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    Class 3:
    The Strategic Design Lens

    • Objectives
    • Introduce the basic concepts and approaches of the strategic design perspective on organizations
    • Provide overview of fundamental principles of organizational design at all levels of the organization
    • Identify topics for organizational analyses

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    3 Perspectives on Organizations

    • Strategic Design Lens
    • Sees organizations as social systems designed to achieve strategic goals
    • Political Lens
    • Sees organizations as arenas for conflict and competition
    • Cultural Lens
    • Sees organizations as places where there are social and personal identities carried by people

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    Strategic Design
    begins with …

    identifying the strategy

    After Identifying the Strategy…
    3 Building Blocks of Strategic Design

    • Grouping Structure
    • Linking Mechanisms
    • Resource Alignments

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    Grouping

    • Drawing boundaries around clusters of tasks or activities to define jobs, departments, processes
    • Differentiation

    Grouping Structures

    • Functional
    • Divisional – Product
    • Divisional – Market
    • Divisional – Geographic
    • Matrix
    • Front Back

    Dell’s Functional Structure

    *

    Dell groups all employees who perform tasks related to assembling personal computers into the manufacturing function and all employees who handle Dell’s telephone sales into the sales function. Engineers responsible for designing Dell’s computers are grouped into the product development function, and employees responsible for obtaining supplies of hard discs, chips, and other inputs are grouped into the materials management function. The functional structure suited the needs of Dell’s growing company, especially as it battled with Compaq, now a part of HP, and Gateway for control of the personal computer market—a battle in which it is currently winning hands down.

    The Functional Structure

    Advantages

    • Coordination
    • Communication
    • Skill improvement
    • Motivation
    • Controlling

    Disadvantages

    • Limited growth under existing structure
    • Limits to number of products and services
    • Coordination difficulties at larger size

    *

    The first issue in organizational design is to choose a division of labor or way to group different jobs together to best meet the needs of the organization’s environment, technology, and human resources. Most organizations group jobs together by function and thereby develop a functional structure.

    A function is a group of people working together who possess similar skills or use the same kind of knowledge, tools, or techniques to perform their jobs.

    A functional structure is an organizational structure composed of all the job specializations that an organization requires to produce its goods or services.

    The Exhibit on the next slide illustrates the functional structure of Dell.

    The advantages of a functional structure are a result of the division of labor and specialization. The advantages can be categorized as coordination advantages and motivation advantages. The disadvantages occur as a result of growth in size. As the firm grows, coordination becomes more difficult.

    Divisional Structures

    Product

    Market

    Geographic

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    If an organization grows, it often employs a second grouping by division and adopts a more complex form. A division is a group of functions created to specialize in making and selling a particular kind of good or service.

    When an organization groups people and functions so that it can produce a wide variety of different products, it uses a product structure. Each product division contains the functions necessary to service the specific goods or products. A product structure is illustrated on the next slide.

    A market structure groups functions into divisions to respond to the needs of particular types of customers.

    A geographic structure groups functions by location. If it adopts a global geographic structure, an organization locates different divisions in each of the world regions in which it operates.

    Using a divisional structure solves the problems created by functional structures when an organization is larger in size.

    Product Structure

    *

    When an organization chooses to group people and functions so that it can produce a wide variety of different products, it moves to a product structure. Each product division contains the functions necessary to service the specific goods or products. Figure 16.3(a) shows the product structure used by a company like General Electric, which has many separate product-oriented divisions—for example, divisions responsible for producing light bulbs, aerospace products, and appliances. Each of these divisions has its own set of functions (such as accounting, marketing, and research and development).

    Market Structure

    *

    Sometimes the most pressing problem facing an organization is to deliver products to customers in a way that best meets customer needs. To accomplish this goal, an organization is likely to choose a market structure and group functions into divisions to respond to the needs of particular types of customers. (See Exhibit 16.3B.) For example, companies such as Staples and Office Max serve individual customers, but they also have large accounts with small-business customers and accounts with large companies and government agencies.

