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Organization structure and strategy

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Ingrid Mignon

on 8 November 2013

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Transcript of Organization structure and strategy

The structure of organizations
Types and implications

What is the role of corporate organizations?
What is the role of corporate organizations?
Create a frame for individuals and activities to interact
Define a frame where working tasks and responsibilities are organized and divided
Define how the decisions are taken
Create a hierarchy
Why are those things important?
Why is it important?
To create stability
To create routines and facilitate everyone's work
To organize resources efficiently
To coordinate/ create a path towards a common goal
To facilitate the information flow
To perform better
....
Different structures fit different contexts
Size of the company
Geographic situation
Type of products/services
Number of core activities
Competition
Need for innovation
Corporate strategy
Types of organizational structures
Basic organizational configuration
People that produce the product and service output.
Where the basic work is performed.

Ex: Production department in a manufacturing company.
Teachers and researchers in a university.
Parts of the organization that

Design and control the working processes within the organization.
Design and take decisions regarding the products/services produced by the organization
Help the organization to adapt to the external context.
Ex: R&D, design, product development.
Parts of the organization that:
facilitate the daily work
are responsible for the organization's maintenance

Ex: Cleaning staff, Human Resources, training department, financial department.
Gives directions
Decides the strategy, the goals and the policies for the entire organization.
The entrepreneurial structure
Context: Dynamic environment

Product/service: Technical product, knowledge-based firms
The machine bureaucracy
Highly specialized, routine operating tasks
Mature firms
Very formalized procedures in the operating core
Rules, regulations and formalized communication
Large-sized units at the operating level
Relatively centralized power for decision making
An elaborate administrative structure
Mintzberg (1983)
The professional bureaucracy
Large and powerful operation core
The operation core is composed of highly-skilled professionals
Large administrative support staff to support the professionals
Goals: Quality and effectiveness
The divisionalized form
Composed of semi-autonomous units - the divisions
Mature and very large firms
Large administrative support staff that deals with the divisions' paper work.
Middle management is the key
Quite autonomous divisions that act as machine bureaucracies on their own, with their own support and technostructure staff.
The adhocracy
Goal: innovation and flexibility to meet continuously changing needs.
Project teams composed of operation, technostructure and support staff.
Morgan (1986)
8 metaphors of organization
Organization
Organization as a brain
The organization is flexible, resilient and inventive.

Within the organization, the capacity for intelligence and control is distributed throughout the enterprise, enabling the system as a whole to self-organize and evolve along with the emerging challenges.
Organization as a culture
Organizations are mini-societies, with their own distinctive values, rituals, ideologies and beliefs.

Within the organization, there is an ongoing process of reality construction, which allows people to see and understand particular events, actions, objects, comments and situations in distinctive ways.
Organizations are systems that exploit their employees, the natural environment and the global economy for their own ends.

