Chapter 2 Leading Operations - Organisational Structure

Understanding and leading Operations Chapter 2 Introduction  Objectives of this Chapter After this lecture students should be able to: 1. Define operations Describe value leadership Define different organizational structures. 2. Explain the key elements in org...

Understanding and leading Operations Chapter 2 Introduction  Objectives of this Chapter After this lecture students should be able to: 1. Define operations Describe value leadership Define different organizational structures. 2. Explain the key elements in organisational design 3. Explain the emerging trends in organisational structures  Understanding Operations Operations take place in all kinds of settings – manufacturing and services, private and public sectors. Operations is vitally important to any organization because, ultimately: An organization is judged by how its operations perform and not what the organization says it is going to do!  Understanding Operations Operations is very wide in scope of responsibilities and will draw upon a range of functions within the organization, not be limited to a specific department.  Defining Operations Operations is concerned with those activities that enable an organization (and not just one part of it) to transform a range of basic inputs (materials, energy, customers’ requirements, information, skills, finance, etc.) into outputs for the end customer. The Basic Operations System  This basic model can be expanded The final, completed Transformation Inputs product/service offering for Capital Transformation of the customer. Tangible and Technology Inputs, adding value intangible elements, Energy combining physical & throughout the entire psychological effects & Know-how process from basic benefits for the customer Experience inputs to finished are in place for in the final goods and services transaction. Services & Inputs: production operations have Materials become linked. Customer Information INPUTS TRANSFORMATION OUTPUTS FEEDBACK The combination of manufacturing and service operations for the customer The Operations Infrastructure from Basic Inputs to End Customer  The Leader/ Stakeholder Theory and Value Creation The key idea about capitalism is that the entrepreneur or manager creates value by capturing the jointness of the interests (of the stakeholders). Yes, sometimes the interests are in conflict, but overtime they must be shaped in the same direction. Freeman (2008b, p 165)  Stakeholder Theory An idea about how business really works. Successful business has to create value for customers, suppliers, employees, communities and financiers, shareholders, banks and others Focus is on all stakeholders. Their interest has to go together, and the job of a manager or entrepreneur is to work out how the interest of customers, suppliers, communities, employees and financiers go in the same direction. Social value – to satisfy many stakeholders - and not created by one single factor, but a collaboration of many.  Value Creation What is value- what the stakeholder will be seeking when they start a relationship with an organisation. Starts by creating goods that are valued by consumers (given competition)- meeting consumer needs more fully.  The Key result area of a CEO Concerned with meeting existing market needs as well as exploiting opportunities for potential market segments (Kim and Mauborgne 2002, Nunes and Cespedes 2003) About making the best use of resources, and to leverage these resources either alone or with partners (Wernerfelt 1984, Barney 1991, Dierickx, and Cool 1989, Lamming, 1993, Hines, 1994, Stump et al 2002, Ireland et al 2002). The ultimate responsibility of senior-level managers within the firm - of course we recognise the vital of importance of a range of stakeholders in the process both within the firm and with eternal linkages to the enterprise (Frambach et al 2003, Hax and Majluf 1991, Dougherty and Corse 1995). About devising and implementing processes that will enable the enterprise to compete and, ideally, to create competitive advantage (Whittington 2001, Hamilton et al 1998).  Why design an organisation Definition: (Johnson. S 2013) “The way that an organisation arranges people and jobs so that its work can be performed and its goals can be met” Graphically it is referred to as an organisational chart. Assignment of responsibilities showing accountability, (reporting structures), communication channels and relationships.  Why Design Comprises the organizational components (units), their relationships and hierarchy Portrays where formal authority and power are located. How does authority/accountability flow? Provides a “home” and identity for employees What do they do? What are the positions and how are they grouped? What is the reporting sequence? What is each person, and each unit, responsible for?  The Best Structures Depends on: Type of work- skilled labour/ or professionals Size in terms of employees Revenue Geographic dispersion of facilities Range of business (degree of diversification)  Two Types of Structures Vertically (Tall) and Horizontal (flat) 1. Vertical Structure Has chain of management (CEO at the top and making all decisions and delegating them to lower level managers. Power emanates from the top down. Well-defined chain of command (the person at the top of the organizational chart has the most power) Employees report to the person directly above them in the organizational structure. Each person is responsible for a specific area or set of duties. Students to give advantages of using vertical structure Vertically structured  Advantages of Vertical Structures Efficiency- quick decision-making Responsibility lies with people highest in the chain of command. Employees coming into a job have clearly defined duties and each position involves specialized tasks, with little need to learn new tasks and skills. Better at designating tasks to employees or departments within the company, have well-defined responsibilities for employees. Generally easier to manage  Disadvantages of Vertical Structure Can be rigid, with many rules. Dependent on a strong leader at the top. Weak upper management means that each successive hierarchical structure will get frustrated by poor decision making by the superior. Lack the transparency of a horizontal company because each layer muddles information more and more. Some employees feel stifled by this kind of structure, or feel their input isn't important. Horizontal Structured Has a less-defined chain of command. Employees across lines have similar input into how the organization is run. Instead of each person having clearly defined duties, employees may work in teams, with everyone on the team having input. Employees may perform many different functions and may report to several supervisors, rather than a single boss. Project managers or team leaders report to a team of supervisors, with members of each team being essentially equal in terms of power. - Has almost no middle managers--meaning that high- level managers handle day-to-day tasks and usually interact with customers and front-line employees personally. costs less to run a horizontal company because managers cost more than rank-and-file employees.  Advantages of Horizontal Structure Fewer rules More power in the hands of employees, which can increase employee satisfaction. Employees in a horizontal organization may have a stronger sense of identification with the company, feeling they are part of a team.  Disadvantages of Horizontal Structure Less efficient, taking more time and resources to make decisions. Workers in horizontal organizations have to learn more skills, which can increase job stress or make the job more interesting, depending on the employee. Horizontal companies are much harder to implement than vertical companies, especially as the business grows, because the business must foster a culture of teamwork. Employees may be less sure about their roles and responsibilities within the company, and project managers can be frustrated by their lack of authority.  Horizontal or Vertical Frank Ostroff (2013) Companies will become more horizontal than vertical as the world globalizes. No business, however, should have a strictly horizontal or vertical structure, but rather should implement the best of both worlds. Most new companies and small businesses opt for a horizontal because a limited amount of employees. Small businesses tend to be more intimate, and the lack of a large workforce means management styles are more informal than formal. In addition, small businesses may not even have the resources to hire any middle management No business, however, should have a strictly horizontal or vertical structure, but rather should implement the best of both worlds. Horizontal Organisation needs more coordination  Emerging Trends 1. Interdependence of different departments. 2. Response to rapid changing environments. 3. Streamline the organization in order to improve communication and decision-making. 4. The rapid rise of technology has made virtual organizations and boundary-less. 5. Self-directed work teams as the basic production group. 6. Motivation: expanding the scope of jobs, involving workers in problem solving and planning, and fostering open communications  Need to Restructure 1. Designing Organizations to Create Value (2003) write, “a poor design can lead to lost profits and even result in the failure of the institution.” Need to cut costs: removing layers of bureaucracy-can increase competitiveness and reorient the organizational culture and behaviors to enhance productivity and profits 2. Response to competition 3. Response to Jit Characteristics of Leadership. Flexibility, Tenaciousness, Empathy Transparency, Compassion, Communication Decisiveness Conflict resolution Clear vision, Passion, Protection Understanding, Problem solving Negotiation: For Tutorial - Pick any characteristic and play-act without revealing the characteristic and then ask the class to guess the characteristic.