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BUSINESS ORGANIZATION
CHAPTER 1 – WHAT ARE ORGANIZATIONS?
Organizational behavior : deals with different behavior of people when they are in groups or how people perceives other people’s behavior ➔ Importance of HR => organizations are composed by human beings! We have several challenges coming from different resources. The history of our discipline is quite recent: it date back to the industrial revolution (industrialization process), this means we are used to fast changes. What happened last year showed us that we really need to concentrate on innovate our discipline and be ready to face non-predictable events; but also before this dramatic situation we already had several challenges that drove us to give a very dynamic situation of both the discipline and its practical implementation. Current challenges (practically speaking) Globalization spread all over the world in a very quick way (markets, technologies and organizations are becoming interconnected) Ethics and social responsibility there are changes in what companies should do and policies they should apply in order to take care of workers and society Speed of responsiveness need to be very dynamic and flexible (one of the major challenges companies should deal with) and this means find a compromise between being structured and being flexible , respond quickly to environmental changes, organizational crisis and shifting customer expectations. The digital workplace digitalization and fusion with smart working (recently), where working smart doesn’t only means working from work but something different that actually means that we seriously need to think about the right to disconnection, how to effectively manage online meetings, how to collectively manage agendas/calendars; digitalization and automation (companies have already started dealing with automation, artificial intelligence and changed the internal organization and processes) Diversity social responsibility means companies should address workers’ wellbeing and diversity management is one of the aspects of workers’ wellbeing. We have several sources of wellbeing ex. Age (Italy is one of the oldest country in the world and we have a huge amount of elder workers and few young workers but we have a high rate of employment: this means we have something that doesn’t work in our market); gender; nationality; religion ecc. All these elements can be considered challenges, issues that companies should deal with and each company should look to its own personal way to deal with them (it doesn’t exist the one best way, one single model that works for every company): we have a huge amount of responses to all these issues from the organizational point of view. We have to match all these issues with all the sources of complexity that come from inside the companies and one of the main sources of complexity is composed by human being: organizing things (machinery, processes) is quite easy as we only need an effort in programming, planning and design processes, but then we have to populate them by people and people and their interactions are sources of internal complexities for a company in the book “Administrative behavior” written by Herbert A. Simon he says that companies should be viewed as black boxes because we can see inputs that go to the box (money, machinery, workers), we can also see the outputs (products) but what really happens inside the box so the organization is very difficult to be analyzed because of the presence of human beings. For these reason, organizational design is deeply connected with human resources management issue.
Definition of organization Organization are
- social entities (because populated by human beings that interacted between each: there are several reasons of interaction within the company as there are various studies that demonstrate that the network of relationships within companies is very dense but also multilayered so several layers of relationships: work-related ones, friendships and the ones related with sharing hobbies and interests or living in the same neighborhoods; this means the organization is very social because is based on relationships)
- that are goal-directed (people working together share a common goal , like deliver specific products or services thanks to a strategic planning, but the first one of the organization is the survival of the organization itself. We can see the organizational structure as the body and the strategy as the behavior for desired goal: it is a complex relationship because each structure is intrinsically rigid while strategy recall flexibility and this means that changing strategy could be quite easy but changing the organizational structure in the medium-short term could be very hard as there are several sources of resistance to changes at organizational levels for example human beings),
- are designed as deliberately structured and coordinated activity systems (first step is to understand which type of activity should be done and then group these activities in order to assign them and tasks to the workers; this means divide labor and then coordinate those people in order to attend the final goal ),
- and linked to the external environment. Types of organizations ❖ Large, multinational corporations (especially in US) ❖ Family owned businesses (also micro-companies are included; these employed max 10 people. For ex. in Italy we has several)
- For-profit^ businesses:^ the^ activities^ of^ the^ managers^ are^ directed^ primarily^ at^ producing^ goods^ and services in a way that retains the confidence of shareholders.
- Non-profit^ organizations Importance of organizations
- Bring together resources to achieve desired goals and outcomes that would not be reachable by a single person.
- Produce goods and services in an efficient way because they use common resources and use the same routine and processes to save cost.
