C.3 Organizational Structure

Question 1

Three components of structure

Answer 1

• Reporting relationships, hierarchy levels, span of control
• departments
• communication, coordination, and integration

Question 2

vertical structure:

Answer 2

reporting: who reports to who

Question 3

horizontal structure:

Answer 3

communication: how do they talk to each other? IT, informal, or formal system

Question 4

Five organizational design alternatives

Answer 4

1. geographical
2. matrix
3. horizontal
4. virtual network
5. hybrid

Question 5

what is functional structure

Answer 5

Easy to understand; Activities grouped by common functions or similar knowledge.

Question 6

when would you want functional structure

Answer 6

• managers want a lot of control and hierarchy
• efficiency
• effectiveness
• when you have only a few products

Question 7

functional structure pros

Answer 7

• allows economies of scale within a department
• enables in-depth knowledge and skill development
• enables org to accomplish functional goals

Question 8

functional structure cons

Answer 8

• slow response time to environmental changes
• may cause decision pile up
• leads to poor horizontal coordination among departments
• less innovation

Question 9

what is divisional structure

Answer 9

product structure or strategic business units. i.e. organized by products

Question 10

when would you use divisional structure

Answer 10

• when you have multiple products

- functional would take a really long time to create products efficiently. in comparison

Question 11

divisional structure pros

Answer 11

• suited to cast change in unstable environment
• leads to customer satisfaction (product responsibility points are clear)
• involves high coordination across functions
• allows units to adapt to product, region, customer differences
• decentralizes decision making

Question 12

divisional structure cons

Answer 12

• eliminates economies of scale across departments
• leads to poor coordination across product lines
• eliminates in-depth competence and technical specialization
• makes integration and standardization across product lines difficult

Question 13

economies of scale

Answer 13

a proportionate savings in cost gained by an increased level in production

Question 14

functional vs divisional

Answer 14

functional:

• efficiency
• control
• vertical
• economies of scale

divisional

• flexible
• adaptable
• coordination

Question 15

geographical structure

Answer 15

• kind of like divisional but instead of different product categories they’re regions
• geographic if it’s ONE product but offered slightly differently in different regions
• horizontal coordination and highly adaptable within a region

Question 16

matrix structure

Answer 16

both product and function or product and geography are emphasized at the same time. generally happens when they don’t have enough people where each product line can have its own group of experts

Question 17

three conditions for matrix structure

Answer 17

1. scarce resources
2. want specialization but you have multiple products
3. environment is very uncertain -> you need all hands on deck for a product when shit hits the fan

Question 18

matrix structure pros

Answer 18

• achieves coordination to meet dual demands from customers
• suited to complex decisions in unstable environment
• flexible sharing of HR across products
• functional and product skill development
• medium-sized with multiple products

Question 19

matrix structure cons

Answer 19

• dual authority can be frustrating and confusing
• participants need good interpersonal skills and extensive training
• time consuming (i.e. meetings and conflict)
• need to adopt collegial and horizontal culture
• great effort to maintain power balance

Question 20

horizontal design

Answer 20

• activities/people are grouped around core processes
• instead of managers, orgs have process owners that coordinate the process
• instead of departments, orgs have self-managed teams
• org is flat, with few vertical levels

Question 21

process

Answer 21

organized group of related tasks and activities that work together to transform inputs into outputs that create value for customers

Question 22

horizontal structure pros

Answer 22

• enables rapid response to customer needs
• customer focused
• broader view of org goals
• focus on teamwork and collaboration
• improves quality of life for employees

Question 23

horizontal structure cons

Answer 23

• determining core processes to organize around is difficult and time-consuming
• requires major org changes
• traditional managers have to give up power and authority
• requires significant training
• can limit in-depth skill development

Question 24

virtual network design

Answer 24

functions such as accounting, marketing, manufacturing, etc. are outsourced to separate companies and coordinated by the central hub.
common with start ups, tech companies, companies with very high differentiation type of strategy bc they only focus on specific product or service they make

Question 25

virtual network structure pros

Answer 25

• extends capacity for small orgs to obtain talent and resources worldwide
• immediate scale and reach
• high flexibility
• reduced overhead

Question 26

virtual network structure cons

Answer 26

• lack of control
• managerially intensive; potential conflicts
• dependence on outside orgs
• potential for weak loyalty and culture -> you outsource everything else, why not me next
• limits coordination across functions

Question 27

hybrid design

Answer 27

• uses a combination of different structures in different parts of the organization. e.g. youve got your functional heads like VP of finance, HR, and then youve got horizontal for each process that has its own director and process owner
• purpose: To take advantage of the strengths of various structures and to avoid some of the weaknesses
• most orgs have hybrid strucutres

Question 28

how should orgs implement a hybrid structure?

Answer 28

the key is deciding which functions can/should be centralized (e.g. HR. legal) and which groupings (e.g. product, geography, process) will best serve the org’s goals

Question 29

symptoms of structural deficiency

Answer 29

• decision making is delayed or lacking in quality
• lack of innovative response to changes
• employee performance declines and goals are not met
• too much conflict is evident

Question 30

from most vertical to least

Answer 30

1. functional structure
2. functional with cross-functional teams, integrators
3. divisional structure
4. matrix structure
5. horizontal structure
6. virtual network structure

Question 31

more vertical = more _____ and promotes _____

Answer 31

control; efficiency

Question 32

more horizontal promotes ______ and ______

Answer 32

learning; innovation

Question 33

More vertical means that x is more:

• tasks
• hierarchy
• communication
• teams
• decision making

Answer 33

• tasks more specialized
• hierarchy more strict
• communication more vertical
• teams are few
• decision making more centralized

Question 34

More horizontal means that x is more:

• tasks
• hierarchy
• communication
• teams
• decision making

Answer 34

• tasks more shared
• hierarchy more relaxed
• communication more horizontal
• teams are many
• decision making is decentralized

Question 35

vertical information linkages: definition

Answer 35

linkages that flow along the chain of command. designed for control of the org

Question 36

vertical information linkages: categories

Answer 36

• hierarchy
• rules and plans
• vertical information systems (e.g. reports, memos)

Question 37

horizontal information linkages: definition

Answer 37

horizontal information linkages create direct connections across departments. they help to increase horizontal coordination

Question 38

horizontal information linkages: categories

Answer 38

• IT systems
• direct contact
• task forces
• full-time integrators (e.g. project managers)
• teams