15 Organizational Structure McGraw-Hill/Irwin © 2008 The McGraw-Hill Companies, Inc All rights reserved Nitro’s Structural Advantage Courtesy of Nitro Group Boutique advertising firm Nitro relies on an organizational structure that keeps it nimble and responsive to customer needs Founded in Shanghai, Nitro is a virtual global agency in which each local office has account service staff, but a global creative swat team is parachuted in as required McShane/Von Glinow OB4e Slide 15-2 © 2008 The McGraw-Hill Companies, Inc All rights reserved Division of Labor Courtesy of Nitro Group  Subdivision of work into separate jobs assigned to different people  Potentially increases work efficiency  Necessary as company grows and work becomes more complex McShane/Von Glinow OB4e Slide 15-3 © 2008 The McGraw-Hill Companies, Inc All rights reserved Forms of Work Coordination • Informal communication – Sharing information – High media-richness – Important in teams – Integrator roles in larger firms • Formal hierarchy – Direct supervision – Common in larger firms – Problems costly, slow, less popular today with workforce • Standardization – Processes formal instructions – Outputs clear goals/output measures – Skills training, learn precise role behaviors McShane/Von Glinow OB4e Slide 15-4 © 2008 The McGraw-Hill Companies, Inc All rights reserved Elements of Organizational Structure Departmentalization Span of Control Organizational Structure Elements Formalization McShane/Von Glinow OB4e Centralization Slide 15-5 © 2008 The McGraw-Hill Companies, Inc All rights reserved Span of Control • Number of people directly reporting to the next level – Assumes coordination through direct supervision • Wider span of control possible with other coordinating mechanisms present McShane/Von Glinow OB4e Slide 15-6 © 2008 The McGraw-Hill Companies, Inc All rights reserved Trend Toward Flatter Structures • Firms moving toward flatter structures – Cuts costs – Puts decision makers closer to front-line information – Supports empowerment • Problem: risk of cutting too much middle management McShane/Von Glinow OB4e Slide 15-7 © 2008 The McGraw-Hill Companies, Inc All rights reserved Centralization and Decentralization Centralization Formal decision making authority is held by a few people, usually at the top Decision making authority is dispersed throughout the organization Decentralization McShane/Von Glinow OB4e Slide 15-8 © 2008 The McGraw-Hill Companies, Inc All rights reserved Formalization • The degree to which organizations standardize behavior through rules, procedures, formal training, and related mechanisms • Formalization increases as firms get older, larger, and more regulated • Problems – – – – Reduces organizational flexibility Work rules can undermine productivity Employees feel disempowered Rules become focus of attention McShane/Von Glinow OB4e Slide 15-9 © 2008 The McGraw-Hill Companies, Inc All rights reserved Mechanistic vs Organic Structures Organic Mechanistic • Narrow span of control • Wide span of control • High formalization • Little formalization • High centralization • Decentralized decisions McShane/Von Glinow OB4e Slide 15-10 © 2008 The McGraw-Hill Companies, Inc All rights reserved W L Gore’s Team-Based Structure W L Gore & Associates Inc has an extreme team-based organizational structure that eliminates the traditional hierarchy Associates are organized around self-directed teams at dozens of manufacturing and sales offices around the world © Bill Kramer/ Bill Kramer Photography Inc McShane/Von Glinow OB4e Slide 15-20 © 2008 The McGraw-Hill Companies, Inc All rights reserved Team-Based Structure Features • Self-directed work teams • Teams organized around work processes • Very flat hierarchy, few management levels • Very little formalization • Usually found within divisionalized structure © Bill Kramer/ Bill Kramer Photography Inc McShane/Von Glinow OB4e Slide 15-21 © 2008 The McGraw-Hill Companies, Inc All rights reserved Evaluating Team-Based Structures • Benefits – Responsive, flexible – Lower admin costs – More informed decisions • Limitations – – – – Interpersonal training costs Slower during team development Stress due to ambiguous roles Problems with supervisor role changes © Bill Kramer/ Bill Kramer Photography Inc McShane/Von