OIS 23-24 Session 02 Warm Up 2 PDF

TrEC - Accounting, Finance and Information Systems Organization and Information System Prof. Diego Campagnolo - Prof. Massimiliano Oleotto Warm up 2 Materials - a.y. 2023-2024 TrEC - Accounting, Finance and Information Systems Organization and Information System Prof. Diego Campagnolo - Prof....

TrEC - Accounting, Finance and Information Systems Organization and Information System Prof. Diego Campagnolo - Prof. Massimiliano Oleotto Warm up 2 Materials - a.y. 2023-2024 TrEC - Accounting, Finance and Information Systems Organization and Information System Prof. Diego Campagnolo - Prof. Massimiliano Oleotto Basic challenges of organizational design Materials - a.y. 2023-2024 Figure 4.4: Organizational Design Challenges 3 [1] Vertical and horizontal differentiation Organization and Information Systems | a.y. 2023-2024 | Diego Campagnolo – Massimiliano Oleotto 1 - Vertical and Horizontal Differentiation 4 n Vertical differentiation: the way an organization designs its hierarchy of authority and creates reporting relationships to link organizational roles and subunits n n Establishes the distribution authority between levels Horizontal differentiation: the way an organization groups organizational tasks into roles and roles into subunits (functions and divisions) n Roles differentiated according to their main task responsibilities Organization and Information Systems | a.y. 2023-2024 | Diego Campagnolo – Massimiliano Oleotto 5 Advantages and disadvantages of differentiation Vertical differentiation Horizontal differentiation Advantages Disadvantages Control, supervision, feedback, career management as motivational factor Less autonomy, risk of distorted comunication, slow decisionmaking, high bureaucratic costs Advantages Disadvantages Economies of scale Economies of specialization Divergent sub-unit orientation High coordination costs Low flexibility Low sinergies 6 2 - Balancing Differentiation and Integration nIntegration: the process of coordinating various tasks, functions, and divisions so that they work together and not at cross-purposes Organization and Information Systems | a.y. 2023-2024 | Diego Campagnolo – Massimiliano Oleotto Balancing Differentiation and Integration 7 Managers facing the challenge of deciding how and how much to differentiate and integrate must: § Carefully guide the process of differentiation so that it develops the core competences that give the organization a competitive advantage § Carefully integrate the organization by choosing appropriate integrating mechanisms that allow subunits to cooperate and that build up the organization’s core competences Organization and Information Systems | a.y. 2023-2024 | Diego Campagnolo – Massimiliano Oleotto 3 - Balancing Centralization and Decentralization 8 Advantages High centralization Clear and unified decision Focus on organizational goals n Disadvantages Scarce autonomy, low flexibility, slow response Ideal balance entails: n Enabling middle and lower managers who are at the scene of the action to make important decisions n Allowing top managers to focus on long-term strategy making Organization and Information Systems | a.y. 2023-2024 | Diego Campagnolo – Massimiliano Oleotto 4- Balancing Standardization and Mutual Adjustment 9 Formalization nChallenge Advantages Disadvantages Standard quality, efficiency, no ambiguity, predictability Routine task, low flexibility, scarce autonomy and innovation facing managers is: nTo find a way of using rules and norms to standardize behavior, and nto allow for mutual adjustment to give managers opportunity to discover new and better ways to achieve goals Organization and Information Systems | a.y. 2023-2024 | Diego Campagnolo – Massimiliano Oleotto TrEC - Accounting, Finance and Information Systems Organization and Information System Prof. Diego Campagnolo - Prof. Massimiliano Oleotto Organizational structures Materials - a.y. 2023-2024 Functional Structure 11 nA functional structure is a design that groups people on the basis of their common skills, expertise, or resources they use nFunctional structure is the bedrock of horizontal differentiation nAn organization groups tasks into functions to increase the effectiveness with which it achieves its goals Organization and Information Systems | a.y. 2023-2024 | Diego Campagnolo – Massimiliano Oleotto 11 Figure 6-1: Functional Structure (cont.) 12 Organization and Information Systems | a.y. 2023-2024 | Diego Campagnolo – Massimiliano Oleotto 12 13 Functional Structure: Advantages and Disadvantages nProvides people with the opportunity to learn from one another and become more specialized and productive nPeople who are grouped together by common skills can supervise one another and control each other’s behavior nPeople develop norms and values that allow them to become more effective at what they do Organization and Information Systems | a.y. 2023-2024 | Diego Campagnolo – Massimiliano Oleotto nCommunication Problems: as more organizational functions develop, each with their own hierarchy, they become increasingly distant from one another nMeasurement Problems: information needed to measure the profitability of any functional group is difficult to obtain nLocation Problems: centralized control hinders ability to satisfy the special needs in different geographic regions nCustomer Problems: servicing the needs of new kinds of customers and tailoring products to suit them is relatively difficult nStrategic Problems: