Engineering Management IE 001 PDF

IE 001 Engineering Management Organizing ORGANIZING INTENDED LEARNING OUTCOMES: 1. Define six (6) key elements in organizational design ∙ Work specialization ∙ Departmentalization ∙ Chain of command ∙ Span of control ∙ Centralization and decentralization ∙ Formalization 2....

IE 001 Engineering Management Organizing ORGANIZING INTENDED LEARNING OUTCOMES: 1. Define six (6) key elements in organizational design ∙ Work specialization ∙ Departmentalization ∙ Chain of command ∙ Span of control ∙ Centralization and decentralization ∙ Formalization 2. Contrast mechanistic and organic organizations ORGANIZING INTENDED LEARNING OUTCOMES: 3. Discuss the contingency factors that favor either the mechanistic model or the organic model of organizational design ∙ Strategy and structure ∙ Size and structure ∙ Technology and structure ∙ Environmental uncertainty and structure 4. Describe traditional organizational designs ∙ Simple structure ∙ Functional structure ∙ Divisional structure ORGANIZING What is Organizing? - the management function of arranging and structuring work to accomplish organizational goals. - it is the process of creating an organization’s structure. ORGANIZING Purposes of Organizing: ∙ Divides work to be done into specific jobs and departments ∙ Coordinates diverse organizational tasks ∙ Clusters jobs into units ∙ Establishes relationships among individuals, groups, and departments ∙ Establishes formal lines of authority ∙ Allocates and deploys organizational resources ORGANIZING What is an Organizational Structure? - the formal arrangement of jobs within an organization. What is an Organizational Chart? - is the visual representation of an organization’s structure. ORGANIZING What is Organizational Design - is the process of developing or changing an organization’s structure. - it involves decisions about six (6) key elements: ∙ Work specialization ∙ Departmentalization ∙ Chain of command ∙ Span of control ∙ Centralization and decentralization ∙ Formalization ORGANIZATIONAL STRUCTURE I. Work Specialization: - the degree to which tasks in the organization are divided into separate jobs with each step completed by a different person. - overspecialization can result in human diseconomies from boredom, fatigue, stress, poor quality, increased absenteeism, and higher turnover. ORGANIZATIONAL STRUCTURE II. Departmentalization - is the basis on which jobs are grouped in order to accomplish organizational goals. - five (5) major ways to departmentalize: ∙ Functional – grouping jobs by functions performed ∙ Product – grouping jobs by product line ∙ Geographical - grouping jobs on the basis of territory or geography ∙ Process - grouping jobs on the basis of product or customer flow ∙ Customer - grouping jobs by type of customer and needs ORGANIZATIONAL STRUCTURE a. Functional Departmentalization ORGANIZATIONAL STRUCTURE b. Geographical Departmentalization ORGANIZATIONAL STRUCTURE c. Product Departmentalization ORGANIZATIONAL STRUCTURE d. Process Departmentalization ORGANIZATIONAL STRUCTURE e. Customer Departmentalization ORGANIZATIONAL STRUCTURE III. Chain of Command - is the continuous line of authority that extends from upper levels of an organization to the lowest levels of the organization and clarifies who reports to whom. horizontal / lateral downward upward diagonal ORGANIZATIONAL STRUCTURE - three (3) related concepts to chain of command: ∙ Authority - the rights inherent in a managerial position to tell people what to do and to expect them to do it. ∙ Responsibility - the obligation or expectation to perform. Responsibility brings with it accountability (the need to report and justify work to manager’s superiors). ∙ Unity of Command - the concept that a person should have one boss and should report only to that person. ORGANIZATIONAL STRUCTURE ∙ Delegation - is the assignment of authority to another person to carry out specific duties. ∙ Acceptance theory of authority – a perspective says that authority comes from the willingness of subordinates to accept it and that they will accept it only if the following conditions are satisfied: - they understand the order - they feel the order is consistent with the organization’s purpose - the order does not conflict with their personal beliefs - they are able to perform the task as ORGANIZATIONAL STRUCTURE Line & Staff Authority: 🡪 Line managers - are responsible for the essential activities of the organization, including production and sales. Line managers have the authority to issue orders to those in the chain of command. ∙ the president, the production manager, and the sales manager are examples of line managers 🡪 Staff managers - have advisory authority, and cannot issue orders to those in the chain of command (except those in their own department). ORGANIZATIONAL STRUCTURE Chain of Command and Line Authority: ORGANIZATIONAL STRUCTURE Line vs. Staff Authority: ORGANIZATIONAL STRUCTURE IV. Span of Control - is the number of employees who can be effectively & efficiently supervised by a manager - width of span is affected by: ∙ Skills and abilities of the manager and the employees ∙ Characteristics of the work being done ∙ Similarity of tasks ∙ Complexity of tasks ∙ Physical proximity of subordinates ∙ Standardization of tasks ORGANIZATIONAL STRUCTURE ∙ Sophistication of the organization’s information system ∙ Strength of the organization’s culture ∙ Preferred style of the manager ORGANIZATIONAL STRUCTURE Contrasting Spans of Control ORGANIZATIONAL STRUCTURE V. Centralization & Decentralization 🡪 Centralization - is the degree to which decision making is concentrated at a single point in the organization. Organizations in which top managers make all the decisions and lower-level employees simply carry out those orders 🡪 Decentralization - is the degree to which lower- level employees provide input or actually make decisions. Employee Empowerment – is increasing the decision-making discretion of ORGANIZATIONAL STRUCTURE Factors that Influence the Amount of Centralization: 🡪 More Centralization ∙ Environment is stable ∙ Lower-level managers are not as capable or experienced at making decisions as upper-level managers ∙ Lower-level managers do not want to have a say in decisions ∙ Decisions are significant ∙ Organization is facing a crisis or the risk of company failure ∙ Company is large ∙ Effective implementation of company strategies depends on managers retaining say over what happens ORGANIZATIONAL STRUCTURE Factors that Influence the Amount of Decentralization: 🡪 More Decentralization ∙ Environment is complex, uncertain ∙ Lower-level managers are capable and experienced at making decisions ∙ Lower-level managers want a voice in decisions ∙ Decisions are relatively minor ∙ Corporate culture is open to allowing managers to have a say in what happens ∙ Company is geographically dispersed ∙ Effective implementation of company strategies depends on managers having involvement and flexibility to make decisions ORGANIZATIONAL STRUCTURE VI. Formalization 🡪 Formalization – is the degree to which jobs within the organization are standardized and the extent to which employee behavior is guided by rules and procedures 🡪 Highly formalized jobs offer little discretion over what is to be done 🡪 Low formalization means fewer constraints on how employees do their work ORGANIZATIONAL DESIGN What is a Mechanistic Organization? - or bureaucracy, was the natural result of combining the six elements of structure. - it is a rigid and tightly controlled structure. What is an Organic Organization? - is a highly adaptive form that is as loose and flexible. ORGANIZATIONAL DESIGN Mechanistic vs. Organic Organizations CONTINGENCY FACTORS Contingency Factors Affecting Structural Choice: 1. Strategy & Structure - Achievement of strategic goals is facilitated by changes in organizational structure that accommodate and support change Strategy Frameworks: ∙ Innovation - pursuing competitive advantage through meaningful and unique innovations favors an organic structuring ∙ Cost minimization - focusing on tightly controlling costs requires a mechanistic CONTINGENCY FACTORS Contingency Factors Affecting Structural Choice (cont’d): ∙ Imitation – minimizing risks and maximizing profitability by copying market leaders requires both organic and mechanistic elements in the organization’s structure 2. Size & Structure - As an organization grows larger, its structure tends to change from organic to mechanistic with increased specialization, departmentalization, centralization, and rules and regulations CONTINGENCY FACTORS Contingency Factors Affecting Structural Choice (cont’d): 3. Technology & Structure - Organizations adapt their structures to their technology - Routine technology = mechanistic org. - Non–routine technology = organic org. - Woodward’s classification of firms based on the complexity of the technology employed: ∙ Unit production of single units or small batches ∙ Mass production of large batches of output CONTINGENCY FACTORS CONTINGENCY FACTORS Contingency Factors Affecting Structural Choice (cont’d): 4. Environmental Uncertainty & Structure - Mechanistic organizational structures tend to be most effective in stable and simple environments. The flexibility of organic organizational structures is better suited for dynamic and complex environments CONTINGENCY FACTORS Traditional Organizational Designs: 1. Simple Structure - Low departmentalization, wide spans of control, centralized authority, little formalization 2. Functional Structure - Departmentalization by function - Operations, finance, human resources, and product research and development 3. Divisional Structure - Composed of separate business units or divisions with limited autonomy under the coordination and control of the parent corporation CONTINGENCY FACTORS Strengths & Weaknesses of Traditional Organizational Designs: CONTINGENCY FACTORS Contemporary Organizational Designs: 1. Team Structures -The entire organization is made up of work groups or self-managed teams of empowered employees 2. Matrix Structures - Specialists for different functional departments are assigned to work on projects led by project managers - Matrix participants have two managers 3. Project Structures - Employees work continuously on projects, moving on to another project as each project is completed CONTINGENCY FACTORS Contemporary Organizational Designs (cont’d): 4. Boundaryless Organization - A flexible and an unstructured organizational design that is intended to break down external barriers between the organization and its customers and suppliers - Removes internal (horizontal) boundaries: ∙ Eliminates the chain of command ∙ Has limitless spans of control ∙ Uses empowered teams rather than departments - Eliminates external boundaries: ∙ Uses virtual, network, and modular organizational structures to get closer to CONTINGENCY FACTORS Removing Boundaries: ∙ Virtual Organization - An organization that consists of a small core of full-time employees and that temporarily hires specialists to work on opportunities that arise ∙ Network Organization - A small core organization that outsources its major business functions (e.g., manufacturing) in order to concentrate on what it does best ∙ Modular Organization - A manufacturing organization that uses outside suppliers to provide product components for its final assembly operations CONTINGENCY FACTORS Outsourcing Issues: ∙ Choosing the wrong activities to outsource ∙ Choosing the wrong vendor ∙ Writing a poor contract ∙ Failing to consider personnel issues ∙ Losing control over the activity ∙ Ignoring the hidden costs ∙ Failing to develop an exit strategy (for either moving to another vendor, or deciding to bring the activity back in-house) CONTINGENCY FACTORS Contemporary Organizational Designs (cont’d): 5. Learning Organization - An organization that has developed the capacity to continuously learn, adapt, and change through the practice of knowledge management by employees Characteristics of a learning organization: 1. An open team-based organization design that empowers employees 2. Extensive and open information sharing 3. Leadership that provides a shared vision of the organization’s future; support; and encouragement CONTINGENCY FACTORS Characteristics of a Learning Organization: CONTINGENCY FACTORS Strengths & Weaknesses of Contemporary Organizational Designs: