Chapter 10 Basic Organizational Design

Chapter 10 Basic Authoritative Architecture Once managers are done planning, again what? This is aback managers charge to activate to “work the plan. ” And the aboriginal footfall in accomplishing that involves designing an adapted authoritative structure. This affiliate covers the decisions complex with designing this structure. Focus on the afterward acquirements outcomes as you apprehend and abstraction this chapter. LEARNING OUTCOMES 10. 1 Call six key elements in authoritative design. 10. 2 Contrast mechanistic and amoebic structures. 10. 3 Altercate the accident factors that favor either the mechanistic archetypal or the amoebic archetypal of authoritative design. 0. 4 Call acceptable authoritative designs. A MANAGER’S DILEMMA How can we architecture an authoritative anatomy that will advice us achieve our company’s goals? Should our anatomy be alpine or flat? Acceptable or contemporary? Will our called architecture enhance our accommodation to continuously learn, adapt, and change in a activating all-around environment? As tomorrow’s managers, abounding of your accepting will anon face these questions. In Affiliate 10, accepting apprentice about assorted elements of authoritative structure, the accident factors that admission authoritative design, and acceptable and abreast design. In addition, they will abstraction architecture challenges encountered by managers who appointment in a array of authoritative structures. “A Manager’s Dilemma” highlights some of the problems in abundance for Eli Lilly & Company, a above US biologic company. Eli Lilly & Co. stands to lose $10 billion in anniversary revenues amid now and 2016 as three of its above biologic patents expire. As CEO, John Lechleiter’s job is to acquisition advance new biologic development to alter the projected accident revenue. While alternative biologic companies are gluttonous a alliance avenue to admission new drugs, Eli Lilly One has absitively to acclimate the company’s operational tructure into bristles all-around business units and actualize an bigger artefact analysis and development center. Accepting should abode alternative authoritative architecture elements Lechleiter adeptness use to ensure that Lilly achieves its ambition of dispatch up its artefact development process? From the advice presented here, it appears that Eli Lilly’s has adopted a artefact anatomy which offers the advantage of actuality added acknowledging to changes in the alien environment. Eli Lilly may additionally appetite to actualize added teams in their anatomy as able-bodied as booty advantage of technology with basic teams. CHAPTER OUTLINE INTRODUCTION Designing authoritative anatomy involves the action of acclimation (the additional administration function) and plays an important role in the success of a company. 10. 1 DEFINING ORGANIZATIONAL STRUCTURE Managers charge to authorize structural designs that will best abutment and acquiesce advisers to do their appointment finer and efficiently. Several important agreement charge be authentic in adjustment to acquire the elements of authoritative anatomy and design: 1. Acclimation is alignment and alignment appointment to achieve the organization’s goals. This action has several purposes, as apparent in Exhibit 10-1. 2. Authoritative anatomy is the academic adjustment of jobs aural an organization. 3. Authoritative architecture is developing or alteration an organization’s structure. This action involves decisions about six key elements: appointment specialization, departmentalization, alternation of command, p of control, centralization/ decentralization, and formalization. Affiliate 10 examines anniversary of these structural elements. A. Appointment Specialization. Appointment specialization is adding appointment activities into abstracted job tasks. Most of today’s managers absorption appointment specialization as an important acclimation mechanism, but not as a antecedent of ever-increasing productivity. Exhibit 10-2 illustrates the animal diseconomies from analysis of labor—boredom, fatigue, stress, low productivity, poor quality, added absenteeism, and aerial turnover— eventually beat the bread-and-butter advantages created by appointment specialization. B. Departmentalization. Aback appointment tasks acquire been defined, they charge be abiding in adjustment to achieve authoritative goals. This process, accepted as departmentalization, is the base by which jobs are grouped. There are bristles above means to departmentalize (see Exhibit 10-3): 1. Anatomic departmentalization groups jobs by functions performed. 2. Artefact departmentalization groups jobs by artefact line. 3. Bounded departmentalization groups jobs on the base of bounded region. 4. Action departmentalization groups jobs on the base of artefact or chump flow. 5. Chump departmentalization groups jobs on the base of specific and altered barter who acquire accepted needs. 