    Geographic Structure

    *

    When organizations expand rapidly both at home and abroad, functional structures can become problematic because managers in one central location may find it increasingly difficult to deal with the different issues facing different regions. In these cases, a geographic structure, in which divisions are broken down by location, is often chosen (see Exhibit 16.3C). To achieve Federal Express’s corporate mission of providing next-day mail service, CEO Fred Smith chose a geographic structure with regional divisions.

    The Divisional Structure

    Advantages

    • As size and complexity of organization increases, it facilitates
    • Coordination
    • Communication
    • Motivation
    • Autonomy

    Disadvantages

    • Increased costs
    • Duplication of functions
    • Miscommunication across divisions
    • Competition for resources
    • Conflict

    *

    This slide lists the advantages and disadvantages of divisional structures. Although the divisional structure has the advantages of solving the disadvantages of the functional structure for larger firms, it can cost more, be less efficient, be subject to miscommunication, and create conflict and competition between divisions.

    The Matrix Structure

    Complex network of reporting relationships among product teams and functions

    People and resources grouped by

    Function

    Product

    *

    In a matrix structure, managers group people and resources in two ways simultaneously: by function and by product. Employees are grouped by functions to allow them to learn from one another and become more skilled. Employees are also grouped into product teams in which members of different functions work together to develop a specific product.

    Each person reports to two bosses: a functional boss and the boss of their product team. Exhibit 16.4 illustrates a matrix structure.

    A company typically uses a matrix structure for three reasons:

    • It needs to develop products very rapidly.
    • It needs to maximize communication and cooperation between team members.
    • Innovation and creativity are the key to the organization’s continuing success.

    A Matrix Structure

    *

    Exhibit 16.4 illustrates a matrix structure. The vertical lines show the functions of an organization, and the horizontal lines show the product teams responsible for developing or manufacturing the organization’s products. At the intersection of the lines are employees who report to both a functional boss and a product boss. The members of the teams are each developing a specific product. One team in Figure 16.4 is working on the Alpha computer workstation for small businesses; another team is working on the Beta workstation designed for large corporate customers.

    The Matrix Structure

    Advantages

    • Coordination
    • Fast new product development
    • Communication
    • Cooperation
    • Innovation
    • Creativity
    • Autonomy

    Disadvantages

    • Role conflict
    • Role ambiguity
    • Stress
    • Unclear individual contributions to team performance

    *

    Members of product teams are generally highly qualified and skilled employees with advanced degrees and expertise in their fields. The matrix structure provides a work setting giving employees freedom and autonomy. These jobs enjoy a high motivating potential score.

    There are several properties that can cause job dissatisfaction. Two bosses can make conflicting demands on an employee. The loose system of reporting relationships can make employees vulnerable to role ambiguity. Role conflict and ambiguity result in stress.

    The matrix structure is associated with the most complex coordination and motivational issues.

    The Front/Back Structure

    • Front end faces the customer
    • Front end grouped by market (geography or customer)
    • Front end includes marketing, sales, distribution, customer service
    • Back end organized by product
    • Back end includes product development, production, logistics

    A Wide Span of Control

    *

    This Exhibit illustrates a wide span of control.

    A Narrow Span of Control

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    This Exhibit illustrates a narrow span of control.

    Linking

    • Creating links across organizational boundaries
    • Integration

    Examples of Linking Mechanisms

    • Liaisons
    • Cross-functional teams
    • Permanent
    • Temporary
    • IT systems
    • Formal reporting structures & systems

    Using a Team to Increase Coordination

    *

    This Exhibit shows how a team can increase coordination between functions.

    A Cross-Functional Team Structure

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    This Exhibit shows an example of a cross-functional team structure formed to facilitate mutual adjustment.

