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Unformatted text preview: Chapter One Organizations and Organization Theory 1 Organization Theory in Action Current Challenges – Globalization – Ethics and Social Responsibility Ethics – Speed of Responsiveness – The Digital Workplace – Diversity 2 What is an Organization? Definition: – Social entity that is goal-directed, designed as structured activity Social system and is linked to the external environment system Types of Organizations – Profit/not-for profit, manufacturing/service, public/private, etc Importance of Organizations – – – – Bring together resources to achieve desired goals and outcomes Produce goods and services efficiently Facilitate innovation Use modern manufacturing and information technologies 3 Importance of Organizations Importance of Organizations (cont’d) – Adapt to and influence a changing Adapt environment environment – Create value for owners, customers and Create employees employees – Accommodate ongoing challenges of Accommodate diversity, ethics, and the motivation and coordination of employees coordination 4 Perspectives on Organizations Open Systems: must interact with the environment Open to survive to System definition: a set of interacting elements System that acquires inputs, transforms them, and discharges outputs to the environment outputs Organizational Configuration – – – – – Technical Core Technical Support Administrative Support Middle Management Top Management 5 An Open System and Its Subsystems Environment Transformation Raw Materials People Information resources Financial resources Input Subsystems Boundary Spanning Output Process Production, Maintenance, Adaptation, Management Boundary Spanning 6 Products and Services Five Basic Parts of an Five Organization Organization Top Management Technical Support Middle Management Administrative Support Technical Core Source: Based on Henry Mintzberg, The Structuring of Organizations (Englewood Cliffs, N. J.: Prentice-Hall, 1979) 215-297; and Henry Mintzberg, “Organization Design: Fashion or Fit?” Harvard Business Review 59 (Jan. – Feb. 1981): 103-116. 7 Dimensions of Organization Design Structural Dimensions – Formalization – Specialization – Hierarchy – centralization Contextual Dimensions – – – – – Size Technology Environment Goals Culture 8 Environment Culture Goals and Strategy Size Structure 1. 2. 3. 4. 5. 6. Technology Formalization Specialization Hierarchy of Authority Centralization Professionalism Personnel Ratios 9 Performance and Effectiveness Performance Outcomes Outcomes Efficiency – Refers to the amount of input needed to Refers achieve organizational output achieve Effectiveness – Refers to how well an organization achieves Refers its goals its Who decides effectiveness – Stakeholders such as owners, unions, Stakeholders customers, employees customers, 10 The Evolution of Organization The Theory and Design Theory Historical Perspectives – Scientific management – Bureaucratic organizations – People focus (Hawthorne studies) – Contingency (do what works) Contemporary Organization Design – Chaos theory – Learning Organizations 11 Efficient Performance vs. the Efficient Learning Organization Learning Move from: – Vertical to horizontal structure – Routine tasks to empowered roles – Formal control systems to shared information – Competitive to collaborative strategy Competitive – Rigid to adaptive culture 12 Two Organization Design Two Approaches Approaches Natural System Design Mechanical System Design Horizontal Structure Vertical Structure Routine Tasks Formal Systems Rigid Culture Competitive Strategy Stable Environment Efficient Performance Organizational Change in the Service of Performance Empowered Roles Shared Information Adaptive Culture Collaborative Strategy Turbulent Environment Learning Organization Source: Adapted from David K. Hurst, Crisis and Renewal: Meeting the Challenge of Organizational Change (Boston, Mass.: Harvard Business School) 13 Chapter Two Strategy, Organization Design and Effectiveness 14 14 Top Management Role in Organization Top Direction, Design, and Effectiveness Direction, External Environment Organization Design Opportunities Threats Uncertainty Resource Availability Strategic Direction CEO, Top Management Team Define mission, official goals Internal Situation Strengths Weaknesses Distinctive Competence Leadership Style Past Performance Source: Adapted from Arie Y. Lewin and Carroll U. Stephens, “Individual Properties of the CEO as Determinants of Organization Design,” unpublished manuscript, Duke University, 1990; and Arie Y. Lewin and Carroll U. Stephens, “CEO Attributes as Determinants of Organization Design: An integrated Model,” Organization Studies 15, no. 2 (1994): 183-212 Select operational goals, competitive strategies Structural Form – learning vs. efficiency Information and control systems Production technology Human resource policies, incentives Organizational culture Interorganizational linkages 15 Effectiveness Outcomes Resources Efficiency Goal attainment Competing values Organizational Purpose Mission Operative Goals Overall Performance Resources Market Employee Development Innovation and Change Productivity The Importance of Goals 16 Goal Type and Purpose Type of