- Facilitate innovation and creativity, putting together different brains and experts.
- Use modern manufacturing and information technologies because organizations have money to make this kind of investment.
- Adapt to and influence a changing environment (not only physical but also institutional and competitive).
- Create value for owners, customers and employees.
- Accommodate ongoing challenges of diversity, ethics, and the motivation and coordination of employees. Short reading lesson 1a: TEXT “On the division of labor” How Smith defines the pin manufacturing? What are the central elements that facilitate the production of a big amount of pins?
- Smith defines the pin manufacturing as a thrifting one (as something not so relevant but there is still a relevant and hard work behind it), destinated to supply the small wants of a small group of people but at the same time the author is quite surprised when he describes the fact that a few workers within a larger knowledge of the manufacturing can produce more than workers that only work on a single aspect. He also emphasize the importance of collaboration and coordination between workers
the output is not a product or is a product but is a service) in the technical core we will also have those who are occupied in the purchasing activities and in the delivery services. We can also include customers, not on the organizational point of view but on a logical one, because in service organization the service doesn’t exist without the customer. II. Management – Top and Middle [Strategic apex and middle line] In the top management we have all the top decision makers; this means in a big company there will be the Board of Directors, its president and CEO, in a small company there will be the entrepreneur and may the general director. When the organization grows more coordination is needed, therefore new roles of middle management are added, who are responsible for different organizational areas. For example we could have the Director of production or the Director of sales or those that are in between. Notice that middle Management is not always present (i.e. little companies). III. Technical Support [Technostructure] Workers that deal with procedures and routine (i.e. control of quality process, administrative processes, planning processes, analysts that are those that review the production process in order to reduce waste). IV. Administrative Support [Support Staff] Activities related to the effectiveness of the organization (= ability of the organization to react to the external environment), like marketing and internal services to workers Dimension of Organizational Design Structural dimensions provide labels to distinguish some key, internal characteristics of an organization, such as the degree of formalization. They provide a basis for comparing the composition of organizations.
- Formalization : it’s the extent to which processes of a company are mapped and formalized. Idea of rigidity vs flexibility.
- Specialization : it deals with division of labor. A high degree of specialization is useful in order to have more specialized workers and to reduce wastes in terms of time and money but it could lead to alienation and demotivation. A degree of specialization is absolutely needed as we need to divide labor. It's a degree to which organizational tasks are subdivided into separate jobs; it increases the productivity of the company, but we must have the so called “rules of the game” (deciding who se is in charge of what), determined by the hierarchy.
- Hierarchy of authority : we could have an horizontal division of labor or a vertical division of labor which lead to the creation of hierarchal authority. Dividing labor vertically means assigning different levels of authority in different organizational positions (so creating a hierarchy). What makes a company rigid is not just the number of hierarchical levels but mostly is the leadership style applied by the middle management that works within the hierarchy.
- Centralization : (opposite of delegation) it’s the degree to which decision-making is centralized at the top of the company (top management area). One of the main problem of the centralization is that it slows down the decision-making process because its decisions should be taken by top managers and we have several steps of the information for going up and then the decision for going down: this could be time consuming, too long. But on the other side high degree of centralization could also make decision more well evaluated accurate in certain situations instead of decentralizing too much (delegating, which means giving some kind of authority to middle managers ex. director of production should buy a new tool and within a certain budget he could buy it autonomly; the same goes for HR dep). Centralization means decisions are made at a central level, meaning that top management keeps decision-making in his hands ex. in order to have the authorizations to make expenses, the director of production should ask the permission to top management; when the HR department needs to hire somebody the final word is given by top management].
- Professionalism : it’s becoming more and more relevant in these recent times as professional workers are very required by companies (professional companies ex. Hospitals, university). It’s the level of formal education and training of employees (that should have high skills in order to succeed).
- Personnel ratios : number of people that are working in different departments (final sales, turnover) Contextual dimensions characterize both the organization as a whole, including its size (as it depends
on the structure of the industry, it is strongly related to the sector in which it operates, to the kind of customers and kind of product: in some sector in order to survive you have to be very big, in others it’s better to be small), technology etc. and the broader organizational settings.
