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Week 7

Lecture 7 Organising Part 1:


Structure & Designing Adaptive
Organisations

• Managing Change
Textbook chapters: 7 (pp. 119 –
125) 9, 10
Recap of Week 6 Topics
1. Review of Management Functions Planning, Organising, Leading, Controlling

2. Kinds/types of managers Top, middle, first-line, team leaders

3. Management skills Technical, human (people), conceptual,


motivational
4. Managerial roles (Mintzburg)  Figurehead, Leader, Liaison
 Monitor Disseminator, Spokesperson
 Entrepreneur, Disturbance handler,
Resource Allocator, Negotiator
5. Planning & SMART goals Specific, Measurable, Attainable, Realistic,
Timely
6. Different types of plans & uses Strategic, Tactical, Operational

2 Topics useful for Second Workbook Assignment :


• Types of management skills required
• Setting SMART goals in planning
Week 7 Topics

1. What organising is ?
2. Four departmentalisation approaches to organisational
structure & team structure
3. The factors that influence organisational
design/structure focusing on strategy and environment
4. Kurt Lewin’s 3 step approach to organisational change.
5. The 5 stages of organisational decline.
6. Different methods that managers can use to minimise
resistance to change.
Why study Organising?

Organizations are changing very fast and


people within them are struggling to find their
place.
People need to understand how their orgs
work if they are to work well within them.
Henry Mintzberg said that people ask
important questions such as ‘What parts
connect to one another? How should
processes and people come together?
Why study structure &
adaptive organisations?
 The need to choose & implement the
types of org structures that best arrange
resources to serve the organization's
mission and objectives
Ultimate purpose : to create an alignment
between g structures and contingency
factors such as strategy, environment &
technology
Topic 1: What is organizing?
Where Organising lies in the Functional or
Process Approach to Management

Source: Samson & Daft textbook


What is Organising?

Deciding:
where decisions will be made
who will do what jobs and tasks
who will work for whom
Organisation Structure

 The way pieces of the organisation


fit together internally (who does
what, who is accountable to who?)
 It reflects the strategy or the way
organizations cope with changing
market conditions or innovative
production technology.
 An organisation's strategy : its plan for
the whole business that sets out how
the organisation will use its major
resources.
Organisational Structure

The framework in which the organisation defines


how tasks are divided, resources are deployed and
departments are coordinated.
 The vertical and horizontal configuration of departments,
authority and jobs within a company
 Answers questions:
• Who reports to whom?
• Who does what?
• Where is the work done?
 Design of systems to ensure effective coordination of
employees across departments.
Organisational Structure:
Basic Concepts
 Authority - The formal and legitimate right of a manager to
make decisions, issue orders and allocate resources
 Responsibility – The duty to perform an assigned task or
activity
 Delegation – Process managers use to transfer authority and
responsibility to positions below them in the hierarchy
 Centralisation and decentralisation
Centralisation -The location of decision authority is located near
top organisational levels.
Decentralisation -The location of decision authority is located
near lower organisational levels.
 Span of control - refers to the number of subordinates or
direct reports a supervisor is responsible for
Topic 2: Types of
Organizational Structures
Departmentalization & Team Work
Traditional Vertical Structure (tall) Versus Flexible Horizontal (flat) Structure
Types of
Departmentalisation

Divides work into separate


units/departments responsible for
particular task

Fundamental characteristic of org


structure

Types include:
1. Functional departmentalisation
2. Product departmentalisation
3. Geographic departmentalisation
4. Customer (client-based)
departmentalisation
Newer organisation structures
Team structures
Network structures
Functional Departmentalization

An organisation structure in which


positions are grouped into
departments based on similar skills,
expertise and resource use.
Works well for small organisations
producing few products or services.
Functional Departmentalisation
2. Product Departmentalization
Organizes employees based on the product line/services (also
known as SBUs: Strategic Business Units) they work with.
2. Product Departmentalization

Advantages:
• Managers specialise, but have broader experiences &
expertise related to an entire product line
• Easier to assess work-unit performance.
• Decision making is faster.
Disadvantages:
• Duplication of activities.
• Difficult to coordinate across departments.
3. Customer Departmentalisation

 Organises work
and workers into
separate units
responsible for
particular kinds of
customers.
4. Geographic Departmentalization

Organizes work
and workers into
separate units
responsible for
doing business
in particular
geographical
areas.
Why work teams?
Team-based
structure: where
the organization
creates a series of
teams to
accomplish
specific tasks and
coordinate major
departments
Modern forms of
org structures
Team-Based Structure