Goals Purpose of Goals Official Goals, mission: Operative goals: Legitimacy Employee direction and motivation Decision guidelines Standard of performance 17 Porter’s Competitive Strategies Competitive Competitive Competitive Advantage Scope Scope Broad Broad Narrow Narrow Strategy Example Low-Cost Leadership Dell Computer Uniqueness Differentiation Starbucks Coffee Co. Low Cost Focused Low-Cost Leadership Enterprise Rent-a- Car Uniqueness Focused Differentiation Edward Jones Investments Low Cost 18 Miles and Snow’s Strategy Typology Prospector – Learning orientation; flexible, fluid, decentralized Learning structure structure – Strong capability in research – Values creativity, risk-taking, and innovation Defender – Efficiency orientation; centralized authority and tight Efficiency cost control cost – Emphasis on production efficiency, low overhead Close supervision; little employee empowerment Source: Based on Michael Treacy and Fred Wiersema, “How Market Leaders Keep Their Edge,” Fortune February 6, 1995, 88-98; Michael Hitt, R. Duane Ireland, and Robert E. Hoskisson, Strategic Management (St. Paul, Minn.: West, 1995), 100-113; and Raymond E. Miles, Charles c. Snow, Alan D. Meyer, and Henry L. Coleman, Jr., “Organizational Strategy, Structure, and Process,” Academy of Management Review 3 (1978), 546-562 19 Miles and Snow’s Strategy Typology (cont’d) Analyzer – Balances efficiency and learning; tight cost Balances control with flexibility and adaptability control – Efficient production for stable product lines; Efficient emphasis on creativity, research, risk-taking for innovation innovation Reactor – No clear organizational approach; design No characteristics may shift abruptly depending on current needs current Source: Based on Michael Treacy and Fred Wiersema, “How Market Leaders Keep Their Edge,” Fortune February 6, 1995, 88-98; Michael Hitt, R. Duane Ireland, and Robert E. Hoskisson, Strategic Management (St. Paul, Minn.: West, 1995), 100-113; and Raymond E. Miles, Charles c. Snow, Alan D. Meyer, and Henry L. Coleman, Jr., “Organizational Strategy, Structure, and Process,” Academy of Management Review 3 (1978), 546-562 20 Contingency Factors Affecting Organization Design Envi ronm ent r St y teg a Technolog Siz Life e/ Cycl e y Cu ltu re Organizational Structure and Design The Right Mix of Design Characteristics Fits the Contingency Factors 21 Contingency Approaches to the Contingency Measurement of Organizational Effectiveness Effectiveness External Environment Organization Resource Inputs Resource-based approach Internal activities and processes Internal process approach Product and Service Outputs Goal approach 22 Reported Goals of U.S. Corporations Goal % Corporations Profitability Growth Market Share Social Responsibility Employee welfare Product quality and service Research and development Diversification Efficiency Financial stability Resource conservation 39 Management development Source: Adapted from Y. K. Shetty, “New Look at Corporate Goals,” California Management Review 22, no. 2 (1979), pp. 71-19. 89 82 66 65 62 60 54 51 50 49 35 23 Four Models of Effectiveness Values STRUCTURE Flexibility Human Relations Emphasis Open Systems Emphasis Primary Goal: human resource Primary Goal: growth, development resource acquisition Subgoals: cohesion, morale, training Subgoals: flexibility, readiness, external evaluation F OInternal External C Internal Process Emphasis Rational Goal Emphasis U Primary Goal: stability, equilibrium Primary Goal: productivity, efficiency, S profit S Subgoals: information management, ubgoals: planning, goal setting communication Adapted from Robert E. Quinn and John Rohrbaugh, “A Spatial Model of Effectiveness Criteria: Toward a Competing Values Approach to Organizational Analysis,” Management Science 29 (1983): 363-377; and Robert E. Quinn and Kim Cameron, “Organizational Life Cycles and Shifting Criteria of Effectiveness: Some Preliminary Evidence,” Management Science 29 (1983): 33-51. Control 24 Contingency Effectiveness Contingency Approaches Approaches Goal Approaches Indicators Usefulness Resource Based Approach Indicators Usefulness Internal Process Approach Indicators Usefulness 25 Chapter Three Fundamentals of Organization Structure 26 26 A Sample Organization Chart CEO V ic e P r e s id e n t F in a n c e C h ie f A c c o u n ta n t B udget A n a ly s t V ic e P r e s id e n t M a n u f a c tu r in g P la n t S u p e rin t e n d e n t M a in t e n a n c e S u p e rin t e n d e n t D ir e c t o r H u m a n R e s o u rc e s T r a in in g S p e c ia lis t 27 B e n e f its A d m in is t r a t o r The Relationship of Organization The Design to Efficiency vs. Learning Outcomes Outcomes Horizontal Organization Designed Horizontal structure is dominantfor • Shared tasks, empowerment Learning Dominan t Structur al Approac h • Relaxed hierarchy, few rules • Horizontal, face-to-face communication • Many teams and task forces • Decentralized decision making Vertical structure is dominant • Specialized tasks • Strict hierarchy, many rules • Vertical communication and reporting systems • Few teams, task forces or integrators • Centralized decision making Vertical Organization Designed for Efficiency 28 Project Manager Location in the