- Size : number of employees, but in some cases, there should be indicated the number of sales. Size can be considered as a deep contextual rule.
- Organizational technology : tools, set of activities that are needed in order to transform inputs into outputs (it’s not only IT). Innovation comes from outside: a company could be an innovator but then the competitors will adapt overtime the same innovations; this means every company will imitating other companies. It’s a contextual dimension because it comes and derive from the industry.
- Environment : it’s the nature we have to preserve, all the social responsibility issues and the competitive environment (industries, government, suppliers); the transactional environment is the closest environment of the company and we have also the external environment that regards the macrolevel.
- Goals and strategy : a company is embedded on the context and we can’t consider companies as closed systems because they are rounded in different contexts (economic, financial, ecc.). Being competitive means making a comparison between the company itself and the market, its competitors (competitive advantage), the availability of resources.
- Culture : every company has its own environmental culture which is the set of values, believes and norms that are shared by employees and regulate the life within the company. Interacting Different Dimensions of Organization Design Organizational culture is strongly influenced also by national culture and we have a clear demonstration of that in different studies which have been made in the same company but in different branches located in different countries. Ex. The prof participated to an analysis (research) of one company located in UK, Italy, Greece and Netherland with four different branches. What clearly emerged is that in the culture of the different branches we could highlight common issues within all the four branches which were all related to the peculiar organizational culture. But then there were a lot of different aspects of the culture of each branch that were strictly related to the national cultures for what concerned the way of how they organized the working life and the kind of relationship that existed among colleagues in different branches (because each branch was influenced by the culture of the nation). What emerged is that the Italian and Greek branches were more similar under the cultural point of view with respect to the UK and Netherland ones. Idea of how difficult it could be to effectively design organizational structure. The structural and dimensional element should go together because a company is a sort of a living entity, not something static but it’s dynamic because populated by people: when we take all the inputs from outside (context) and then we try to adapt the design of the company to external requests, then we tend to forget that there are people living inside the company. Several theoretical approaches go in this direction, they contextualize organizational design in a very strong way (ex. Contingency theories are very focused on organizational design as a response to contextual challenges). But in this way company tend to lose its individuality and richness and what about knowledge, power of interaction among people composing a company? It’s ok to have as a strong point of preference context but we should also keep in mind that we have a very important source of richness internally made by human beings (even though is a source of complexity).
and outside of the organization that has a stake in the organization’s performance while we are designing our company but mainly when we are assessing the outcomes of the performance of the company we should take into account all stakeholders: internal (managers, workers) but also external (customers, institutions, environment). When evaluating the effectiveness of our performances and outputs we should consider all the stakeholders and look if we are able to satisfy or not. (Stakeholder: any group within or outside of the organization that has a stake in the organization’s performance) Different than the shareholder approach (focus only on shareholders, who own part of the company through shares of stock): in attempting to align shareholders and managers goals, an organization should provide managers with stock-option. Major stakeholder Groups and What they Expect
- Owners and stockholders expect financial returns (American vision) and grow (European approach)
- Employees expect satisfaction, pay and good supervision
- Customers expect high quality goods and service, and also top sales services
- Creditors expect creditctivness and fiscal responsibility
- Managements expect efficiency and effectiveness
- Government expect obedience to laws and regulations and fair competition
- Union expect workers pay and benefits
- Community expect good corporate clients and contribution to community affairs
- Suppliers expect satisfactory transactions and revenue form purchases It’s not easy to satisfy all and mediate AGENCY PROBLEM when somebody (owner or stockholder) delegates somebody else (manager) and the person who receive the delegation is the “agent”. Usually the owner doesn’t have all the details and information the agent has, because these ones are the ones that really operates within the company (they are involved). But the problem is arising because of the time of intentions of the expectation of these two groups: owners/stockholders have a long-time orientation and are interested in the grow and survival of the company over the time; top managers are more interested into short-terms returns so yearly revenues as usually their benefits are related to the year revenues. This create a sort of misalignment to the expectations of the owners and the managers BUT how can we try to solve this problem? For instance linking a relevant part of managers benefits to the values on the stock market: their benefits also depends on the value of the stocks (and we know that usually the value of the stocks reflects a serious investment policy which is also long-term oriented). The evolution of organization theory and design Business organization is a new science. HISTORICAL PERSPECTIVES Organization design and management practices have varied over time in response to changes in the larger society. ✹ Efficiency is everything ( Classical perspective ) (late 19th^ century): apply rational calculations to turn organizations into efficient, well-oiled machines = principles of scientific management pioneered by Frederick Taylor. He analyzed in deep each phase of the assembly line, looking for a way to reduce the time. Under this scientific management approach, the work of an employee was underestimated, there were no holidays and no insurance and everything was standardized. ✹ How to get organized: Administrative principles consideration of the design and functioning of the organization as a whole.
