BU398 Chapter Notes - Chapter 3: Hierarchical Organization, Network Virtualization, Jack Welch

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30 Jan 2013

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Sunday, January 13th, 2013
Fundamentals of Organizational Structure
Organizations use various structural alternatives to help them achieve their
purpose and goals
Nearly every firm needs to undergo structural reorganization to help them
meet new challenges
Organizational Structure
Three key components:
1. designates formal reporting relationships hierarchy, span of control
2. groups individuals together into departments, developing the entire
3. design of systems for effective communication, coordination, integration
across all departments
structure is reflected in an organizational chart; visual representation of a
whole set of underlying processes and activities in an organization at a
particular point in time
Information-Processing Perspective on Structure
vertical linkages are designed primarily for control
horizontal mechanisms are for coordination and collaboration, which
reduces control
organizations must be designed for both horizontal and vertical information
flow, find the best combination
more vertical is built for efficiency, more horizontal is built for learning
Horizontal LEARNING
specialized tasks
few teams
strict hierarchy
vertical reporting system
centralized decision making
communication among
employees an departments necessary
to accomplish the overall task
lower level employees carry
out activities consistent with top-
level goals
1. Hierarchical Rules: chain of
command acting as
communication channels
2. Rules and Plans: makes
problems and decisions
shared tasks
horizontal hierarchy
few rules
face-to-face communications
many teams/task forces
decentralized decision making
overcomes barriers between departments and
provides opportunities for coordination among
employees to achieve unity of effort and organizational
1. Information Systems: computerized way for
front-line employees and managers to routinely
communicate, provide support
2. Direct Contact: one way of doing this I through
a liaison role where a person is responsible for
communicating and achieving coordination
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Sunday, January 13th, 2013
repetitions because they guide
how they are to resolve
things, they provide structure
and unspoken guidance and
3. Vertical Information
System: periodic reports,
written information,
communications distributed
to managers
between departments
3. Task Forces: temporary committee composed
of representatives of each organizational unit
affected by a problem
4. Full-time Integrator: a position or department
responsible solely for the purpose of
coordination, located outside departments
like a brand manager lot of responsibility, but
little authority
5. Teams: strongest horizontal linkage
mechanism, permanent strong coordination
over long periods of time
Organizational Design Alternatives
Required Work Activities
Departments are created to perform tasks created strategically important to
the company
Reporting Relationships
How the departments should fit together in the organizational hierarchy
Chain of command, reped through vertical lines linking people together
Departmental Grouping Options
Five options:
1. Departmental: employees share a common supervisor and common
resources, jointly responsible for performance, identify and collaborate,
2. Functional: employees who perform similar work processes, have
similar knowledge, skills not as common today, hard to maintain pure
functional organization ex. University
Allow economies of scale
within functional
Enables in-depth skills and
knowledge development
Enables organizations to
accomplish functional goals
Best with only one or few
Valuable when in-depth
expertise is critical to meet
organizational goals and
efficiency is necessary
Slow response to
environmental changes
May cause decisions to pile
up, hierarchy overload
Leads to poor horizontal
Less innovation
Restricted view of
organizational goals
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