Chapter 12 Flashcards
What is organizational structure
- Location of decision making responsibilities
- Formal division of the company into subunits
- Establishment of integrating mechanisms to coordinate the activities of subunits
What are the components of organizational structure
- Structure
- Control and incentives
- Processes
- Culture
What are controls
Metrics used to measure the performance of the subunits and make judgement about how well managers are running those subunits
What are incentive
Devices used to encourage desired employee behaviour and are very closely tied to performance metrics
What are organizational processes
Refers to the manner in which decisions are made and work is performed within the company
What is culture
Norms and value systems that are shared among employees of the company
What is human capital
Employees
What are the dimensions of organizational structure
- Vertical differentiation
- Horizontal differentiation
- Integrating mechanisms
What is centralization (Vertical Differentiation)
A condition where decision making authority is concentrated at a high level in the management hierarchy
What is decentralization
Condition where decision making authority is vested in lower level managers or other employees
What are the arguments for centralization
- Can facilitate coordination
- Help ensure that decisions are consistent with the companys objectives
- Can avoid duplication of activities that occur when similar activities are carried
- Can give top level managers the means to bring about needed major organizational changes
What are arguments of decentralization
- Top management can become overburdened when decision making authority is centralized
- Give employees more responsibility, they will work harder
- Permits greater flexibility - more rapid response
- Can result in better decisions
- Can increase control and be used to establish autonomous self contained units
When does centralization work best
- Overall company strategy
- Financial expenditures
- Financial objectives
- Legal issues
- Realization of economies of scale
When does decentralization decisions work best
- Sales decisions
- Local adaptations
- Environment characterized by high uncertainty and rapid change
- Functional decisions related to production, marketing, R&D, human resource
What are tall hierarchies
Lots of layers of management
What are flat hierarchies
Few layers
What are span of control
- Number of direct reports that the manager has
- Nature of work being supervised
- Extent to which the performance of subordinates are visible
- Extent of decentralization within a company
What are the problems with tall hierarchies
- Tend to omit data when transmitting information
- Lead senior managers making important decisions based on inaccurate information
- Expensive
- Difficult to change to protect their turf and jobs
What is delayering
An attempt to reduce number of levels of management to boost a companys performance
What are the structural forms
- Functional structure
- Multidivisional Structure
- Matrix structure
What are the functional structure
Division of labour with different functions focusing on different tasks
What are the aspects of functional structure
- Works well for a company in a single line of business
- Harder to assess if the business is performing well or poorly
- Lack of accountability because there is no individual or management team responsible for the performance of each business
What are the multi-divisional structure
The company is divided into different divisions, each responsibile for a distinct business area
What are the aspects of multi divisional structure
- Set up as a self contained, largely autonomous entitiy
- Responsibility for functional decisions and business level strategy is decentralized to the divisions
- Performance is highly visible
What is the matrix structure
Team reports to multiple leaders
What are the aspects of matrix structure
- Lead to conflict or power struggles
- Difficult ascertain accountability because one side can always blame others
- Matrix structure can work providing that there are clear lines of responsibility
What are formal integrating mechanisms
- Used to coordinate subunits vary in complexity from simple, direct contact and liaison roles, to teams, to a matrix structure
- Greater need for coordination between subunits
- More formal integrating mechanisms
What is knowledge network
- System for transmitting information within a company that is based not on formal organizational structure button informal contracts between managers
- Managers in different locations are linked together
What are organization controls
Process where managers regulate the activities of individuals and units so that they are consistent with goals and standards of a company
What are methods of control
- Personal Controls
- Bureaucratic Controls
- Output Controls
- Incentive Controls
- Market Controls
- Control Through Culture
What are personal controls
- Controls by personal contract with and direct supervision of subordinates
- Consists of making sure that employees and units behave consistently with goals
What are the limitations of personal control
- Excessive supervision can be demotivating and build resentment
- Costly because managers must devote considerable time and attention
- Starts to breakdown when a company grows in size and complexity
What is bureaucratic controls
Control through formal system of written rules and procedures, prescribes what employees and units can and cannot do
What are output controls
- Sets goals for units or employees and monitoring their performance against these goals
- Performance - reward program
- They help facilitate decentralization and give managers greater autonomy
- Managers must achieve these goals consistently with companys values and standards
What are market controls
- Involve regulating the behaviour of employees and units within a company by setting up internal market for valuable resources such as capital
- Act as internal investment bank, allocating capital funds between the completing claims of the different product divisions based upon an assessment of their future performance
What are incentive controls
- Devices used to encourage and reward appropriate employee behaviour through incentives such as bonuses
- Closely tied with performance metrics
- Designed to facilitate self control and peer control
What are organizational culture
Values, norms and assumptions that are shared among employees
What are values
Abstract ideas about what employees believe to be good, right and desirable
What are norms
Social rules and guidelines that prescribe the appropriate behaviour in situations
What are expectations of organizational culture
- Influence the way employees behave
- Influence decisions
- Influence that the company pays attention to
- Influence companys strategy and performance
What is organizational processes
- Formulating strategy
- Allocating resources
- Evaluating new product ideas
- Handling customer inquiries and complaints for improve product quality
- Evaluating employee performance
What is a single business company
Organized along functional lines
What does the need for integration for single business depend on
- Business level strategy of the company
- Nature of the environment where the company competes
- The need is for companies that have product development and innovation
What are bureaucratic controls (LOW)
Forms of budget used to allocate financial resources to each function and control spreading by functions
What are output controls (LOW)
Used to assess how well a function is performing
What are low integration
Minila integration
What are high integration
Company that faces an uncertain, highly turbulent, competitive environment where rapid adaptation to changing market conditions are required and integration is needed to survive
What are bureaucratic controls (HIGH)
Used for financial budgets
What are output controls (HIGH)
Applied to the different functions and cross functional product development teams
What are performance ambiguity
Be an issue when it is difficult to identify precision the reason for high or low performance of a team
What are multi business company
- Organizes itself along divisional lines
- Extent of integration between functions within divisions may differ from division to division depending on the business level strategy
What are related diversification
Strategy that tries to realize economies of scope and need for integrating mechanisms
What are unrelated diversification
Company operates well with minimal or no integrated mechanisms between divisions
What are the challenges for a diversified company pursuing a strategy related to diversification
Leverage competencies across product divisions and realize economies of scope
What are the 2 control problems
- Have to find control mechanisms that induces divisions to cooperate with each other
- Need to find a way to deal with performance ambiguities when divisions are tightly coupled with each other
