“ Sometimes, the more chairs you

move around, the more dust you see

behind the chairs”
High Costs Weak Sales Falling Profits

Slow to introduce new products

 “Four-S Management” Strategy

– Simple-Small-Speedy-Strategic
 What advice would you give
President about structural design?

What structural changes will enable

Matsushita to reduce high internal
costs and move quickly to introduce
new products?
Every firm wrestles with the problem how to
organize
Reorganization often is necessary to reflect
a new strategy, changing market condition
or innovative production technology
Xerox Corp has restructured itself
AT&T broke into three decentralized
businesses
“Each of these Organizations is using
fundamental concepts of organizing”
 Deciding on how best to group
Organizational activities & Resources

OR
Deployment of Organizational resources to
achieve strategic goals
OR
the process of creating an organization’s
structure
 The organizing process leads to the creation of Organizations
structure, which defines how tasks are divided & resources
deployed

1. Set of formal tasks assigned to individuals & departments

2. Formal reporting relationships, including line of authority, decision
responsibility, number of hierarchical levels and span of
managers control
3. Design of systems to ensure effective coordination of employees
across departments
 Important features of Vertical Structure

 Org perform a wide variety of tasks

 Fundamental principle is that work can be
performed more efficiently if employees are
allowed to specialize
 Sometimes called division of labor, is the degree
to which organizational tasks are subdivided into
separate jobs
 Employees within each department perform only
the tasks relevant to their specialized function
 Specialization
• Benefits • Dis-Advantages
• Workers performing • too much specialization,
small, simple tasks will employees are isolated
become more proficient and do only a single, tiny,
at each task boring job
• Transfer time btw tasks • employees become
decreases dissatisfied & bored
• More narrowly defined a • Absenteeism rises
job is, the easier it is to
develop specialized
equipment to assist with
that job
 Alternatives
• Moving employee from one job to
another
Job rotation • Jobs do not change but instead
workers move from job to job…
•Example Warehouse

•Increase total number of

Job Enlargement tasks worker perform
•Example : Water pumps

•Increases both number of

Job Enrichment tasks & control the worker
has over the job
•Assigning new &
challenging tasks
•Example : AT&T typist
An unbroken line of authority that links all
individuals in the Organization and specifies
who reports to whom
 All persons in the Org should know to whom they
report as well as the successive management
levels all the way to the top (Org-Chart)
Two Components
Unity of command Scalar principle
Each employee is held  Clearly defined line of authority in
accountable to only one supervisor the org that includes all employees
 each employee is held  Authority & responsibility for
accountable to only one supervisor different tasks should be distinct
 Formal and legitimate right of a manager
Authority to make decisions, issue orders, allocate
resources to achieve Org desired outcomes
 Three Characteristics– Open Book

Responsibility The duty to perform the task or

activity an employee has been
assigned

The process managers use

Delegation to transfer authority and
responsibility to positions
below them in the hierarchy
 Characteristics of Authority
1. Authority is vested in Organizational
positions, not people

2. Authority is accepted by subordinates

3. Authority flows down the vertical hierarchy

?
 Parts of the Delegation Process
a. Manager assign responsibility or gives
the subordinate a job to do (assignment)
b. Assignment + authority to do the job
c. Manager establishes the subordinate’s
accountability
Step 1 Step 2 Step 3
Assign responsibility Granting Authority Creating accountability

Manager Manager Manager

Subordinate Subordinate Subordinate

Line & Staff Authority
 Span of Management
• The number of employees who report to a
supervisor; also called span of control
• Traditional views recommends 7 subordinates
per manager
• When Supervisors closely involved with
subordinates, the span should be small, & when
the supervisor need little involvement with
subordinates, it can be large
• Factors associated with less supervisor
involvement & thus larger spans of control
1. Work performed by subordinates is
stable & routine
2. Subordinates perform similar work tasks
3. Subordinate are concerned in a single
location
4. Subordinates are highly trained & need
little direction in performing tasks
5. Rules & procedures defining task
activities are available
 Tall structure Flat Structure
• A management • A management
structure structure
characterized by an characterized by an
overall narrow span of overall broad span of
management and a control & relatively
relatively large few hierarchical levels
number of
hierarchical levels
 Tall Structure
CEO McDonald’s

President & CEO USA President & CEO international

EVP EVP EVP

Zone Manager Zone Manager

Regional Manager Regional Manager

Operations Manager

Supervisors

Store Manager

Shift Manager

Crew Persons
FLAT STRUCTURE

President & CEO

• The location of • The location of decision
decision authority making authority near
near top lower organizational
levels
Organizational levels
• The process of
• The process of systematically delegating
systematically power and authority
retaining power and throughout the
authority in the hands organization to middle
and lower level managers
of higher-level
managers • Relieve the burden on
top managers
1. Greater change & Uncertainty in the
environment are usually associated with
decentralization
2. Amount of C or D should fit the firms strategy
J&J and Banking Industry switched to centralization to cut costs,
speed up etc
3. Crisis or Risk of Company failure, authority
may be centralized at the top
Honda : could not get agreement among divisions about new car
models, President made the decision himself
P&G Global Exec VP---Synergy (soup & detergent, health care,
beauty)
• The written documentation used to direct
& control employees
• Includes Rule books, Policies, Job
descriptions & Regulations
• These documents complement the ORG
Chart by providing description of tasks,
responsibilities, & decision making
 Departmentalization
• The process of grouping jobs, according to
some logical order
• Another characteristic of Org Structure,
grouping individuals/positions into dept’s &
dept’s into the total Organization
Functional Approach Divisional Approach Matrix approach

