BBA 1564 Principles of Management PDF

ninth edition BBA 1564 STEPHEN P. ROBBINS MARY COULTER PRINCIPLES OF MANAGEMENT 1PowerPoint Presentation by Charlie Cook The University of West Alabama BBA 1564...

ninth edition BBA 1564 STEPHEN P. ROBBINS MARY COULTER PRINCIPLES OF MANAGEMENT 1PowerPoint Presentation by Charlie Cook The University of West Alabama BBA 1564 ninth edition STEPHEN P. ROBBINS MARY COULTER Organizational Design TOPIC 6 PowerPoint Presentation by Charlie Cook The University of West Alabama Chapter 6: Organizational Design Learning Outcomes Successful students will be able to: 1.Describe six key elements in organizational design. 2.Identify the contingency factors that favour either the mechanistic model or the organic model of organizational design. 3.Compare and contrast traditional and contemporary organizational designs. 4.Discuss the design challenges faced by today’s organizations. MGT104 3 Organizational Design Is the creation of or change to an organization’s structure. The designer has to come out with the chain of command, formal authority, types of departments and span of control to come out with an overall structural approach. MGT104 4 Models of Organizational Design Mechanistic Versus Organic Models Models of Organizational Design (Cont’d) 2005V1.0 MGT104 6 Models of Organizational Design (Cont’d) Differences Between the Mechanistic and Organic Models  Mechanistic Models - synonymous with the bureaucracy structure - highly standardized - highly formalized - more managerial hierarchy  Organic Models - flat structures - less formal procedures for making decisions - has multiple decision makers - flexible practices Traditional Organizational Designs Organizational Design The six (6) key elements of organizational design:  Work specialization,  Departmentalization,  Chain of command,  Span of control,  Centralization/decentralization,  and formalization. 2005V1.0 MGT104 9 Strategy and Structure Growth Simple Structure CEO Sales shares Owner Growth - knowledge Makes -Coordination and and decision All Control problems Making. decisions. Functional Structure Separate business or Sales profit Growth - center. -Coordination and Control problems Multi-divisional Structure MGT104 10 Types of Organizational Designs 1. Simple Structure 2. Functional Structure Early (traditional) 3. Divisional (or Geographical) Organizational Design Structure 4. The Bureaucracy 5. Matrix Structure 6. Boundaryless Organization Contemporary (modern) Organizational Design 7. Network Structure 2005V1.0 MGT104 11 Types of Organizational Designs (Cont’d) Early Organizational Design 1. Simple Structure It has a low degree of departmentalization, wide spans of control, authority centralized in a single person, and little formalization. It is a flat organization. It usually has only two to three vertical levels. Most widely used in small businesses. 2005V1.0 MGT104 12 Types of Organizational Structures Early Organizational Design 1. Simple Structure 2005V1.0 MGT104 13 Types of Organizational Structures Early Organizational Design 2. Functional Structure  The organization design that groups positions into departments based on similar skills, expertise and resources.  Example: HR, Finance, Production, Marketing MGT104 14 Functional Departmentalization Most common form of organization MGT104 15 Types of Organizational Structures (Cont’d) Advantages of Functional Structure: 1. Minimize duplication of personnel and equipment. 2. Employees feel comfortable as it gives them the opportunity to talk the same language as their peers. MGT104 16 Types of Organizational Structures (Cont’d) Advantages of Functional Structure: 3. Simplifies training. 4. Communication and coordination are excellent within the department. MGT104 17 Types of Organizational Structures (Cont’d) Disadvantages of Functional Structure: 1. Employees would know more of their own functions rather than the company as a whole – difficult to train them to CEO position in future. 2. Leads to barriers in communication, cooperation and coordination between functions. Examples of departmentalization: Product, Process, Customer, Geographical. MGT104 18 Product Departmentalization + Allows specialization in particular products and services + Managers can become experts in their industry + Closer to customers – Duplication of functions – Limited view of organizational goals MGT104 19 Process Departmentalization + More efficient flow of work activities – Can only be used with certain types of products MGT104 20 Customer Departmentalization + Customers’ needs and problems can be met by specialists - Duplication of functions - Limited view of organizational goals MGT104 21 Types of Organizational Structures (Cont’d) Early Organizational Design 3. Divisional (or Geographical) Structure  Organization group all functions into a single division and duplicate each of the functions across all the divisions.  