Operations and Organizational Structure

Chapter Objectives

• Define operations
• Describe value leadership
• Define different organizational structures
• Explain the key elements in organizational design
• Explain emerging trends in organizational structures

Understanding Operations

• Applies to manufacturing, services, private, and public sectors.
• Organizations are ultimately judged by the performance of their operations.
• Operations have a wide range of responsibilities.
• Operations draw upon various functions within the organization.
• Operations are concerned with activities enabling the orgainzation to transform inputs into outputs for the end customer.
• Inputs include: material, energy, customers' requirements, information, skills and finance

Basic Operation System

• Basic operations system expands on the inputs and outputs
• Inputs lead to transformation that add value
• It then leads to the final product/service offering for the customer
• The final product needs to consider tangible and intangible aspects to ensure phyiscal and psychological effects and benefits

Leader/Stakeholder theory

• Management creates value by understanding the joint interests of stakeholders
• Stakeholder interests may conflict but should align.
• Successful businesses create value for customers, suppliers, employees, communities, financiers, shareholders, and banks
• Focus is on all stakeholders, aligning their interests through management.
• In order to achieve Social Value, collaboration is needed
• Social value satisfies multiple stakeholders not created by on factor

Value Creation

• Value includes the stakeholder's goals when engaging with an organization.
• Value creation starts by matching consumer needs more fully through the development of valued goods
• It is key for CEOs to meet existing market needs and explore potential market segments.
• Value creation makes the best use of resources, alone or with partners.
• Senior management is ultimately responsible for stakeholders and external connections.
• Value creation devises and implements enterprise processes to compete and gain an advantage.

Why Design an Organization

• Organizations arrange people and jobs to meet goals.
• Organizational design is graphically represented by an organizational chart.
• Design assigns responsibilities, showing accountability, reporting, communication, and relationships.
• It comprises the organizational components and their relationships and hierarchy.
• It portrays where authority and power are located.
• Organizational Design provides a "home" and identity for employees
• It also designates what their positions and their groups are
• It is also used to define the reporting structure and the responsibilities of people and units

Structures

• The best structure depends on the type of work, skilled or professional labor.
• Size, revenue, geographic dispersion, and diversification are also factors
• Two types of structures are vertical (tall) and horizontal (flat)

Vertical Structures

• Has a chain of management.
• The CEO is at the top and all decisions are delegated down to lower level managers
• Power emanates from the top down.
• There is a well-defined chain of command and the person at the top of the organizational chart has the most power
• Employees report to the person directly above them.
• Each person is responsible for a specific area or set of duties.
• Vertical structures are efficient for quick decision making.
• Responsibility is held by those highest in the chain of command.
• Employees have defined duties and positions involve specialized tasks.
• Designating tasks to employees/departments is better, they have well defined responsibilities
• It is generally easier to manage
• Rigidity of rules can be a disadvantage.
• They are dependent on strong leadership
• In Vertical Structures, weak upper management leads to the structure being frustrated because of decision making by superiors
• Horizontal transparency is lacking due to layers muddling information.
• Employees may feel stifled or unheard.

Horizontal Structures

• Has a less-defined chain of command.
• Employees across like have similar into how the organization is rune
• Instead of each person having clearly defined duties, they work in teams where everyone has input
• Employees complete different functions and may report to several supervisors.
• High-level managers handle daily tasks and interact with customers/frontline employees meaning there are little middle managers
• Horizontal structures cost less because managers are more expensive than other employee
• There are fewer rules
• There is more power in the hands of the employee
• This leads to increased employee satisfaction.
• Employees may identify more with the company and they may feel part of a team.
• Less efficient decision-making takes more time and resources
• Workers must learn more skills, which can increase job stress
• Horizontal companies are more difficult to implement than vertical
• Building a culture of teamwork is essential.
• Employees may be unsure of their roles.
• Project managers may be frustrated by the lack of authority.
• Implement the best of both structure

Horizontal vs Vertical in a Globalized World

• Companies are becoming more horizontal as the world globalizes
• Small businesses often opt for a horizontal structure due to a limited of employess
• Small businesses are more informal and lack of the resources to middle management

Emerging Trends

• Interdependence of different departments is on the rise
• Must respond to rapid changes
• Organizations are streamlining communication and decision making
• Technology has caused virtual organizations to be boundaryless
• Self-directed work teams are becoming the basic production group.
• Motivation is expanded by being involved in problem sovling and planning which leads to open communication

Need to Restructure

• Poor design can lead to lost profits and failures.
• Cutting costs by removing layers of bureaucracy can raise conpetitiveness
• It can enhance productivity and profits
• Must respond to both competition and Just in Time systems

Characteristics of Leadership

• Flexibility
• Tenaciousness
• Empathy
• Transparency
• Compassion
• Communication
• Decisiveness
• Conflict resolution
• Clear vision
• Passion
• Protection
• Understanding
• Problem solving
• Negotiation