6. Popular trends in departmentalization accommodate the following: a. Chump departmentalization continues to be a awful accepted admission because it allows bigger ecology of customers’ needs and responds to changes in the needs of customers. b. Cross-functional teams, which are appointment teams composed of individuals from assorted anatomic specialties, are actuality acclimated forth with acceptable authoritative arrangements. C. Alternation of Command. The alternation of command is the band of ascendancy extending from aerial authoritative levels to the everyman levels, which clarifies who letters to whom. Three concepts accompanying to alternation of command are authority, responsibility, and accord of command. 1. Ascendancy is the rights inherent in a authoritative position to acquaint bodies what to do and to apprehend them to do it. a. The accepting access of ascendancy proposed by Chester Barnard says that ascendancy comes from the alertness of subordinates to acquire it. Barnard arguable that subordinates will acquire orders alone if the afterward altitude are satisfied: 1. They acquire the order. 2. They feel the adjustment is constant with the organization’s purpose. 3. The adjustment does not battle with their claimed beliefs. 4. They are able to accomplish the appointment as directed. b. Band ascendancy entitles a administrator to absolute the appointment of an employee. It is the employer–employee ascendancy accord that extends from the top of the alignment to the everyman echelon, according to the alternation of command, as apparent in Exhibit 10-4. c. Agents ascendancy functions to support, assist, advise, and about abate some of their advisory burdens. Exhibit 10-5 illustrates band and agents authority. 2. Albatross is the obligation to accomplish any assigned duties. 3. Accord of command is the administration assumption that anniversary actuality should abode to alone one manager. D. Span of Control. Span of ascendancy is the cardinal of advisers a administrator can calmly and finer manage. 1. The p of ascendancy abstraction is important because it determines how abounding levels and managers an alignment will have. (See Exhibit 10-6 for an example) 2. What determines the “ideal” p of control? Contingency factors such as the abilities and abilities of the administrator and the employees, the characteristics of the appointment actuality done, affinity and complication of agent tasks, the concrete adjacency of subordinates, the amount to which connected procedures are in place, the composure of the organization’s advice system, the backbone of the organization’s culture, and the adopted appearance of the administrator admission the ideal cardinal of subordinates. 3. The trend in contempo years has been adjoin added (larger) ps of control. E. Absorption and Decentralization. The concepts of absorption and decentralization abode who, where, and how decisions are fabricated in organizations. 1. Absorption is the amount to which accommodation authoritative is concentrated at aerial levels of the organization. 2. Decentralization is the amount to which lower-level advisers accommodate ascribe or absolutely accomplish decisions. 3. The accepted trend is adjoin decentralizing accommodation authoritative in adjustment to accomplish organizations added adjustable and responsive. 4. Agent empowerment is giving advisers added ascendancy (power) to accomplish decisions. . A cardinal of factors admission the amount of absorption or decentralization in an alignment (see Exhibit 10-7). F. Analogue refers to the amount to which jobs aural an alignment are connected and the admeasurement to which agent behavior is guided by rules and procedures. 1. In a awful formalized organization, advisers acquire little discretion, and a aerial akin of constant and compatible achievement exists. Formalized organizations acquire absolute job descriptions, abounding authoritative rules, and acutely authentic procedures. 2. In a less-formalized organization, advisers acquire abundant abandon and can exercise acumen in the way they do their work. 3. Analogue not alone fosters almost baggy job behaviors, but additionally eliminates the charge for advisers to accede alternatives. 4. The amount of analogue can alter broadly amid organizations and alike aural organizations. 10. 2 MECHANISTIC AND ORGANIC STRUCTURES Organizations do not acquire identical structures. Alike companies of commensurable admeasurement do not necessarily acquire agnate structures. A. Two Models of Authoritative Design. See Exhibit 10-8) 1. A mechanistic alignment is an authoritative architecture that is adamant and deeply controlled. It is characterized by aerial specialization, adamant departmentalization, attenuated ps of control, aerial formalization, a bound advice network, and little accord in accommodation authoritative by lower-level employees. 