Section I: Organizations I-C: Organizational Structures
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1 Section I: Organizations I-C: Organizational Structures Learning Objectives Identify basic elements of organizations Describe the basic nature of origination design Discuss how an organization's mission statement and its design are related. Abdullah Konak School of Information Sciences and Technology Penn State Berks A. Konak IST 301/ Section I: Organizations 2 Organizing Deciding the best way to group organizational elements. Job Specialization: The degree to which a task is broken down into smaller components. Adam Smith (1776, Wealth of Nations): Very Broad Very Specialized Reporting Relationship Authority Coordinating Differentiation Pin Shop Pin Factory... A. Konak IST 301/ Section I: Organizations 3 Draw, straighten, and cut the wire+ shape the head and point+... Draw the wire Straighten the wire Quality Control A skilled craftsman 10 workers (not so skilled) 20 pins /day 48,000 pins /day A. Konak IST 301/ Section I: Organizations 4... Mass Production Ford Plant Highland, Michigan Invention of the assemly line by Henry Ford (1913) Increased production rate per worker Reduced cost Standardization A. Konak IST 301/ Section I: Organizations 5 A. Konak IST 301/ Section I: Organizations 6 1
2 The Legend of Ford Model T In 1914, 13,000 workers at Ford made 260,720 cars. By comparison, in the rest of the industry, it took 66,350 workers to make 286,770. The beginning at a price of $850 when competing cars often cost $2000-$3000. By the 1920's the price had fallen to $300. Advantages of Job Specialization? Increased productivity due to less tool transfer time proficiency Easy training and substitution Low cost low skilled labor A. Konak IST 301/ Section I: Organizations 7 A. Konak IST 301/ Section I: Organizations 8 Disadvantages of Job Specialization? Low quality due to lack of accountability and ownership of products Low job satisfaction Low motivation Alternatives to Job Specialization Job rotation Job enlargement Job enrichment Job characteristics approach Work teams A. Konak IST 301/ Section I: Organizations 9 A. Konak IST 301/ Section I: Organizations 10 Departmentalization The process of grouping jobs (tasks) according to some logical arrangements, then assigning a manager to oversee and supervise the work of others. Formal Organizational Chart A formal organizational chart presents the official structure of an organization, which is made of officially designated roles and their reporting relationships. President Management Vice President Vice President Vice President Dept. Head Dept. Head Dept. Head Assistant Operative Operative A. Konak IST 301/ Section I: Organizations 11 A. Konak IST 301/ Section I: Organizations 12 2
3 Bases for Departmentalization What do managers do? Type Functional Product Customer Structure the same and similar activities jobs around products or services jobs to respond customer Advantages Expertise Easy supervision Cost efficient Easy integration of activities Tracking performance of individual products Focused and fast decision making Better service to customer Customer based expertise Focused and fast decision making Disadvantages Slow decision making Narrow focus Difficult to track performance Costly Planning and decision making Organizing: coordinating activities and resources Leading: motivating and managing people Control: monitoring and evaluating activities Location /Time Geographic sites/time Easy respond to unique customer and environmental characteristic A. Konak IST 301/ Section I: Organizations 13 A. Konak IST 301/ Section I: Organizations 14 Types of s Reporting Relationships Top managers Creating organization's goals, overall strategy, operating policies. Represent the organization to the external environment Middle s Responsible for implementing plans and policies developed by the top managers. Management Reporting Relationship Formal Organizational Chart First-Line s Overseeing day to day operations. A. Konak IST 301/ Section I: Organizations 15 A. Konak IST 301/ Section I: Organizations 16 Reorganizing in Berks (Proposal 1) Reorganizing in Berks (Proposal 2) Berks-Lehigh Valley College Information Technology Department Proposed 2005-? Chief Information Officer PSU Berks Information Technology Department Proposal 2 Services (BK), Security, Server Administration User Services Design Chief Information Officer Services Specialist LV Administrators Security EBC LV Design PC PC Night Support & Dorms Science Liberal Art Administration+ Perkins+ Library (BK), Security, Server Administration PC Support Software Support Workshop Coordinator Faculty Support PC PC PC Security Administrators PC PC AV Telecom Software A. Konak IST 301/ Section I: Organizations 17 A. Konak IST 301/ Section I: Organizations 18 3
