Organisational Structure Lecture 3

Organisational Structure Dr Petya Koleva ©copyright, Heriot-Watt University, 2024  Objectives: Organisations structure and its relationship to strategy and the environment Traditional and emerging structures Pre-work : Oticon ©copyright,...

Organisational Structure Dr Petya Koleva ©copyright, Heriot-Watt University, 2024  Objectives: Organisations structure and its relationship to strategy and the environment Traditional and emerging structures Pre-work : Oticon ©copyright, Heriot-Watt University, 2024  Change as Change as Process Cycle Diagnos ing Explain Enacti ing ng Hayes, ©copyright, Heriot-Watt University, 2024 Beech and MacIntosh, 2018  Presenter Notes 2023-09-27 11:35:27 -------------------------------------------- Recap Organizational Structure A basic taxonomy from Burns and Stalker’s (1961) study of Scottish electronic firms Formal configuration of roles, governance, authority, and decision-making channels ©copyright, Heriot-Watt University, 2024  Divides work into specific jobs and departments Assigns tasks and responsibilities Purposes associated with individual jobs Coordinates diverse organizational of task Organization Clusters jobs into units al Establishes relationships among Structure individuals, groups and departments Establishes formal lines of authority ©copyright, Heriot-Watt University, 2024  Organizational Design: The Star Model https://www.youtube.com/ watch ?v=41v3PENTEXw&t=8s ©copyright, Heriot-Watt University, 2024  Strategy and structure have a reciprocal relationship Business environment can significantly impact the way in which Why organizations are structured should Structure supports culture organizational Motivation & morale structure Decision-making matter? Coordination Innovation promotion or hinderance ©copyright, Heriot-Watt University, 2024 11–8 Organizational Structure Stabilit Effective structures y provide: Flexibili ty The capacity required to consistently and predictably manage daily work routines Structural stability The opportunity to explore competitive possibilities The allocation of resources to activities that provides: Structural shape needed competitive advantages flexibility provides for: ©copyright, Heriot-Watt University, 2024  Organisational design - Burns and Stalker’s (1961) Mechanistic Organic High work Low specialisation specialisation High degree of Low degree of delegation delegation Low uniformity High uniformity of work High span of control Inside Apple’s iPhone Factory in Google’s HQ in London: China: Short span of https://www.youtube.com/watch? https://www.youtube.com/watch?v v=Gq- control =9XkX 6EGk_CA ©copyright, Heriot-Watt University, 2024 ra9cwK  Presenter Notes 2023-09-27 11:35:28 -------------------------------------------- Recap A basic taxonomy from Burns What are basic strategies? and Stalker’s (1961) study of Scottish electronic firms Cost minimization Innovation (Differentiation – First mover) Imitation (second mover) ©copyright, Heriot-Watt University, 2024  Structure and the Environment Beech and MacIntosh (2012, p.85), based on ©copyright, Heriot-Watt University, 2024 (Mintzberg 1993)  Group Discussion Exercise Pre-work: Watch the videos and respond to three questions: 1. What were the environmental changes impacting Oticon? 2. How did Oticon’s strategy change in response to these environmental changes? 3. What structural changes did Oticon make in response ©copyright, Heriot-Watt University, 2024  Beech and MacIntosh (2012, ©copyright, Heriot-Watt University, 2024 p.236-7)  Sensing a need for change and formulating a change agenda starts with individuals noticing and responding to what they Strateg perceive to be significant (external or internal) triggers ic Firms need to develop the dynamic cognition capability (besides from operational of capability) to address and adapt to change change Sensing Seizing Teece et al. (1997, 2007) Reconfiguration of resources ©copyright, Heriot-Watt University, 2024  Dynamic capability & environment change Managing Sensi Seizi Threats/ ng ng Transformi ng Teece (2009, p. 48) ©copyright, Heriot-Watt University, 2024  Dynamic Capabilities Teece (2009, p. 48) ©copyright, Heriot-Watt University, 2024  Centralised vs Decentralised Structure ©copyright, Heriot-Watt University, 2024  Flat vs tall/Hierarchic org structure ©copyright, Heriot-Watt University, 2024  Presenter Notes 2023-09-27 11:35:29 -------------------------------------------- Examples in the text ©copyright, Heriot-Watt University, 2024  Presenter Notes 2023-09-27 11:35:29 -------------------------------------------- Recap Entrepreneurial and Simple Structures Functional and divisionalized Types structures of Matrix and project-based structures Organisation Network structures al Virtual organization Structure Borderless organization Agile organization Holacracy ©copyright, Heriot-Watt University, 2024 Learning organization? 