Structure President Finance Department Financial Accountant Budget Analyst Engineering Department Product Designer Marketing Department Market Researcher Purchasing Department Project Manager New Product A Buyer Buyer Management Accountant Draftsperson Electrical Designer Project Manager New Product B Buyer Project Manager New Product C Advertising Specialist Market Planner 29 Teams Used for Horizontal Teams Coordination at Wizard Software Company Company President Marketing Vice Pres. Videogames Sales Manager Programming Vice Pres Videogames Chief Engineer Research Vice Pres Videogames Basic Research Supervisor Applications and Testing Supervisor Videogames Product Team Memory Products Sales Manager Memory Products International Manager Advertising Manager Memory Products Chief Programmer Memory Products Research Supervisor Memory Products Team Customer Service Manager Procurement Supervisor 30 Ladder of Mechanisms for Horizontal Ladder Linkage and Coordination Linkage Teams Amount of Horizontal Coordination Required H IGH Full-time Integrators Task Forces Direct Contact LO W Information Systems LO W HIG H Cost of Coordination in Time and Human Resources 31 Structural Design Options for Structural Grouping Employees into Departments Departments Functional Grouping CEO Engineering Marketing Divisional Grouping P ro d u c t D iv is io n 1 Manufacturing CEO P ro d u c t D iv is io n 2 Source: Adapted from David Nadler and Michael Tushman, Strategic Organization Design (Glenview, Ill.: Scott Foresman, 1988), 68. P ro d u c t D iv is io n 3 32 Strengths and Weaknesses of Strengths Functional Organization Structure Functional WEAKNESSES: – Slow response time to Slow environmental changes environmental Allows economies of Allows May scale within functional – May cause decisions to pile on top, hierarchy overload on departments departments – Leads to poor horizontal Leads Enables in-depth Enables coordination among knowledge and skill departments departments development development Enables organization – Results in less innovation Enables – Involves restricted view of to accomplish Involves organizational goals functional goals organizational functional Is best with only one Is or a few products or STRENGTHS: – – – – Source: Adapted from Robert Duncan, “What Is the Right Organization Structure? Decision Tree Analysis Provides the Answer,” Organizational Dynamics (Winter 1979): 429. 33 Strengths and Weaknesses of Strengths Divisional Organization Structure Divisional STRENGTHS: – Suited to fast change in Suited unstable environment unstable – Leads to client satisfaction Leads because product responsibility and contact points are clear and – Involves high coordination Involves across functions across – Allows units to adapt to Allows differences in products, regions, clients regions, – Best in large organizations with Best several products several – Decentralizes decision-making Source: Adapted from Robert Duncan, “What Is the Right Organization Structure? Decision Tree Analysis Provides the Answer,” Organizational Dynamics (Winter 1979): 431. WEAKNESSES: – Eliminates economies of Eliminates scale in functional departments departments – Leads to poor Leads coordination across product lines product – Eliminates in-depth Eliminates competence and technical specialization technical – Makes integration and Makes standardization across product lines difficult product 34 Reorganization from Functional Structure Reorganization to Divisional Structure at Info-Tech to Info-Tech President Functional Structure R&D Manufacturing Divisional Structure M fg Marketing I n f o -T e c h P re s id e n t E le c t ro n ic P u b lis h in g R& D Accounting A c c tg O ffic e A u t o m a t io n M k tg R& D M fg A c c tg V irt u a l R e a lit y M k tg R& D 35 M fg A c c tg M k tg Structural Design Options for Structural Grouping Employees (Continued) Grouping Multifocused Grouping CEO Marketing Manufacturing Product Division 1 Product Division 2 Source: Adapted from David Nadler and Michael Tushman, Strategic Organization Design (Glenview, Ill.: Scott Foresman, 1988), 68. 36 Structural Design Options for Structural Grouping Employees (Continued) Grouping Horizontal Grouping CEO Human Resources Finance Core Process 1 Core Process 2 Source: Adapted from David Nadler and Michael Tushman, Strategic Organization Design (Glenview, Ill.: Scott Foresman, 1988), 68. 37 Dual-Authority Structure in a Dual-Authority Matrix Organization Matrix President Director of Product Operations Design Vice President Mfg Vice President Marketing Vice President Controller Product Manager A Product Manager B Product Manager C Product Manager D 38 Procurement Manager Strengths and Weaknesses of Strengths Matrix Organization Structure Matrix STRENGTHS: – Achieves coordination Achieves necessary to meet dual demands from customers demands – Flexible sharing of human Flexible resources across products resources – Suited to complex decisions Suited and frequent changes in unstable environment unstable – Provides opportunity for Provides both functional and product skill development skill – Best in medium-sized Best organizations with multiple products products Source: Adapted from Robert Duncan, “What Is the Right Organization