Bureaucratic organizations designing and managing organizations on an impersonal, ostensibly rational basis by establishing clearly defined authority and responsibility, formal record keeping and uniform application of standard rules. Problem: the application of these principles by human beings because they started breaking rules or trying find new creative interpretation of them [These two first points were about activities, then in 20th^ century we have a sort of turnover] ✹ What^ about^ People? Hawthorne Studies (end of 20th^ century) considered the beginning of the studies about the relevance of human resources within companies, workers are at the center of the organization; these studies started studying the effects of the environment in which workers worked (es. temperature of the offices, lights and so on): in fact, positive treatment of employees, improved their motivation and productivity. ✹ Don’t forget the context! Contingency : there must a “goodness of fit” between “structural” and “contextual” dimensions. we need to be effective and efficient at the same time; adaptable and flexible. ✹ Contemporary^ Organization^ Design the principles are not changing, but the combination of those is changing because of the turbulent and complex context and there was the need of face the new challenges ✹ Chaos theory suggests that relationships in complex systems are nonlinear and made up of numerous interconnections and divergent choices (i.e. butterfly effect that means that something that happens here can have an impact on the other side of the world). Applied to an organizational design it demonstrates that also very linear processes should not produce any kind of chaos situation because of the lack of some information and because of the strictly interconnection among different systems; because of these also the very deterministic processes could be chaotic. At the basis of the chaos theory there is the effect of the interconnection of system and a great example is the butterfly example ✹ Learning Organization^ is based on equality, open information, little hierarchy (difficult to have a career) and a culture that encourages adaptability, participation, communication and collaboration (i.e. Google). It’s not a kind of organizational design, it’s an approach towards organizational leadership. ✹ Efficient^ performance (efficiency was the Taylor approach)^ vs.^ the^ learning^ organization o From Vertical to Horizontal structure o From routine tasks (very high specialization) to empowered roles (give autonomy) o From formal control systems to shared information o From competitive to collaborative strategy o From rigid to adaptive culture Two organization Design Approaches: Mechanical system design (tayloristic approach) and Neutral System design (learning one) In the mechanical one we have some structural characteristics which seem to lead to more rigidity and a better control of efficiency and it reacts in stable environment. In very dynamic environment, this mechanic way of managing companies could have problems so it’s better to go toward the natural system In order to adapt to these recent times. Short reading lesson 1b
Pin-makers: division of labor starts from the identification of elementary activities (18 activities in pin-making); “One activity to one person” seems to be too much specialization due to coordination costs (e.g. the time spent in transferring pins from a worker to another one); here we come to “ organizational roles ”: a set of activities assigned to a person. Division of labour drives to specialization and to look for the right compromise between economies of specialising and minimizing coordination costs. As external complexity arises (increase in consumer demand) Ms Raku’s pottery has to structure itself. Between two persons, direct interaction and mutual adjustment are sufficient to guarantee coordination. Then, more specialization (assigning roles) and formalization ( introducing procedures and hierarchy ) are needed. Specialization implies coordination. Hierarchy implies delegation and control. Organizational design focus Organizational design includes four main aspects:
- Identification of elementary activities to get the final outcome.