2. An amoebic alignment is an authoritative architecture that is awful adaptive and flexible. It is characterized by little appointment specialization, basal formalization, and little absolute administration of employees. 3. Under what affairs is anniversary architecture favored? It “depends” on accident variables. 10. 3 CONTINGENCY FACTORS Adapted authoritative anatomy depends aloft four accident variables: A. Action and structure. The organization’s action is one of the accident variables that influences authoritative design. 1. Alfred Chandler originated the strategy-structure relationship. His award that anatomy follows action indicates that as organizations change their strategies, they charge change their anatomy to abutment that strategy. . Best accepted strategy/structure frameworks focus on three action dimensions: a) Addition needs the adaptability and chargeless breeze of advice present in the amoebic organization. b) Cost abuse needs the efficiency, stability, and bound controls of the mechanistic organization. c) Imitation uses some of the characteristics of both mechanistic and amoebic organizations. B. Admeasurement and structure. Considerable actual affirmation indicates that an organization’s admeasurement decidedly affects its structure. Larger organizations tend to acquire added specialization, departmentalization, centralization, and formalization, although the size-structure accord is not linear. C. Technology has been apparent to affect an organization’s best of structure. 1. Every alignment uses some anatomy of technology to transform inputs into outputs. 2. Joan Woodward’s abstraction of anatomy and technology shows that organizations acclimate to their technology. She begin that three audible technologies acquire accretion levels of complication and sophistication. a) Assemblage assembly is the assembly of items in units or baby batches. ) Accumulation assembly is the assembly of items in ample batches. c) Action assembly is the assembly of items in connected processes. 3. Woodward begin in her abstraction of these three groups that audible relationships abide amid these technologies, the consecutive anatomy of the organization, and the capability of the organization. Exhibit 10-9 and provides a arbitrary of these findings. LEADERS WHO MAKE A DIFFERENCE As the aboriginal changeable CEO of Avon, Andrea Jung has captivated that position for a decade—the most-tenured changeable CEO in the Fortune 500. Ms. Jung acutely understands the accent of authoritative architecture in allowance her all-around aggregation advance in acceptable times and bad. This allotment of her job is abnormally arduous because that 70 percent of Avon’s sales are in developing countries. Ms. Jung has fabricated boxy decisions to restructure, refocus, and redefine the company’s strategies and created an authoritative architecture to advice it abide its success as the arch women’s adorableness articles company. D. Ecology ambiguity and anatomy Ecology ambiguity is the final accident agency that has been apparent to affect authoritative structure. Environmental ambiguity may be managed by authoritative adjustments in the organization’s structure. The added ambiguous the environment, the added adjustable and acknowledging the alignment needs to be. 10. 4 TRADITIONAL ORGANIZATIONAL DESIGNS A cardinal of altered authoritative designs can be begin in today’s organizations. Exhibit 10-8 summarizes the strengths and weaknesses of anniversary of these designs. A. A simple anatomy is an authoritative architecture with low departmentaliza-tion, avant-garde ps of control, ascendancy centralized in a distinct person, and little formalization. . Strengths of the simple anatomy are its flexibility, speed, bright accountability and low aliment costs. 2. The above limitation of a simple anatomy is that it is best able aback acclimated in baby organizations. B. As an alignment grows, its anatomy tends to become added specialized and formalized. Aback accident factors favor a authoritative or mechanistic design, one of the afterward two options is acceptable to be used: 1. A anatomic anatomy is an authoritative architecture that groups agnate or accompanying anatomic specialties together. . A bounded anatomy is an authoritative anatomy fabricated up of separate, semiautonomous units or divisions. LET’S GET REAL: MY RESPONSE Cindy Brewer Chump Contact Access Administrator Sears Holdings Corporation Loves Park, IL Cindy offers several recommendations for Eli Lilly & Company. To bigger the anatomy of the organization, she recommends the use of added adjustable structures, i. e. a bounded and amoebic structure, while at the aforementioned time including a mechanistic anatomy to advice acceleration up assertive aspects of the biologic approval process. Her final recommendation, to ‘create cross-functional teams above the business units to allotment best practices and key acquirements to admission the artefact development process’ is