Structure? Decision Tree Analysis Provides the Answer,”Organizational Dynamics (Winter 1979): 429. WEAKNESSES: – Causes participants to experience Causes dual authority, which can be frustrating and confusing frustrating – Means participants need good Means interpersonal skills and extensive training training – Is time consuming; involves Is frequent meetings and conflict resolution sessions resolution – Will not work unless participants Will understand it and adopt collegial rather than vertical-type relationships relationships – Requires great3effort to maintain Requires 9 power balance power A Horizontal Structure Top Management Team Process Owner Team 1 Market Analysis Research Team 2 Product Planning Team 3 Testing Customer New Product Development Process Process Owner Team 1 Analysis Sources: Based on Frank Ostroff, The Horizontal Organization, (New York: Oxford University Press, 1999); John A. Byrne, “The Horizontal Corporation,” Business Week, December 20, 1993, 76-81; and Thomas A. Stewart, “The Search for the Organization of Tomorrow,” Fortune, May 19, 1992, 92-98. Purchasing Team 2 Material Flow Team 3 Customer Distrib. Procurement and Logistics Process 40 Strengths and Weaknesses of Strengths Horizontal Structure Horizontal STRENGTHS: – Flexibility and rapid response to Flexibility changes in customer needs changes – Directs the attention of everyone Directs toward the production and delivery of value to the customer value – Each employee has a broader view of Each organizational goals organizational – Promotes a focus on teamwork and Promotes collaboration—common commitment to meeting objectives to – Improves quality of life for employees Improves by offering them the opportunity to share responsibility, make decisions, and be accountable for outcomes Sources: Based on Frank Ostroff, The Horizontal Organization: What the Organization of the Future Looks Like and How It Delivers Value to Customers, (New York: Oxford University Press, 1999); and Richard L. Daft, Organization Theory and Design, 6th ed., (Cincinnati, Ohio: South-Western College Publishing, 1998) 253. WEAKNESSES: WEAKNESSES: – Determining core processes Determining to organize around is difficult and time-consuming and – Requires changes in culture, Requires job design, management philosophy, and information and reward systems and – Traditional managers may Traditional balk when they have to give up power and authority up – Requires significant training Requires of employees to work effectively in a horizontal team environment team – Can limit in-depth skill Can 41 development development The Relationship of Structure to The Organization’s Need for Efficiency vs. Learning Learning Functional with Functionalcross-functional Divisional Matrix Horizont Modular Structur al Structureteams, integrators Structure Structur e e Structur e Dominant Structural Vertical: • Control Approach • Efficiency • Stability • Reliability Horizontal: • Coordination • Learning • Innovation • Flexibility 42 Symptoms of Symptoms Structural Deficiency Structural Decision making is delayed or lacking in Decision quality quality The organization does not respond The innovatively to a changing environment innovatively Too much conflict is evident 43 Chapter Four The External Environment 44 44 An Organization’s Environment (a) Competitors, industry size and competitiveness, related issues (j) (a) (b) Suppliers, International Industry manufacturers, real Sector Sector estate, services (i) (c) Labor market, Sociocultur DOMAIN al employment agencies, Sector universities, training schools, employees (h) in other companies, Government unionization Sector ORGANIZATION (d) Stock markets, banks, savings and (g) Economic loans, private Conditions investors Sector (e) Customers, clients, (e) (f) Market potential users of products Technolo Sector gy and services Sector (f) Techniques of production, science, computers, information technology (b) Raw Materials Sector (c) Human Resourc es Sector (d) Financial Resources Sector 45 (g) Recession, unemployment inflation rate, rate of investm economics, gro (h) City, state, federal and regulations, ta services, court sys political proce (i) Age, values, bel education, relig work ethic, consu and g movem (j) Competition f and acquisitio foreign fi entry into over markets, fore customs, regulati exchange r Framework for Assessing Framework Environmental Uncertainty Environmental STABLE Simple + Stable = Complex + Stable = Low Uncertainty Low-Moderate Uncertainty 1. Small number of external 1. Large number of external elements and elements are elements and elements are similar dissimilar 2. Elements remain the same of 2. Elements remain the same or change slowly change slowly Examples: soft drink bottlers, beer U Examples: Universities, appliance Un nc distributors, container manufacturers, chemical cos, er cet manufacturers, food processors rai insurance cos ta ENVIRONMENTAL CHANGE UNSTABLE Simple + Unstable = High-Moderate Uncertainty 1. Small number of external elements and elements are similar 2. Elements change frequently and unpredictably Examples: E-commerce, fashion clothing, music industry, toy manufacturers nn ity ty Complex + Unstable = High Uncertainty 1. Large number of external elements