Module 3: Organisational Configurations

Question 1

Simple configuration

Answer 1

• Low functional specialisation
• Low product/service/customer orientation

Question 2

Simple configuration: information processing, coordination, & control

Answer 2

• 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.

Question 3

Simple Configuration: goals

Answer 3

Flexible, but not usually efficient or effective.

Question 4

Simple configuration: why is it not efficient or effective?

Answer 4

• 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.

Question 5

Functional Configuration

Answer 5

• High functional specialisation
• Low on product/service/customer orientation.

Question 6

Functional configuration: information processing, coordination, & control.

Answer 6

• 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).

Question 7

What is the functional specialisation dimension?

Answer 7

Work divided into specialised activities (e.g. functions/ departments/ subunits).

Question 8

What is the product/service/customer orientation dimension?

Answer 8

Divisions with product or customer names.

Question 9

Lion company Case study: Divisional Structure

Answer 9

• Australian Division

Question 10

Four basic configurations (Miles & Snow, 1978)

Answer 10

• 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.

Question 11

Practical Design questions relating to organisational complexity (Burton, DeSanctis, & Obel, XXXX)

Answer 11

• 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.

Question 12

Divisional configuration

Answer 12

• Low on functional specialisation
• High on product/service/customer orientation

Question 13

Divisional configuration: information processing, coordination, & control

Answer 13

• 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).

Question 14

What is a division of a product/customer?

Answer 14

• A division can be a SBU, Product Business, Customer Business, Country Business (each division has its own market & customers).

Question 15

Divisional Configuration: Advantages

Answer 15

• 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.

Question 16

Divisional Configuration: Disadvantages

Answer 16

• 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).

Question 17

Example of disadvantage at IBM:

Answer 17

• A customer goes to buy consulting services & network computers.
• The customer must deal with both divisions that manage these products.

Question 18

What can a firm do about an inefficient division?

Answer 18

Each division can be efficient using a functional configuration. If a division becomes ineffective, it can be sold off in the marketplace.

Question 19

Lion Case Study: Lion Needs to increase efficiencies within its divisions!!

Answer 19

• Each division should have functional subunits with WELL-DEFINED JOB ROLES to increase efficiency gains.

Question 20

Matrix Configuration

Answer 20

• High functional specialisation
• High on product/service/customer orientation

Question 21

Functional configuration: information processing, coordination, & control

Answer 21

• 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.

Question 22

Functional configuration: Advantages

Answer 22

• Matrix structure can realise both efficiency & effectiveness.

Question 23

Functional configuration: Disadvantages

Answer 23

• 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).

Question 24

What traits/skills should matrix managers have to effectively manage a Unit?

Answer 24

• 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.

Question 25

What is the Jello Effect in a Matrix Organisation?

Answer 25

This is the name for a situation where a small change in one part of the organisation requires change & adjustment throughout the organisation.

For example, in a matrix organisation, a change in one function (or projects) frequently requires adjustments in a number of other functions (or projects).

Question 26

What are cross-organisational mechanisms to coordinate across the dominant hierarchy in the firm?

Answer 26

(A) All of which consider issues which are not dealt with well or quickly within the hierarchy in a matrix org.:
- lateral relationships
- liaison roles
- various coordinating committees

(B) Introducing middle management can be an effective way to support & manager a complex matrix configuration
- Jello effective: matrix includes a small number of units - 4 or divisions.

Question 27

Tell Tale signs of a matrix in trouble

Answer 27

• Overload of decision at the executive level as matrix managers are not able to solve problems (between them).
• Problems are not deal with at all & opportunities are lost (massive decisional delays).
• Budgets are exceeded/ operations are not coordinated.
• Resource utilisation is lost or inefficient,
• Employees are confused & unhappy
• Subunits are spending excessive time coordinating with other subunits to the detriment of subunit performance.