Chapter 7
Designing Adaptive
Organizations
Major Concerns in Organizing
Division of Labor (Differentiation)
Coordination (Integration)
In Reference to the Organizational Chart,
Organizing Involves:
VERTICAL STRUCTURE
Coordination from Top to Bottom
HORIZONTAL STRUCTURE
Departmentalization (Who works together?)
Work Specialization
Degree to which tasks are subdivided
into individual jobs
A highly specialized job is narrow in
scope
Increases efficiency up to a point
With extreme specialization, workers
tend to become bored and alienated
Chain of Command
The line of authority, shown in the
organization chart, that links all persons
and shows who reports to whom.
CEO
VP Marketing
VP Production
VP Finance
Authority
Managers have authority because of the positions
they hold (not who they are)
To be effective, it must be accepted by
subordinates.
Responsibility
Duty to perform the task an employee has been
assigned
Authority should be commensurate with
responsibility.
Delegation
Process to transfer authority and
responsibility to positions below
Delegation does not reduce responsibility
Benefits both the organization and the
individual employee
Common Practice is to:
CENTRALIZE (authority at top)
Accounting
Finance
Human Resources Management
Information Systems
DECENTRALIZE (much delegation)
Production
Marketing
Span of Management
Number of employees reporting to a
supervisor
Tradition has recommended a span of
management of four to seven
subordinates
What is best depends on the situation
Departmentalization
Basis for grouping job positions into departments and departments
into the total organization.
Internal Operations Oriented
Functional
Network (Virtual)
Output Oriented
Divisional
Product
Geographic
Customer
Team (Cluster)
Combinations
Hybrid (different types at different places in
an org.)
Matrix (different types at simultaneous at
the same places in an org.)
Functional Approach
Departments based on similar activities, skills
and resource use.
Advantages:
Disadvantages:
Poor communication
Efficient use of
among departments
resources
Slow response to
Economies of Scale
external changes
In-depth skill
Loyalty more to function
specialization
than customer or the
whole organization
Divisional Approach
Departments are grouped together based
on organizational outputs (e.g., product,
geography, customer)
Functions (e.g., marketing) are split
among the divisions
Its advantages and disadvantages tend to
be the opposite of those of the functional
approach
Divisions
Advantages:
Quicker changes in
an unstable
environment
More in touch with
customers
Disadvantages:
Duplication
Competition for
resources among
divisions
More managers
needed
Less professional
specialization
Matrix Approach
Functional and divisional chains of
command simultaneously
Violates the unity of command concept.
Matrix Structure - Why?
To get the advantages of both Functional
and Divisional Structures
Sophisticated technology, fast-changing
environment
Diverse products and geographical areas
Disadvantages of Matrix
Many meetings to coordinate activities
High conflict between two sides of matrix
Need for extensive human relations
training
Team Approach
Cross-functional teams (Clusters) consist
of employees from various functional
departments
Teams typically have more decision
making power than previously held by
workers at their levels.
Team Approach
Advantages
Quicker response time
Better morale
Reduced administrative overhead
Disadvantages
Conflict
Time and resources spent on meetings
Network (Virtual) Approach
Organization divides major functions
among separate companies brokered by
a small headquarters organization
Somewhat like a functional organization.
Network Approach
Advantages
Increases competitiveness, especially of
small firms
Flexibility
Reduced Costs
Disadvantages
No hands-on control
Loyalty weakened.
Mechanistic vs. Organic
Organizations
Vertical vs. Horizontal Structural Dominance
Rigid vs. Flexible
Specialized Jobs vs. Unspecialized
Boss Control vs. Self-Control
Centralized Decisions vs. Decentralized
Bureaucratic vs. Non-bureaucratic
Departmentalization Types
(From most Mechanistic to most Organic)
Functional
Functional with integrators, crossfunctional committees, etc.
Matrix
Divisional
Team
When the Mechanistic (Vertical)
Approach is most Appropriate:
External Environment is: Stable
Growth and Innovation Goals are:
Few or Nonexistent (Internal Stability)
The Organizations Size is: Large
The Technology is: Mass Production (or
involving low-level skills)
When the OrganicApproach is
most Appropriate:
External Environment is: Unstable
Growth and Innovation Goals are: Numerous
Technology is:
Small Batch
Continuous Process
Flexible Manufacturing (Computer Assisted)
Service, especially professional service jobs.
Service Technology
Tends to be more Organic (Horizontal)
than manufacturing
Employees have direct contact with
customers
Output of the firm is intangible
Production and consumption are
simultaneous