and elements are dissimilar 2. Elements change frequently and unpredictably Examples: Computer firms, aerospace firms, telecommunications, airlines SIMPLE COMPLEX ENVIRONMENTAL COMPLEXITY 46 Organizational Departments Organizational Differentiate to Meet Needs of Differentiate Sub-environments President R&D Division Manufacturing Division Sales Division Scientific Sub-environment Manufacturing Sub-environment Market Sub-environment Scientific journals Research centers Professional associations Labor Raw Suppliers materials Customers Advertising Competitors agencies Production equipment Distribution system 47 Differences in Goals and Orientations Differences Among Organizational Departments Among Characteristic R&D Department Manufacturing Department Sales Department New New developments, quality quality Efficient Efficient production production Customer Customer satisfaction satisfaction Time Horizon Long Short Short Interpersonal Orientation Mostly task Task Social Formality of Structure Low High High Goals Source: Based on Paul R. Lawrence and Jay W. Lorsch, Organization and Environment (Homewood, Ill.: Irwin, 1969), pp. 23-29. 48 Environmental Uncertainty and Environmental Organizational Integrators Organizational Industry: Plastics Foods Container Environmental Uncertainty High Moderate Low Departmental Differentiation High Moderate Low 22% 17% 0% Percent of Percent management in integrating roles roles Source: Based on Jay W. Lorsch and Paul R. Lawrence, “Environmental Factors and Organizational Integration,” Organization Planning: Cases and Concepts (Homewood, Ill.: Irwin and Dorsey, 1972), 45. 49 Forms Mechanistic: Organic: Tasks are broken down into specialized, separate parts. parts. Tasks are rigidly defined. There is a strict hierarchy There of authority and control, and there are many rules. and Knowledge and control of Knowledge tasks are centralized at the top of the organization. organization. Communication is vertical. Source: Adapted from Gerald Zaltman, Robert Duncan, and Jonny Holbek, Innovations and Organizations (New York: Wiley, 1973), 131. Employees contribute to Employees the common task of the department. department. Tasks are adjusted and Tasks redefined through teamwork. teamwork. There is less hierarchy of There authority and control, and there are few rules. there Knowledge and control of Knowledge tasks are located anywhere in the organization. in Communication is Communication 50 horizontal. horizontal. Contingency Framework for Contingency Environmental Uncertainty and Organizational Responses Organizational Low Uncertainty 1. Mechanistic structure; formal, centralized 2. Few departments STABLE No integrating roles 3. ENVIRONMENTAL CHANGE 4. Current operations orientation; low speed response Low-Moderate Uncertainty 1. Mechanistic structure; formal, centralized 2. Many departments, some boundary spanning 3. Few integrating roles 4. Some planning; moderate speed UUesponse r n cc ner etra ti it High-Moderate Uncertainty annyy t 1. Organic structure, teamwork; participative, decentralized 2. Few departments, much boundary UNSTABLE spanning 3. Few integrating roles 4. Planning orientation; fast response High Uncertainty 1. Organic structure, teamwork; participative, decentralized 2. Many departments differentiated, extensive boundary spanning 3. Many integrating roles 4. Extensive planning, forecasting; high speed response SIMPLE COMPLEX ENVIRONMENTAL COMPLEXITY 51 Organization Strategies for Organization Controlling the External Environment Controlling Establishing Establishing Interorganizational Linkages: Interorganizational – Ownership – Contracts, joint ventures – Cooptation, interlocking Cooptation, directorates directorates – Executive recruitment – Advertising, public relations Controlling the Controlling Environmental Domain: Domain: – Change of domain – Political activity, Political regulation regulation – Trade associations – Illegitimate activities 52 Relationship Between Environmental Relationship Characteristics and Organizational Actions Actions Environment High complexity Organization High uncertainty High rate of change Environmental domain (ten sectors) Many departments and boundary roles Greater differentiation and more integrators for internal coordination Organic structure and systems with low formalization, decentralization, and low standardization to enable a high-speed response Establishment of favorable linkages: ownership, strategic alliances, cooptations, interlocking directorates, executive recruitment, advertising, and public relations Scarcity of valued resources Resource dependence Control of the environmental domain: change of domain, political activity, regulation, trade associations, and illegitimate activities 53 Chapter Five Interorganizational Interorganizational Relationships Relationships 54 54 A Framework of Interorganizational Framework Relationships* Relationships* Organization Type Dissimilar Similar Competitive Resource Dependence Population Ecology Collaborative Network Institutionalism Organization Relationship Cooperative *Thanks to Anand Narasimhan for suggesting this framework. 