Slides Courtesy of Professor Joe Labianca Page 2 Organization Charts Page 3 Example Org Chart Cox Communications Metro Newspaper Structure Publisher GM Finance HR Advertising Controller ID: 283052
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Organizational Design
Slides Courtesy of Professor Joe
LabiancaSlide2
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Organization ChartsSlide3
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Example Org Chart: Cox Communications (Metro Newspaper Structure)
Publisher
GM
Finance
HR
Advertising
Controller
IT
ProductionSlide4
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What do organization charts tell us?
Basic InformationWho reports to whom
Who has the ultimate official authority to make decisions
Which people are being asked to specialize in what areasSlide5
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Types of Groupings
Groupings for specialization happen around two basic types of groups:
Functional groupings
(e.g., Accounting, Human Resources, Marketing, Nursing)
Divisional groupings
Products or Services (e.g., Computer Hardware, Software, IT Consulting Services, Sports Medicine, Plastic Surgery)
Geographic Areas (e.g., Northern KY, Southern KY, Eastern KY)
Clientele (e.g., Educational institutions, Government, Corporate; Women’s Clinics, Sports Clinics; High Net Worth Banking)Slide6
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Functional vs. Divisional Grouping Structures
Human Resources
Sales
Accounting
CEO
Functional
Structure
HR
Sales
Acct
Hardware
Software
Consulting
CEO
Divisional
Structure
HR
Sales
Acct
HR
Sales
AcctSlide7
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The Apple-Orange Company Structure (Part One)
How will you structure your company?Functional?
Divisional?
Why do you prefer this structure?
What are the advantages?
What are the disadvantages?List the criteria you are considering when making this decision
Are there other pieces of information you wished you had as you were making the decision? What were they?Slide8
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What is the best organizational structure?
It dependsNo way of grouping people is perfectEvery structure
has its advantages and disadvantagesSlide9
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Functional Structure Strengths
Enables in-depth knowledge and skill development within the functional area (e.g., all researchers can learn from each other, regardless of what product they are currently researching)
Allows economies of scale within functional departments
(e.g., might not need as many workers or managers because of less duplication)
Very efficient; helps to minimize costsSlide10
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Divisional Structure Strengths
Allows divisions to adapt to differences in products, geographic regions, and clientsDecentralizes decision-makingSuited to fast change in unstable environments
Best in large organizations with several products
Highly adaptableSlide11
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The Apple-Orange Company Structure (Part Two)
Imagine that you chose the functional grouping in Part One
As the company continues to grow, the decision is made to diversify into the following products:
Pears
Eggplant
Grapes
BroccoliSlide12
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Possible Functional Structure for Apple-Orange
John
Carl
Sales
Salespeople
(Apples, Oranges, Pears, Broccoli, Grapes, Eggplant)
Production
Grow & Harvest
Field Workers
(Apples, Oranges, Pears, Broccoli, Grapes, Eggplant)
Research
Researchers
(Apples, Oranges, Pears, Broccoli, Grapes, Eggplant)Slide13
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The Apple-Orange Company Structure (Part Two, continued)
Now place yourself in the role of the Vice-President of Research. What problems do you foresee happening as the number of products proliferates? What will happen to the VP of Sales? The VP of Production?Slide14
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Functional Structure Weaknesses
Leads to poor horizontal coordination among departmentsInvolves restricted view of organizational goals (functional silo mentality)
May cause decisions to pile on top, creating overload at top of hierarchy
Slow response time to environmental changes
Results in less innovation
Works best when there are few productsLow in adaptabilitySlide15
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The Apple-Orange Company Structure (Part Three)
Now imagine that you chose the divisional grouping in Part One.
As the company continues to grow, the decision is made to diversify into the following products:
Pears
Eggplant
Grapes
BroccoliSlide16
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Possible Divisional Structure for Apple-Orange
John
Carl
Apple Division
Salespeople (Apples)
Orange Division
Field Workers (Apples)
Researchers (Apples)
Salespeople (Oranges)
Field Workers (Oranges)
Researchers (Oranges)
Pear Division
Broccoli
Division
Grapes
Division
Eggplant
Division
Salespeople
(Pears)
Field Workers
(Pears)
Researchers
(Pears)
Salespeople
(Broccoli)
Field Workers
(Broccoli)
Researchers
(Broccoli)
Salespeople
(Grapes)
Field Workers
(Grapes)
Researchers
(Grapes)
Salespeople
(Eggplant)
Field Workers
(Eggplant)
Researchers
(Eggplant)Slide17
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The Apple-Orange Company Structure (Part Three, continued)
What problems do you foresee happening as the number of products proliferates? Slide18
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Divisional Structure Weaknesses
Leads to poor coordination across product lines
Eliminates economies of scale in functional departments
Restricts in-depth competence and technical specialization in a functional area
Very inefficient; great deal of duplicationSlide19
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Example Divisional Structure: IBM (pre-June 2002)
CEO
Hardware
Software
Services
Global Finance
HR
Finance
Sales
IT
HR
Finance
Sales
IT
HR
Finance
Sales
IT
HR
Finance
Sales
ITSlide20
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The Organizational Environment
’
s Role in Determining StructureSlide21
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What determines the choice of structure?
