Chapter 9: Implementing Strategy Through Organizational Design
Organizational Design – The process through which managers select the combination of organizational structure and control systems that they believe will enable the company to create and sustain a competitive advantage.
Coordinate and motivate employees To create value and
Obtain a competitive advantage
Koontz and O’Donnell The Process School of Management Planning Organizing Staffing Directing Controlling
Building blocks of organizational structure Differentiation Vertical – how much authority to delegate Horizontal – how to divide people Into functions and divisions Integration – coordinate people and functions To accomplish organizational goals and tasks
Tall structure (7 – 10 levels)
Flat structure (2 – 4 levels)
Tall Structure Problems Coordination Information distortion Motivation Too many middle managers
McKinsey Consulting Company Increased height of company organization structures Presidents Office President of each division
Centralization or Decentralization (tending toward)
Decentralization
1. Delegate decision making authority to middle and lower level managers
2. Adapt to local conditions. Promotes flexibility
3. Fewer managers needed
Centralization
1. Facilitates coordination and planning
2. Decisions fit broad organizational objectives
Management Policy – Guidelines for decision making are made at highest levels And passed down to lower levels
Horizontal Differentiation – How to group tasks and activities to meet strategies
Functional Structure – Grouping by expertise. Most U. S. firms have a functional structure Advantages Good place to learn Easy to control Effective and efficient Disadvantages Geographical diversion causes duplication of people and costs Communication problems Measurement problems Location problems Strategic problems
Product Structure – Group by product line.
Product Team structure Matrix Management
Coordinate and motivate employees To create value and
Obtain a competitive advantage
Koontz and O’Donnell The Process School of Management Planning Organizing Staffing Directing Controlling
Building blocks of organizational structure Differentiation Vertical – how much authority to delegate Horizontal – how to divide people Into functions and divisions Integration – coordinate people and functions To accomplish organizational goals and tasks
Tall structure (7 – 10 levels)
Flat structure (2 – 4 levels)
Tall Structure Problems Coordination Information distortion Motivation Too many middle managers
McKinsey Consulting Company Increased height of company organization structures Presidents Office President of each division
Centralization or Decentralization (tending toward)
Decentralization
1. Delegate decision making authority to middle and lower level managers
2. Adapt to local conditions. Promotes flexibility
3. Fewer managers needed
Centralization
1. Facilitates coordination and planning
2. Decisions fit broad organizational objectives
Management Policy – Guidelines for decision making are made at highest levels And passed down to lower levels
Horizontal Differentiation – How to group tasks and activities to meet strategies
Functional Structure – Grouping by expertise. Most U. S. firms have a functional structure Advantages Good place to learn Easy to control Effective and efficient Disadvantages Geographical diversion causes duplication of people and costs Communication problems Measurement problems Location problems Strategic problems
Product Structure – Group by product line.
Product Team structure Matrix Management