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Chapter 9

Chapter 9

6 Pages
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Department
Administrative Studies
Course Code
ADMS 4900
Professor
Kelly Thomson

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Feb.06/2014 Lecture 5 Chapter 9—Creating Effective Organizational Designs Traditional Forms of Organizational Structure - organizational structure formalized patterns of interactions that link a firm’s tasks, technologies, and people - duties of structure: ~ helps ensure resources are used effectively ~ means of balancing two conflicting forces: need for division of tasks into meaningful groupings and need to integrate the groupings to ensure efficiency and effectiveness ~ identifies managerial, executives and administrative organization and indicates responsibilities and hierarchical relationships ~ influences flow of information and context and nature of human relationships - type of structure dependent on nature and magnitude of growth Patterns of Growth of Large Corporations: Strategy-Structure Relationships - strategy and structure change with size, diversifies into new product markets, expands geographic scope - simple structure increases sales revenue and volume of outputs over time ~ some vertical integration so secure supply (backward integration) and distribution channels (forward integration) ~ then implements functional structure - functional structure concentrate efforts on increasing efficiency and enhancing operations and products ~ allows firm to group operations in functions, departments, geographic areas - divisional structure strategy of diversification needs to be reorganized around product line and geographic market ~ business expands and growth opportunities seem limited, option to expand into international markets ~ choose from several types of structures: • international division • geographic area • worldwide product division • worldwide functional division • worldwide matrix ~ when choosing structure for international operations depends on: 1. extent of international expansion 2. type of strategy (global, multi-domestic or transnational) 3. degree of product diversity - holding company structure firm acquires assets and competencies because it is more economical then developing internally ~ unrelated strategy requires little integration across business and sharing of resources 1. Simple Structure - most common organizational structure form - small firm, narrow product line where owner-manager makes most of the decisions - owner-manager controls most activities - advantages: ~ informal ~ co-ordination of tasks is accomplished by direct supervisor ~ centralized decision making ~ few rules/regulations ~ informal evaluation and reward system in place - disadvantages: ~ foster creativity and individualism ~ employees may not clearly understand their responsibilities ~ employees take advantage of lack of regulations and act in self-interest ~ limits opportunity for upward mobility ~ recruitment and retaining talent can become difficult due to lack of future advancement 2. Functional Structure - owner-manager not specialized on all areas thus needing to hire specialists in various functional areas (marketing, accounting, engineering etc.) - co-ordination and integration of functional areas becomes central responsibility for chief- executive - found in firms where there is a single closely related product or service, high production volume, some vertical integration - high level of centralization that helps integration and control over related product-market activities or multiple primary activities - advantages: ~ centralized decision making; more control ~ more efficient use of managerial and technical talents ~ career paths and professional developments - disadvantages: ~ difference in value and orientations may impede communication and coordination ~ ‘silos’—departments view themselves as isolated with little need for interaction with other departments ~ short-term thinking ~ fighting for resources ~ difficulty establishing uniform performance standards 3. Divisional Structure - organized around products, projects or markets - each division has its own functional specialists - encompasses set of relatively autonomous unites governed by central corporate office - operating divisions are independent and are made up of product/service that are different from other divisions - top-level managers need to delegate decision making to lower-level managers - divisional executives—help determine product-market and financial objectives for the division as well as their division’s overall contribution to corporate performance - advantages: ~ separation of strategic control and operating control ~ divisional markets can focus on improving operations in the product markets for which they are responsible ~ conflicts regarding sharing resources are minimized because each division has its own functional departments - disadvantages: ~ expensive; same positions, operations and investments in all divisions ~ dysfunctional competition among divisions ~ ‘zero-sum’—discourage sharing ideas and resources among divisions for common good of the corporation ~ difference in image and quality across divisions ~ urge to focus on short-term performance 4. Strategic Business Unit Structure - has dozens of divisions - divisions with similar products, markets, and/or technologies are grouped into homogenous units to achieve some synergy - each SBU in corporation operates as profit center - advantages: ~ planning and control by corporate office if manageable ~ individual businesses can react more quickly - disadvantages: ~ difficult to achieve synergy across SBUs ~ level of management increases number of personnel and overhead expenses ~ corporate office unaware of key developments that could have major impact on corporation 5. Holding Company Structure - variation of divisional structure - used when businesses in corporation’s portfolio do not have much in common ~ potential for synergy is limited - corporate office provides autonomy to operating divisions and relies on financial controls and incentive programs to get high levels of performance - advantages: ~ cost savings because of fewer personnel and lower overhead and fewer hierarchical levels ~ autonomy of holding company increases motivation for level of divisional executives and enables them to react quickly to market opportunities - disadvantages: ~ lack of control at corporate level executives have over divisional executives ~ problems in division could be difficult to turn around because of limited staff support in corporate office 6. Matrix Structure - combination of functional and divisional structure - functional departments are combined with product groups on project basis - in matrix organization there are two managers: project manager and manager of funct
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