- Grouping those activities into roles , then functions and/or divisions (i.e. according to the different criteria).
- Co-ordination of the activities: at each grouping level, coordination mechanisms depend on the degree of interdependence.
- Control on effective and efficient way of activities performing. Grouping levels and co-ordination needs When the offer to the market is becoming too complex, we have to change group level, according to the following graph (from the bottom to the top). The division of labor generates interdependencies among activities and individuals within organizations. Interdependencies need to be managed: that is co- ordination. Interdependence Division of labor creates interdependence = an exchange or share of goods (service) and information among workers within or between organizational units; the extent to which departments depend on each other for resources or materials to accomplish their tasks. There are 3 types of interdependence: ○ Reciprocal interdependence: interactive relationships where one man’s activity directly influences the activity of all the others (= different workers that should work together in the same moment); actors work simultaneously and continuously share information (high information complexity, high communication needs, tacit interaction). (ex. surgeon equip) ○ Sequential interdependence: the output of an organizational unit is the input of the following one (ex. assembly line). The activity A is the input of activity B, this means activity B cannot start without the complexion of activity A. ○ Generic interdependence: A and B are not directly connected (they are generic and independent between them) but they both have a direct connection with C (they share a common dependence with C): actors contribute with their activity to the common goal of the organization by performing their tasks independently, there are no direct relationship of exchange or sharing.
(ex. agencies or network of selling points, banks with the central branch and then the local ones) The relationship between independence and co-ordination: idea that given a dominant kind of interdependence, we should apply on kind of coordinating mechanism. So whenever the most relevant kind of interdependence is the reciprocal one, then the best coordinating mechanism is the mutual adjustment: this approach says “do nothing “, so leave them organize themselves and then check the output. Whenever the dominant interdependence is the sequential one, then we could apply the standardization. The best way for managing generic interdependence is direct supervision: we have the main branch that will have a direct relationship with the other branches, sharing procedures and suggestions, saying what branches have to do but the headquarter is the center of this relationship. Co-ordinating mechanisms Mutual adjustment
- Based on horizontal relationships;
- Actor’s autonomy requested for let workers organized themselves; for example when you have a team of experts (like medical doctors), who are left to do their work alone;
- Reciprocal interaction: the operators have to interact in order to obtain the final product;
- Save of managerial interventions. Standardization: it designs the process in advance (what should be done and how); there are different kinds according to what time of the process: (i) Process standardization : programming and detailing workflow. (ii) Outputs standardization : expected results are declared and we are matching the gap between actual and desired performance. (iii) Inputs and capacity standardization : raw materials quality and capacities have to match specific standards. The main role in this mechanism is the role of the analysist. Manager will solve hypothetical and unexpected problems. Direct supervision (true hierarchy)
- Coordinating by orders and direct guidelines;
- Effective when the supervisor has the formal power and needed competences;
- High costs when complexity increases. Ex. Inputs and capacity standardization: University Customers: students Activity of university: provide knowledge and produce certified competences Output: graduation of satisfied students Coordinating mechanism: standardize activity and competences University analyze the competencies and knowledge of the professors through a national competition.
- Process standardization: the programm is deciding by the professors (so in this case this type of standardization is really low, because professors can decide by their own). But the on the other side, this standardization is used by the administrative offices, which organize timetables and classrooms.