4 Operative Concerns in Reporting Relationships Tall versus Flat Organizations Chain of Command Unity of command: Each person in the organization must have a clear reporting responsibility to one and only one boss. Scalar principle: Someone must be responsible for every decision. Span of management (control): # of people directly report to each manager. Wide or Narrow Span? President President President President Tall Organization Flat Organization A. Konak IST 301/ Section I: Organizations 19 A. Konak IST 301/ Section I: Organizations 20 Distributing Authority Delegation Process Assigning a portion of managers workload to others. Management Reporting Relationship Formal Organizational Chart Who makes decisions? Authority work authority accountability Subordinate A. Konak IST 301/ Section I: Organizations 21 A. Konak IST 301/ Section I: Organizations 22 Distributing Authority : Centralization and Decentralization Case Study: Andersen Windows Power & authority to make decisions Power & authority to make decisions Centralized Decentralized Power and Authority in the hands Employees are empowered. of higher-level managers. Most Lower-level managers and decisions are made by higher-level operatives have power and Konak managers. authority to make decisions. IST 301/ Section I: Organizations 23 A. Konak IST 301/ Section I: Organizations 24 A. 4
5 Coordination Needs for Coordination Management Reporting Relationship Formal Organizational Chart Coordinating Who makes decisions? Authority President Manufacturing Customer Service Purchasing Accounting 2 4 work order purchase order parts Shipping 6 Information 1 computer order 3 computer cost shipping information 5 bill Customer A. Konak IST 301/ Section I: Organizations 25 A. Konak IST 301/ Section I: Organizations 26 Coordination in Organization Management (Hierarchical) Rules and Procedures (code) Liaison Task Force (Teams) Basic Form of Organizational Design Functional design Divisional design Matrix design Hybrid A. Konak IST 301/ Section I: Organizations 27 A. Konak IST 301/ Section I: Organizations 28 What affect organizational design? Functional Structure Core technology Unit and small-batch large-batch/mass-production Continues process Environment Organizational Size Organizational Life Cycle Manufacturing Assembly Operations Quality Control Testing Finance CEO Operations Man. Inventory Cont Marketing... ing Software Paint Shop Specifications Scheduling A. Konak IST 301/ Section I: Organizations 29 Press Shop A. Konak IST 301/ Section I: Organizations 30 5
6 Functions provide excellence in functional areas cost effective management Used when... environment is relatively stable functional excellence is needed fast decisions and execution are needed Used by... organizations with well-established and steady markets small organizations Disadvantages... inability to respond changing environment more functional focus and less organizational focus high coordination required under uncertainty (overloaded top management) Divisional Structure Operations Product A Quality Accounting CEO Operations Quality Product B Accounting A. Konak IST 301/ Section I: Organizations 31 A. Konak IST 301/ Section I: Organizations 32 Divisions could be... products geographical markets demographic markets client-based Used... to develop innovative products for better customer (client) service Used by... medium- to large-sized organizations with different products, operating in different market segments, or serving customers in large and diverse geographical span. (e.g., Procter & Gamble) Disadvantages... repetition and loss of scale of economics weak technical specialization weak coordination across divisions A. Konak IST 301/ Section I: Organizations 33 Matrix Structure CEO Engineering Sales Div./Project A Div./Project B Div./Project C E E E S S S T T T A. Konak IST 301/ Section I: Organizations 34 Matrix structure provides different points of views in operations technological expertise across divisions Used when... tasks and environment are complex a company is transforming itself (projects) large amounts of information need to be processed sharing resources Used by... consulting firms temporary-based projects research and development organizations Disadvantages... determining authority, responsibility, and accountability spent great deal of time for decisions ambiguous for employees A. Konak IST 301/ Section I: Organizations 35 A. Konak IST 301/ Section I: Organizations 36 6
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