 Team-based structure: emphasis is on horizontal


communication and information sharing, because
representatives from all functions are coordinating their
work and skills to complete a specific organisational task.
 A small number of people with complementary skills
who hold themselves mutually accountable for pursuing a
common purpose, achieving performance goals and
improving interdependent work processes.
 91 per cent of American organisations use work teams
to solve specific problems.
Team-Based Structures
Source: Campling et al, (2008) Figure 9.5
 A network structure is the one in which more than one organization combine
to produce a good or provide a service
 Either through a partnership for a particular venture, or it can hire others to
handle one or more of its functions (outsourcing), for example, marketing,
production, sales and so on.
H&M distributes its functions to different companies which, in
this case, are present in different countries: product
development company in Australia, Call center company in New
Zealand, the Accounting company in Australia, Distribution
company in Singapore and Manufacturing company in Malaysia.
Watch this clip: Steve Job on Organisation
Structure and answer a few questions
https://www.youtube.com/watch?v=xcTtQ0
hiHbE
PAUSE
Organisational Design

– Choosing and implementing


structures that best arrange
resources to serve the
organization's mission and
objectives
– Ultimate purpose : to create
an alignment between
supporting structures and
contingency factors such as
the environment, strategy &
technology
Alignment between structures,
strategy & environment

• Firms restructure to become leaner,


more nimble & efficient in competitive
global environment e.g. Qantas
• For the organisation to deliver its plans,
the strategy & structure must be woven
together seamlessly
• Organisations need to respond to both
internal and external environmental
changes to be successful – implies that
strategy and structure must be woven
together.
Organisational Design

Campling et al (2008) Text, Figure 10.1


Organisational Design

Two broad choices of structure:


– Mechanistic design (tall structure):
• bureaucratic
• rigid, vertical, centralised structure

• lots of rules & procedures & clear lines of authority

– Organic design (flat structure):


• adaptive
• wider span of control so more horizontal, decentralised
structure
• lots of delegation of authority to lower levels
Mechanistic vs Organic Designs
Source Campling et al. (2008) , Figure 10.2
Bureaucratic, Traditional Vertical Structure Versus
Organic Flexible Horizontal Structure
Topic 3

The factors that influence organisational


design/structure focusing on strategy and
environment
Factors shaping/influencing organising
design/structure
• Structure reflects the scale of
operations
• Structure follows strategy
• Structure reflects the environment
• Structure fits the technology
Factors that Influence
Organisational Design/Structure

1. Scale : As organisations grow in numbers, products,


roles, location, so does its complexity. Eg: BHP Billiton
head office is in Melbourne & it employs 38,000 staff
throughout 25 different countries.
2. Strategy : What you do to achieve the goals set by the
CEO? – e.g. do you adopt differentiation or cost-
leadership strategy?
3. Environment : The impact of both the external and
specific environment – e.g. is the environment stable or
unstable??
4. Technology : A combination of resources, knowledge
and techniques that convert inputs into outputs
Structure & Strategy: Inseparable
Structure & Strategy: Inseparable
Strategy and structure are intertwined….
one cannot exist without the other

Father of Strategy : Pioneering Minds


What exactly is strategy?
Let’s examine what Michael
Porter has to say particularly
about 2 types of strategies:
Cost Leadership &
Differentiation
American academic known for his theories
on economics, business strategy,
Watch this video clip & answer the following
questions …….

https://www.youtube.com/watch?v=FzBbYhO0
X0Q
• PAUSE
Porter’s Generic Strategies
 Porter proposed two generic competitive or business-
level strategies that organisations can adopt:
1 Differentiation: where organisation attempts to
develop innovative products unique to the market.
Strategic goals include differentiation, innovation and
flexibility.
2 Cost leadership: where organisation strives for
internal efficiency. Strategic goals include cost leadership,
efficiency and stability.
 The strategies of differentiation or cost leadership
require different structural approaches so managers try
to pick strategies and structures that are compatible.
Examples of Companies Practicing
Cost Leadership Strategy

 IKEA has successfully combined low cost with good quality, and
its “democratic designs” that balance function, quality, design,
and price giving IKEA a competitive edge.
 Payless ShoeSource is a discount retailer that sells inexpensive
shoes for men, women, and children. Their advertising slogans
such as”Why pay more when you can Payless?” and”You could
pay more, but why?” consistently preach a low-price message.
 Supercuts makes clear their longstanding cost leadership strategy
by noting, “A Supercut is a haircut that has kept people looking
their best, while keeping money in their pockets, since 1975.”
 7-Eleven stores offers $1.00 coffee or iced coffee, sometimes on
specific weekdays. Adding a chocolate bar or lottery ticket would
increase the total bill, and make up for any loss on coffee price
Source: https://opentextbc.ca/strategicmanagement/chapter/cost-
leadership/
When to use
tall mechanistic structure
 Influenced by the strategy & the environment it operates in
 When strategy is stability oriented such as cost leadership –
choice of org design should be based on the premise that little
significant change will be occurring in the external environment
 Hence plans can be set up and operations programmed to be
routinely implemented.
 To best support this strategic approach, org should be
structured to operate in a well defined and predictable way so
most likely to adopt a functional approach.
 With more centralised authority, many rules and procedures, a
precise division of labour, narrow spans of control and formal
means of coordination
 Eg McDonalds and KFC
When to use an
organic flat structure
 When strategy is growth oriented such as
differentiation and likely to change frequently, the
situation is more complex, fluid and uncertain.
 Operations and plans are likely to have short life spans
and require frequent and even continuous
modification over time.
 So most suitable to use a structure that allows for
internal flexibility and freedom to create new ways of
doing things – most characteristic of empowerment
found in adaptive orgs using more organic design
alternatives – such as team and network structures.
 Especially applicable to orgs based on new digital or
information technology
Relationship between structure and strategy

