Lecture management a pacific rim focus chapter 10 strategic organisation design

CHAPTER 10 STRATEGIC ORGANISATION DESIGN © 2003 McGraw-Hill Australia Pty Ltd PowerPoint Lecture outline • • • • • Overview: Organisation structure design Assessing structural alternatives Weighing contingency factors Matching strategy & structure Promoting innovation © 2003 McGraw-Hill Australia Pty Ltd PowerPoint Organisation structure design • Strategy & structure: which comes first? – Strategy & structure are closely linked with each other – Mismatches in strategy/structure lead to difficulties • Factors influencing organisation design – Contingency factors: technology, size, environment – Need to promote innovation: roles, differentiation, transfer processes © 2003 McGraw-Hill Australia Pty Ltd PowerPoint Organisation structure design Contingency Contingencyfactors factors ••Technology Technology ••Size Size ••Environment Environment Strategy Strategy Organisational Organisationalgoals goals Organisation structure Organisation structure (efficiency && (efficiency ••Functional Functional effectiveness) ••Divisional effectiveness) Divisional ••Hybrid Hybrid ••Matrix Matrix Structural Structuralmethods methodsfor for promoting promotinginnovation innovation ••Roles Roles ••Reservations Reservations ••Differentiation Differentiation ••Transfer Transferprocesses processes © 2003 McGraw-Hill Australia Pty Ltd PowerPoint Assessing structural alternatives • • • • • Functional structure Divisional structure Hybrid structure Matrix structure Emergent structure © 2003 McGraw-Hill Australia Pty Ltd PowerPoint Assessing structural alternatives Functional structure Structure in which positions are grouped according to their main functional (or specialised) area CEO Manager, Manufacturing Manager, Distribution Manager, Administration © 2003 McGraw-Hill Australia Pty Ltd PowerPoint Functional structure Advantages Disadvantages • In-depth expertise development • Clear career path within function • Efficient use of resources • Economies of scale (possible) • Ease of co-ordination • Technical advantage on competition • Slow response re: multifunction problems • Decision backlog at top of hierarchy • Bottlenecks re: sequential tasks • Inexact measures of performance • Narrow training of future managers © 2003 McGraw-Hill Australia Pty Ltd PowerPoint Assessing structural alternatives Divisional structure: Structure in which positions are grouped according to similarity of products, services or markets © 2003 McGraw-Hill Australia Pty Ltd PowerPoint Assessing structural alternatives CEO, CEO, Alpha Alpha Industries Industries Chief ChiefGeneral General Manager Manager Copier Copierproducts products Chief ChiefGeneral General Manager Manager Photographic Photographic products products Chief ChiefGeneral General Manager Manager Scanner Scannerproducts products Chief ChiefGeneral General Manager ManagerComputer Computer Storage products Storage products Chief ChiefGeneral General Manager Manager Industrial Industrial Imaging Imagingproducts products Chief ChiefGeneral General Manager Manager Marine MarineElectronic Electronicproducts products © 2003 McGraw-Hill Australia Pty Ltd PowerPoint Divisional structure Advantages Disadvantages • • • • • • • Fast response to environmental change Simplified co-ordination across functions Simultaneous emphasis on organisational goals Strong customer orientation Accurate measurement of performance Broad training in management skills • • • • • Resource duplication in each division Reduction of in-depth expertise Competition amongst divisions Limited sharing of expertise between divisions Innovation restricted to each division Neglect of overall goals © 2003 McGraw-Hill Australia Pty Ltd PowerPoint Assessing structural alternatives Hybrid structure: Structure adopting both functional and divisional structures at the same management levels © 2003 McGraw-Hill Australia Pty Ltd PowerPoint Hybrid structure Advantages • Alignment of corporate & divisional goals • Functional expertise &/or efficiency • Adaptability & flexibility in divisions Disadvantages • Conflicts between corporate departments & divisions • Excessive administration overhead • Slow response to exceptional situations © 2003 McGraw-Hill Australia Pty Ltd PowerPoint Assessing structural alternatives Matrix structure: Structure superimposing a horizontal set of divisional reporting relationships onto a hierarchical functional structure Appropriate when: • Need for a strong focus on both functional & divisional dimensions • Need to quickly process information & co-ordinate activities • There is pressure for shared resources © 2003 McGraw-Hill Australia Pty Ltd PowerPoint Assessing