2 1 Entrepreneurial and Simple Structures Entrepreneur Employees ©copyright, Heriot-Watt University, 2024  Organising by Function ©copyright, Heriot-Watt University, 2024  Relatively simple, with major decisions dealt with by a small top management team Organising Builds up expertise and career path by for specialists Function Economies of scale as production rises Best for small, single-product organizations in markets where change and risk are predictable and manageable. ©copyright, Heriot-Watt University, 2024  Organising by Product ©copyright, Heriot-Watt University, 2024  As competitive or technological changes increase firm diversifies into multiple products In these circumstances the product structure is Organising superior to the functional structure in: speed of decision making by top by management Product knowledge of customers and markets communication between specialists and managers ©copyright, Heriot-Watt University, 2024 product and future leaders’  Matri x Organizati on ©copyright, Heriot-Watt University, 2024  Combines aspects of both the product organisation functional and Specialists from different functions work together on the same task or The project Matrix Specialists are accountable to both Structu the project management and their own functional management re Matrix structures can help to as organisations preserve grow flexibility ©copyright, Heriot-Watt University, 2024  Dual reporting can lead to conflict and stress Conflict between product and Problems functional managers over priorities with of resources, time and costs Matri Functional managers fear their x authority undermined Structur Functional specialists fear loss of es their specialist identity and threat to their career progression ©copyright, Heriot-Watt University, 2024  Separate divisions or Divisionalis Strategic Business Units ed (SBUs) Structure based on different product ranges or on the geographical locations of customers ©copyright, Heriot-Watt University, 2024  Decisions are taken nearer to the point of action Corporate management is freed-up for more strategic matters Advantages Profit responsibility is delegated to of divisions allowing business Divisionalisatio activities to be evaluated n separately Helps develop general managers ©copyright, Heriot-Watt University, 2024  Which is the best basis for creating divisions may not always be clear in practice Problems There can be conflict between divisions over investment and with the share of central services Divisionalisatio Greater interdependence = harder to make divisionalisation n work effectively Fast growth of a division may alter its characteristics ©copyright, Heriot-Watt University, 2024  Networ k Structu re ©copyright, Heriot-Watt University, 2024  Starbuc ks Networ k Structu re 3 5 Today's organizational design/structure challenges Keeping employees connected Widely dispersed and mobile employees Implications of Covid-19 pandemic Managing Global structural issues Cultural implications of design elements Building a Learning Organization. https://www.youtube.com/watch?v=xcTt Q0hiHbE ©copyright, Heriot-Watt University, 2024  A responsive organization? How can organizations respond to these challenges? ©copyright, Heriot-Watt University, 2024  A responsive organization? Simplify, de-layer Reduce HQ/ support staff Widen spans of control Empower workers; team working The ‘Boundaryless’ organisation ‘Service-driven’ organisations service audits ‘wall-to-wall’ ©copyright, Heriot-Watt University, 2024 employee  Presenter Notes 2023-09-27 11:35:31 -------------------------------------------- Zollo, M. and Winter, S. G. The Learning Organization (2002) ‘Deliberate learning and the evolution of dynamic capabilities’, Organization science, 13(3), pp. 339–351 An organizations that has developed the capacity to continuously learn, adapt and change through the practice of knowledge management by employees Characteristics of a learning organization An open team-based organizational design that empowers employees Extensive and open information sharing Leadership that provides a shared vision of the organization’s future A strong culture of shared values, trust, openness and a sense of community See Garvin (1993) and Zollo and Winter (2002) https://www.youtube.com/watch?v=lUP4WcfNyAA&t=481s ©copyright, Heriot-Watt University, 2024  https://www.youtube.com/watch?v=szgfR 9Nxlw0 https://www.youtube.com/watch?v=MUHf ©copyright, Heriot-Watt University, 2024 VoQUj54  Summary Structure responds to the environment Structure follows strategy Once strategic change is identified, structure should be re-designed Firms need to build responsive and learning organizations to cope with and to create change. ©copyright, Heriot-Watt University, 2024  Reading Chapter 7 in Beech and Macintosh, 2012 GALBRAITH, J.R., 1974. Organization design: An information processing view. Interfaces, 4(3), pp.28-36. GARVIN, D. 1993, “Building a learning organisation”, Harvard Business Review, July-August, pp. 78-91 MINTZBERG, H. 1993 Structure in Fives: Designing Effective Organizations. Hemel Hempstead: Prentice Hall TEECE, D. J. 2007. Explicating Dynamic Capabilities: the Nature and Microfoundations of (Sustainable) Enterprise Performance. Strategic Management Journal, 28, 1319-1350. TEECE, D.J. 2009 Dynamic Capabilities and Strategic Management. Oxford: Oxford University Press TEECE, D. J., PISANO, G. & SHUEN, A. 1997. Dynamic Capabilities and Strategic Management. Strategic Management Journal, 18, 509-533. ©copyright, Heriot-Watt University, 2024