Environmental Uncertainty
Uncertainty is driven by two main factors:
Environmental complexity
the
number
and similarity of elements (e.g., suppliers, customers, regulators) in the organization’s environment
Environmental dynamismthe rate of change in the elements in the organization’s environmentSlide22
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An Organization
’s Environment
International Context
(j)
International
Sector
(d)
Financial
Resources
Sector
(e)
Market
Sector
(f)
Technology
Sector
(g)
Economic
Conditions
Sector
(a)
Industry
Sector
(h)
Government
Sector
(c)
Human Resources
Sector
(b)
Raw Materials
Sector
(i)
Socio-cultural
Sector
ORGANIZATION
DOMAINSlide23
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Environmental Sectors
Industry
Competitors, industry size & competitiveness, related industries
Market
Customers, clients, potential users of products and services
Raw materials
Suppliers, manufacturers, real estate, services
Human resources
Labor market, employment agencies, universities, training schools, employees in other companies, unionization, illegal immigration
Financial
Stock markets, banks, savings and loans, private investors
Technology
Production techniques, science, information technology
General economic condition
Recession, unemployment rate, inflation rate, rate of investment, economics, growth
Government
City, state, federal laws and regulations, taxes, services, court system, political processes
Sociocultural
Demographics, values, beliefs, education, religion, work ethic, consumer and green movements
International
Competition from and acquisition by foreign firms, entry into overseas markets, foreign customs, regulations, exchange ratesSlide24
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Relationship Between Structure and Environment
Flexibility
Change
Innovation
Efficiency
Reliability
Reducing Costs
Divisional
Structure
Functional
Structure
Simple, Stable Environments
Complex, Unstable Environments
Dominant
Structural
Approach
Environmental
UncertaintySlide25
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What happens between the extremes?
Simple, stable environments = functional structures
Complex, unstable environments = divisional structures
Q. What happens when you have a:
simple, but unstable environment (e.g., fashion industry)?
complex, but stable environment (e.g., universities, hospitals)?
Organizations use:hybrid structures
matrix structuresSlide26
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Possible Hybrid Structure for Apple-Orange
John
Carl
Apple Division
Orange Division
Field Workers (Apples)
Researchers (Apples)
Field Workers (Oranges)
Researchers (Oranges)
Pear Division
Broccoli
Division
Grapes
Division
Eggplant
Division
Field Workers
(Pears)
Researchers
(Pears)
Field Workers
(Broccoli)
Researchers
(Broccoli)
Field Workers
(Grapes)
Researchers
(Grapes)
Field Workers
(Eggplant)
Researchers
(Eggplant)
Salespeople
(Apples, Oranges,
Pears, Broccoli,
Grapes, Eggplant
)Slide27
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Hybrid Structure Strengths
Allows organization to balance achieving some adaptability and coordination in product divisions and some efficiency in centralized functional departmentsAchieves some degree of coordination both within and between product linesSlide28
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Hybrid Structure Weaknesses
Leads to conflict between divisions and corporate departmentsHas potential to favor the creation of excessive administrative overhead in the corporate departmentsSlide29
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Example of a Hybrid Structure: Sun Petrochemical
Functional
Structure
President
Technology
Vice
President
Financial
Services
Vice Pres.
Human
Resources
Director
Chief
Counsel
Chemicals
Vice
President
Lubricants
Vice
President
Fuels
Vice
President
Product
StructureSlide30
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Possible Matrix Structure for Apple-Orange
John
Carl
Apple Division
Salespeople (Apples)
Orange Division
Field Workers (Apples)
Researchers (Apples)
Salespeople (Oranges)
FieldWorkers (Oranges)
Researchers (Oranges)
Pear Division
Broccoli
Division
Grapes
Division
Eggplant
Division
Salespeople
(Pears)
Field Workers
(Pears)
Researchers
(Pears)
Salespeople
(Broccoli)
Field Workers
(Broccoli)
Researchers
(Broccoli)
Salespeople
(Grapes)
Field Workers
(Grapes)
Researchers
(Grapes)
Salespeople
(Eggplant)
Field Workers
(Eggplant)
Researchers
(Eggplant)
VP of Sales
VP of
Production
VP of
Research Slide31
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Matrix Structure Strengths
Provides opportunity for both functional and product skill developmentFlexible sharing of human resources across products, while still promoting efficiency goals
Team-based approach can be useful for satisfying customers
’
dual concerns for innovation and cost-savingsSlide32
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Matrix Structure Weaknesses
Causes employees to experience dual authority (e.g., product manager and functional manager), which can be frustrating and confusing
Meetings, meetings, and more meetings
Is time consuming; involves frequent meetings and conflict resolution sessions
Conflict between division heads and functional dept heads is pushed down onto employees
Will not work unless participants, particularly managers, understand it and adopt collegial rather than vertical-type relationships; often requires adoption of 360 degree reviews
Means employees need good interpersonal skills and extensive training, particularly in conflict resolution
Best in medium-sized organizations with multiple productsSlide33
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Matrix Example: Harland Checks
’ Functional Matrix
VP Customer Care
IT
Milton
Process & Quality
Reporting & Forecasting
HR & Training
Sales & Mktg
Salt Lake City
Atlanta