55 Changing Characteristics of Changing Interorganizational Relationships Interorganizational Traditional Orientation: Adversarial New Orientation: Partnership Suspicion, competition, arm’s length Trust, addition of value to both sides, high commitment Price, efficiency, own profits Equity, fair dealing, both profit Limited information and feedback Electronic linkages to share key information, problem feedback and discussion Legal resolution of conflict Minimal involvement and up-front investment, separate resources Short-term contracts Contract limiting the relationship Mechanisms for close coordination, people on-site Involvement in partner’s product design and production, shared resources Long-term contracts Business assistance beyond the contract 56 Elements in the Population Ecology Elements Model of Organizations Model Variation Large number of variations appear in the population of organizations Selection Retention Some organizations find a niche and survive A few organizations grow large and become institutionalized in the environment 57 Three Mechanisms for Institutional Three Adaptation Adaptation Mimetic Coercive Normative Uncertainty Dependence Duty, obligation Events: Innovation visibility Political law, rules, sanctions Professionalism —certification, accreditation Social basis: Culturally supported Legal Moral Pollution controls, school regulations Accounting standards, consultant training Reasons to become similar: Example: Reengineering, benchmarking Source: Adapted from W. Richard Scott, Institutions and Organizations (Thousand Oaks, Calif.: Sage, 1995). 58 Chapter Six Designing Organizations for Designing the International Environment the 59 59 Four Stages of International Four Evolution Evolution I. Domestic II. International III. Multinational IV. Global Strategic Orientation Domestically Domestically oriented oriented Export-oriented, Export-oriented, multidomestic multidomestic Multinational Global Stage of Stage Development Development Initial foreign Initial involvement involvement Competitive Competitive positioning positioning Explosion Global Structure Domestic Domestic structure plus export department department Domestic structure Domestic plus international division division Worldwide Worldwide geographic, product product Matrix, transnational Market Potential Moderate, Moderate, mostly domestic mostly Large, Large, multidomestic multidomestic Very large, Very multinational multinational Whole world Sources: Based on Nancy J. Adler, International Dimensions of Organizational Behavior (Boston: PWS-KENT, 1991), 7-8; and Theodore T. Herbert, “Strategy and Multinational Organization Structure: An Interorganizational Relationships Perspective,” Academy of Management Review 9 (1984): 259-71. 60 Matching Organizational Structure to Matching International Advantage International When Forces for When Global Integration are . . . And Forces for And National Responsiveness are . . . are Low Strategy Structure Low Export International International Division Division High Low Globalization Global Product Global Structure Structure Low High Multidomestic Global Global Geographic Structure Structure High High Globalization and Globalization Multidomestic Multidomestic Global Matrix Global Structure Structure 61 Domestic Hybrid Structure with Domestic International Division International CEO Human Resources Electrical Products Division Corporate Finance Scientific Products Division Medical Products Division Research & Development International Division Europe (Sales) Brazil (Subsidiary) Mid East (Sales) 62 Staff (Legal, Licensing) Partial Global Product Structure Used by Partial Eaton Corporation Eaton Chairman Law & Corporate Relations Engineering President Finance & Administration International Regional Coordinators Global Automotive Components Group Global Industrial Group Source: Based on New Directions in Multinational Corporate Organization (New York: Business International Corp., 1981). Global Instruments Product Group Global Materials Handling Group 63 Global Truck Components Group Global Matrix Structure International Executive Committee Business Areas Germany Norway Country Managers Argentina/ Brazil Power Transformers Transportation Industry Local Companies 64 Spain/ Portugal Building Global Capabilities The Global Organizational Challenge Increased Complexity and Differentiation Need for Integration Knowledge Transfer Global Coordination Mechanisms Global Teams Headquarters Planning Expanded Coordination Roles 65 Cultural Differences in Coordination Cultural and Control and National Value Systems Power Distance Uncertainty Avoidance Three National Approaches to Coordination and Control Centralized Coordination in Japanese Companies European Firms’ Decentralized Approach The United States: Coordination and Control The through Formalization through 66 Transnational Model of Transnational Organizations Organizations Assets and resources are dispersed worldwide into highly Assets specialized operations that are linked together through interdependent relationships. interdependent Structures are flexible and ever-changing. Subsidiary managers initiate strategies and innovations that Subsidiary become strategy for the corporation as a whole. become Unification and coordination are achieved primarily through Unification corporate culture, shared visions and