The organization works hard to find strategies to avoid taking its ethical and social responsibilities.
Organization as instrument of domination
Organizations as rational enterprises, designed and structured to achieve predetermined ends as efficiently as possible, using the "one best way" to organize.
Organization as a machine
Organization as an organism
Organizations as living organisms, seeking to adapt and survive in a changing environment.
Organization as a psychic prison
Organizations are systems that get trapped in their own thoughts and actions.
Within the organization, place is left to obsessions, mind traps, narcissism, strong emotions, illusions of control, anxieties and defense mechanisms.
Organizations are expressions of deeper processes of transformation and change.
Organization as flux and transformation
Organization as a political system
Organizations are systems of political activity, with patterns of competing interests, conflict and power.
Organization structures in practice
What are the corporate organization types that you know?
Functional organizations
The organization is divided into specific functions
+
Allows economies of scale within functional departments.
Enables specialization: in-depth knowledge and skill development.
Enables the organization to accomplish functional goals.
Is best with only one or a few products.
-
Slow response time to environmental changes.
May cause decisions to pile on top: hierarchy overload.
Leads to poor horizontal coordination between departments.
Results in less innovation.
Involves restricted view of organizational goals.
Divisional organizations
Horizontal organizations
Matrix organizations
Grouping is based on organizational outputs.
+
Suited to fast change in unstable environment.
Leads to customer satisfaction because product responsibility and contact points are clear.
Involves high coordination across functions.
Allows units to adapt to differences in products, regions, customers.
Best in large organizations with several products.
Decentralizes decision making
-
Eliminates economies of scale in functional departments.
Leads to poor coordination across divisions.
Eliminated in-depth competence and technical specialization.
Makes integration and standardization across divisions difficult
A dual hierarchy
+
Achieves coordination necessary to meet dual demands from customers.
Flexible sharing of human resources across products.
Suited to complex decisions and frequent changes in unstable environment.
Provides opportunities for both functional and product skill development.
Best in medium-sized organizations with multiple products.
Causes participants to experience dual authority, which can be frustrating and confusing.
Means participants need good interpersonal skills and extensive training.
Is time consuming: involves frequent meetings and conflict resolution sessions.
Will not work unless participants understand it and adopt collegial rather that vertical type relationships.
Required great effort to maintain power balance.
-
Structure is created around cross-functional core processes rather than tasks, functions or geography
+
Promotes flexibility and rapid response to changes in customer needs.
Directs the attention of everyone towards the production and delivery of value to the customer.
Each employee has a broader view of organizational goals.
Promotes a focus on teamwork and collaboration.
Share responsibilities and decision-making.
-
Determining core processes is difficult and time consuming.
Requires changes in culture, job design, management philosophy, information and reward systems.
Traditional managers may balk when they have to give up power and authority.
Requires significant training of employees to work effectively in a horizontal team environment.
Can limit in-depth skill development.
Risk of free-riders.
Often in new, small start-up company
Core parts of the organization: top management (often 1 person) and operation
Very few support or technostructure staff.
Little formalization or specialization
High flexibility and quick adaptability
When is it best to choose that kind of organization?
When is it best to choose that kind of organization?
Context: stable environment
Product/service: mass-production, manufacturing
When is it best to use that kind of organization?
Context: complex environment
Product/service: often service organization
Ex: Universities, hospitals
When is it best to choose that kind of organization?
Context: global market
Product/service: several products are manufactured.
When is it best to choose that kind of organization?
Context: complex, changing environment
Product: specialized, highly complex
How should managers think when designing (or rather before re-organizing) an organization?

Type of task: mass-production? expertize/knowledge? one product or several products?
The technology involves: does it require specialization? what organization is the most cost-efficient one?
The size of the organization: 10 employees or 40000? National or global?
The type of employees: Organizational culture? Education level? Age?
Organizational aspects:
The environment of the corporation:
Competition: high or low?

Environment:
Is the product developing quickly?
Do laws, regulations or political power affect the market?
In other words: in the environment complex or stable?
Case study: Toyota
Toyota - 2008
1 chairman
1 president (Akio Toyoda, the grandson of the company founder)
6 vice-presidents
15 executive managing directors.

All Japanese men. All Toyota insiders.
6 assembling plants.
No headquarters.
US executives are responsible for their own sales and marketing, but report independently to Japan for any technical problems.
All US executives are assigned a Japanese boss to mentor them, and they not have the mandate to do issue recalls.
In the US
Toyota's board:
Questions:
1- Refering to Mintzberg, what kind of organization does Toyota have? Why?

2- In what way would you say that Toyota's organization may be responsible for the problem?
Message from the president: 5 major changes
Change #1:
Reducing the number of directors in the board (from 27 to 11)
Change #2:
Reducing the decision-making layers
Change #3:
Establishing Executive General Managers (communication link between operations and decision-makers)
Change #4:
Building the structure and system where each region can initiate decisions, close to their customers.
Change #5:
Establishment of a mechanism to listen to outside opinion more closely, and reflect them in the corporate management.
"Images of Organization"
"Structure in Fives"
Full transcript