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York University
Organization Studies
ORGS 2010
Eleanor Westney

READING #1: ORGANIZATIONS AS A STRATEGIC DESIGN - strategic design: - perspective sees organizations as social systems that are constructed to achieve strategic goals, or in the language of business today, to deliver on the organization’s strategy. - by understanding basic principles of organization design, by aligning the organization’s design with its strategy, and by making sure that both strategy and design fit the environment in which the organization is operating, managers can make their organization both more efficient and more effective - built on the assumption that the organization has a strategy for creating value, and this strategy provides the test for generating and assessing the organization’s design -Efficiency: - involves accomplishing strategic goals with the least possible expenditure of resources; -effectiveness involves ensuring that goals are accomplished to the standard necessary for the organization to succeed. - the activities at which the organization excels can (and should) influence the strategy  ex. an excellent marketing department should be involved in creating strategy of developing new advertising campaigns or talking to customers, instead of trying to cut costs - must also ask: “Which activities should be inside the boundaries of the organization and which outside?”  “make or buy” issue; addressing the question of how to organize the activities that the chosen strategy includes inside the organization Key Elements of Organization Design - Strategic Design perspective sees information as the key resource of the organization - achieve goals? need to share information, create it through cooperation, and direct it to those who can use it  ^ in this perspection, org is simply information processing  guides the value‐creating activities to meet goals - task:  smallest unit of the activities that need to be performed if the organization is to realize its strategic goals  vary in complexity (very very simply to creating new division)  vary in routinzation: the extent to which the activity can be specified and programmed (simple and complex tasks can be routinized)  vary in interdependence (can be totally separate in carrying out task or not) TYPES OF INTERDEPENDENCE ( James Thompson) 1. Sequential Interdependence: one task completed & then sent to next stage 2. Pooled Interdependence: interdependent tasks done at same time & final result that put together or pooled 3. Reciprocal Interdependence: tasks are conducted in repeated interaction with each other COMPARING INTERDEPENDENCES: - pooled easiest, then sequential, then reciprocal - pooled: one assignments, can carry on without exchange - sequential: info flows dense at transfer points - reciprocal: sustained & interactive links across boundaries of units - org design begins with (1)strategic grouping: the differentiation of clusters of activities, positions, and individuals into work units - (2) units must be linked according to the nature and level of interdependence in their tasks (ensure that information and other needed resources flow effectively and efficiently between the activities or groups separated by the grouping boundaries (linking) - (3) design must use a variety of alignment mechanisms  ex. incentive systems, information systems, etc.,  ensure that people have the resources and the incentives to carry out tasks assigned - The basic assumption of the strategic design perspective is that an organization is most 4 effective when its strategy fits the conditions of its environment and when the organizational components are aligned with the strategy and with each other. - Strategic grouping, linking, and alignment are relevant at every level of the organization STRATEGIC GROUPING - Grouping decisions dictate the basic framework within which all other organizational design decisions are made - Each grouping structure has strengths and weaknesses, and the selection of a grouping structure should be direct outgrowth of the strategy of the organization - fundamental assumption is coordination and communication are easier and denser within a unit than across units; sharing information and building and adding to a common knowledge base are easier - types of grouping: 1. Grouping by Expertise/Function - brings together individuals who share similar functions, disciplines, skills, and work processes - gives rise to functional organizations: all the activities concerned with a particular function are grouped into separate units - strengths? i. allows the development of deep functional expertise and a high degree of specialization of knowledge within each function ii. “economies of scope”: that is, the functional organization makes it relatively easy to transfer resources across activities within functions iii. allows each group to create separate alignment systems (such as performance evaluation, incentives and rewards, training) suited to its needs and to reinforcing its strengths - weaknesses? i. cost of integration across functions; assumes a sequential interdependence across the functions that can be difficult; ii. functional organizations are therefore often not very responsive to changes in markets or customers iii. as their level of specialization increases, individuals tend to develop narrower perspectives, and have difficulty in solving problems that require joint efforts with other groups iv. difficult in this kind of organization to assess costs clearly; assign accountability for the overall performance v. there is a tendency for the number of levels of management in each function to expand over time, often have very tall hierarchies that can inhibit speedy and effective information flows vi. few opportunities for managers to gain experience outside their functional areas as they move up the career ladder, the functional organization does not develop a large supply of general managers who can see the organization as a whole 2. Grouping by Output/Product - organizes on the basis of the service or product provided - people within the group perform a variety of different tasks