Anderson_PPT04.pptx

Organization Design: Creating Strategic and Agile Organizations

Donald L. Anderson

Chapter 4

Structure

Connecting Strategy and Structure

Strategy Influences Structure

Structure is one method for executing and implementing strategy

Certain structures are better suited to particular strategies

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How Structure Influences Strategy

Structure follows strategy

Structure determines how information is processed and acted upon

Two-way flow

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Dimensions of Organization Structure

Departmentalization or groupings

Shape/configuration

Centralization/Decentralization

Division of labor and specialization

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Departmentalization or Groupings

Purpose:

Establishes a common system of supervision among positions and units

Typically requires positions and units to share common resources

Creates common measures of performance

Encourages mutual adjustment

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Structure Options

Functional

Product

Geographic

Customer/market

Process

Network

Front-back

Matrix

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LO 4-1: Different options for structuring organizations into departments or groupings

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Functional Structure

Organized function or types of work

Streamline decision making

Interdepartmental coordination

Complexity

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Product Structure

Responsibilities are divided by product

Coordination and focus within unit

Duplication of work

Lack of shared knowledge

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Customer/Market Structure

Organized by market segments of customer population

Focus on customers’ unique needs

Understanding specific markets

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Anderson, Organization Design

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Geographic Structure

Organized by location

Facilitates regional specialization

Appear as local company

Expensive to duplicate resources

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Process Structure

Organized by process steps:

Breaks down traditional hierarchy

Cross-functional, self-managed teams

“Boundaryless”

Difficult for different management structures to coexist

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Anderson, Organization Design

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Network Structure

Reduces organization’s functions to its central competencies

Four characteristics:

Vertical disaggregation

Brokers

Market mechanisms

Full disclosure information systems

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Anderson, Organization Design

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Vertical disaggregation: The separation of product development, manufacturing, shipping and logistics into unique activities performed by different organizations.

Brokers: A hub-and-spoke model where one or more parties brings the network together.

Market mechanisms: Market needs and contracts for services hold the network together.

Full-disclosure information systems: “Broad-access computerized information systems are used as substitutes for lengthy trust-building processes based on experience” (p. 65).

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Network Structure

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Front-Back Structure

Hybrid structure

Customer structure on front end

Product structure on back end

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Front-Back Structure

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Front-Back Structure

Motivations:

Customers can buy all products

Customers want a sourcing partnership

Customers want a single point of contact

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Front-Back Structure

Customers want solutions and systems

Opportunities for cross-selling and bundling

Value-added is increasingly customer specific

Superior knowledge about customers and customer segments

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Matrix Structure

Organization maintains dual perspectives

Function and geography

Product and customer

Equal balance

Employees report directly to two managers

Potential for role conflict and power struggle

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Matrix Structure

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Matrix Structure

Conditions:

Pressures for multiple areas of focus

Work is especially complex or interdependent

Resources need to be shared for maximum efficiency

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Advantages and Disadvantages of Structure Types

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LO 4-2: The advantages and disadvantages of each of those structure types

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Advantages and Disadvantages of Structure Types

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LO 4-2: The advantages and disadvantages of each of those structure types

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Advantages and Disadvantages of Structure Types

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LO 4-2: The advantages and disadvantages of each of those structure types

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Choosing a Structure and Evaluating the Options

Considerations:

Maximizing resource utilization

Specialization and economics of scale

Measurement and control issues

Development of individuals and the organization’s capacity to use its human resources?

Final output of the organization?

Responsiveness important competitive demands?

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Principles of Structure

Wide span of control:

Add more people per manager or unit

Flatter hierarchy with fewer managers and layers

Narrow span of control:

Assign fewer people per manager

Increasing number of managers and layers in the hierarchy

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Shape/Configuration: Span of Control and Layers

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LO 4-3: How structure includes other decisions such as span of control and centralization

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Factors Influencing Span of Control

Employee

Manager

Work

Organizational

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Employee factors:

Employee experience

Employee independence

Manager factors:

Competence in delegation and coaching

Diversity of responsibilities

Work factors:

Interdependence of work

Work complexity

Predictability of work cycles

Organizational factors:

Geographic dispersal of team

Amount of turnover

Amount of change

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Distribution of Power: Centralization/Decentralization

Centralization:

Create standard processes

Economies of scale

Shared knowledge and trust

Decentralization:

Responsive to customer needs

Speed

Allows experimentation

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Distribution of Power: Centralization/Decentralization

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Distribution of Power: Centralization/Decentralization

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Division of Labor and Specialization

Less specialization:

Greater rewards and satisfaction with job

Less burnout due to repetition

Ability to learn other job tasks

More specialization:

More departments

Narrower scope of work

Depth of knowledge

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Connecting Strategy and Structure: Revisited

Strategy and structure are intertwined:

Defender strategy benefits from functional structure

Operational excellence companies benefit from centralized functions

Organizational structure is most visible aspect of design

Choice of structure should be drive by strategy

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LO 4-4: How different strategy choices affect structure options

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