Organizing Controlling

Organizational Structure

• Organizing is the process managers use to establish relationships among employees to meet goals.
• Organizational structure is a formal system outlining tasks and reporting relationships to show how workers utilize resources.
• Organizational design involves managers making decisions to create an organizational structure.
• Effective organizational design depends on the specific situation of the organization.

Factors Affecting Design

• Environment: Rapid environmental changes require flexible structures.
• Strategy: Different strategies need different organizational structures. A differentiation strategy needs a flexible structure while a low-cost strategy may need a more formal structure.
• Technology: Complex technology often requires flexible organizational structures while simple technology can be better managed with formal structures.
• Human Resources: Higher skilled workers often benefit from more flexible structures that enable teamwork.

What is Organizing

• Defining Organizing: The process of arranging resources and tasks to achieve organizational objectives.
• Purpose of Organizing: Ensures efficient resource use, clarifies roles, and enables smooth workflows.
• Key Goal of Organizing: Facilitates coordination and ensures all organizational parts work toward common objectives.

Importance of Organizing

• Clear Structure and Hierarchy: Creates a clear structure and hierarchy.
• Assigned Tasks and Responsibilities: Assigns tasks and responsibilities.
• Efficient Communication: Establishes effective communication channels.
• Reduced Waste: Reduces duplication of work and resource waste.
• Alignment of Efforts: Aligns individual efforts with organizational goals.

Organizational Structure Types

• Functional Structure: Groups departments by function (e.g., marketing, human resources, finance).
• Divisional Structure: Organizes by product lines, geographic regions, or markets.
• Matrix Structure: Combines functional and divisional structures with dual reporting lines.
• Network Structure: Focuses on core functions and outsources non-core activities.

Determinants of Structure

• Environment: A changing environment requires more flexible structures.
• Strategy: Different strategies necessitate different structures (e.g., differentiation vs. low cost).
• Technology: Complex technology necessitates flexible organization, with simple technology supporting formal structures. Complex technology requires managers to regulate less.
• Human Resources: Higher skill workers often need flexible organizations that allow teamwork.

Technology & People

• Small Batch Technology: Produces small quantities of one-of-a-kind products, needing flexible structures.
• Mass Production Technology: Produces high volumes of standard products, best suited to formal structures.
• Continuous Process Technology: Totally mechanized systems, needing flexible structures for managing unexpected problems.

Job Design

• Defining Job Design: Grouping tasks into specific jobs.
• Results of Job Design: A division of labor that is efficient and effective.
• Job Simplification: Reducing tasks for each worker. Can lead to boredom.
• Job Enlargement: Adding tasks to reduce boredom.
• Job Enrichment: Increasing a worker's responsibility over a job. This can lead to higher worker involvement.

Job Characteristics Model

• Characteristics of jobs: Skill variety, task identity, task significance, autonomy, feedback.
• Outcomes: High motivation, performance, and satisfaction.

Grouping Jobs into Functions

• Definition of Functional Structure: People with similar skills, tools, and techniques working together.
• Example of Functional Structure: Departments like marketing, production, and finance.
• Pros of Functional Structure: Easy for managers to monitor and evaluate workers; workers can learn from each other.
• Cons of Functional Structure: Difficult for departments to communicate, managers can focus on their department over the whole company.

A Sample of Pier 1's Functional Structure (Diagram)

Divisional Structures

• Definition of Division: A collection of functions working together to produce a product or service.
• Impact of Divisions: Create smaller, manageable parts; develop business-level strategies.
• Types of Divisional Structures: Product, geographic, market.

Product Structure (Diagram)

Geographic Structure (Diagram)

Market Structure (Diagram)

Global Structures

• Global Structures: Needed when managers face different problems or demands globally.
• Global Geographic Structure: Different divisions serve each world region.
• Global Product Structure: Customers in different regions buy similar products.

Matrix & Product Teams

• Matrix Structure: Groups people by function and product team simultaneously, leading to complex reporting relationships.
• Flexibility of Matrix Structure: Very flexible and can respond quickly to changes.
• Problems of Matrix Structure: Employees have two bosses which can cause problems.
• Product Team Structure: No two-way reporting and team members are permanently assigned to deliver a product to the market.

Matrix Structure (Diagram)

Product Team Structure (Diagram)

Hybrid Structures

• Hybrid Structures: Many large corporations have divisional structures where each manager chooses the best structure for their division.
• Example of Variety: Some divisions might use functional structures, while others use geographic or other models.
• Effectiveness of Hybrid Structures: Breaks the large organization into smaller parts, simplifying management.

Coordinating Functions

• Importance of Delegation: To ensure sufficient coordination between functions, managers delegate authority.
• Authority Definition: Power to make decisions and use resources.
• Hierarchy of Authority: Describes the relative authority of each manager.
• Span of Control: The number of workers a manager manages.
• Line Authority: Managers who are in the direct chain of command for production.
• Staff Authority: Managers who provide advice to line managers.

Tall & Flat Organizations

• Tall Structures: Many levels of authority, slow communications, and prone to multiple levels of decisions that lead to complications.
• Flat Structures: Few levels and wide spans of control, fast communications but can lead to overworked managers.

Minimum Chain of Command

• Evaluating Middle Managers: Managers need to carefully evaluate the right number of middle managers.
• Altering Structure: Determine if changing the structure can reduce levels.
• Decentralization: Decentralized operations put more authority at lower levels, leading to flatter organizations; workers need the authority to reach decisions; can lead to a loss of sight of overarching organizational goals.
• Considerations with Decentralization: Do workers have the right skills to reach decisions?

