Value what you do, and add value by what you do.
287
What Would You Do?
288
no pay. At Verizon’s high-speed fiber optic Internet, television, and telephone service,“volunteers” do just that. Many large corporations, start-up companies, and venture capitalists are betting that this “emerg- ing corps of Web-savvy helpers will transform the field of customer service.”
As director of Verizon’s e-commerce unit, Mark Studness was familiar with Web sites where users offered tips and answered questions. His challenge?
Find a way to use that potential resource for cus- tomer service. His solution? “Super” or passionate users—that is, users who provided the best answers and dialogue in Web forums. How should Verizon’s managers deal with the structural challenges of this unique type of work arrangement?
They’re individuals you might never have thought of as being part of an organization’s structure, but for many organizations, volunteers provide a much-needed source of labor.1 Maybe you’ve volunteered at a Habitat build, a homeless shelter, or some nonprofit organization. How- ever, what if the volunteer assignment was at a for-profit business and the job description read like this: “Spend a few hours a day, at your computer, supplying answers online to cus- tomer questions about technical matters like how to set up an Internet home network or how to program a new high-definition television,” all for
288
LEARNING OUTCOME 11.1
Describe contemporary organizational designs.
Welcome to the fascinating world of organizational structure and design in the twenty-first century! Did you ever consider that a business might actually have work tasks completed by someone other than employees . . . for free? Mark Studness and Verizon were open to trying new ways to do what they’re in business to do and the unusual structural experiment seems to be working well. He describes the company-sponsored customer-service site as a “very pro- ductive tool, partly because it absorbs many thousands of questions that would otherwise be expensive calls to a Verizon call center.”
In the last chapter, we introduced the basic concepts of traditional organizational design including the six building blocks of an organization’s structure: work specializa- tion, departmentalization, chain of command, span of control, centralization and decen- tralization, and formalization. In this chapter, we’re going to explore contemporary aspects of organizational design as organizations adapt to the demands of today’s envi- ronment. We’re going to first look at some contemporary organizational designs and then move on to discussing how organizations are coping with those demands through collaborative work efforts, flexible work arrangements, and a contingent workforce. We’ll wrap up the chapter by describing some organizational design challenges facing today’s managers.
Contemporary Organizational Designs
Microsoft’s Windows 7 was the outcome of a three-year project marked by close collab- oration among the thousands of people working on various aspects of the product.2 This approach contrasted sharply with the development of Windows Vista, where the development team had evolved into “a rigid set of silos—each responsible for specific technical features—that didn’t share their plans widely.” With Vista, programming code created by each group might have worked fine on its own, but it caused technical prob- lems when integrated with code created by other groups. Those design issues, as well as internal communications breakdowns, contributed to numerous product delays and defects. CEO Steve Ballmer was adamant about not repeating that mistake. Thus, to
“rebuild Windows, Microsoft razed walls”—that is, organizational structure walls that acted as barriers and impediments to efficient and effective work.
team structure
An organizational structure in which the entire organization is made up of work teams
Like Steve Ballmer, many managers are finding that the traditional designs (discussed on pp. 277–278) often aren’t appropriate for today’s increasingly dynamic and complex environment. Instead, organizations need to be lean, flexible, and innovative; that is, they need to be more organic. So managers are finding creative ways to structure and organize work. These contemporary designs include team structures, matrix and project structures, boundaryless organizations, and learning organizations. (See Exhibit 11-1 for a summary of these designs.)
Team Structures
Larry Page and Sergey Brin, cofounders of Google, created a corporate structure that “tack- les most big projects in small, tightly focused teams.”3Ateam structureis one in which the entire organization is made up of work teams that do the organization’s work.4In this struc- ture, employee empowerment is crucial because no line of managerial authority flows from top to bottom. Rather, employee teams design and do work in the way they think is best, but the teams are also held responsible for all work performance results in their respective areas.
Team Structure
• What it is: A structure in which the entire organization is made up of work groups or teams.
• Advantages: Employees are more involved and empowered.
Reduced barriers among functional areas.
• Disadvantages: No clear chain of command.
Pressure on teams to perform.
Matrix-Project Structure
• What it is: Matrix is a structure that assigns specialists from different functional areas to work on projects who then return to their areas when the project is completed. Project is a structure in which employees continuously work on projects. As one project is completed, employees move on to the next project.
• Advantages: Fluid and flexible design that can respond to environmental changes.
Faster decision making.
• Disadvantages: Complexity of assigning people to projects.
