Transcript G.T. Payne
Managing Innovation and Change Structure (4) Dr. Tyge Payne (with Dr. Keith Brigham) Office: BA1015 Office Phone: (806) 742-1514 Email: [email protected] Structure Definition: “the sum total of the ways in which an organization divides its labor into distinct tasks and then coordinates them.” “the distributions, along various lines, of people among social positions that influence the role relations among these people” (Blau, 1974). “a complex medium of control which is continually produced and recreated in interaction and yet shapes that interaction: structures are constituted and constitutive” (Ranson, Hinings & Greenwood, 1980). Basically, structure is an arrangement of parts that serve three basic functions: 1. To produce outputs or achieve goals the best way possible. 2. To minimize the influence of individual variations on the organization. 3. To establish the basis for power and decision-making, communications, information, and activity flow in the organization. T. Payne 2 Purposes of Structure Differentiation / Division of Labor Ability to perform tasks more effectively and efficiently than individuals working alone Specialization and specifically designated tasks Coordination Create activities towards a productive goal while still operating separately Rules and procedures used for this purpose Integration Come together and create something new by combining knowledge and operating as a unit Teams and task forces often used for this purpose T. Payne 3 Structural Forms Recall Weber’s (1947) description of the ideal type of bureaucracy: 1. 2. 3. 4. 5. 6. 7. Hierarchy of Authority Limited Authority Division of Labor Technically Competent Participants Procedures for Work Rules for Incumbents Differential Rewards But not all organizations resemble this ideal type. Burns & Stalker (1961) recognized this and developed a continuum of organizational forms identifying the “mechanistic” and the “organic” forms. T. Payne 4 Dimensions of Structure Complexity: Creation of distinct tasks and responsibilities within the firm. The more complex an organization is, the more complex it will become. Types of Complexity or Differentiation Degree of Specialization (horizontal differentiation) Levels of Hierarchy (vertical differentiation) Geographic Spread or Dispersion Control/Centralization: Design of hierarchy to supervise various differentiated elements. The distribution of power within the firm or the level and variety of participation in strategic decisions by groups relative to the number of groups in an organization (Hage, 1980) Extent to which authority for decision making is held at higher levels of the organization Higher levels - Centralization Lower levels - Decentralization Formalization: Extent to which rules and procedure govern the actions of individuals and groups within the organization Consists of rules and procedures as well as tradition and culture. Too Low = Uncertainty about authority and responsibility T. Payne Too High = Limit innovation and creativity 5 Vertical Differentiation Tall Organization Flat Organization Governing Body President / CEO Senior Vice President VP President / CEO Director Director Director Director Director Senior Vice President VP VP VP Director Director Director Director Director Director Director Director Director Director Director Example: U.S. Army Example: University General >>>>>>>>>Private President > Provost > Dean > Chair > Professor Low Vertical Complexity <<< High Vertical Complexity Few Hierarchical Levels <<< Many Hierarchical Levels Broad Span of Control <<< Narrow Span of Control T. Payne 6 Tall vs Flat Designs Horizontal Organization Designed for Learning Dominant Structural Approach Horizontal structure is dominant • Shared tasks, empowerment • 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 T. Payne 7 Centralization Centralization: Extent to which rules and procedure govern the actions of individuals and groups within the organization Don’t confuse with vertical differentiation, although they are often correlated. Decentralized decision making may lead to more localized concerns taking the forefront rather than the organization’s interests. Organizations relying heavily on centralization assume that employees may lack the information, knowledge, skills, and good judgment to solve problems or make decisions. EXAMPLES?? T. Payne 8 Formalization Formalization: Extent to which rules and procedure govern the actions of individuals and groups within the organization Consists of rules and procedures as well as tradition and culture. Unwritten norms and standards can be just as binding as those in writing…but written systems are generally used to measure formalization. Organizations relying heavily on formalization assume that employees may lack the information, knowledge, skills, judgments, or self-control necessary to coordinate diverse sets of tasks in the organization. EXAMPLES?? T. Payne 9 Other Terms Span of Control: The number of immediate subordinate positions a superior position controls or coordinates. Broader spans of control linked to flatter organizations; narrower, taller. Standardization: Reduces the uncertainty and unpredictability of organizational work. Comes throughProcess – how to guidelines on output Specifications – human resources or raw material inputs listing requirements for each. Inspection specifications – ensures final product or service is delivered according to specific requirements. T. Payne 10 Mechanistic vs. Organic Structural Characteristics Mechanistic Organic Complexity High Vertical and Horizontal Low Vertical and Horizontal Formalization High Low Centralization High Centralization High Decentralization Spans of Control Narrow Broad Standardization High Low T. Payne 11 Types of Structures Need to focus on task efficiency Functional Structure Grouping by function Matrix Structure Grouping by function and purpose Divisional Structure Primary grouping by purpose; secondary grouping by function Multidivisional Structure Primary grouping by purpose; secondary grouping