GMS 200 Lecture Notes - Lecture 8: Departmentalization, Organizational Architecture, Jack Welch

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Chapter 8: Organization Structures and Design
April 5 th
, 2016
Organizing: Process of arranging people and other resources to work together to accomplish a
goal
Adams Smith’s Pin Factory: Labour Davison
Pin factory shows a process under one roof in which the unschooled worker, worth no
access to its special machines, would be lucky to turn out a single pin a day
Formal Structures
The structure of the organization in its official state
Organization Chart: describes the arrangement of work positions within an
organization
oFormal communication
channels
oType of work performed
oMajor Subunits (reporting to
a common manager)
oDivision of work
oLevels of management
Informal Structures
The way work actually gets done
Relationships in the shadow organization
Unofficial working relationships and communication patterns
Social Network Analysis: identifies the informal structures and their embedded social
relationships that are active in an organization
Functional Structures: People with similar skills and performing similar tasks are grouped
together into formal work
Advantages: economies of scale with efficient use of resources, task assignments
consistent with expertise and training, high quality technical problem solving, in-depth
training and skill development within functions, clear career paths within functions
Disadvantages: difficulty in pinpointing responsibilities, product or service quality, and
innovation
Functional Chimneys problem: is a lack of communication and coordination across
functions
Divisional Structures
Group of people who work on the same product or process. Serve similar customers, and
or are located in the same area or geographical region
Product Structures: groups together people and jobs focused on a single product or
service
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Geographical Structures: groups together people and jobs performed in the same
location
Customer Structure: groups together people and jobs that serve the same customers or
clients
Process Structures: groups jobs and activates that are part of the same processes
oWork Process: is a group of related tasks that collectively creates a valuable
work product
Advantages of Divisional Structures
More flexibility in responding to environmental changes
Improved coordination
Clear points of responsibility
Expertise focused on specific customer, products, and regions
Greater ease in restructuring
Disadvantages
Reduce economies of scale and increase costs through the duplication of resources
Create unhealthy rivalries as divisions compete for resources and top management
attention
Matrix Structure
Combines functional and divisional structures to gain advantages and minimize
disadvantage of each
Advantages and Disadvantage of Matrix Structure
Better cooperation across functions
Improved decision making, increased flexibility, better customer service
Disadvantages
Two-boss system is susceptible to power struggles
Groupitis: strong team loyalties that cause a loss of focus on larger organizational goals
Team Structures
Extensively use permanent and temporary teams to solve problems, complete special
projects, and accomplish day-today tasks
Cross-functional teams bring together members from different areas of work
responsibility
Advantages of Team Structures
Eliminate difficulties with communication and decision-making that result from the
functional chimneys problem
Break down barriers between departments as people from different parts an organization
get to know one another
Improve speed and quality of decisions
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Disadvantages
Conflicting loyalties for persons with both teams and functional assignments
Issues of time management and group process
Network Structures
A central core that is linked through networks of relationships with outside contractors
and suppliers of essential services
Potential advantages of network structures:
oFirms can operate with fewer full-time employees and less complex internal
systems.
oReduced overhead costs and increased operating efficiency.
oPermits operations across great distances.
Potential disadvantages of network structures:
oControl and coordination problems may arise from network complexity.
oPotential loss of control over outsourced activities.
oPotential lack of loyalty among infrequently used contractors.
oExcessively aggressive outsourcing can be dangerous.
Departmentalization
oThe process of making decisions on how to group work positions into formal
teams that are linked together so they operate in a coordinated manner within the
larger organization (CEO marketing, production ...etc.)
Boundary less Organizations
A combination of team and network structures, with the addition of temporariness
Internal boundaries are eliminated as people work together as needed
oResearch and development, production, sales, purchasing, distribution
External boundaries vary as alliances change with shifting needs/opportunities
Key requirements:
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