Task and personality conflicts.
Boundaryless Structure
• What it is: A structure that is not defined by or limited to artificial horizontal, vertical, or external boundaries; includes virtualandnetworktypes of organizations.
• Advantages: Highly flexible and responsive.
Utilizes talent wherever it’s found.
• Disadvantages: Lack of control.
Communication difficulties.
Learning Structure
• What it is: A structure in which employees continually acquire and share new knowledge and apply that knowledge.
• Advantages: Sharing of knowledge throughout organization. Sustainable source of competitive advantage.
• Disadvantages: Reluctance on part of employees to share knowledge for fear of losing their power.
Large numbers of experienced employees on the verge of retiring.
EXHIBIT11-1
Contemporary Organizational Designs
In large organizations, the team structure complements what is typically a functional or divisional structure and allows the organization to have the efficiency of a bureaucracy and the flexibility that teams provide. Companies such as Amazon, Boeing, Hewlett-Packard, Louis Vuitton, Motorola, and Xerox, for instance, extensively use employee teams to improve productivity.
Matrix and Project Structures
Other popular contemporary designs are the matrix and project structures. The matrix structureassigns specialists from different functional departments to work on projects being led by a project manager. (See Exhibit 11-2.) One unique aspect of this design is that it creates a dual chain of commandbecause employees in a matrix organization have two managers: their functional area manager and their product or project manager, who share authority. The project manager has authority over the functional members who are part of his or her project team in areas related to the project’s goals. However, any decisions about promotions, salary recommendations, and annual reviews typically remain the functional manager’s responsibility. The matrix design “violates” the unity of command principle, which says that each person should report to only one boss. Despite that, it can, and does, work effectively if both managers communicate regularly, coordinate work demands on employees, and resolve conflicts together.
Many organizations use a project structure, in which employees continuously work on projects. Unlike the matrix structure, a project structure has no formal departments where employees return at the completion of a project. Instead, employees take their specific skills, abilities, and experiences to other projects. Also, all work in project structures is performed by teams of employees. For instance, at design firm IDEO, project teams form, disband, and form again as the work requires. Employees “join” project teams because they bring needed skills and abilities to that project. Once a project is completed, however, they move on to the next one.5
Project structures tend to be more flexible organizational designs, without the depart- mentalization or rigid organizational hierarchy that can slow down making decisions or tak- ing action. In this structure, managers serve as facilitators, mentors, and coaches. They eliminate or minimize organizational obstacles and ensure that teams have the resources they need to effectively and efficiently complete their work.
The Boundaryless Organization
The Large Hadron Collider is a $6 billion particle accelerator lying in a tunnel that’s 27 kilometers (17 miles) in circumference and 175 meters (574 feet) below ground near Geneva, Switzerland. “The atom smasher is so large that a brief status report lists
EXHIBIT11-2 Example of a Matrix Organization
R&D Marketing Customer
Services (CS)
Human
Resources (HR) Finance Information Systems (IS) R&D
Group
Product 1 Marketing
Group
CS Group
HR Group
Finance Group
IS Group R&D
Group
Product 2 Marketing
Group
CS Group
HR Group
Finance Group
IS Group R&D
Group
Product 3 Marketing
Group
CS Group
HR Group
Finance Group
IS Group
project structure
An organizational structure in which employees continuously work on projects
boundaryless organization
An organization whose design is not defined by, or limited to, the horizontal, vertical, or external boundaries imposed by a predefined structure
Managing at a distance meansboth positive and negative. On the positive side, it allows employees to be creative and gives them room to grow. The negative aspects include making decisions, policies, and process without employee input and distancing management from employees.
virtual organization
An organization that consists of a small core of full-time employees and outside specialists temporarily hired as needed to work on projects
network organization
An organization that uses its own employees to do some work activities and networks of outside suppliers to provide other needed product components or work processes
2,900 authors, so complex that scientists in 34 countries have readied 100,000 computers to process its data, and so fragile that a bird dropping a bread crust can short-circuit its power supply.” 6But exploiting the collider’s potential to expand the frontiers of knowledge has required that scientists around the world cut across “boundaries of place, organization, and technical specialty to conduct ever more ambitious experiments.”