Team Approach Network Approach

 •People are grouped together by common skills &
work activities
• Organization staff all important positions with
functional experts & facilitates coordination

President

V PR&D V P Finance V P Marketing V P Manufacturing

Regional Sales Manger

District Sales Manger

• None of the functional departments can
survive without the others….HOW?
• Marketing needs product from operations
to sell & funds from finance to pay for
advertising
• Mostly commonly used in small Org
because an individual CEO can easily
oversee & coordinate the entire Org
 Advantages Disadvantages
• Employees perform common • communication & coordination
task are grouped together so across functional dept’s is poor
as to permit Eco of scales &
efficient use or Resources • Poor coordination means slow
• Career progress within response to environmental
functional dept’s changes, because innovation &
• High quality technical problem change require involvement of
solving several dept’s
• Excellent Coordination within • Responsibility for problems is
functions difficult to pinpoint – product fails
• Limited view of Organizational
goals by employees
 Divisional Approach
•Organizational structure in which dept’s are grouped based on
similar outputs
• divisions are created as self contained units for producing a
Single product

President

Merchandising
Division 1 Theme parks Movies
Unit

R&D Manufacturing Finance Marketing R&D Marketing Finance

 Divisional Structure
• Divisional structure is essential for large
companies (Time Warner)
• Each division is an autonomous business,
huge Org produces products for different
markets
• Important: Employees goals typically are
directed toward product success rather
their own functional departments
 Adv & Disadvantages
• Excellent coordination • Duplication of resources
across functional across divisions
departments • Less technical depth &
• Easy pinpointing of specialization in divisions
responsibility for product • Poor coordination across
problems divisions
• Emphasis on overall • Competition for corporate
product & divisional goals resources
• Development of General
management skills
 •Differences of opinion among different dept’s would be
resolved at divisional level rather than president
•Thus DS encourages decentralization
•Decision making is pushed down at least one level in the
hierarchy freeing President & other Top managers for Strategic
planning
 Geographic Based Divisions
Alternative for assigning divisional responsibility is to group
company activities by geographic region

President

Corporate Staff

Western U.S Easter U.S Latin America Asian Division

R&D Marketing HR Finance

 Matrix Approach
• It is also known as a multiple command structure.
•Employees have two bosses.
•It means the employee has to report to both a functional or divisional
manager and to a project or group manger.

Matrix Structure
• President

• VP VP VP
• HR Finance Marketing

Project Head A ------HR----- Finance -------Marketing

Project Head B ------HR----- Finance --------Marketing

Project Head C-------HR------- Finance ------Marketing

 Developing a new product
Representative chosen from
They also retain membership
each functional areas to
in the original functional group
work as a team on the new
product
 Global Matrix Structure
•GM of plant producing plastic containers in Germany reports to both head of
the plastics products division and the head of German operations
•German boss coordinates all the affiliates within Germany and the plastics
products boss coordinates the Manufacturing & sale of products around the
world
CEO

Germany Latin America Spain

Plastic Products

Glass Fibers

Insulation
 Key positions in a Matrix Structure
Two Boss employee : reports to 2 supervisor simultaneously

Matrix Boss : Product or functional boss, responsible for one side of the matrix

Top Leader : overseer of both Product & functional chain of command

Top Leader
President

Matrix Boss Matrix Boss Matrix Boss

Director Engineer
Matrix Boss

Matrix Boss Two Boss Employee

V.P Medical Senior Engineer
Product Division

Matrix Boss
 Adv & Disadvantages
• Team members highly • Confusion & frustration
motivated & committed to caused by the dual chain
the Org, assume major of command
role in decision
• Opportunity to learn new • Difficulty with the dual
skills reporting relationships
• Efficient use of Human
Resource because • Time lost during resolving
specialists can be
conflicts regarding goal
transferred from one
preferences
division to another
 Network Approach
Series of strategic alliances that an Org creates with suppliers,
manufacturers & distributors to produce & market a product

Southeast Asian Suppliers

• Instructions new sole design
Strategic Alliances
Sent to Taiwan
•Instructions for leather uppers to
supplier in Malaysia

Nike’s Headquarter
Design the shoe
South Asian
Manufacturing
• send them for final
assembly
to China

• Strategic alliance is an agreement in which managers share their

Organizations resources and know how with a foreign company & the two
Organizations share rewards & risks of starting a new venture
 Advantages & Disadvantages
• NO hands on control
• Global
competitiveness
• can lose
Organizational part
• Workforce flexibility

• Reduced • Employee loyalty

administrative weakened
overhead
• TEAM APPROACH
• Summary