Chapter Three

Chapter Three

Fundamentals of Organization Structure

A Sample Organization Chart

CEO

Vice President Fianance

Vice President Manufacturing

Director Human Resources

Chief Accountant

Budget

Plant Maintenance Training Benefits

Analyst Superintendent Superintendent Specialist Administrator

The Relationship of Organization Design to Efficiency vs. Learning Outcomes

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

Vertical structure is dominant

? Decentralized decision making

? 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

Ladder of Mechanisms for Horizontal Linkage and Coordination

Amount of Horizontal Coordination Required

H IGH

Teams

Full-time Integrators

Task Forces

Direct Contact

LOW

Information Systems

LOW

HIGH

Cost of Coordination in Time and Human Resources

Project Manager Location in the Structure

President

Finance Department

Financial Accountant

Budget Analyst

Engineering Department

Product Designer

Draftsperson

Management Accountant

Electrical Designer

Marketing Department

Market Researcher

Advertising Specialist

Market Planner

Purchasing Department

Buyer

Buyer

Buyer

Project Manager New

Product A

Project Manager New

Product B

Project Manager New

Product C

Teams Used for Horizontal Coordination at Rodney Hunt Company

Marketing Vice Pres.

Water Control Equip. Sales Manager

Water Control Product Team

Textile Machinery Domestic Sales Manager

Textile Machinery Export Manager

Advertising Manager

President

Engineering Vice Pres

Manufacturing Vice Pres

Water Control Equip. Chief Engineer

Textile Machinery Chief Engineer

Textile Product Team

Customer Service, Purchasing,

Production Manager

Foundry General Supervisor

Machine Shop General Supervisor

Stainless Steel General Supervisor

Shipping and Yard Supervisor

Structural Design Options for Grouping Employees into Departments

Functional Grouping

Engineering

CEO Marketing

Manufacturing

Divisional Grouping

CEO

Product Division 1

Product Division 2

Source: Adapted from DavidNadler and Michael Tushman , Strategic Organization Design (Glenview, Ill.: ScottForesman , 1988), 68.

Product Division 3

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

Source: Adapted from Robert Duncan, "What Is the Right Organization Structure? Decision Tree Analysis Provides the Answer," Organizational Dynamics (Winter 1979): 429.

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

Strengths and Weaknesses of Divisional Organization Structure

b STRENGTHS:

b WEAKNESSES:

? 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,

? Eliminates economies of scale in functional departments

? Leads to poor coordination across product lines

? Eliminates in-depth competence and technical specialization

clients

? Makes integration and

? Best in large organizations with

standardization across

several products

product lines difficult

? 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.

Reorganization from Functional Structure to Divisional Structure at Info-Tech

Functional Structure

R&D

Info-Tech President

Manufacturing Accounting Marketing

Divisional Structure

Info-Tech President

Electronic Publishing

Office Automation

Virtual Reality

R&D Mfg Acctg Mktg R&D Mfg Acctg Mktg R&D Mfg Acctg Mktg

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