and activities, but they are all contributors to the same final output - pioneered in the U.S. by DuPont and General Motors - if company has many products, usually use product line or multidivisional structure A. Product Division Structure: (usually for strategies that emphasize efficiency (cost & profitability very important) - 2 major adv’s: -transparency of performance: it makes the costs and profits of each business much clearer than does the functional structure - clear strategic focus it provides for the managers of the product division: each business division head is responsible for the profitability and growth of a complete “value chain”. - helps with speed to market (crossfunctional communication) - Disadvantages: - Making each business unit accountable for its own “P‐and‐L” (profit and loss statement) can make it difficult for units to share resources and can lead to duplication of activities - new business creation difficult: in some cases business units focus exclusively on expanding their existing business, instead of finding new opportunities or compete to “own” new business - can lose their professional focus and become less attuned to breakthrough innovations in their own fields - rigidity in resource use/transfers - lead to missed learning opportunities in core functions//innovation problems as units tend to find short term solution 3. Grouping by Market (Geography or Customer) - for companieswhose strategies are customer‐focused - gathers together people who perform different activities and tasks and produce different outputs but who serve the same customers or market segments - for tailoring P&S’s to customers whose needs and tastes differ considerably - Advantages: - capacity for developing deep customer knowledge and close customer relationships(mostly in service industries) - Disadvantages: - the duplication of activities and resources - the erosion of deep technical expertise - missed opportunities for synergies and learning HYBRID STRUCTURES: - hybrid or multidimensional grouping structures in an attempt to break out of the constraints imposed by a single mode of strategic grouping (2 types described below) 1. Matrix Organization: - form that picks two strategic grouping dimensions and gives them equal weight in the organization structure, so that the manager of each operating unit reports to two “bosses”, one for each dimension - vary in the number of people who report equally to two bosses (can be only higher level or almost everyone) - popular in the 1980s and early 1990s - but complicated: require dual systems, roles, controls, and rewards that reflect both dimensions of the matrix  lead to confusion, higher costs, delays in reaching decisions, and a heightened potential for conflict - therefore, went to linking mechanisms rather than grouping to make the organization responsive to multiple strategic dimensions - Advantages? - reduce costs in able to find where costs can be cut - quality of information transferred improves short term - if company has time to change design; matrix is better to implement - Disadvantages? - add costs for speed to market - higher coordination time b/w departments making longer speed to mrkt ST - bad system integration: still have no single face to customer 2. Front/Back Structure - organization is divided into two parts, both multifunctional but each with a different grouping dimension - front end: faces the customer and is organized by market (geography or cust. Segment); includes functions that directly relate with the customer: marketing, sales, distribution, service and support - backend: organized by product and takes the form of business units that include technology development (product development and process engineering), production, and logistics (including the management of outsourcing relationships) - Advantages: - potential for facilitating in the back end the close integration of technology development and production that was one of the strengths of the product division structure, - in the front end the close customer relationships and deep knowledge of the market characteristic of market‐based or functional structures - ^ done without complexity - Disadvantages: - fragmentation of technical expertise in the back end - poor integration between market needs and technology development that we sometimes see in functional or market‐based structures - ensuring adequate integration and synergy between the front and back ends can be a challenge Modular or Network Structures -loosening the hierarchical reporting lines characteristic of formal grouping structures in favour of a structure in which relatively small subunits focused on a specialized set of activities operate within a “self‐organizing” network - subunits come together and cooperate to deliver a specific product or service, and then re‐ configure with other subunits when different requirements come along LINE AND STAFF - line: activities in the direct “value chain” providing products and services to the customer - support: include everything from the Finance department to the amorphous term of “Administrative Services” - grouped by expertise - in functional structures: additional functional units (Ex. Finance, Marketing, etc.) - in other structures (ex. bus. Division/hybrid/etc.): more challenge to group and are varied; some in “Shared Services” and go across divisions; or by business unit SUMMARY OF GROUPING - no clear choice - design must address all three elements of expertise/function, business/product, and geography/customer. - main question: which dimension will be primary, and how the others will be nested at the next levels (ex. function within business within geo or function within geo within business) - choice depends heavily on organization strategy; match strategic linking to the grouping and to the strategy is equally, if not more, important STRATEGIC LINKING - involves designing structures and processes to connect and coordinate organizational units and subunits whose tasks are interdependent but that have been separated by strategic grouping decisions - issues with formal structures: - i
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