structural alternatives GM, Transport Manager, Business A Manager, Business B Manager, Business C Manager, Business D Manager, Business E GM, Sales GM, HRM GM, Finance Transport, Business A Sales, Business A HRM, Business A Finance, Business A Transport, Business B Sales, Business B HRM, Business B Finance, Business B Transport, Business C Sales, Business C HRM, Business C Finance, Business C Transport, Business D Sales, Business D HRM, Business D Finance, Business D Transport, Business E Sales, Business E HRM, Business E Finance, Business E © 2003 McGraw-Hill Australia Pty Ltd PowerPoint Matrix structure Advantages Disadvantages • Decentralised decisionmaking • Strong product coordination • Improved environmental monitoring • Flexible use of human resources • Efficient use of support systems • Fast response to change • High administrative costs • Confusion over authority & responsibility (potential) • Excessive focus on internal relations • Overemphasis on group decision making • Slow response to change (possible) © 2003 McGraw-Hill Australia Pty Ltd PowerPoint Assessing structural alternatives Emerging structures: • Process structure Type of departmentalisation where positions are grouped by a complete flow of work • Networked structure Form of organising where many functions are contracted out to other independent firms & coordinated by use of information technology networks to operate as if they were within a single corporation © 2003 McGraw-Hill Australia Pty Ltd PowerPoint Weighing contingency factors The best structure for an organisation depends on contingency factors such as: • Technology • Size • Environment © 2003 McGraw-Hill Australia Pty Ltd PowerPoint Weighing contingency factors Technology: • Technological complexity (Woodward) – Unit & small batch production – Large batch & mass production – Continuous process production • Technological interdependence (Thompson) – Pooled interdependence – Sequential interdependence – Reciprocal interdependence © 2003 McGraw-Hill Australia Pty Ltd PowerPoint Weighing contingency factors •• Four Four trends trends With Withgrowth: growth: more moredepartments, departments, shift shiftfrom fromfunctional functional to todivisional divisionalform form With Withgrowth: growth: additional additionalrules rules &®ulations regulations (formalisation) (formalisation) With Withgrowth: growth: more morestaff staffpositions positions to toassist assistsenior senior management management With Withgrowth: growth: tendency tendencyto todecentralise decentralise (enabled (enabledby by formalisation) formalisation) © 2003 McGraw-Hill Australia Pty Ltd PowerPoint Weighing contingency factors Stable environments, mechanistic Unstable/uncertain environments, organic • • Narrow tasks, prescribed tasks, hierarchical control, decision-making levels, communication vertical, instructions by superiors, loyalty to organisation & obedience to superiors General tasks, tasks subject to continuous negotiation, network control, decision making rests with those with knowledge, communication across & between levels, ‘supervision’ is information & advice, commitment to organisational goals, possession of expertise •• Lawrence Lawrence&&Lorsch: Lorsch:Balance Balanceofofdifferentiation differentiation&&integration integration © 2003 McGraw-Hill Australia Pty Ltd PowerPoint Matching strategy & structure Managers must match strategy & structure to achieve effectiveness e.g: Niche Niche differentiation: differentiation: –narrow –narrowtarget targetmarket market Cost Costleadership: leadership: Innovative Innovative differentiation: differentiation: Market Marketdifferentiation: differentiation: ––advertising, advertising,prestige prestige –complex –complexproduct product ororservice serviceinnovations innovations –organisational –organisational efficiency, efficiency, lower lowerprices prices pricing pricing&& market marketsegmentation segmentation © 2003 McGraw-Hill Australia Pty Ltd PowerPoint Promoting innovation Structure’s ability to support strategy can be enhanced by using structural means to encourage innovation Innovation is critical to various differentiation strategies © 2003 McGraw-Hill Australia Pty Ltd PowerPoint Promoting innovation Four major means of using organisation structure to facilitate innovation are: • Vital roles Idea champion, sponsor, orchestrator • Reservations Organisation units devoted to the generation of innovative ideas • Differential paradox Separating innovation process decreases chance of implementation • Transfer process The difficulty of translating ideas into products/services © 2003 McGraw-Hill Australia Pty Ltd PowerPoint Lecture summary • Overview: Organisation structure design – Strategy & structure closely linked – Factors influencing design: contingency factors, need for innovation • Assessing structural alternatives – Functional, divisional, hybrid, matrix, emerging structures • Weighing contingency factors – Technology, size, environment © 2003 McGraw-Hill Australia Pty Ltd PowerPoint Lecture summary • Matching strategy and structure – Structure must match chosen strategy for effectiveness • Promoting innovation – Structure may enhance innovation – Key factors: vital roles, reservations, differential paradox, transfer process © 2003 McGraw-Hill Australia Pty Ltd PowerPoint [...]