- Output standardization: valuation from students’ opinion
The role of strategic direction in organization design We know that one of the basic pillars of companies is to have and follow a strategy. Organization design is used to implement goals and strategy and thereby influences the prospects of success (strictly related with success). the way how strategy is implemented required a lot of time, because top managers have to consider organizational revenues (competencies for managing a new strategy, organizational units, resources that can be existing or not) sometimes the organizational design can obstacle the strategy: new people may require a training, new resources may have to be bought. Organization design is not always a highly rational process which involves careful calculation and proceeds smoothly through a series of stages that are stated in the organizational process as we have a lot of unpredictable circumstances that may directly impact on the organizational design process (an emergent process, not rational and deliberated as it emerges form the continuous interactions between the structure and external environment). In fact, the design of organization is political process in which established routines and vested interests are challenged and defended. ➔ Organizational structure can be a limitation, a threat for the implementation of the strategy. Organizational design is done to support organizational strategy, however we have a mismatch related to dynamisms and the resistance respectively between the strategy and the organizational structure mainly in a short period of time: organizational structure are very slow in changes (they tend to resist to be changed because they are populated by human beings!) while the strategy by definition usually is a dynamic concept (idea of quickly adapt to the changing environment)
Organization Direction, Design and Effectiveness general model which includes several aspects that contributes understanding the relationship between the strategic decisions and organizational design Strategy is deliberated by the top-management team under the guidance of the CEO. In evaluating the definition of strategies of course top-management team is strongly influenced by the external environment with its opportunities, threats, uncertainty, availability of resources (we have several external issues that have a strong impact). Other pressure will come from the internal situation of the organization and under this point of view the situation itself could have some strength points but also several weaknesses ore specific and distinct competences that should be considered while making strategic decisions ecc.: any strategic decision taken today is grounded on the past history of the company together with the challenges coming from the environment. Strategic directions should come from mission, vision and goals of the organization: top-management team should look for internal coherence among mission and strategic goal. Strategic decision-making process deals with operational goals (making the strategy concrete) and also highlighting competitive strategies (the behavior companies should have on the competitive ground with other competitors). There is a double impact between the organizational design and the strategic decisions, which is related to what we have already said about the influence that the organizational structure could have in the short run on strategic decisions making process: it could be an aspect that could slow down the implementation of the strategy in the short-term. What are the mayor issues of the organizational design? The structure of the firm, there is a sort of trade-off between looking for learning strategies, which means looking for effectiveness, and looking for efficiency, so cost saving. Information and control systems; production technology; human resource policies and incentives; organizational culture and interorganizational links. How could be measured the outcomes of the implementation of the strategy through the organizational design? We have several indicators: the use of resources, the degree of efficiency that a company is able to get, measuring the goal obtainment and evaluating competing values. By checking if these outcomes has been achieved or not is a source of feedback with respect to the internal situation and this supports and helps top-management teams in making future strategic decisions.
Managers should choose which strategy to emphasize between these three; they should balance and understand what and where are the companies’ core competences in order to understand which strategy could suit better. According to Porter, company has to choose (it’s a trade- off): Differentiation strategy: focus on uniqueness Example.: Apple (broad scope), Edward Jones Investments (narrow scope) Low-cost leadership: focus on efficiency, low cost Example.: ASDA (broad scope), Costculter (narrow scope) Focus strategy: the company has to individuate the right market/customer group. MILES AND SNOW’S STRATEGY TYPOLOGY Based on the idea that managers seek to formulate strategies that will be congruent with the external environment. They individuate different kinds of actors and players. The four main typologies of strategies are: ★ Prospector:^ approach^ of^ anticipating^ changes,^ the company^ has^ a^ learning^ orientation^ (it^ is^ able^ to adapt; and has a flexible, fluid, decentralized structure), it is creative, it’s able to innovate and take risks , as well as able to create needs in the customers. It a strategy fully oriented in creating values and it has also a strong impact on organizational design because the structure is decentralized which means using of a lot of delegation, and it’s flexible which means the processes and procedures are design in order to be able to change in a fast way as well as the worker who should be able to adapt himself to the newness. ★ Defender: opposite of the prospector as it is concerned with stability and it’s oriented to internal efficiency (= centralize authority , able to control costs and eliminate waste ) and control to produce reliable, high- quality products for existing customers. The emphasis is on production efficiency with a low overhead: the defender is a company which is concentrated on internal processes and looks for a way of keeping the costs as low as possible, because it’s protecting its efficiency against external “enemies” ★ Analyzer: balances^ efficiency^ and^ learning^ through a^ tight^ control^ on^ cost together^ with^ flexibility and adaptability; the emphasis is on creativity , research in order to look for new way for getting both objectives (innovation). ★ Reactor: it doesn’t have a clear organizational approach; it has a risky way of adapting the market, for this reason design characteristics may shift abruptly depending on current needs.