values, and management style rather than through formal structures and systems style 67 Chapter Seven Manufacturing and Service Manufacturing Technologies Technologies 68 68 Core Transformation Process for a Core Manufacturing Company Manufacturing ENVIRONMENT Organization Raw Material Inputs Core Work Processes Product or Service Outputs Materials Handling Assembly Milling Inspection 69 Woodward’s Classification Based on Woodward’s System of Production System Group I – Small-batch and unit production Group II – Large-batch and mass production Group III – Continuous process production 70 Flexible Manufacturing Systems Computer-aided design – (CAD) Computer-aided manufacturing – (CAM) Integrated Information Network 71 Relationship of Flexible Manufacturing Technology Relationship to Traditional Technologies to Flexible Manufacturing Small batch NEW PRODUCT FLEXIBILITY Customized TR AD ITI O Mass Customization CHOICES Mass Production NA L Continuous Process Standardized Small Source: Based on Jack Meredith, “The Strategic Advantages of New Manufacturing Technologies For Small Firms.” Strategic Management Journal 8 (1987): 249-58; Paul Adler, “Managing Flexible Automation,” California Management Review (Spring 1988): 34-56; and Otis Port, “Custom-made Direct from the Plant.” Business Week/21st Century Capitalism, 18 November 1994, 158-59. BATCH SIZE Unlimited 72 CH O I CE S Comparison of Organizational Characteristics Associated Comparison with Mass Production and with Flexible Manufacturing Systems Characteristic Mass Production FMS Structure: Span of Control Span Wide Narrow Hierarchical levels Hierarchical Many Few Tasks Tasks Routine, repetitive Adaptive, Specialization Specialization High Low Decision making Decision Centralized Decentralized Overall Overall Bureaucratic, Bureaucratic, mechanistic mechanistic Self-regulating, Self-regulating, organic organic Source: Based on Patricia L. Nemetz and Louis W. Fry, “Flexible Manufacturing Organizations: Implications for Strategy Formulation and Organization Design.” Academy of Management Review 13 (1988); 627-38; Paul S. Adler, “Managing Flexible Automation,” California Management Review (Spring 1988); 34-56; Jeremy Main, “Manufacturing the Right Way,” Fortune, 21 May 1990, 54-64. 73 craft-like Comparison of Organizational Characteristics Associated Comparison with Mass Production and with Flexible Manufacturing Systems (cont.) Characteristic Mass Production FMS Human Resources: Interactions Interactions Standalone Teamwork Training Training Narrow, one time Broad, frequent Expertise Expertise Manual, technical Cognitive, social Solve problems Source: Based on Patricia L. Nemetz and Louis W. Fry, “Flexible Manufacturing Organizations: Implications for Strategy Formulation and Organization Design.” Academy of Management Review 13 (1988); 627-38; Paul S. Adler, “Managing Flexible Automation,” California Management Review (Spring 1988); 34-56; Jeremy Main, “Manufacturing the Right Way,” Fortune, 21 May 1990, 54-64. 74 Comparison of Organizational Characteristics Associated Comparison with Mass Production and with Flexible Manufacturing Systems (cont.) Characteristic Mass Production FMS Interorganizational: Customer Demand Customer Stable Changing Suppliers Suppliers Many, Many, arm’s length arm’s Few, close Few, relations relations Source: Based on Patricia L. Nemetz and Louis W. Fry, “Flexible Manufacturing Organizations: Implications for Strategy Formulation and Organization Design.” Academy of Management Review 13 (1988); 627-38; Paul S. Adler, “Managing Flexible Automation,” California Management Review (Spring 1988); 34-56; Jeremy Main, “Manufacturing the Right Way,” Fortune, 21 May 1990, 54-64. 75 Differences Between Manufacturing and Differences Service Technologies Service Manufacturing Technology 1. 2. Service Technology 1. 2. 3. 4. 5. Intangible product Production and consumption take 6. place simultaneously 7. 3. Labor and knowledge intensive 4. Customer interaction generally 8. high 5. Human element very important 6. Quality is perceived and difficult to measure 7. Rapid response time is usually necessary 8. Site of facility is extremely important Service: Product and Service: Airlines, Hotels,Consultants, Fast-food outlets, Cosmetics, Healthcare, Law firms Real estate, Stockbrokers, Retail stores Sources: Based on F. F. Reichheld and W. E. Sasser, Jr., “Zero Defections: Quality Comes to Services,” Harvard Business Review 68 (September-October 1990): 105-11; and David E. Bowen, Caren Siehl, and Benjamin Schneider, “A Framework for Analyzing Customer Service Orientations in Manufacturing,” Academy of Management Review 14 (1989): 75-95. Tangible product Products can be inventoried for later consumption Capital asset intensive Little direct customer interaction Human element may be less important Quality is directly measured Longer response time is acceptable Site of facility is moderately important Product: Soft drink companies, Steel companies, Auto manufacturers, Food processing plants 76 Configuration and Structural Characteristics of Configuration Service Organizations vs. Product Organizations Service Service Product Structure: Separate boundary roles Separate Few Many Geographical dispersion Geographical