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Chapter 8

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Department
Global Management Studies
Course
GMS 200
Professor
Ricardo Reyes
Semester
Winter

Description
Chapter 8 – Organization Structure and Design Organizing as a Management Function • Organizing – Process if arranging people and other resources to work together to accomplish a goal • Organization Structure – System of tasks, workflows, reporting relationships, and communication channels that link together diverse individuals groups Formal Structures • Formal Structures – The structure of the organization in its official state • Organization Chart – diagram describing reporting relationships and the formal arrangement of work positions within an organization • An organization chart identifies the following aspects of formal structure: o Division of work o Supervisory relationships o Communication channels o Major subunits o Levels of management Informal Structures • Informal Structures – “Shadow” organization made up of the unofficial, but often critical, working relationships between organization members • Potential advantages: o Helping people accomplish their work o Overcoming limits of formal structure o Gaining access to interpersonal networks o Informal learning • Potential disadvantages o May work against best interests of entire organization o Susceptibility to rumour o May carry inaccurate information o May breed resistance to change o Diversion of work efforts from important objectives o Feeling of alienation by outsiders Functional Structures 1 • Functional Structures – people with similar skills and performing similar tasks are grouped together into formal work units • Members work in their functional areas of expertise • Not limited to businesses • Work well for small organizations producing few products or services • Advantages: o Economies of scale o Task assignments consistent with expertise and training o High-quality technical problem solving o In-depth training and skill development within functions o Clear career paths within functions • Disadvantages: o Difficulties in pinpointing responsibilities o Functional chimneys problem – Lack of communication, coordination, and problem solving across functions o Sense of common purpose and sense of cooperation break down o Narrow view of performance objectives o Excessive upward referral of decisions Divisional Structures • Group together people who work on the same product or process, serve similar customers, or are located in the same area of geographical region • Common in complex organizations with diverse operations Types of Divisional Structures • Product Structure – focus on a single product or service • Geographical Structure – groups together people and jobs performed in the same location • Customer Structure – focus on the same customer or clients • Process structure – focus on the same processes Advantages of divisional structures: • More flexibility in responding to environmental changes • Improved coordination • Clear points of responsibility • Expertise focused on specific customers, products, and regions 2 • Greater ease in restructuring Disadvantages of divisional structures: • Reduce economies of scale through duplication of resources and efforts across divisions • Competitions and poor coordination across divisions • Emphasis on divisional goals at expense of organizational goals Matrix Structure • Combines functional and divisional structures to gain advantages and minimize disadvantages of each • Used in: o Manufacturing o Service industries o Professional fields o Non-profit sector o Multi-national corporations • Advantages: o Better cooperation across functions o Improved decision making o Increased flexibility in restructuring o Better customer service o Better performance accountability o Improved strategic management • Disadvantages: o Two-boss system is susceptible to power struggles o Two-boss system can create task confusion and conflict in work priorities o Team meetings are time consuming o Team may develop “groupitis” – strong team loyalties that cause a loss of focus on larger organizational goals o Increased costs due to adding team leaders to structure Team structures • Team structure – extensively use permanent and temporary teams to solve problems, complete special projects, and accomplish day-to-day tasks • Often use cross-functional teams composed of members from different functional departments 3 • Project teams – convened for a specific task or project and disbanded once completed • Advantages: o Eliminates difficulties with communication and decision making o Eliminates barriers between operating departments o Improved morale o Greater sense of involvement and identification o Increased enthusiasm for work o Improved quality and speed of decision making • Disadvantages: o Conflicting loyalties among members o Excessive time spent in meetings o Effective use of time depends on quality of interpersonal relations, group dynamics, and team management Network Structures • A central core that is linked through networks of relationships with outside contractors and suppliers of essential services • Own only core components and use strategic alliances or outsourcing to provide other components • Advantages: o Firms can operate with fewer full-time employees and less complex internal systems o Reduced overhead costs and increased operating efficiency o Permits operations across great distances • Disadvantages o Control and coordination problems may arise from network complexity o Potential loss of control over outsources activities o Potential lack of loyalty among infrequently used contractors o Excess
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