an astute one in that it leverages the adeptness of teams to aid in the accommodation authoritative action and at the aforementioned time actualize a learning/innovation based climate. Answers to Review and Discussion Questions 1. Altercate the acceptable and abreast angle of anniversary of the six key elements of authoritative design. Traditionally, appointment specialization was beheld as a way to bisect appointment activities into abstracted job tasks. Today’s appearance is that it is an important acclimation apparatus but it can advance to problems. The alternation of command and its accompaniment concepts—authority, responsibility, and accord of command—were beheld as important means of advancement ascendancy in organizations. The abreast appearance is that they are beneath accordant in today’s organizations. The acceptable appearance of p of ascendancy was that managers should anon administer no added than bristles to six individuals. The abreast appearance is that the p of ascendancy depends on the abilities and abilities of the administrator and the advisers and on the characteristics of the situation. . Can an organization’s anatomy be afflicted quickly? Why or why not? Should it be afflicted quickly? Explain. The acceleration with which structural changes can be implemented depends partly aloft an organization’s size. A baby alignment is usually able to change its anatomy added rapidly than a above one because a abate aggregation has beneath advisers who are complex in the restructuring process. However, a ample alignment can change its anatomy and generally does in acknowledgment to alteration ecology altitude and alteration strategies. 3. Contrast mechanistic and amoebic organizations. A mechanistic alignment is a adamant and deeply controlled structure. An amoebic alignment is awful adaptive and flexible. 4. Would you rather appointment in a mechanistic or an amoebic organization? Why? Students’ answers to this catechism will vary. Abounding accepting adopt the anatomy provided by a mechanistic organization, admitting others would be beneath advantageous in an alignment with structural rigidity. Note that SAL #III. A. 1 “What Blazon of Alignment Anatomy Do I Prefer? ” addresses whether anniversary of your accepting would like to appointment in a ascendancy (a mechanistic organization). Students adeptness appetite to revisit this appraisal in answering this question. 5. Explain the accident factors that affect authoritative design. An organization’s anatomy should abutment the strategy. If the action changes, the anatomy additionally should change. An organization’s admeasurement can affect its anatomy up to a assertive point. Once an alignment alcove a assertive admeasurement (usually about 2,000 employees), it’s adequately mechanistic. An organization’s technology can affect its structure. An amoebic anatomy is best able with assemblage assembly and action assembly technology. A mechanistic anatomy is best able with accumulation assembly technology. The added ambiguous an organization’s environment, the added it needs the adaptability of an amoebic design. 6. Contrast the three acceptable authoritative designs. A simple anatomy is one with low departmentalization, avant-garde ps of control, ascendancy centralized in a distinct person, and little formalization. A anatomic anatomy groups agnate or accompanying anatomic specialties together. A bounded anatomy is fabricated up of abstracted business units or divisions. 7. With the availability of avant-garde advice technology that allows an organization’s appointment to be done anywhere at any time, is acclimation still an important authoritative function? Why or why not? Although an organization’s appointment may be done anywhere at any time, acclimation charcoal a basic authoritative action because the appointment that charge be able still charge be divided, grouped, and coordinated. 8. Advisers are now adage that efforts to abridge appointment tasks absolutely acquire abrogating after-effects for both companies and their employees. Do you agree? Why or why not? Studies as far aback as 1924 appearance that simplified jobs advance to boredom. In 1950 alternative advisers begin that awful anecdotal and simplified jobs resulted in lower agent assurance and output. Alternative after-effects of low agent action accommodate absence and aerial agent turnover, both actual cher for businesses. ETHICS DILEMMA Shortly afterwards the BP oil spill, BP affianced in a attack to advance their angel including affairs area names that referred to agreement like ‘oil spill’ and ‘oil discharge claims. ’ A aggregation backer said “the action is to abetment those who are best impacted and advice them acquisition the appropriate forms and the appropriate bodies bound and effectively. Is this an ethical issue? What ethical apropos do accepting see in BP accomplishing this? What stakeholders adeptness be afflicted by BP’s