Much Little Decision making Decision Decentralized Centralized Formalization Formalization Lower Higher Employee skill level Employee Higher Lower Skill emphasis Skill Interpersonal Technical Human Resources: 77 Departmental Technologies ROUTINE – High analyzability – Low variety – Examples: Sales Clerical Drafting Auditing CRAFT – Low analyzability – Low variety – Examples: Performing arts Trades Fine goods Fine manufacturing manufacturing 78 Departmental Technologies ENGINEERING – High analyzability – High variety – Examples: Legal Engineering Tax accounting General accounting NONROUTINE – Low analyzability – High variety – Examples: Strategic planning Social science research Applied research 79 Relationship of Department Technology to Relationship Structural and Management Characteristics Characteristics Mostly Organic Structure 1. 2. 3. 4. 5. Moderate formalization Moderate centralization Work experience Moderate to wide span Horizontal, verbal communications Organic Structure 1. 2. 3. 4. 5. CRAFT Mechanistic Structure 1. 2. 3. 4. 5. High formalization High centralization Little training or experience Wide span Vertical, written communications ROUTINE Low formalization Low centralization Training plus experience Moderate to narrow span Horizontal communications meetings NONROUTINE Mostly Mechanistic Structure 1. 2. 3. 4. 5. Moderate formalization Moderate centralization Formal training Moderate span Written and verbal communications ENGINEERING 80 Thompson’s Classification of Thompson’s Interdependence and Management Implications Implications Form of Form Interdependence Interdependence Demands on Demands Horizontal Communications, Decision Making Decision Pooled (bank) Low communication Client Sequential Sequential (assembly line) (assembly Client Medium communication Reciprocal (hospital) High communication Client Type of Type Coordination Required Required Priority for Priority Locating Units Close Together Close Standardization, rules, Standardization, procedures procedures Divisional Structure Low Plans, schedules, Plans, feedback feedback Task Forces Mutual adjustment, crossdepartmental meetings, departmental teamwork teamwork Horizontal Structure 81 Medium High Primary Means to Achieve Coordination for Primary Different Levels of Task Interdependence in a Manufacturing Firm Manufacturing INTERDEPENDENCE Reciprocal (new product development) COORDINATION High Horizontal structure, cross-functional teams Mutual Adjustment Face-to-face communication, Unscheduled meetings, Full-time integrators Sequential (product manufacture) Scheduled meetings, task forces Planning Vertical communication Pooled (product delivery) Plans Rules Standardization Low Source: Adapted from Andrew H. Van de Ven, Andre Delbecq, and Richard Koenig, “Determinants of Communication Modes Within Organizations,” American Sociological Review 41 (1976): 330. 82 Relationships Among Interdependence Relationships and Other Characteristics of Team Play and Baseball Football Basketball Interdependence: Pooled Sequential Reciprocal Physical dispersion of Physical players: players: High Medium Low Coordination: Rules that Rules govern the sport sport Game plan Game and position roles roles Mutual Mutual adjustment and shared responsibility responsibility Key management job: Select players Select and develop their skills their Prepare and Prepare execute game game Influence flow of Influence game game Source: Based on William Passmore, Carol E. Francis, and Jeffrey Halderman, “Sociotechnical Systems: A North American Reflection On the Empirical Studies of the 70’s,” Human Relations 35 (1982): 1179-1204. 83 Sociotechnical Systems Model The Social System The Social System Individual and team Individual and team behaviors behaviors Organizational/team Organizational/team culture culture Management practices Management practices Leadership style Leadership style Degree of communication Degree of communication and openness and openness Individual needs and Individual needs and ddesires esires The Technical System The Technical System Design for Design for Joint Optimization Joint Optimization Work roles, tasks, Work roles, tasks, workflow workflow Goals and values Goals and values Skills and abilities Skills and abilities TType of production ype of production technology (small batch, technology (small batch, mass production, FMS, etc.) mass production, FMS, etc.) LLevelof interdependence evel of interdependence (pooled, sequential, (pooled, sequential, reciprocal) reciprocal) PPhysicalwork setting hysical work setting CComplexityof production omplexity of production pprocess(variety and rocess (variety and aanalyzability) nalyzability) NNatureof raw materials ature of raw materials TTime pressure ime pressure Sources: Based on T. Cummings, “Self-Regulating Work Groups: A Socio-Technical Synthesis,” Academy of Management Review 3 (1978): 625-34; Don Hellriegel, John W. Slocum, and Richard W. Woodman, Organizational Behavior, 8th ed. (Cincinnati, Ohio: South-Western College Publishing, 1998), 492; and Gregory B. Northcraft and Margaret A. Neale, Organizational Behavior: A Management Challenge, 2nd ed. (Fort Worth, Tex.: The Dryden Press, 1994), 551. 84 ...
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