    Alignment

    • Positioning elements of the organization (such as rewards and incentives) to provide access to the resources and the incentives to do the tasks assigned

    Examples of Resource Alignments

    • Performance measurement systems
    • Rewards & incentives
    • Resource allocation
    • Financial
    • Human
    • Capital
    • Human resource development
    • Training & development

    Dynacorp Case

    • What is the strategy or the strategic direction of Dynacorp?

    *

    Dynacorp’s CEO has identified the main problems as…

    • High costs
    • Slow product cycles
    • Need to create more value for the customer

    *

    Dynacorp Case

    • What design option would you choose?
    • First choice
    • Second choice

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    Grouping Structures

    • Functional
    • Divisional – Product
    • Divisional – Market
    • Divisional – Geographic
    • Matrix
    • Front Back

    Dynacorp Case Discussion

    • Which of the problems of the current design does the proposed design address?
    • What problems would it not address?
    • Are there any new problems that will be created?

    *

    Dynacorp Case Discussion

    • What linking and alignment mechanisms would you propose to make the grouping arrangement more effective?

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    Take-Aways from Dynacorp

    • Changing the grouping structure can be disruptive
    • Dynacorp needs to weigh the advantages of a new structure vs. the possibilities of using linking and alignment to strengthen the existing system
    • If Dynacorp chooses a new structure, its success will also depend on designing effective linking and alignment mechanisms

    *

    Team Projects

    Criteria for Organizational Analysis Projects

    • The initiative must already be underway, but not in existence for too long a period of time (@ 1 year or less than 1 year)
    • The initiative must involve a reorganization or change in the structure (for ex., different reporting relationships or new departments)
    • At least 6 individuals who are involved in the initiative must be individually interviewed (in person, via Zoom or Skype or other video format following health guidelines)
    • You can choose to do this individually or within a group
    • Groups must be @5 people

    Examples of Organizational Analyses

    • ProMedica
    • Reorganization of purchasing function to centralize it
    • ProMedica
    • Introduction of a new department-acute health care delivery at home
    • UT Dept. of Environmental Health
    • Combination of 2 departments to create a new group
    • Flower Hospital
    • Reorganization of the nursing structure/changing roles
    • Dimensions Credit Union
    • New C-suite level added with new reporting relationships

    Final Paper: Grouping Structure Examples

    Because the residents left, they were replaced by Nurse practitioners. Previously, there was a resident available 24 hours to manage care for the stroke patients of behalf of the Attending MD. Since the change, the residents were replaced by 2 nurse practitioners, who rotate days. These NPs only available to care for the strokes patients 8a-5p. Since there is no one in house overnight to care for the patients, the nurses must call the Attending MD at home if they need anything that cannot wait until morning. Because the Neuro/Stroke Attending MD cannot be in house at all times, the ICU team may take over care for critical stroke patients in the Medical/Neuro ICU while the Hospitalist (Attending Medicine MD) may take over care for noncritical stroke patients on the Neuro/Stroke MedSurg Unit.

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    Team Structure

    Grouping: Original Alignment

    MSP Analytics Manager

    MSP Business Analysts (15)

    Reporting Analysts (10)

    Reporting Analyst Manager

    Analysts (6)

    RPO R&A Manager

    RPO Technology & Analytics Director

    President

    *

    Team Structure

    Grouping: New Alignment

    Business Intelligence Manager

    BI Consultant

    BI Consultant

    BI Consultant

    BI Analyst (4)

    BI Analyst (4)

    BI Analyst (4)

    Reporting Analyst Manager

    Reporting Analyst Lead

    Reporting Analysts (7)

    COO

    Technology & Analytics Director

    *

    Organizational Structure

    Before

    After

    Organizational Analysis Projects

    • Discussion Questions
    • Introductions
    • Why are you interested in this topic?
    • What thoughts do each of you have about a specific organizational change initiative that you could study?
    • What ideas do each of you have about an organization where you could study this topic/initiative?

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