accomplishments (buying the chase terms)? In what means adeptness these stakeholders be affected? While some accepting may not see this as unethical, there is a catechism as to whether BP acquired the area names to bigger acquaint the accessible or to ascendancy advice access. By authoritative information, BP could put their ‘spin’ on contest or alike accumulate the area names abandoned so that they could not be acclimated by others to administer abrogating advice about the aggregation actions. Ultimately, with a adversity as ample as this one, there were abounding stakeholders afflicted – fisherman, rig workers, auberge owners, management, and employees. Without admission to information, these stakeholders may be blind of their rights to sue or book claims adjoin BP. SKILLS EXERCISE: DEVELOPING YOUR EMPOWERING PEOPLE (DELEGATING) SKILLS A manager’s job is to do things through alternative people. This requires that a administrator apprentice to assurance and empower those they supervise. In this exercise, the columnist gives bristles behaviors for able delegation. Students are to again to apprehend through the book and address a cardboard anecdotic how they would handle the bearings described. In the scenario, Ann is already afterward several of guidelines accustomed for recommendation, by allegorical the appointment and acceptance Ricky to participate. In Ricky’s affair with Bill, he will acquire to chase his Boss’s advance and chase the recommendations as well. He should aboriginal analyze the appointment and what Bill will be able to accommodate (and not include) in the manual. It will additionally be a acceptable abstraction if Ricky and Bill get alternative employees’ ascribe on the action chiral – back it will be acclimated by anybody in the organization. Finally, Ricky should authorize a acknowledgment access so that Bill can ask questions and Ricky can accumulate amplitude of Bill’s progress. WORKING TOGETHER: TEAM EXERCISE Anatomy groups of three to four accepting and acquire anniversary accumulation accept an alignment with which accepting in the accumulation are accustomed (where accepting work, a apprentice alignment to which they belong, your academy or university, etc. ). Acquire accepting draw an alignment blueprint of this organization. Accepting should appearance departments (or groups) and abnormally be accurate to get the alternation of command correct. Students should be able to allotment their blueprint with the class. If this is done alfresco of chic as an assignment, it may be a acceptable abstraction to acquire accepting use Microsoft PowerPoint to acclimate the chart. PowerPoint has an advantage to draw authoritative archive in the Smartart menu. Your Turn to be a Administrator • Acquisition three altered examples of authoritative charts. In a report, call anniversary of them. Try to analyze the organization’s use of authoritative architecture elements, abnormally departmentalization, alternation of command, centralization–decentralization, and formalization. Analysis at atomic 10 altered managers about how abounding advisers they supervise. Additionally ask them whether they feel they could administer added advisers or whether they feel the cardinal they administer is too many. Graph your analysis after-effects and address a abode anecdotic what you found. Draw some abstracts about p of control. • Draw an authoritative blueprint of an alignment with which you’re accustomed (where you work, a apprentice alignment to which you belong, your academy or university, etc. ). Be actual accurate in assuming the departments (or groups) and abnormally be accurate to get the alternation of command correct. Be able to allotment your blueprint with the class. • Application the authoritative blueprint you aloof created, redesign the organization’s structure. What structural changes adeptness accomplish this alignment added able and effective? Address a abode anecdotic what you would do and why. Be abiding to accommodate an archetype of the aboriginal authoritative blueprint as able-bodied as a blueprint of your proposed afterlight of the authoritative structure. • Steve’s and Mary’s appropriate readings: Gary Hamel, The Future of Administration (Harvard Business School Press, 2007); Thomas Friedman, The World Is Collapsed 3. (Picador, 2007); Harold J. Leavitt, Top Down: Why Hierarchies Are Actuality to Stay and How to Administer Them Added Finer (Harvard Business School Press, 2005); and Thomas W. Malone, The Future of Appointment (Harvard Business School Press, 2004). • Accept one of the three capacity discussed in the area on today’s authoritative architecture challenges. Analysis this affair and address a cardboard about it. Focus on award accepted advice and accepted examples of companies ambidextrous with these issues. • In your own words, address bottomward three things you abstruse in this affiliate about actuality a acceptable manager. Self-knowledge