Glinow OB4e Slide 15-22 © 2008 The McGraw-Hill Companies, Inc All rights reserved Network Organizational Structure Product developmen t partner (U.S.A.) Call center partner (India) Core Firm Package design partner (UK) Accounting partner (Canada) Assembly partner (Mexico) McShane/Von Glinow OB4e Slide 15-23 © 2008 The McGraw-Hill Companies, Inc All rights reserved Network Structure v Virtual Corp • Network structure – An alliance of several organizations for the purpose of creating a product or serving a client • Virtual corporation – Several independent companies that form unique partnership teams to provide customized products or services, usually to specific clients, for a limited time McShane/Von Glinow OB4e Slide 15-24 © 2008 The McGraw-Hill Companies, Inc All rights reserved Evaluating Network Structures • Benefits – Highly organic flexible design – Efficiencies from acquiring and discarding resources as needed from partnerships • Limitations – Exposes core firm to market forces shortages of facilities and talent – Less control over non-core work processes McShane/Von Glinow OB4e Slide 15-25 © 2008 The McGraw-Hill Companies, Inc All rights reserved External Environment & Structure Dynamic Stable • High rate of change • Use team-based, network, or other organic structure Complex Simple • Many elements (such as stakeholders) • Decentralize McShane/Von Glinow OB4e • Steady conditions, predictable change • Use mechanistic structure • Few environmental elements • Less need to decentralize Slide 15-26 © 2008 The McGraw-Hill Companies, Inc All rights reserved External Environment & Structure (con’t) Diverse Integrated • Several products, clients, regions • Use divisional form aligned with the diversity Hostile Munificent • Competition and resource scarcity • Use organic structure for responsiveness McShane/Von Glinow OB4e • Single product, client, place • Use functional structure, or geographic division if global • Plenty of resources and product demand • Less need for organic structure Slide 15-27 © 2008 The McGraw-Hill Companies, Inc All rights reserved Effects of Organizational Size • As organizations grow, they have: – More division of labor (job specialization) – Greater use of standardization – More hierarchy and formalization – More decentralization McShane/Von Glinow OB4e Slide 15-28 © 2008 The McGraw-Hill Companies, Inc All rights reserved Technology and Structure • Technology – Mechanisms or processes by which an organization turns out its product or service • Variability – The number of exceptions to standard procedure that tend to occur • Analyzability – The predictability or difficulty of the required work McShane/Von Glinow OB4e Slide 15-29 © 2008 The McGraw-Hill Companies, Inc All rights reserved Technology and Structure High Analyzability Low Analyzability McShane/Von Glinow OB4e Assembly Line Engineering Projects Skilled Trades Scientific Research Low Variety High Variety Slide 15-30 © 2008 The McGraw-Hill Companies, Inc All rights reserved Organizational Strategy • Structure follows strategy • Differentiation strategy – Providing unique products or attracting clients who want customization • Cost leadership strategy – Maximize productivity in order to offer competitive pricing McShane/Von Glinow OB4e Slide 15-31 © 2008 The McGraw-Hill Companies, Inc All rights reserved 15 Organizational Structure McGraw-Hill/Irwin © 2008 The McGraw-Hill Companies, Inc All rights reserved 15 Chapter 15 Extras McGraw-Hill/Irwin © 2008 The McGraw-Hill Companies, Inc All rights reserved General Motors’ IT Matrix Structure McShane/Von Glinow OB4e Slide 15-34 © 2008 The McGraw-Hill Companies, Inc All rights reserved ... precise role behaviors McShane/Von Glinow OB4e Slide 15-4 © 2008 The McGraw-Hill Companies, Inc All rights reserved Elements of Organizational Structure Departmentalization Span of Control Organizational. .. standardize behavior through rules, procedures, formal training, and related mechanisms • Formalization increases as firms get older, larger, and more regulated • Problems – – – – Reduces organizational. .. reserved Centralization and Decentralization Centralization Formal decision making authority is held by a few people, usually at the top Decision making authority is dispersed throughout the organization