Integrating Mechanisms

• Direct Contact: Managers in different divisions to solve problems.
• Liaison Roles: A manager dedicated to communication in an area.
• Task Forces: Temporary committees to tackle specific issues.
• Cross-functional Teams: Permanent task forces to address ongoing problems.
• Matrix Structure: Inherently contains integrating mechanisms.

Strategic Alliances

• Strategic Alliance: A formal agreement between two or more companies to combine resources for producing products or services.
• Network Structure: Incorporates many strategic alliances, bringing resources together in a boundary-less organization.
• Examples of Strategic Alliances: Toyota and Honda.

Controlling Organizational Control and Culture

• Monitoring and Evaluating: Managers monitor and evaluate organizational efficiency in converting inputs to outputs.
• Questions for Evaluating: Are inputs efficiently being converted to outputs? How accurate is the measuring of outputs and inputs? Is product quality improving? How competitive are outputs compared to others? Are employees responsive to customers? Are managers innovative? Does the control system encourage risk-taking?

Control Systems

• Formal control systems: target-setting, monitoring, evaluation, and feedback to keep strategy and structure efficient.
• A good control system: Is flexible to respond to needs; Provides timely and accurate information on organizational status.

Three Types of Control

• Feedback Control: After-the-fact control, managers assess results.
• Concurrent Control: During conversion process, corrective action is taken to keep process on track.
• Feedforward Control: Before start of process, controls anticipate problems to prevent them from arising.

Control Process Steps

• Establish Standards: Set goals/targets to measure performance.
• Measure Performance: Track actual results.
• Compare Performance: Compare actual performance to standards.
• Evaluate Results: Identify differences and take corrective actions when needed.

The Control Process

• Setting Standards: Standards should be consistent with strategy (e.g., low cost vs. differentiation).
• Measuring Actual Performance: Measures outputs or behaviors.
• Comparing Results: Determine if there are significant differences between actual and targeted performance.
• Corrective Actions: If significant differences between actual and target performance exist, then corrective action should be taken.

The Goal-Setting Process

• Hierarchical Goal Setting: Overall goals from corporate level are translated down into goals for divisions and functional departments.

3 Organizational Control Systems

• Output Control: Focuses on financial measures (profitability, ROI), and operating budgets.
• Behavioral Control: Managers use direct supervision, rules, standard operating procedures, and management by objectives (MBO).
• Culture/Clan Control: Control through shared values, norms, and organizational culture.

Output Control Systems

• Financial Controls: Objective measures for comparison to other firms.
• Profit Ratios: Efficiency of resource conversion to profits.
• Liquidity Ratios: Ability to meet short-term debt obligations.
• Leverage Ratios: Amount of debt used to finance operations.
• Activity Ratios: Efficiency of asset usage and creation of value.
• Operating Budgets: Blueprints for resource use.

Output Control Problems

• Motivating all levels: Setting output standards that motivate all levels.
• Short-term vs. Long-term Goals: Focus on both short-term and long-term measures, and avoid sacrificing the later for the former.
• Setting Appropriate Standards: Standards should be attainable but not overly challenging.
• High Standards and Unethical Behaviors: High standards can push workers toward unethical behaviors.
• Strategic Issues: Increased sales can be achieved regardless of strategic considerations to meet the short-term demands of the business, which can increase risk.

Behavior Control Systems

• Direct Supervision: Managers directly observe and guide employee behavior.
• Management by Objectives (MBO): Employee and supervisor set goals together, provide more autonomy and flexibility than direct supervision, and reviews are to ensure that goals are being met.
• Rules and Standard Operating Procedures (SOPs): Formal procedures that standardize actions.

Bureaucratic Control

• Control through rules, standard operating procedures (SOPs).
• Predictable Outcomes: SOPs standardize actions for predictable outcomes.
• Issues with Bureaucracy: Leads to "red tape," can make the firm inflexible, is best used for routine problems.

Organizational Culture & Clan Control

• Definition of Organizational Culture: A collection of values, norms, and behaviors that impact employee interactions.
• Clan Control: Control through shared values, norms, and organizational culture.
• Internal Systems: Accepts norms and values as standard.
• Examples of Clan Control: Dress styles, work hours, pride in work.
• Applicability: Effective when output and behavior controls fail.

Values and Norms

• Organizational Values and Norms: Guide worker behavior and inform workers about what goals they should peruse to reach organizational goals, and how they should behave.
• Encouraging Risk-Taking: Some firms prioritize creating cultures where risk-taking is welcomed and incentivized.
• Caution as a Value: Other environments and industries, such as oil drilling, emphasize caution and safety.

Creating Strong Organizational Culture (Diagram)

Organizational Culture

• Founder's Values: Critical in setting the initial culture.
• Socialization Process: Newcomers learn the culture through observations, training activities, meetings, etc.

Culture & Managerial Action

• Management Functions in Different Cultures: The culture will encourage planning and participation in more innovative/creative firms, while slow/less flexible companies prefer structured/formal processes when it comes to planning.
• Organizing in Different Cultures: Creative firms typically have organic, flexible structures.
• Leading in Different Cultures: Managers take risks and trust lower managers, and they serve as examples to be followed by other staff.

Conclusion

• Fundamental Management Function: Organizing is the basis for efficient operations within any organization.
• Achieving Goals Through Organizing: Organizing facilitates attaining organizational goals through clear structure and processes.
• Ensuring Goal Achievement Through Controlling: Controlling and measuring performance is essential to ensure organizational objectives are met by maintaining consistency with the established organizational goals and adjusting accordingly to ensure continued improvement.
• Continuous Improvement: A combination of planning and controlling are useful to ensure the organization's efficiency.

Test your knowledge on different management structures including functional and divisional structures. This quiz covers characteristics, potential drawbacks, and hierarchy relationships within these frameworks. Perfect for students studying management principles.