Module 3: Organisational Configurations Flashcards
Simple configuration
- Low functional specialisation
- Low product/service/customer orientation
Simple configuration: information processing, coordination, & control
- information processing: executive is at the centre of information flows (centralised at top management)
- coordination: executive coordinates activities & work tasks broken down & assigned to employees on an as needed basis. Task assignment can change frequently.
- Control: executive controls operations - main contact with the market, customers, suppliers, & clients of the firm.
Simple Configuration: goals
Flexible, but not usually efficient or effective.
Simple configuration: why is it not efficient or effective?
- not efficient because employees do not have detailed job descriptions & may be asked to do many tasks for which they may not be fully skilled in (remember simple structures are more for start-ups and small organisations).
- not effective because coordination of activities & decision-making are both undertaken by the executive. Exec is at the centre of information processing - and it can be difficult for one person to manage all information - especially as information changes and there is the need to adjust the firm’s direction or seek innovative opportunities. Focus can be narrow - not very effective for firm’s customers who vary needs overtime.
Functional Configuration
- High functional specialisation
- Low on product/service/customer orientation.
Functional configuration: information processing, coordination, & control.
- information processing: accommodates a high degree information flows, department manager at the centre of information flows (leveraging economics of scale; efficiency-focused).
- coordination: firm tasks are broken down & assigned to subunits, & coordination of these subunits is through hierarchy (using a continuation of rules & directives)
- control: high vertical differentiation, functional manager develops goals & strategy, & each function processes information on its own, so executives do not need to know all problems in each unit (offloading information burden on execs).
What is the functional specialisation dimension?
Work divided into specialised activities (e.g. functions/ departments/ subunits).
What is the product/service/customer orientation dimension?
Divisions with product or customer names.
Lion company Case study: Divisional Structure
- Australian Division
Four basic configurations (Miles & Snow, 1978)
- The four basic configurations can be used as building blocks of more complicated structures.
- Can also be used to analyse a team, division, department, or whole organisation.
- A division could use a functional structure, matrix structure, or have another division (department) under it.
Practical Design questions relating to organisational complexity (Burton, DeSanctis, & Obel, XXXX)
- the width of specialisation (regarding the number of functions/ departments in the firm).
- the span of control (also regarding width, but measuring the number of individuals having to report to a manager).
- the delayering of the firm to eliminate middle management (regarding level of vertical differentiation - decision-making)
- the scope in a divisional configuration
- the limitation on the number of functions & division in the matrix organisation.
Divisional configuration
- Low on functional specialisation
- High on product/service/customer orientation
Divisional configuration: information processing, coordination, & control
- information processing: information processing demands are lower as executives oversee relatively AUTONOMOUS sub-units (SBUs), information flows to headquarters &
- Coordination: high on horizontal differentiation because each SBU is responsible for its own market and customers, works best when there is limited coordination for top, inter-divisional coordination & dependency is low (each SBU aims to carry out activities to meet the targets set for their markets & broad corporate objectives)
- Control: low on vertical differentiation, divisional (or product) manager reports to the head quarters (exec team), head office role is in charge of bank & central planning (general policy vs detailed operations).
What is a division of a product/customer?
- A division can be a SBU, Product Business, Customer Business, Country Business (each division has its own market & customers).
Divisional Configuration: Advantages
- Aims to be effective with its external focus on the product, customer, or region.
- More market responsive than functional configuration
- Divisions are relatively autonomous - make decision, meet needs of the marketplace in creative ways - this fosters opportunity for growth.
Divisional Configuration: Disadvantages
- Each division is relatively independent, therefore, this form does not handle inter-divisional dependencies well (i.e., difficult to coordinate divisions &/or duplication of efforts).
Example of disadvantage at IBM:
- A customer goes to buy consulting services & network computers.
- The customer must deal with both divisions that manage these products.
What can a firm do about an inefficient division?
Each division can be efficient using a functional configuration. If a division becomes ineffective, it can be sold off in the marketplace.
Lion Case Study: Lion Needs to increase efficiencies within its divisions!!
- Each division should have functional subunits with WELL-DEFINED JOB ROLES to increase efficiency gains.
Matrix Configuration
- High functional specialisation
- High on product/service/customer orientation
Functional configuration: information processing, coordination, & control
- Information processing: Executives responsible for both functional & divisional dimensions - to set policy, priorities, & resolve conflicts among the subunits; can handle more information than other structures.
- coordination: coordination problems are handled by the matrix managers. Matrix managers make multiple, variable trade-offs, involving both the function & division.
- control: top management relies heavily on functional & divisional managers for detail, ongoing coordination adjustments so to meet firm priorities e.g., dual coordination across functions & divisions leads to dual responsibility production (function) & product (division) manager; resolving conflicts leads to lateral & vertical trade-offs - who wins out?
*a matrix org. can be high on both horizontal & vertical differentiation.
Functional configuration: Advantages
- Matrix structure can realise both efficiency & effectiveness.
Functional configuration: Disadvantages
- If matrix is not managed well, it can be neither efficient nor effective.
- Other key concerns: reconciling lateral (functions) & vertical (divisions/products) subunits, information overload, excessive meetings, & decision delays.
(Emphasis may lie on the function or may lie on the product).
(Consider cost vs benefits; additional costs of coordination - hence matrix structure is to be justified beyond the functional or divisional configuration).
What traits/skills should matrix managers have to effectively manage a Unit?
- need to be adaptable & handle uncertainty.
- have a willingness to consider complicated trade offs.
- be able to negotiate realistic solutions
- be focused on achieving best results for the unit.
