to ensure that products conform to customer requirements. Widely accepted internationally; often required of suppliers
Six Sigma - a quality standard that establishes a goal of no more than 3.4 defects per million units or procedures “Black belt” TQM - it is essentially a zero-defects standard Just-in-Time (JIT) inventory : System in which parts or supplies arrive at an organization when they are needed and not before. Criticisms of TQM (4) Quality Bureaucracy: Laborious documentation of processes and changes can lead to frustrating delays. Goal conflict : Short-term goals can conflict with Quality’s long- term, “do it right” orientation. Overload: Quality improvement projects can overwhelm the organization and lead to disillusionment. Failed Empowerment : Quality requires worker empowerment (defect prevention at the source) – very tough for mechanistic, command & control organizations. Process reengineering Fundamental rethinking and radical redesign of business processes to achieve dramatic improvement in critical measures of performance. Also known as “Business” process reengineering, BPR, or just reengineering. From classic Harvard Business Review article: “It is time to stop paving cow paths” - automating or rationalizing fundamentally flawed processes is a sure road to failure. Instead, “reengineer” business processes by breaking away from old rules & using information technology. Key differences between TQM and Process reengineering