Differentiation:
Growth oriented

Cost leadership:
Stability oriented

 Porter proposed two generic competitive or business-level strategies that organisations


can adopt:
1 Differentiation: where organisation attempts to develop innovative products unique
to the market. Strategic goals include differentiation, innovation and flexibility.
2 Cost leadership: where organisation strives for internal efficiency. Strategic goals
include cost leadership, efficiency and stability.
 The strategies of differentiation or cost leadership require different structural
approaches so managers try to pick strategies and structures that are compatible.
Strategy also has to be aligned with the environment –
hence aligning Structure to the Environment

Strategy also integrates the firm with its external environment. This means that the
structure of the firm must align with external conditions. The problem this presents is
that the environment constantly changes and the firm has little control over the
changes. Strategy and structure must be flexible to adapt to changes in the
environment.
Organisational Design:
Fitting structure to the environment

Environmental Certainty
- Composed of relatively stable and predictable
elements
- Therefore able to succeed with relatively few
changes in the goods or services produced or in the
manner of production over time.

So….bureaucratic and mechanistic designs are quite adequate


under such conditions.
Organisational Design:
Fitting structure to the environment
Environment uncertainty causes:
– Increased differences among departments
– More dynamic and less predictable elements.
– Need for increased horizontal coordination to
keep departments working together
– Need to be flexible and responsive toward
environment over relatively short time frame
– requires more adaptive organisations and organic
designs.

SO… a flat structure (horizontal structure)/organic design is


more suitable to make snap, quick decisions
Organic design

Mechanistic design
Fit between Strategy, Environment and Structure
Source: Campling et al., 2008, Figure 10.3

E.g. Differentiation
e.g. Cost Leadership
Organisational Design
Contingency thinking

Campling et al (2008) Text, Figure 10.1


Remember …. Good organisational design uses
contingency thinking

1. Does the design fit well with the major problems and
opportunities of the external environment?
2. Does the design support implementation of strategies and
the accomplishment of key operating objectives?
3. Does the design support core technologies and allow them
to be used to best advantage?
4. Can the design handle changes in organisational size and
different stages in the organisational life cycle?
5. Does the design support and empower workers and allow
their talents to be used to best advantage?
• PAUSE
Organisational Change
Chap 7:119-125

Organisations need to respond to both internal


and external environmental changes.

Failure to change can lead to business collapse.


Topic 4: Kurt Lewin & Change
Management
Kurt Lewin & Change Management

Forces that promote E.g. from external


environment such
as technological
advancement

Change
E.g. from internal
environment such as
employees that resist
change due to self-
interest & distrust

Forces that resist


Topic 5: Five Stages of
Organisational Decline
Five Stages of Organisational Decline when
organisations do not recognize need for change

Blinded : fail to recognize change

Inaction: recognize but tail to take action

Faulty action:, managers assume that if they just run a ‘tighter ship’,
company performance will return to previous levels.

Crisis : bankruptcy likely; need to reorganise

Dissolution : dissolve

Decline occurs when organizations do not recognize the


need for change
Lewin’s three phases of planned organisational change

: getting the
people affected
by change to
believe that
change is
needed

: getting
workers &
managers to
change their
behavior &
work practices

: supporting &
reinforcing new
changes for
them to ‘stick’
Managing resistance to change: Kurt Lewin

Change
Unfreezing Refreezing
intervention

• Share reasons • Benefits • Top management


• Empathise • Champion support
• Communicate • Input • Reinforce
• Timing
• Security
• Training
• Pace
Errors made when leading change
Unfreezing
1. Not establishing a great enough sense of urgency.
2. Not creating a powerful enough guiding coalition.
Change
Most
errors 3. Lacking a vision.
made at 4. Under communicating the vision by a factor of 10.
this 5. Not removing obstacles to the new vision.
stage
6. Not systematically planning for and creating short-term wins.
Refreezing
7. Declaring victory too soon.
8. Not anchoring changes in the corporation’s culture.
Resistance to change

Causes:
Eg: Fear of the unknown, disrupted habits, loss of control,
poor timing, work overload
– Fear of the unknown – not understanding what is
happening or what comes next
– Disrupted habits – feeling upset when old ways of doing
things cannot be followed
– Loss of control – feeling that things are being done to
you rather than by or with you
– Poor timing – feeling overwhelmed by the situation or
that things are moving too fast
– Work overload – not having the physical or psychic
energy to commit to the change
Topic 6 Managing
Resistance to change
Managing resistance to change

Education and communication

Participation

Negotiation

Managerial support Use as a last


resort as it
Coercion does not lead
to permanent
change
 Attempt the mcqs in Quiz 7 to test your
knowledge and application of this week’s lecture

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