EMERGING CONCEPTS IN BUSINESS STRATEGY
Blue Ocean Strategy by Chan Kim and Renée Mauborgne ocean is full of sharks that eat all the other fishes, and when they do this the sea water becomes red: ocean is considered as a metaphor. (^) An ocean is blue when entrepreneurs create new industries to conquer unknown market niches that are undiscovered by market competitors (so that there are no sharks and the ocean is blue). In the blue ocean strategy, demand is satisfied with no external competition, creating real business opportunities for profitable and fast-growing companies. As a result, navigating through blue oceans is the best entrepreneurial strategy that should follow newcomers and start-ups. Complementary to blue oceans there is the concept of red oceans: when a company “navigates in red oceans” means that is facing a strong competition. (Similar idea suggested by Porter) James Barron and Michael Hannah have studied the importance of strategy models in start-up companies, and they have found out five blueprints which are:
- Star : the company wants to be like a star, recruiting top talent and paying highly (but then you have to sell expensive products and services)
- Engineering : emphasizing professional commitment with people that like the job; this means having the need for high-trained workers with clear competences; here you need to know how to combine different competences to get to the final product
- Commitment : building a strong family identity to encourage retention (positive and familiar values, taking care of one of another), tending to generate high retention rate; this means adopting a leadership style
- Bureaucracy : organizational behavior is driven by written rules and operating systems.
- Autocracy : the company is built around a hierarchical discipline, kind of military organization (in a lot of companies, also in the Hi-Tech sector, especially when companies produce dangerous products); when you need to have a clear chain of command and a clear distribution of responsibilities then you need hierarchy and are ready to build your autocratic organization How these strategies affect organizational design? ⇨ Choice of strategy has implications for internal organization characteristics. In principle, organization design characteristics support the firm’s competitive approach. Ex.: Porter Strategy: Differentiation which means that the company is looking for its unique identify with respect to the other competitors Organizational Design:
- Learning orientation with a strong horizontal coordination, high information flow
- Strong capability in research (in order to deliver always more quality)
- Values and builds in mechanisms for customer intimacy
- Rewards employee creativity, risk-taking and innovation Ex.: Miles and Snow’s strategy Strategy: Prospector Organization Design:
- Learning orientation with a very flexible, decentralized structure and high delegation
- Strong capability in research Other Factors affecting organization design Organization design is fluid (or at least it’s expected to be fluid) and it is also a result of numerous contingencies (=pressures that comes from the external environment, ex. technological paradigm, degree of differentiation of the competitive market), this means that external issues and challenges will have an impact on the internal structure of an organization. One responsibility of managers is to design organizations that fit the contingency factors of strategy, environment, size and life cycle, technology and culture. The idea is that a company should be designed in order to be able to deal with external challenges, but this way of
Problems: fails to adequately consider the changing value of various resources (ex. the company is used to look for new human resources at the university, but changes in the competitive environment suggest that it should start looking for human resources also in professional schools; but the company could be late in understanding and pursuing this changes because it relies on a behavior that has been repeated over time). Internal process approach It’s more concentrated on evaluating internal activities and processes, looking at the internal situation of the company. It assesses effectiveness by indicators of internal health and efficiency. Indicators: evaluate the strong corporate culture and positive work climate, teamwork, trust between workforce and management, decision-making near sources of information, horizontal and vertical communication, rewards for performance, interaction between all parts of organization. Usually these are quite expensive activities. Usefulness: it is important because the development of resources and harmonious internal functioning are ways to assess organizational effectiveness. If there is something wrong in the internal situation, the company could decide to pay and external consultant for submitting an engagement survey to the workers; this survey will highlight some areas of “stress” and at this point the company should share the results with the workers and then take positive actions in order to solve the problems. It’s is a huge investment but by doing this the general organizational climate will improve in order to have a positive corporate culture , happy employees. Problems: total output and the relationship with the external environment are not evaluated, plus, many aspects of internal processes are not readily or meaningfully quantifiable. We should use an integrated effectiveness model called “competing values model” which tires to balance the concern with different kinds and aspects of effectiveness rather than focusing on one approach. The major indicators could be two dimensions which are focus (internal vs external) and structure (stability vs flexibility). This means we could have four different configurations: open system, rational goal, internal process and human relations emphasis. This approach is quite useful because it integrates different concepts of effectiveness, but in order to adapt this kind of model the company should have a high maturity in human resource management and a sophisticated controlling procedure: adopting this approach is not for all companies. EXAMPLES FOR MEASURING OUTPUTS Customer satisfaction, delivery time of products, logistic effectiveness. For managing the university effectiveness under an output perspective:
