Chapter 11

Organizational Structures
and Processes

© 2004 by Nelson, a division of Thomson Canada Limited 1

 What Would You Do?
 Exide Technologies is currently
organized geographically
 Share prices are decreasing
 Debt load is increasing
 Which organizational structure
should Exide have?

© 2004 by Nelson, a division of Thomson Canada Limited 2

 Learning Objectives:
Designing Organizational
Structures
After reading these next three
sections, you’ll have a better
understanding of the importance of
organizational structure because you
should be able to:

1. describe the departmentalization

approach to organizational structure
2. explain organizational authority
3. discuss the different methods for job
design
© 2004 by Nelson, a division of Thomson Canada Limited 3
 Departmentalization
 Functional
 Product
 Customer
 Geographic
 Matrix

© 2004 by Nelson, a division of Thomson Canada Limited 4

 Functional
Departmentalization

Exhibit 11.1
© 2004 by Nelson, a division of Thomson Canada Limited 5
 Functional
Departmentalization
Advantages Disadvantages
 creates highly  cross-department
skilled specialists coordination can
 lowers costs be difficult
through reduced
duplication
 may lead to
slower decision
 communication
and coordination making
problems are  produces
lessened managers with
narrow
experiences
© 2004 by Nelson, a division of Thomson Canada Limited 6
 Product
Departmentalization

Easy Food Market

Cheese Milk Ice cream

© 2004 by Nelson, a division of Thomson Canada Limited 7

 Product
Departmentalization
Advantages Disadvantages
 managers  duplication often
specialize but increases costs
have broader  difficult to
experience coordinate across
 easier to assess departments
work-unit
performance
 decision making is
faster
© 2004 by Nelson, a division of Thomson Canada Limited 8
 Customer
Departmentalization

American Express

Cards Travel Financial Services Business Services

Adapted from Exhibit 11.3

© 2004 by Nelson, a division of Thomson Canada Limited 9
 Customer
Departmentalization
Advantages Disadvantages
 focuses on  duplication of
customer needs resources
 products and  difficult to achieve
services tailored
to specific coordination
customers across
departments
 decisions that
please the
company but may
hurt the company
© 2004 by Nelson, a division of Thomson Canada Limited 10
 Geographic
Departmentalization

Coca-Cola Enterprises

Central North Eastern North Western North

Europe
America America America

© 2004 by Nelson, a division of Thomson Canada Limited 11

 Geographic
Departmentalization
Advantages Disadvantages
 responsive to  duplication of
demand of resources
different markets  difficult to
 reduce costs by coordinate across
locating resources departments
close to customers

© 2004 by Nelson, a division of Thomson Canada Limited 12

 Matrix
Departmentalization
A hybrid structure in which two or
more forms of departmentalization
are used together
 most common forms combine product
and functional
 employees report to two bosses
 increased cross-functional interaction
 significant interaction between
functional and project managers
required
© 2004 by Nelson, a division of Thomson Canada Limited 13
 Matrix
Departmentalization
Advantages Disadvantages
 efficiently manage  requires high
large, complex levels of
tasks coordination
 effectively  increased conflict
manage large, levels
complex tasks  requires high level
of management
skills

© 2004 by Nelson, a division of Thomson Canada Limited 14

 Organizational
Authority
 Chain of command
 Line versus staff authority
 Delegation of authority
 Degree of centralization

© 2004 by Nelson, a division of Thomson Canada Limited 15

 Chain of Command
 The vertical line of
authority in an organization
 clarifies who reports to whom
 Unity of command
 workers report to only one boss
 violated by matrix structure
 Span of control
 Number of people reporting to a
specific supervisor