... information & co-ordinate activities • There is pressure for shared resources © 2003 McGraw-Hill Australia Pty Ltd PowerPoint Assessing structural alternatives GM, Transport Manager, Business A Manager, Business B Manager, Business C Manager, Business D Manager, Business E GM, Sales GM, HRM GM, Finance Transport, Business A Sales, Business A HRM, Business A Finance, Business A Transport, Business B Sales,... Structure’s ability to support strategy can be enhanced by using structural means to encourage innovation Innovation is critical to various differentiation strategies © 2003 McGraw-Hill Australia Pty Ltd PowerPoint Promoting innovation Four major means of using organisation structure to facilitate innovation are: • Vital roles Idea champion, sponsor, orchestrator • Reservations Organisation units devoted...Assessing structural alternatives Hybrid structure: Structure adopting both functional and divisional structures at the same management levels © 2003 McGraw-Hill Australia Pty Ltd PowerPoint Hybrid structure Advantages • Alignment of corporate & divisional goals • Functional expertise &/or efficiency • Adaptability & flexibility in divisions Disadvantages • Conflicts between corporate departments... Lawrence Lawrence&&Lorsch: Lorsch:Balance Balanceofofdifferentiation differentiation&&integration integration © 2003 McGraw-Hill Australia Pty Ltd PowerPoint Matching strategy & structure Managers must match strategy & structure to achieve effectiveness e.g: Niche Niche differentiation: differentiation: –narrow –narrowtarget targetmarket market Cost Costleadership: leadership: Innovative Innovative differentiation:... morestaff staffpositions positions to toassist assistsenior senior management management With Withgrowth: growth: tendency tendencyto todecentralise decentralise (enabled (enabledby by formalisation) formalisation) © 2003 McGraw-Hill Australia Pty Ltd PowerPoint Weighing contingency factors Stable environments, mechanistic Unstable/uncertain environments, organic • • Narrow tasks, prescribed tasks, hierarchical... to the generation of innovative ideas • Differential paradox Separating innovation process decreases chance of implementation • Transfer process The difficulty of translating ideas into products/services © 2003 McGraw-Hill Australia Pty Ltd PowerPoint Lecture summary • Overview: Organisation structure design – Strategy & structure closely linked – Factors influencing design: contingency factors, need... divisions • Excessive administration overhead • Slow response to exceptional situations © 2003 McGraw-Hill Australia Pty Ltd PowerPoint Assessing structural alternatives Matrix structure: Structure superimposing a horizontal set of divisional reporting relationships onto a hierarchical functional structure Appropriate when: • Need for a strong focus on both functional & divisional dimensions • Need... differentiation: differentiation: Market Marketdifferentiation: differentiation: ––advertising, advertising,prestige prestige –complex –complexproduct product ororservice serviceinnovations innovations –organisational –organisational efficiency, efficiency, lower lowerprices prices pricing pricing&& market marketsegmentation segmentation © 2003 McGraw-Hill Australia Pty Ltd PowerPoint Promoting innovation... innovation • Assessing structural alternatives – Functional, divisional, hybrid, matrix, emerging structures • Weighing contingency factors – Technology, size, environment © 2003 McGraw-Hill Australia Pty Ltd PowerPoint Lecture summary • Matching strategy and structure – Structure must match chosen strategy for effectiveness • Promoting innovation – Structure may enhance innovation – Key factors: vital... B Finance, Business B Transport, Business C Sales, Business C HRM, Business C Finance, Business C Transport, Business D Sales, Business D HRM, Business D Finance, Business D Transport, Business E Sales, Business E HRM, Business E Finance, Business E © 2003 McGraw-Hill Australia Pty Ltd PowerPoint Matrix structure Advantages Disadvantages • Decentralised decisionmaking • Strong product coordination