Quản trị kinh doanh - Chapter 6: Organizational structure

Chapter 6: Organizational Structure3/29/20201Chapter 6: Organizational StructureTypes of Organizational StructuresHierarchyFunctional StructureDivisional StructureMatrix or Project StructureNetwork StructureWhich Structure Should a Firm Use? CoordinationTwo Types of Coordination ProblemsCoordination MechanismsCentral Budgeting and PlanningTraining and Standard Operating ProceduresCorporate CultureCommunicationGeneral Managers, Liaisons, and Job RotationPersonality NetworksPerformance Evaluation and IncentivesImplementationSpan of Control and Number of Levels in a HierarchyTypes of Tasks to be PerformedSkills of Managers and SubordinatesIncentive ProblemsCosts of Acquiring and Communicating KnowledgeSkills, Pay, and StructureEvolution of a Firm’s StructureSummary3/29/20202Chapter 6: Organizational StructureOn completing this chapter, you will gain an economic perspective on:A range of organizational structuresThe effects of structures on costs and decisionsOther coordinating mechanismsCombined decision makingThe relationship between organizational structure and firm strategy3/29/20203Types of Organizational Structures3/29/20204HierarchyTake hierarchy seriously – the principle of a single decision makerbenefits of team decision makingbroader skills & knowledgemay reduce decision making biases (unless team members are “Yes Men”)can serve as a coordination mechanism (see below)however, it is almost always more efficient for one person to have ultimate authorityexample: EADS / Airbus53/29/2020FunctionsUse a functional structure for specializationpeopleeconomies of scale in investments in skillsextremely unlikely a person can be an expert at many things, so specialization allows better matching of skills to jobsjob designspecialized jobs tend to increase productivity, often dramatically (below)lowers communication costs with close colleaguessimplifies supervision[Jargon warning: Specialization can mean two thingsin job design, the worker is given a small number of tasksin education & training, the person focuses on a narrow area of study]63/29/2020The Classic: Functional HierarchyPutting these together, virtually every structure uses functional hierarchy7CEOR&DEVPSalesEVPProductionEVP VPManagerAssistantVPManagerAssistantVPManagerAssistantDivisional Structure: ModularityModularize the overall structurea firm of any reasonable size is too large for a single person to effectively manage you have to break it into divisionsHow? Put the most closely related steps in the business process together, to reduce coordination costsby definition, modularity achieves this, so it is a good rule of thumbbut balance that against economies of scalesome (support) functions corporate-wideothers organized at the division8CEODivision 1PresidentR&DSalesProductionDivision 2PresidentR&DSalesProductionDivision 3PresidentR&DSalesProduction3/29/2020Matrix StructureBelow is a matrix structureEach person is assigned to a function, & to a divisionCross functional teams are similar, though less formalEach person has 2 bosses, violating the single decision maker principlePerformance evaluation is complexThe structure can be highly politicalpolitical & teamwork skills are valuable9Division 2PresidentDivision 3PresidentDivision 1PresidentCEOR&DEVPADGSalesEVPBEHProductionEVPCFI3/29/2020Network StructuresOrganizations also use informal “network” structureseither overlaid on formal structure, or made more explicitoften serve a similar purpose to lateral coordination mechanismsbut are more fluid / less permanentNetwork structures are essentially a form of internal marketthe “asset” is “capital”less transactional, more relationship-basedmore political103/29/2020Coordination3/29/202011Coordination MechanismsTwo types of coordination: Synchronization and IntegrationThe classic way to guarantee coordination is to centralize decision makingFunctional hierarchies need coordination across functionstypically done by a small # of generalistsbroadened by job rotation across functions, orthis is a primary reason for MBAsMarkets coordinate a great deal through prices. Firms can achieve much coordination through similar schemesperformance evaluation & incentives – later123/29/2020More Coordination MechanismsMany coordination problems require consistent actions across divisions, but not regular communicationThese are the easiest coordination problems to solveevaluation & incentives to take into account effects on other divisionsconsistency of practicesrecruit similar personalitiesbuild strong culturecommunicate extensively about common goals, strategy, etc.train thoroughly in standard operating procedures133/29/2020Still More Coordination MechanismsIntegration problems are the most challenging coordination problemsmultiple pieces of specific knowledge must be combined to make a decision who do you decentralize to?example: Apple’s laptop computer design processIndividuals from different areas must work together (lateral coordination mechanisms)cross-functional teamsmatrix structuresinformal networks14CEOR&DBASalesABProductionBA3/29/2020Implementation3/29/202015ImplementationHierarchy, functions, divisions, & (esp. lateral) coordination mechanisms add complexity & inefficiencycomplexity grows more rapidly than # of employeesBureaucracy costs are one of the most important sources of dis-economies of scale in firmswhat are the costs of a given structure?slow decision makinghuman resources (management staff)loss of creativityimperfect coordinationIf these costs are too severe, rethink your business plan!16Q€3/29/2020Internal Market MechanismsInternal Competition for Resourcesby bidding, specific knowledge of divisions is considered in resource allocationbidding managers must have good incentives, & skills for estimating their value from using resourcesdepending on how far you take the model, you are decentralizing strategyex.: GSB “RATS” system; HBS; Hewlett Packard in the good old days; AirTexTransfer Pricingcentrally-set prices must be based on meaningful accounting #s, or they will distort incentivesnegotiated prices are more flexible, incorporate specific knowledge of divisionsOutsourcing (buying or selling)provides benchmark prices, reduces danger of internal monopoly / monopsony173/29/2020Key IdeasHierarchyFunctional specializationModularitySimple coordination problemsvariety of coordination mechanismsIntegration problemslateral coordination mechanisms183/29/2020RECAP of Chapter 6: Organizational StructureFirm structures determined by economies of scale and scopeStructure options includeFlat – Hierarchical – Matrix -- NetworkFunctional hierarchies persist because decisions must be madeWhen specific knowledge is crucial, firm structural design may tend toward shared decision making (matrix or some derivative)3/29/202019