DIMENSIONS OF OS

Formalization refers to degree to which jobs within organization are standardized Job holder has minimum amount of discretion over what is to be done or how should it be done Job descriptions are more explicit, lots of organizational rules and clearly defined work procedures

ECONOMICS OF FORMALIZATION
Since greater formalization requires less discretion it has cost implications When organization uses less formalization then decisions has to be made by individual. This implies organization will need to hire employees who have more managerial and decision making capabilities

This will have repercussions on compensation and wages Further, suppose wrong decision is taken by a manager, say purchasing manager in a plant then more cost will be incurred in logistics and procurement as well as more compensation that a manager is already charging

However, organization can choose between professional formalization and within organization formalization Formalization can be carried out by rules, regulations, policies and procedures

CENTRALIZATION
Refers to extent to which decision making is concentrated to a single point or level in organization thus permitting employees (usually low in the organization) minimum input into their work. The more learning, knowledge-based work, and knowledge sharing present in the organization, the more decentralized and flatter the organization can become

To shift the locus of decision-making from the top to the bottom of the organization, firms should achieve a high level of horizontal integration cross-functional groups and teams, which is a characteristic of high level of horizontal integration, make effective decisions rapidly.

Manufacturing practices such as reengineering setups, establishing preventive maintenance programs, and creating quality improvement efforts can be facilitated when firms give shop-floor employees discretion in decision-making and are involved in problem solving

COMPLEXITY
Refers to level of differentiation that exists within organization Differentiation occurs at three levels: horizontal, vertical and spatial Specialization and departmentalization are two special cases of horizontal differentiation Vertical differentiation refers to level and number of layers in the organization

Economies and Diseconomies of Work Specialization

Departmentalization lowers network density by reducing ties between actors across department boundaries Density also falls with greater vertical complexity because additional supervisory layers separate actors as rigid lines of authority limit direct ties.

Because a departmentalized in organizational structure isolates employees from interdepartmental connectedness, it damages the efficiency and speed of the decision-making and problem-solving processes

organizations with high structural differentiation had more elaborated administrative apparatus and wide power bases

If differentiation is accompanied by integration then structure becomes more complex Thus cross functional teams consisting of functional experts and accompanied by high coordination and knowledge sharing will have complex structure

Mechanistic Versus Organic Structures

High horizontal differentiation Rigid hierarchical relationships Fixed duties High formalization Formalized communication channels Centralized decision authority

Low horizontal differentiation Collaboration (vertical and horizontal) Adaptable duties Low formalization Informal communication Decentralized decision authority
14

Organization Structure

General manager

Finance

Human resources

Research and development

Operations

Product marketing

Functional Design
Potential Benefits

Potential Pitfalls

Supports skill specialization Reduces duplication of resources & increases coordination Enhances career development & training within functional area Allows superiors and subordinates to share common expertise Promotes high-quality technical decision making

Inadequate communication Difficulties with interunit coordination Focus on departmental rather than organizational issues and goals

16

H. J. Heinz s OS
CEO

Vice President Research and Development

Vice President Materials Management

Vice President Finance

PDM

PDM

PDM

PDM

Canned Soups Division

Frozen Vegetable Division

Frozen Entrees Division

Baked Goods Division

Centralized support functions Divisions/S.B.U.s

Product Design
Potential Benefits

Potential Pitfalls

Permits fast changes in a product line Allows greater product line visibility Fosters a concern for customer demand Clearly defines responsibilities for each product line Develops managers who can think across functional lines

Not allowing efficient utilization of skills and resources Not fostering coordination of activities across product Encourages politics and conflicts in resource allocation across product lines Limits career mobility for personnel outside their own product lines

18

Organizational Structure
S.B.U. General manager

Sales/marketing

Information technology

Finance

Human Resources

Operations

Health Sales Marketing Information technology Installation and repair Network operations

Financial services Sales Marketing Information technology Installation and repair Network operations

Governments Sales Marketing Information technology Installation and repair Network operations

Apples OS
CE0

Apple Products

Apple USA

Apple Europe
Europe West Europe North

Apple Pacific

Canada

Sales Service and Marketing To Regions

Australia

France

Japan

South Europe

Latin America Far East

Geographical Design
Potential Benefits

Potential Pitfalls

Able to develop expertise in solving problems unique to one location Gaining an understanding of customers problems and desires Getting production closer to raw materials and suppliers

Duplication of functions, to varying degrees, at each regional or individual unit location Conflict between each location's goals and the organization's goals Adds levels of management and extensive use of rules and regulations to coordinate and ensure uniformity of quality among locations

21

Xerox, Hallmark and Chryslers OS

CEO

Functions

V ice President Research and Development

V ice President Sales and Marketing

V ice President Manufacturing

V ice President Materials Management

V ice President Finance

Product Development Teams PTM PTM PTM

Matrix
Product Division Product Division Product Division

Functional specialist PTM Product Team Manager

FRONT BACK HYBRID MODEL

Traditional vs. Innovative System Changes - 2

TASK ORIENTATION:

INDIVIDUALIST/ SPECIALIST

TEAM/ GENERALIST

Team Approach

Cross-functional teams consist of employees from various functional departments Interdisciplinary approach to management Permanent team = to solve ongoing problems

25

Team Approach
Potential Benefits

Potential Pitfalls

Enhances flexibility and innovation Reduced barriers among departments Quicker response time Better morale

Co-ordination and control problems Time and resources spent on meetings Unplanned decentralization.

26