- The number of degrees each year (but it doesn’t give us a complete information) and the evaluations, this means the distribution of the marks that the students got in the degree sessions (university needs to give this information to the ministry, which uses this info to evaluate the university itself)
- Students’ satisfaction and their evaluation of teaching and the services of the university (questionaries)
- The hiring rates
- The average marks and their distribution (frequency)
- The capability of producing high value competences (the ability to “produce” students that could easily find a job
- The providing of internships
- How long it takes to get a degree! (unibs not good, mainly in the bachelor degree many students graduated very late and are out of the official timing) for ex we have a lot of students that work but for this reason the university approved the possibility to enroll as a working student meaning you have 6 years instead of 3 to complete the university without going “fuoricorso” and paying more taxes but they had to set up this option in a very rigid way: they have half of exams each year but they have to respect strictly the semesters in order to get the frequency and have the possibility to do the exam. There are also some exams which are
considered harder than the classical ones. But that’s not enough to explain this phenomenon.
- Number of students in the rooms (overcrowded) and how many students a single professor has (the ratio between number of professors and number of students) and that’s why the university created up to three different channels for each course (AD-EN-OZ or AG-HZ).
- Number of students leaving the university
CHAPTER 4 – FUNDAMENTALS OF ORGANIZATION STRUCTURE
Organization structure The basis of our discipline is the division of labor and coordination. Through the organization structure we have the possibility to do both them: dividing work and starting to coordinate the activities. We have three main components: ➢ Vertical aspect of organizing (strongly related to the distribution of power) which means
- Defining the formal reporting relationships including the number of levels and the span of control.
- Grouping the individuals into departments and departments into the total organization (according to the criteria applied we will have different organizational structures). ➢ Horizontal aspect of organizing
- Designing a set of systems to ensure effective communication, coordination and integration of efforts. A sample organization chart We have three hierarchical levels: vertical dimension is composed by CEO, then three middle managers (Vice President of Finance, of Manufacturing and of Human Resources, finally another level composed by chief accountant, budget analyst, plan superintendent and so on. By reading this last hierarchical level we could guess that within each organizational area (light blue) we could have probability several different hierarchical levels. This is a chart, meaning that it should be represented following specific indications: we need to use rectangles in order to individuate organizational units and organizational positions and then we have to use lines that are structured with angles (not round lines; each line is oriented because we have power flowing from the top to the bottom with orders, but we also have a reverse flow going from the bottom to the top that is the flow of information that are collected at a local level and then they converge at the top of organization where they are analyzed and used to make decisions).
- Vertical lines: relationship of power;
- Horizontal lines: a horizontal coordination is needed the graph cannot show this, but by common sense we figure out that for example the Chief Accountant and the Budget Analyst, as part of the same unit, have to communicate. Vice President Finance and Director Human Resources are staff functions, while Manufacturing is a line function; we also know that finance belongs to the technostructure and HR activities usually belong to the support staff but some of them also belong to the technostructure (ex. training specialist) Information-processing perspective on structure (^) Traditi onal organizati on VS learning organizati on Traditional organization: design emphasizes vertical communication and control (the classical way of designing the structures, the way that represent the hierarchical flows). Learning organization: more oriented on communication and collaboration (probability we will have flatter organizational structure, so with less hierarchical level and with bigger organizational units including also activities which are complementary among them, Ex. a team composed by all the people involved in the