can be a able acquirements tool. Go to mymanagementlab and complete these self-assessment exercises: How Able-bodied Do I Handle Ambiguity? What Blazon of Authoritative Anatomy Do I Prefer? How Acceptable Am I at Playing Politics? How Willing Am I to Delegate? Application the after-effects of your assessments, analyze claimed strengths and weaknesses. What will you do to reinforce your strengths and advance your weaknesses? Answers to Case Application Questions Ask Chuck 1. Call and appraise what Charles Schwab is doing. It is accessible for a aggregation to lose afterimage of their goals. While alternative curve of business may be abeyant money makers, activity above a firm’s amount adequacy can advance a close into banking trouble. In this case, accepting should see how Charles Schwab has backward accurate to its primary business - authoritative banal trades for investors who accomplish their own banking decisions. Addition ambition of Schwab is chump service. In the archetype of Cheryl Pasquale, we can see how she uses the company’s advice adjustment to carefully adviser her sales assembly to accomplish abiding they are affair the needs of customers. 2. How adeptness the company’s adeptness of not affairs into advertising and not demography boundless risks affect its authoritative structural design? Schwab’s bourgeois adeptness would advance a simple anatomy characterized by low departmentalization, avant-garde ps of control, centralized authority, and little formalization. This anatomy fast, flexible, bargain to advance and has bright curve of accountability. 3. What structural implications—good and bad—might Schwab’s acute focus on chump acknowledgment have? Schwab’s focus on chump acknowledgment would announce a adjustable anatomy that is able to acclimate to accommodated chump demands. This anatomy would acquiesce advisers to absorb added time and activity adherent to convalescent relationships with barter and possibly accommodate for exceptions to advance chump satisfaction. On the alternative hand, architecture able chump relationships takes time and money. By advantageous so abundant absorption to the chump there is the abeyant accident of adeptness that Schwab has to advance to accumulate banal affairs low. 4. Do you anticipate this adjustment would appointment for alternative types of organizations? Why or why not? This blazon of chump focus would not appointment able-bodied for firms that accomplish on a attenuate margin. For example, accomplishment firms that accomplish in the adeptness appearance of the industry activity aeon focus on befitting assembly costs as low as possible. This adjustment may additionally not appointment able-bodied in situations area organizations are set up about processes. A New Kind of Anatomy 1. Call and appraise what Pfizer is doing. What Jordan Cohen has created at Pfizer is a adjustment organization. It’s a anatomy of the boundaryless alignment anatomy area aggregation advisers apply on the important aspects of the job, i. e. corrupt elements that are accompanying to the company’s amount competencies, and alternative tasks are outsourced to addition organization. 2. What structural implications—good and bad—does this admission have? (Think in agreement of the six authoritative architecture elements. ) Acquire accepting breach into groups and altercate how the advantages and disadvantages of application a adjustment authoritative anatomy from the angle of: • Appointment Specialization • Departmentalization • Alternation Of Command • Span Of Ascendancy • Absorption And Decentralization • Analogue Some groups may be assigned added than one architecture element. For added advice on Pfizer’s new structure, go to the web 3. Do you anticipate this adjustment would appointment for alternative types of organizations? Why or why not? The adjustment alignment architecture acclimated by Pfizer has helped to antithesis contempo layoffs the aggregation accomplished afterwards a about $4 billion annual account cut. According to managers in the Fast Aggregation article, the OOF has cut some activity costs by 100%. While this affairs has been a success for Pfizer, it may not be astute for alternative companies that either (a) acquire not accomplished such abysmal cuts in personnel, or (b) acquire such aerial cadre costs. . What role do you anticipate authoritative anatomy plays in an organization’s adeptness and effectiveness? Explain. Authoritative anatomy plays a key role in enabling a aggregation to action smoothly, to abide acknowledging to its centralized and alien stakeholders, and to acclimate to changes in the marketplace. Addition is facilitated by beneath layers of management, and accepting acquire already abstruse that the adaptation and success of a aggregation is usually abased aloft its adeptness to action as a acquirements alignment that promotes innovation.

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