The separate divisions may act almost as separate business units (strategic business units) and work autonomously. MGT104 22 Types of Organizational Structures (Cont’d) Advantages of Divisional Structure: 1. Divisional structures are flexible and responsive to change because each unit focuses on is own environment. 2. Good for developing top managers as division managers gain broad range of experience in running the free-standing units. MGT104 23 Types of Organizational Structures (Cont’d) Disadvantages of Divisional Structure 1. Duplication of activities and resources. 2. Employees in different divisions may feel that they are competing with one another, therefore, no inter-company teamwork. MGT104 24 Divisional Structure 2005V1.0 MGT104 25 Divisional Structure 2005V1.0 MGT104 26 Geographical Departmentalization Advantages More effective and efficient handling of specific regional issues that arise Serve needs of unique geographic markets better Disadvantages Duplication of functions Can feel isolated from other organizational areas MGT104 27 Types of Organizational Designs (Cont’d) Traditional Organizational Design 4. The Bureaucracy The key concept that underlies all bureaucracies is standardization. Characteristics of bureaucracy: High routine operating tasks, Formalized rules and regulations, tasks grouped into functional departments, Centralized authority, Narrow span of control, Decision making follows the chain of command. 2005V1.0 MGT104 28 Example of the Bureaucracy 2005V1.0 MGT104 29 Types of Organizational Structures (Cont’d) o Contemporary Organizational Designs 5. Matrix Structure  Organization structure that uses functional and divisional chain of commands simultaneously in the same part of the organization.  The functional hierarchy of authority runs vertically from the functional departments; whereas the project authority (divisional) runs laterally / horizontally from group to group. MGT104 30 Types of Organizational Structures (Cont’d) Advantages of Matrix Structure 1. Flexible as teams can be created, changed, dissolved without a major problem. 2. Talents from various departments can contribute to certain projects in the organizations. MGT104 31 Types of Organizational Structures (Cont’d) Advantages of Matrix Structure 3. Save cost and time to source for new talents – use internal talents. 4. Do not need to give orientation to new staff on organization culture and environment. MGT104 32 Types of Organizational Structures (Cont’d) Disadvantages of Matrix Structure 1. Potential conflict, confusion and frustration because of the dual chain of command. 2. Difficult to manage everyone together for the new project as they are from different departments. MGT104 33 2005V1.0 MGT104 34 Example of a Matrix Organization 2005V1.0 MGT104 35 MGT104 36 Organizational Designs (cont’d) Contemporary Organizational Designs 6. Boundary less Organization  A flexible and 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 MGT104 37 structures to get closer to stakeholders. Removing External 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 what it does best. Modular Organization  A manufacturing organization that uses outside suppliers to provide product components for its final assembly operations. MGT104 38 Boundary less Organization 2005V1.0 MGT104 39 Types of Organizational Structures (Cont’d) o Contemporary Organizational Designs 7. Network Structure  Organization structure where the small central organization relies on other organizations to perform manufacturing, marketing, engineering, and other functions on a contract basis rather than creating these functions internally. MGT104 40 Types of Organizational Structures (Cont’d) Advantages of Network Structure: 1. Flexible because organization purchase only specific services needed. 2. Administrative overhead are low because a lot of administrative personnel and specialist are not needed. MGT104 41 Types of Organizational Structures (Cont’d) Disadvantages of Network Structure: 1. Lack of control because the functions are not under the company. 2. Reliability of suppliers is risky because if suppliers fails to deliver, goes out of business or have problems in the production plant, it will affect the company. MGT104 42 Network Structure 2005V1.0 MGT104 43