Ch. 5.pdf

In an organic structure, specic norms and values develop that emphasize personal competence, experse, and the freedom to act in innovave ways. The con ngency approach to organiza onal design The con ngency approach is a management approach in which the design of an organizaon’s structure is tai...

In an organic structure, specic norms and values develop that emphasize personal competence, experse, and the freedom to act in innovave ways. The con ngency approach to organiza onal design The con ngency approach is a management approach in which the design of an organizaon’s structure is tailored to the sources of uncertainty facing an organizaon. The structure is designed to respond to various conngencies – things or changes that might happen and therefore must be planned for. According to the conngency theory, an organizaon must design its internal structure to control the external environment. Paul Lawrence and Jay Lorsch think the strength of the forces in the general and specic environments have a direct e*ect on the extent of di*erenaon inside an organizaon. §5 Designing organiza onal structure: authority and control 5.1 Authority: how and why ver cal dieren a on occurs An organizaon’s hierarchy begins to emerge when managers nd it more and more di;cult to coordinate and movate employees e*ecvely. An organizaon does two things to improve its ability to control, which is coordinate and movate, its members: 1. it increases the number of managers it uses to monitor, evaluate and reward employees, and; 2. it increases the number of levels in its managerial hierarchy so that they hierarchy of authority becomes taller over me. These two things increase vercal di*erenaon and gives the organizaon direct face-to-face control over its members. Personal supervision can be a very e*ecve way of movang employees and promong behaviours that increase e*ecveness. The personal authority relaonship in an organizaon is perhaps the 20 most signicant or tangible one that creates and bonds people into an organizaon and determines how well they perform. Size and height limita ons A tall organiza on is an organizaon in which the hierarchy has many levels relave to the size of the organizaon. A Eat organiza on is an organizaon that has few levels in its hierarchy. Research suggests that the increase in the size of the managerial components in an organizaon is less than proporonal to the increase in size of the organizaon as it grows. In a pyramid-like structure an organizaon has fewer and fewer managers at each level. A bloated structure has increasing numbers of managers at each level (see gure 5.3). But there are some problems with tall hierarchies: - - Communicaon problems and distoron, which means that informaon becomes distorted as it :ows up and down the hierarchy through many levels of management. Besides, informaon may be manipulated, and the quality of decision making su*ers at all levels.; Movaon problems: when more authority and responsibility is given to managers and employees, they are more movated to perform their organizaonal roles; Bureaucrac costs of the managers. The terms restructuring and downsizing are used to describe the process by which managers streamline hierarchies and lay o* managers and workers to reduce bureaucrac costs The Parkinson’s law problem Parkinson argued that the growth in the number of managers and hierarchical levels is controlled by two principles: 1. an o;cial wants to mulply subordinates, not rivals (‘make a larger empire’), and 2. o;cials make work for one another (more managers lead to more work). The ideal number of hierarchal levels: the minimum chain of command According to the principle of minimum chain of command, an organizaon should choose the minimum number of hierarchical levels consistent with its goals and the environment in which it operates. An organizaon with a :at structure will also experience fewer communicaon, movaon 21 and cost problems than a tall organizaon (so the :a9er the be9er). The only reason why an organizaon should choose a tall structure is when it needs a high level of direct control and supervision. Span of control How can an organizaon avoid become too tall yet maintain e*ecve control of its workforce? By increasing its managers’ span of control, which is the number of subordinates each manager directly manages. The size and limit of a manager’s span of control is determined by the inability to exercise adequate supervision over the acvies of subordinates as they grow in number. In general, a manager’s ability to supervise and control subordinates’ behaviour directly is limited by two factors: - the complexity; when subordinates’ tasks are complex, a manager’s span of control needs to be small; the interrelatedness; when subordinates’ tasks are closely interrelated, so that what one person does has a direct e*ect on what another person does, coordinaon and control are greater challenges for a manager. So, managers supervising subordinates who perform highly complex, interrelated tasks have a much narrower span of control than managers supervising workers who perform separate, relavely roune tasks. 