by purpose; lowest grouping by function Need to focus on purpose T. Payne 12 Functional Forms Traditional Functional General Manager Structure Process-Oriented Functional Structure General Manager Research & Development Manufacturing Engineering Foundry & Castings Screw Machining Milling & Grinding Inspection Finishing & Heat Treating Marketing Human Resources Finance & Accounting Customer Service Loading & Shipping Billing & Accounting T. Payne 13 S/W of Traditional Functional Structure STRENGTHS: – Allows economies of scale within functional departments – Enables in-depth knowledge and skill development – Enables organization to accomplish functional goals – Is best with only one or a few products WEAKNESSES: – Slow response time to environmental changes – May cause decisions to pile on top, hierarchy overload – Leads to poor horizontal coordination among departments – Results in less innovation – Involves restricted view of organizational goals T. Payne 14 S/W of Process Functional Structure (aka, Horizontal Structure) STRENGTHS: Flexibility and rapid response to changes in customer needs Directs the attention of everyone toward the production and delivery of value to the customer Each employee has a broader view of organizational goals Promotes a focus on teamwork and collaboration—common commitment to meeting objectives Improves quality of life for employees by offering them the opportunity to share responsibility, make decisions, and be accountable for outcomes T. Payne WEAKNESSES: Determining core processes to organize around is difficult and time-consuming Requires changes in culture, job design, management philosophy, and information and reward systems Traditional managers may balk when they have to give up power and authority Requires significant training of employees to work effectively in a horizontal team environment Can limit in-depth skill development 15 Divisional Forms Geographic Structure GM GM North America Latin America CEO Corporate Staff GM Europe GM GM Central Asia & Asia Pacific Africa Decentralized Line-ofBusiness Structure District Staff Engineering & Prod. Design Production Marketing & Distribution CEO Corporate Services GM Business A GM Business B GM Business C Functional/Process Departments Functional/Process Departments Functional/Process Departments T. Payne 16 S/W of Divisional Structure STRENGTHS: Suited to fast change in unstable environment Leads to client satisfaction because product responsibility and contact points are clear Involves high coordination across functions Allows units to adapt to differences in products, regions, clients Best in large organizations with several products Decentralizes decision-making T. Payne WEAKNESSES: Eliminates economies of scale in functional departments Leads to poor coordination across product lines Eliminates in-depth competence and technical specialization Makes integration and standardization across product lines difficult 17 Matrix Forms General Manager Example: Biotech Firm Head R&D Head Manufacture Head Marketing Head Finance Venture Manager 1 R&D Specialists Production Specialists Marketing Specialists Finance Specialists Venture Manager 2 R&D Specialists Production Specialists Marketing Specialists Finance Specialists Venture Manager 3 R&D Specialists Production Specialists Marketing Specialists Finance Specialists R&D Specialists Production Specialists Marketing Specialists T. Payne Venture Manager 4 18 Finance Specialists S/W of Matrix Structure STRENGTHS: Achieves coordination necessary to meet dual demands from customers Flexible sharing of human resources across products Suited to complex decisions and frequent changes in unstable environment Provides opportunity for both functional and product skill development Best in medium-sized organizations with multiple products WEAKNESSES: Causes participants to experience dual authority, which can be frustrating and confusing Means participants need good interpersonal skills and extensive training Is time consuming; involves frequent meetings and conflict resolution sessions Will not work unless participants understand it and adopt collegial rather than vertical-type relationships Requires great effort to maintain power balance T. Payne 19 Hybrids Do Exist Sun Petrochemical Functional Structure Product Structure Chief Counsel President Human Resources Director Fuels Vice President Technology Vice President Lubricants Vice President T. Payne Financial Services Vice Pres. Chemicals Vice President 20 Hybrids Do Exist Ford Customer Service Division Functional Structure Horizontal Structure Director and Process Owner Vice President and General Manager Strategy and Communication Finance Human Resources Teams Parts Supply / Logistics Group Director and Process Owner Teams Vehicle Service Group Director and Process Owner Teams Technical Support Group T. Payne 21 Structure & Fit Organizations may diversify or reorganize to better fit their environments. They adapt forms to fit culture They try to differentiate themselves from others (not conforming to institutional pressures) Technologies may limit or enhance options. Decisions made in regard to attempted strategies affect structure. T. Payne 22 A Visual Representation of Structure-Environment/Strategy Fit in a Corporation Environment Corporate Strategy A Business Strategy 2 B Business Strategy 1 Corporate Structure 3 Business Structure A 5 4 Business Structure B Environment 5 Structure Follows Strategy Strategy is Created Problems Emerge Economic Performance Declines Profit Does Not Return Improve New Appropriate Structure Applied Profit Level Improves T. Payne 24 Structure Fit with Various Factors Factor Mechanistic Organic 1.Size Larger Smaller 2.Strategy Cost-minimization, imitation Innovation, single product line 3.Technology Mass production, routine tasks, welldefined problems 4.Environment Placid-randomized, placid-clustered Unit production, intensive technology (combining services tailored to customer), non-routine tasks, illdefined problems Disturbed-reactive, turbulent field T. Payne 25