The structural arrangement for getting work done that has developed around the mas- sive collider is an example of another contemporary organizational design called the boundaryless organization, which is an organization whose design is not defined by, or limited to, the horizontal, vertical, or external boundaries imposed by a predefined structure.7Former GE chairman Jack Welch coined the term because he wanted to elim- inate vertical and horizontal boundaries within GE and break down external barriers between the company and its customers and suppliers. Although the idea of eliminating boundaries may seem odd, many of today’s most successful organizations are finding that they can operate most effectively by remaining flexible and unstructured: that the ideal structure for them is nothaving a rigid, bounded, and predefined structure.8
What do we mean by boundaries? There are two types: (1) internal—the horizontal ones imposed by work specialization and departmentalization and the vertical ones that separate employees into organizational levels and hierarchies; and (2) external—the boundaries that separate the organization from its customers, suppliers, and other stakeholders. To minimize or eliminate these boundaries, managers might use virtual or network structural designs.
VIRTUAL ORGANIZATIONS. Is an internship something you’ve ever thought about doing (or maybe have done)? How about an internship that you could do, not in a workplace cubicle, but from your couch using your computer?9Such virtual internships are becom- ing quite popular, especially with smaller and midsize companies and, of course, with online businesses. The type of work virtual interns do typically involves “researching, sales, marketing, and social-media development”—tasks that can be done anywhere with a computer and online access. Some organizations are structured in a way that allows most employees to be virtual employees.
Avirtual organizationtypically consists of a small core of full-time employees and outside specialists temporarily hired as needed to work on projects.10An example is Straw- berryFrog, a global advertising agency with offices in Amsterdam, New York, Sa~o Paulo, and Mumbai. It does its work with a relatively small administrative staff but has a global network of virtual freelance employees who are hired to work as needed on client projects.
By relying on these virtual employees, the company enjoys a network of talent without all the unnecessary overhead and structural complexity.11
NETWORK ORGANIZATIONS. Food marketer Smart Balance Inc. helps people stay trim and lean with its heart-healthy products.12The company’s organizational structure is also trim and lean. With only 67 employees, the company outsources almost every other organi- zational function including manufacturing, product distribution, and sales. Smart Balance’s structural approach is one that also eliminates organizational boundaries and can be described as a network organization, which uses its own employees to do some work activities and networks of outside suppliers to provide other needed product components or work processes.13This organizational form is sometimes called a modular organization by manufacturing firms.14Such an approach allows organizations to concentrate on what they
matrix structure
An organizational structure that assigns specialists from different functional departments to work on one or more projects
The Working World in 2020
Flexible Organizations
By 2020, a considerably smaller proportion of the labor force will hold full-time jobs. Organizations will increasingly rely on contract employees and part-timers to get the work done, giving the organ- ization greater flexibility. From the employee’s standpoint, it will mean greater individual control of the employee’s future rather than being dependent on a single employer.
Future workers will be more like outside con- sultants than full-time employees. Assignments
will be temporary. They might last a few weeks or a few years, but the presumption is—on the part of both workers and employers—that the relation- ship will not become permanent. As such, you will find yourself consistently working on new projects with a different group of coworkers.
Additionally, expect to see fewer large corporate headquarter buildings and centralized corporate centers. Work demands will not require organizations to house large numbers of workers in one place. “Headquarter” cities such as New
York, Toronto, or London will find themselves with lots of empty office space. Conversely, job oppor- tunities will be geographically dispersed, and in many cases, not dependent at all on where employees reside. An increasing proportion of the labor force will work from home. And many organizations will create regional satellite centers where employees meet or work. These centers will be less costly to operate than centralized offices and will cut down on commuting distances for workers.
do best by contracting out other activities to companies that do those activities best. For instance, the strategy of British company ARM, a microchip designer, is to find a lot of partners. It contracts with those partners for manufacturing and sales. Because ARM doesn’t manufacture, it can encourage its customers (ARM’s chip designs serve as the brains of 98% of the world’s cell phones) to request whatever they like. Such flexibility is particu- larly valuable in the cell phone market where having custom chips and software can provide an edge.15At Boeing, the company’s head of development for the 787 Dreamliner manages thousands of employees and some 100 suppliers at more than 100 sites in differ- ent countries.16 Sweden’s Ericsson contracts its manufacturing and even some of its research and development to more cost-effective contractors in New Delhi, Singapore, California, and other global locations.17And at Penske Truck Leasing, dozens of business processes, such as securing permits and titles, entering data from drivers’ logs, and pro- cessing data for tax filings and accounting, have been outsourced to Mexico and India.18
Learning Organizations
Doing business in an intensely competitive global environment, British retailer Tesco real- izes how important it is for its stores to run well behind the scenes.19And it does so using a proven “tool” called Tesco in a Box, which is a self-contained complete IT system and matching set of business processes that provides the model for all of Tesco’s international business operations. This approach promotes consistency in operations as well as being a way to share innovations. Tesco is an example of a learning organization, an organiza- tion that has developed the capacity to continuously learn, adapt, and change. “Today’s managerial challenge is to inspire and enable knowledge workers to solve, day in and day out, problems that cannot be anticipated.”20In a learning organization, employees contin- ually acquire and share new knowledge and apply that knowledge in making decisions or doing their work. Some organizational theorists even go so far as to say that an organiza- tion’s ability to do this—that is, to learn and to apply that learning—may be the only sus- tainable source of competitive advantage.21What structural characteristics does a learning organization need?