5.2 Control factors: aec ng the shape of the hierarchy Horizontal dieren a on Horizontal di*erenaon leads to the emergence of specialized subunits (funcons or divisions). Each disnct division, funcon or department inside a funcon has separate hierarchies. Horizontal di*erenaon is the second principal way in which an organizaon retains control over employees when it cannot increase the number of levels in the organizaonal hierarchy. Increasing horizontal di*erenaon increases vercal di*erenaon within an organizaon because many subunit hierarchies come into being. But horizontal di*erenaon avoids many of the problems of tall hierarchies because the development of numerous subunit hierarchies allows the organizaon to remain :at. Managers can control the coordinaon and movaon problems (coming with horizontal di*erenaon) by making wise choices concerning centralizaon, standardizaon and the in:uence of the informal organizaon. Centraliza on As the hierarchy becomes taller, managers begin to spend more me monitoring and supervising their subordinates and less me planning and goal se3ng, and organizaonal e*ecveness su*ers. One soluon is to decentralize authority, because now less direct managerial supervision is needed. Decentralizaon enables a relavely tall structure to be more :exible in its responses to changes in the external environment because it reduces the amount of direct supervision required. Standardiza on Managers can also gain control over employees by standardizing their behaviour to make their acons predictable. The use of standardizaon reduces the need for personal control by managers 22 and the need to add levels in the hierarchy because rules and SOPs substute for direct supervision and face-to-face contact. Standardizaon also allows upper-level managers to delegate responsibility more condently when subordinates have clearly specied procedures to follow. So, rst managers increase the level of vercal di*erenaon, paying parcular a9enon to keeping the organizaon as :at as possible and to maintaining an appropriate balance between centralizaon and decentralizaon. Second, they increase horizontal di*erenaon and thereby also increase vercal di*erenaon. Third, they decide how much they can use rules, SOPs, and norms to control acvies. 5.3 The principles of bureaucracy A bureaucracy is a form of organizaonal structure in which people can be held accountable for their acons because they are required to act in accordance with rules and standard operang procedures. Max Weber developed principles for designing a hierarchy so it e*ecvely allocates decision-making authority and control over resources. The following principles dene a bureaucracy or a bureaucrac structure: 1. A bureaucracy is founded on the concept of raonal-legal authority. Ra onal-legal authority is the authority a person possesses because of his or her posion in an organizaon. This principle indicates that choices a*ecng the design of an organizaon’s hierarchy should be based on the needs of the task, not on the needs of the person performing the task (people are appointed by posions, they don’t own them). 2. Organizaonal roles are held on the basis of technical competence, not because of social status, kinship, or heredity. People occupy roles because they can do the job, not because of who they are or who they know. These rst two principles establish the organizaonal role, and not the person in that role, as the basic component of bureaucrac structure. The next three principles specify how the process of di*erenaon should be controlled. 3. A role’s task responsibility and decision-making authority and its relaonship to other roles in the organizaon should be clearly specied. A clear and consistent pa9ern of vercal di*erenaon (decision-making authority) and horizontal di*erenaon (task responsibility) is the foundaon for organizaonal e*ecveness. But this might cut down on role conEict = the state of opposion that occurs when two or more people have di*erent views of what another person should do and, as a result, make con:icng demands on the person) and role ambiguity = the uncertainty that occurs for a person whose tasks or authority are not clearly dened). 4. The organizaon of roles in a bureaucracy is such that each lower o;ce in the hierarchy is under control and supervision of a higher o;ce. To control vercal authority relaonships, the organizaon should be arranged hierarchically so people can recognize the chain of command. 5. Rules, standard operang procedures, and norms should be used to control the behaviour and the relaonship among roles in an organizaon. Rules, SOPs, and norms clarify people’s expectaons about one another and prevent misunderstandings over responsibility or the use of power. Besides, rules and norms enhance the integraon and coordinaon of organizaonal roles and di*erent levels and between di*erent funcons. 