Chapter Organizational Structure and Design PowerPoint slides by R Dennis Middlemist Colorado State University Learning Objectives After studying this chapter, you should be able to:  Explain the concepts of organizational structure and design  Explain the concepts of differentiation and integration and their role in organizational structure and design ©2005 Learning Objectives After studying this chapter, you should be able to:   Describe mechanisms used to achieve differentiation and integration and balance these two structural dimensions Identify the various structures used by organizations and describe their strengths and weaknesses ©2005 Learning Objectives After studying this chapter, you should be able to:   List the environmental factors that influence organizational structure Determine the appropriate organizational structure for a firm given a set of internal and external factors ©2005 Principles of Organizational Structure  Organizational structure  The sum of ways an organization divides its labor into distinct, coordinated tasks  Organizational design  Assessing the organization’s strategy and environmental demands  Determining the appropriate organizational structure ©2005 Principles of Organizational Structure  Organizational charts  Illustration of relationships  Units  Lines of authority among supervisors and subordinates  Illustrated by use of labeled boxes and connecting lines ©2005 Suncor Energy Organizational Structure CEO Executive Vice President Oil Sands ©2005 Executive Vice President Marketing and Refining Executive Vice President Natural Gas and Alternative Energy Senior Vice President Major Projects Adapted from Exhibit 7.1: Suncor Energy Organizational Structure Differentiation  Differentiation  Division of tasks into subtasks that are performed by individuals with specialized skills  Task differentiation  Cognitive differentiation ©2005 Integration  Integration  Facilitation of cooperation and interaction of various parts of the organization  Interdependence  Pooled  Sequential  Reciprocal ©2005 Appropriateness of Rules, Goals, Values Level of Appropriateness High Low Low High Level of Interdependence Level of Uncertainty 10 ©2005 Adapted from Exhibit 7.2: Appropriateness of Rules, Goals, Values Division Structure CEO Vice President Medical systems 24 ©2005 Vice President Bioscience Vice President Clinical Anesthesia Labware Vacutainer Hypodermic Cell biology Diagnostics Infusion Immunology Consulting Adapted from Exhibit 7.8: Division Structure Division Structure Strengths  Reduced functional duplication  Customer focus can increase  Cross-product coordination is eased  Cross-regional coordination is often eased 25 ©2005 Weaknesses  Most appropriate only for diversified, large companies with many products and product families  May inhibit cross-division coordination  Coordination difficulties between division and corporate objectives Customer Structure CEO Vice President Retail 26 ©2005 Vice President Industrial Vice President Military Small Domestic Army Mid-size International Navy Adapted from Exhibit 7.9: Customer Structure Customer Structure Strengths  In-depth understanding of specific customers  Responsiveness to changes in customer preferences and needs  Responsiveness to moves by competitors to better serve customers 27 ©2005 Weaknesses  Duplication of functional resources in each customer unit  Coordination between customer units and corporate objectives  Failure to leverage technology or other strengths in one unit across other units Geographical/Regional Structure Chief Executive Officer Vice President North America Vice President Europe Vice President Southeast Asia Strengths: • Facilitates local responsiveness • Develops in depth knowledge of specific regions/countries • Creates accountability by region Facilitates cross-functional coordination within regions 28 â2005 Vice President Latin America Vice President Africa Weaknesses: • Often creates cross-regional coordination difficulties • Can inhibit ability to capture global scale economies • Duplicates resources and functions across regions Adapted from Exhibit 7.10: Geographical/Regional Structure Matrix Structure Chief Executive Officer Health Beauty Cleaning Food NA AP EMEA LA 29 ©2005 Adapted from Exhibit 7.11: Matrix Structure Matrix Structure Strengths  Information flow  Decision quality  Suited to a changing and complicated business environment  Flexible use of human resources 30 ©2005 Weaknesses  Complexity of performance evaluations  Inhibited ability to respond to changing conditions  Diffused accountability  Conflicts between differing perspectives and objectives Hybrid Structures CEO Vice President Finance 31 Vice President Human Resources Vice President Operations Vice President Product A Vice President Product B Auditing Recruiting Purchasing Retail Education Accounting Training Manufacturing Industrial Government Treasury Compensation Logistics ©2005 Adapted from Exhibit 7.12: Hybrid Structure Hybrid Structures: Continued CEO 32 Vice President North America Vice President Latin America Marketing Marketing Marketing Marketing Operations Operations Operations Operations Sales Sales Sales Sales ©2005 Asia Pacific Vice President EMEA Adapted from Exhibit 7.12: Hybrid Structure Networked Structures  Formal or informal relationships among units or organizations (along the firm’s value chain)  Outsourcing  Value chain as a tool for understanding networked structures 33 ©2005 Outsourced Structure Support Activities Primary Activities 34 ©2005 Adapted from Exhibit 7.13: Outsourced Structure Outsourced Structure Outsourced to EDS Support Activities Primary Activities 35 ©2005 Adapted from Exhibit 7.13: Outsourced Structure Network Structure 36 ©2005 Adapted from Exhibit 7.14: Network Structure Organizational Uncertainty Simple Complex 37 ©2005 Low uncertainty Low demands placed on structure to facilitate extent or speed of coordination Moderate uncertainty Low demands placed on structure for broad coordination, high for speed of coordination Moderate Uncertainty High demands placed on structure to facilitate extent or speed of coordination, low demand on speed Static High uncertainty High demands placed on structure to facilitate both extent and speed of coordination Dynamic Adapted from Exhibit 7.15: Matrix of Organizational Uncertainty International Strategy and Structure 38 High Foreign Sales Geographic structure Matrix structure Low Foreign Sales International division Worldwide product division Low International Product Diversity High International Product Diversity ©2005 Adapted from Exhibit 7.16: International Strategy and Structure ... coordination—A narrower span of control is advisable in firms where management expends much time coordinating tasks performed by subordinates 12 ©2005 Adapted from Exhibit 7.3: Factors that Influence... of relationships  Units  Lines of authority among supervisors and subordinates  Illustrated by use of labeled boxes and connecting lines ©2005 Suncor Energy Organizational Structure CEO Executive... Structure Differentiation  Differentiation  Division of tasks into subtasks that are performed by individuals with specialized skills  Task differentiation  Cognitive differentiation ©2005