© 2004 by Nelson, a division of Thomson Canada Limited 16

 Line Versus Staff
Authority
 Line authority-function
 the right to command immediate
subordinates in the chain of
command
 an activity that contributes directly to
creating or selling a company’s
products
 Staff authority-function
 the right to advise but not command
others
© 2004 by Nelson, a division of Thomson Canada Limited
 an activity that supports line activities
17
 Delegation of Authority
The assignment of direct authority and
responsibility to a subordinate to
complete tasks for which the manager is
normally responsible
 Three transfers from manager to

subordinate
 transfer of full responsibility of assignment
 transfer of authority over required
resources
 transfer of accountability
© 2004 by Nelson, a division of Thomson Canada Limited 18
 How to Be a
More Effective
Delegator
1. Trust your staff to do a good job
2. Avoid seeking perfection
3. Give effective instructions
4. Know your true interests
5. Follow up on progress

Adapted from Exhibit 11.7

© 2004 by Nelson, a division of Thomson Canada Limited 19
 How to Be a
More Effective
Delegator
6. Praise the efforts of your staff
7. Don’t wait until the last minute to
delegate
8. Ask questions, expect answers
and assist employees
9. Provide sufficient resources
10. Delegate to the lowest possible
level
Adapted from Exhibit 11.7
© 2004 by Nelson, a division of Thomson Canada Limited 20
 Degree of
Centralization
 Centralization of authority
 most authority is held at the upper levels of
the organization
 Decentralization
 significant authority is found in lower levels
of the organization
 Standardization
 Solving problems by applying rules,
procedures, and processes

© 2004 by Nelson, a division of Thomson Canada Limited 21

 Job Design
 Job specialization
 Job rotation
 Job enlargement
 Job enrichment

© 2004 by Nelson, a division of Thomson Canada Limited 22

 Job Design
 Job specialization
 breaking jobs into smaller tasks
 simple, easy-to-learn, and economical
 can lead to low job satisfaction, high
absenteeism, and turnover
 Job rotation
 periodically moving workers from one
job to another
© 2004 by Nelson, a division of Thomson Canada Limited 23
 Job Design
 Job enlargement
 increasing the number of tasks
performed by a worker
 Job enrichment
 adding more tasks and authority to a
worker’s job

© 2004 by Nelson, a division of Thomson Canada Limited 24

 Learning Objectives:
Designing Organizational
Processes

After reading these next two sections,

you should be able to:

4. explain the methods that companies are

using to redesign internal organizational
processes (i.e., intraorganizational
processes)
5. describe the methods that companies are
using to redesign external organizational
processes (i.e., interorganizational
© 2004 by Nelson, a division of Thomson Canada Limited
25
 Intraorganizational
Processes
 Reengineering

 Empowerment

 Behavioural informality

© 2004 by Nelson, a division of Thomson Canada Limited 26

 Reengineering
 Fundamental rethinking of
business processes
 Intended to achieve dramatic
improvements in performance
 Changes the organization’s
orientation form vertical to
horizontal
 Changes task interdependence
© 2004 by Nelson, a division of Thomson Canada Limited 27
 Task Interdependence
 The extent to which collective
action is required to complete an
entire piece of work
 Three types
 pooled
 sequential
 reciprocal

© 2004 by Nelson, a division of Thomson Canada Limited 28

 Empowerment

 Permanently passing decision-

making authority and responsibility
from managers to workers
 workers need information and
resources to make good decisions
 workers should be rewarded for
taking initiative
© 2004 by Nelson, a division of Thomson Canada Limited 29
 Behavioural Informality
Behavioural Behavioural
informality formality
 spontaneity  routine and
 casualness regimen
 interpersonal  specific rules
familiarity  impersonal
detachment

© 2004 by Nelson, a division of Thomson Canada Limited 30

 Interorganizational
Processes
 Modular organizations

 Virtual organizations

 Boundaryless organizations

© 2004 by Nelson, a division of Thomson Canada Limited 31

 Modular Organization

© 2004 by Nelson, a division of Thomson Canada Limited 32

 Virtual Organization

© 2004 by Nelson, a division of Thomson Canada Limited 33

 Boundaryless
Organization

© 2004 by Nelson, a division of Thomson Canada Limited 34

 What Really Happened?
 Exide Technologies
implemented a product
structure around global
business units
 Problems associated with
product structure caused a
return to a geographic
structure
 Exide is still searching for the
proper structure
© 2004 by Nelson, a division of Thomson Canada Limited 35