Employees throughout the entire organization—across different functional specialties and even at different organizational levels—must share information and collaborate on work activities. Such an environment requires minimal structural and physical barriers, which allows employees to work together in doing the organization’s work the best way they can and, in the process, learn from each other. Finally, empowered work teams tend to be an important feature of a learning organization’s structural design. These teams make
Being a learning organization means being open to resources, technologies, and ideas that may be outside the box.
LEARNING OUTCOME
11.2
Discuss how organizations organize for collaboration.
Benefits Drawbacks
• Increased communication and coordination • Potential interpersonal conflict
• Greater innovative output • Different views and competing goals
• Enhanced ability to address complex problems • Logistics of coordinating
• Sharing of information and best practices
Sources: Based on R. Wagner and G. Muller, “The Pinnacle of Partnership: Unselfishness,” Gallup Management Journal Online[http://gmj.gallup.com], February 18, 2010; M. T. Hansen, “When Internal Collaboration Is Bad for Your Company,” Harvard Business Review, April 2009, pp. 83–88; G. Ahuja,
“Collaboration Networks, Structural Holes and Innovation: A Longitudinal Study,” Academy of Manage- ment Proceedings Online,1998; and M. Pincher, “Collaboration: Find a New Strength in Unity,”
Computer Weekly,November 27, 2007, p. 18.
decisions about doing whatever work needs to be done or resolving issues. With empow- ered employees and teams, there’s little need for “bosses” to direct and control. Instead, managers serve as facilitators, supporters, and advocates.
Organizing for Collaboration
In 3M’s dental products division, Sumita Mitra, a research scientist, helped develop coatings that prevent tooth plaque and innovative cement bonding materials that could be set by light.22 However, as cosmetic dentistry’s popularity increased, she sensed an opportunity for develop- ing a product that had both the strength and the natural appearance that dentists wanted. Find- ing that product meant venturing outside the realm of traditional dental materials. Mitra first turned to 3M’s database of technical reports written by the company’s some 7,000 scientists.
Although this database is invaluable for spreading knowledge throughout the company, “the real work of collaboration happens face-to-face, often at events sponsored by TechForum, an employee-run organization designed to foster communications between scientists in different labs or division.” There, Mitra found valuable information and guidance from other scientists in different divisions of the company. 3M also has an R&D Workcenter networking Web site, which Mitra describes as “a LinkedIn for 3M scientists.” It also proved to be a valuable col- laborative tool. Both the TechForum and the R&D Workcenter proved beneficial for Mitra’s research efforts. Three years after starting her research, 3M introduced Filtek Supreme Plus, a strong, polishable dental material and the first to include nanoparticles. At 3M, employees are expected to collaborate and are evaluated on their success. Such collaborations among the company’s scientists have led to several breakthroughs in product technology.
It’s fair to say that the world of work has changed. Organizations need to be more flexible in how work gets done, although it still needs to get done efficiently and effec- tively. Throw in the fact that innovation and the ability to bring innovations to market quickly is critical and you can begin to appreciate how traditional top-down decision mak- ing that strictly follows the chain of command and narrowly defined functional arrange- ments might not be the best structural mechanisms to do this. Many organizations, like 3M, are encouraging collaborative work among employees. Exhibit 11-3 lists some of the benefits and drawbacks of working collaboratively. An organization’s collaboration efforts can be internal—that is, among employees within the organization. Or those efforts can be external collaborations with any stakeholders. In both types, it’s important that managers recognize how such collaborative efforts “fit” with the organization’s structure and the challenges of making all the pieces work together successfully. Let’s take a look at each of these types of collaboration.
learning organization
An organization that has developed the capacity to continuously learn, adapt, and change
EXHIBIT11-3
Benefits and Drawbacks of Collaborative Work