A Sample Organization Chart

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Chapter Three

Fundamentals of

Organization Structure

A Sample Organization Chart

Chief

Accountant

Budget

Analyst

Vice President

Fianance

Plant

Superintendent

Maintenance

Superintendent

Vice President

Manufacturing

Training

Specialist

Benefits

Administrator

Director

Human Resources

CEO

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The Relationship of Organization Design

to Efficiency vs. Learning Outcomes

Horizontal Organization

Designed for Learning

Vertical Organization

Designed for Efficiency

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

Ladder of Mechanisms for Horizontal

Linkage and Coordination

HIGH LOW

LOW

_{Information Systems}

Direct Contact

Task Forces

Full-time Integrators

Teams

Amount of Horizontal Coordination Required

Cost of Coordination in

Time and Human Resources

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Project Manager Location

in the Structure

President Finance Department Financial Accountant Budget Analyst Management Accountant Engineering Department Product Designer Draftsperson Electrical Designer Marketing Department Market Researcher Advertising Specialist Market Planner Purchasing Department Buyer Buyer Buyer Project Manager New Product B Project Manager New Product A Project Manager New Product C

Teams Used for Horizontal

Coordination at Rodney Hunt Company

Water Control Equip. Chief Engineer Engineering Vice Pres

Customer Service, Purchasing, Production Manager

Foundry General Supervisor Manufacturing Vice Pres

Machine Shop General Supervisor

Shipping and Yard Supervisor Water Control Equip.

Sales Manager Marketing Vice Pres.

Textile Machinery Export Manager

Advertising Manager

Textile Machinery

Chief Engineer General SupervisorStainless Steel Textile Machinery

Domestic Sales Manager

President

Water Control Product Team

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Structural Design Options for

Grouping Employees into Departments

P r o d u c t

Division 1

P r o d u c t

Division 2

P r o d u c t

Division 3

C E O

Engineering

Marketing

Manufacturing

CEO

Functional

Grouping

Divisional

Grouping

Source: Adapted from David Nadler and Michael Tushman , Strategic Organization Design (Glenview, Ill.: Scott Foresman , 1988), 68.

Strengths and Weaknesses of

Functional Organization Structure

b

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

few products

b

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

Source: Adapted from Robert Duncan, “What Is the Right

Organization Structure? Decision Tree Analysis Provides the Answer,”

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Strengths and Weaknesses of

Divisional Organization Structure

b

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

b

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

Source: Adapted from Robert Duncan, “What Is the

Right Organization Structure? Decision Tree Analysis Provides the Answer,” Organizational Dynamics (Winter 1979): 431.

Reorganization from Functional Structure

to Divisional Structure at Info-Tech

R&D

Manufacturing

Accounting

Marketing

Info-Tech

President

Functional

Structure

R&D Mfg Acctg Mktg Electronic Publishing R&D Mfg Acctg Mktg Office Automation R&D Mfg Acctg Mktg Virtual Reality Info-Tech President

Divisional

Structure

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Structural Design Options for

Grouping Employees (Continued)

Multi-focused

Grouping

CEO

Manufacturing

Marketing

Product

Division 2

Product

Division 1

Source: Adapted from David Nadler and Michael

Tushman , Strategic Organization Design (Glenview, Ill.: Scott Foresman , 1988), 68.

Structural Design Options for

Grouping Employees (Continued)

Horizontal

Grouping

CEO

Finance

Human Resources

Core

Process 2

Core

Process 1

Source: Adapted from David Nadler and Michael Tushman , Strategic Organization Design (Glenview, Ill.: Scott Foresman ,

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Geographical Structure

for Apple Computer

CEO Steve Jobs

Apple

Europe PacificApple France Apple Products Far East Japan Australia Apple Americas Canada Latin America/ Caribbean Sales Service and Marketing to Regions Source: www.apple.com Product Manager A Product Manager B Product Manager C Product Manager D Director of Product Operations Design Vice President Mfg Vice President Marketing Vice President Controller Procure-ment Manager President

Dual-Authority Structure in a

Matrix Organization

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b

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

b

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

Strengths and Weaknesses of

Matrix Organization Structure

Source: Adapted from Robert Duncan, “What Is the Right

Organization Structure? Decision Tree Analysis Provides the Answer,”Organizational Dynamics (Winter 1979): 429.

Matrix Structure for

Worldwide Steel Company

President Industrial Relations Vice President Mfg. Services Vice President Finance Vice President Marketing Vice President Mfg. Vice President Metallurgy Vice President Field Sales Vice President Open Die Business Mgr. Ring Products Business Mgr. Wheels & Axles Business Mgr. Steelmaking Business Mgr.

Vertical Functions

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A Horizontal Structure

Team 3 Team 2 Team 1 Top Management Team Team 3 Team 2 Team 1 Customer Customer Process Owner Process Owner Testing Product Planning Research Market Analysis

New Product Development Process

Distrib. Material

Flow Purchasing Analysis

Procurement and Logistics Process

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, 92-9 8 .

Strengths and Weaknesses of

Horizontal Structure

b

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

b

WEAKNESSES:

• Determining core processed 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

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, 6t hed., (Cincinnati, Ohio: South -Western College Publishing, 1998) 253.

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Functional

Structure

Hybrid Structure

Part 1. Sun Petrochemical Products

President Technology Vice President Financial Services Vice Pres. Human Resources Director Chief Counsel Chemicals Vice President Lubricants Vice President Fuels Vice President

Product

Structure

Sources: Based on Linda S. Ackerman, “Transition Management:

An In-Depth Look at Managing Complex Change,”

Organizational Dynamics (Summer 1982): 46-6 6 ;

and Frank Ostroff, The Horizontal Organization, (New York: Oxford University Press, 1999), Fig. 2.1, 34.

Hybrid Structure

Part 2. Ford Customer Service Division

Director and Process Owner

Sources: Based on Linda S. Ackerman, “Transition Management:

An In-Depth Look at Managing Complex Change,” Organizational Dynamics (Summer 1982): 46 -66; and Frank Ostroff , The Horizontal Organization, (New York: Oxford University Press, 1999), Fig. 2.1, 34.

Human Resources Strategy and

Communication Finance

Vice President and General Manager

Teams

Director and

Process Owner Teams

Technical Support Group Vehicle Service and Programs Group

Parts Supply / Logistics Group Functional

Structure

Horizontal Structure

Teams Teams

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Organization Contextual Variables

that Influence Structure

Structure (learning vs. efficiency) Environment Chapters 4, 5 Culture

Chapter 9 Chapter 8Size

Strategy, Goals Chapter 2

Technology Chapters 6,7

Sources: Adapted from Jay R. Galbraith, Competing with Flexible Lateral Organizations, 2n ded. (Reading, Mass.: Addison-Wesley, 1994), Ch.1; Jay R. Galbraith, Organization Design (Reading, Mass.: Addison-Wesley, 1977), Ch. 1.