23 6. Administrave acts, decisions, and rules should be formulated and put in wring. When rules and decisions are wri9en down, they become o;cial guides to the way the organizaon works. The advantages of bureaucracy The primary advantage of a bureaucracy is that it lays out the ground rules for designing an organizaonal hierarchy that e;ciently controls interacons between organizaonal levels. Individuals can be held accountable for what they do, which reduces the transacon costs that arise when people must connually negoate and dene their organizaonal roles. Another advantage is that bureaucracy separates the posion from the person. Bureaucracy provides people to develop their skills and pass them on to their successors. One of the problems of bureaucracy is that managers fail to control the development of the organizaonal hierarchy properly. As a result, these organizaons o2en become very tall, centralized and in:exible. Decision making slows down, the organizaon begins to stagnate, and bureaucrac costs increase because managers start to make work for each other. Another problem is that organizaonal members come to rely too much on rules and SOPs to make decisions, and this overreliance makes them unresponsive to the needs of customers and other stakeholders. Remember: there is nothing intrinsically bad or ine;cient about a bureaucracy. When organizaons become overly bureaucrac, the fault lies with the people who run them (with managers who prefer the pursuit of power and status to the pursuit of operang e;ciency). Management by objec ves To provide a framework within which to evaluate subordinates’ behaviour and to allow managers to monitor progress toward achieving goals, many organizaons implement some version of management by objec ves (MBO). This is a system of evaluaon subordinates on their ability to achieve specic organizaonal goals or performance standards and to meet operang budgets. MBO involves three specic steps: 1. Specic goals and objecves are established at each level of the organizaon. 2. Managers and their subordinates together determine the subordinates’ goals. 3. Managers and their subordinates periodically review the subordinates’ progress towards meeng goals. In a decentralized organizaon, MBO works somewhat di*erently, it’s not about goals for the subordinates, it’s about goals for the teams. The reward system is linked to team performance. 5.4 The inEuence of the informal organiza on At all levels in the organizaon, decision making and coordinaon frequently take place outside the formally designed channels as people interact informally on the job. Moreover, many of the rules and norms that employees use to perform their tasks emerge out of informal interacons between people. Managers need to consider the e*ects of the informal organizaon on individual and group behaviour when they make any organizaonal changes. Altering the formal structure o2en disrupts the informal norms that make the organizaon work. Managers must harness the power of the informal organizaon to help achieve organizaonal goals. 24 5.5 IT, empowerment, and self-managed teams An important trend, which is accelerang as the result of advances of IT, is the increasing use of empowered workers, self-managed teams, cross-funconal teams, and conngent or temporary workers. IT is making it much easier for managers to design a cost-e*ecve structure and control system that gives them much more and much be9er informaon about subordinates’ acvies, assesses funconal performance, and intervenes as necessary to be9er achieve organizaonal goals. Thus, the increasing use of IT has led to a decentralizaon of authority in organizaons and an increasing use of teams. Empowerment is the process of giving employees throughout an organizaon the authority to make important decisions and to be responsible for their outcomes. Self-managed teams are formal work groups consisng of people who are jointly responsible for ensuring that the team accomplishes its goals and who are empowered to lead themselves. Cross-func onal teams are formal work groups of employees from across an organizaon’s di*erent funcons that are empowered to direct and coordinate the value-creaon acvies necessary to complete di*erent programs or projects. Con ngent workers are those who are employed for temporary periods by an organizaon and who receive no indirect benets such as health insurance or pensions. The advantages of conngent workers are that they cost less to employ and they can be let go easily when their services are no longer needed. However, the disadvantages are that coordinaon and movaon problems may arise because temporary workers have less incenve to perform at a high level, given that there is no prospect for promoon. Second, organizaons must develop core competences in their funcons to gain compeve advantage, and it’s unlikely that conngent workers will help them develop these competences, because they do not remain with the organizaon very long and are not commi9ed to it. 25