top managers spend too much time finding ways to improve coordination 13 EXAMPLE OF INTEGRATION ROLE Functional with Product or Market Integration 14 DG Marketing Product Manager CDG Product Manager LSG Sales Technical Assistance Modified Functional Structure 15 CEO Structural modification: adding of full time and dedicated integrators (role or unit) Integrator Operation Marketing &Sales CEO 2 Possible Integrators: Integrators Without Authority –PM, BM, Merchandiser, Fashion Coordinator; -PM -BM -Merch. Operation Product & Style CEO Operation Integrators With Authority –PjM Marketing &Sales - PjM - Process Owner Marketing &Sales Product & Style Product & Style Modified Functional Structure –Integrators Without Authority 16 Pathological situation üWe design a second line integrator with the assigned task of integrating the first line units First line integration need CEO Operation Marketing &Sales Product & Style Second line Integrator Integrators Without Authority : Working Conditions 17 a. High differentiation High integration need across functions b. High interdependency Complex coordination mechanism (integrator) High degree of interfunctional coordination Support conditions for the implementation 1. Characteristics of the integrator: a. position in the structure; b. assigned goals and incentives c. career path; d. competencies and experiences 2. Characteristics of the units to be integrated: a. physical proximity b. cognitive proximity Organization and Information Systems | a.y. 2023-2024 | Diego Campagnolo – Massimiliano Oleotto From Functional Structure to Divisional Structure (cont.) 18 nAs organizations grow, they begin to produce more products that may be different from one another nOrganizations also increase production at a number of locations to serve many nMore complex structure is based on: n Increasing vertical differentiation n Increasing horizontal differentiation n Increasing integration Organization and Information Systems | a.y. 2023-2024 | Diego Campagnolo – Massimiliano Oleotto different types of customers Moving to a Divisional Structure 19 nOrganizations most commonly adopt the divisional structure to solve control problems that arise with too many products, regions, or customers nDivisional structure is dependent on control problem to be solved n Create smaller, more manageable subunits n Product structure n Geographic structure n Market structure Organization and Information Systems | a.y. 2023-2024 | Diego Campagnolo – Massimiliano Oleotto Advantages and Disadvantages of a (multi)didivisional structure 20 nIncreased organizational effectiveness: clear division of labor between corporate and divisional managers generally increases organizational effectiveness nIncreased control: extra control provided by nManaging the corporate-divisional relationship: finding the balance between centralization and decentralization nCoordination problems between divisions: divisions start competing for resources and coordination problems arise between divisions the corporate office can encourage the stronger pursuit of internal organizational efficiency by divisional managers nTransfer pricing: problems between divisions often revolve around the nProfitable growth: when each division is its own nBureaucratic costs: multidivisional structures are very expensive to profit center, individual profitability can be clearly evaluated nInternal labor market: the most able divisional managers are promoted to become corporate managers Organization and Information Systems | a.y. 2023-2024 | Diego Campagnolo – Massimiliano Oleotto transfer price, i.e., the price at which one division sells a product or information about innovations to another division operate nCommunication problems: tall hierarchies tend to have communication problems, particularly the distortion of information Matrix Structure 21 nMatrix structure: an organizational design that groups people ways simultaneously, by function and product and resources in two nA matrix is a rectangular grid that shows a vertical flow of functional responsibility and a horizontal flow of product responsibility nThe members of the team are called two-boss employees because they report to two superiors: the product team manager and the functional manager nThe team is the building block and principal coordination and integration mechanism Organization and Information Systems | a.y. 2023-2024 | Diego Campagnolo – Massimiliano Oleotto Figure 6-12: Matrix Structure 22 Organization and Information Systems | a.y. 2023-2024 | Diego Campagnolo – Massimiliano Oleotto 22 23 Advantages of a Matrix Structure nThe use of cross-functional teams reduces functional barriers and subunit orientation. nOpens communication between functional specialists nThe matrix enables an organization to maximize its use of skilled professionals, who move from product to product as needed nThe dual functional and product focus promotes concern for both cost and quality Organization and Information Systems | a.y. 2023-2024 | Diego Campagnolo – Massimiliano Oleotto nMatrix lacks a control structure that leads employees to develop stable expectations of one another nThe lack of a clearly defined hierarchy of authority can also lead to conflict between functions and product teams over the use of resources nPeople are likely to experience a vacuum of authority and responsibility n People then create their own informal organization to provide themselves with some sense of structure and stability