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Chapter 3: Organizing for Performance

Chapter 3: Organizing for Performance. Group 2 Brenda Grier John Harris Pornthip Jenjessada (“Oh”) John Moodie Duncan Patterson. Main Point. ORGANIZATIONS NEED TO BE STRATEGICALLY DESIGNED SO THAT ATTENTION IS FOCUSED ON THE COMPANY’S MISSION AND OBJECTIVES. Span of Control.

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Chapter 3: Organizing for Performance

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  1. Chapter 3:Organizing for Performance Group 2 Brenda Grier John Harris Pornthip Jenjessada (“Oh”) John Moodie Duncan Patterson

  2. Main Point • ORGANIZATIONS NEED TO BE STRATEGICALLY DESIGNED SO THAT ATTENTION IS FOCUSED ON THE COMPANY’S MISSION AND OBJECTIVES

  3. Span of Control Span of Accountability Design of Work Units

  4. Agenda • Organizational Structure(Duncan) • Accountability (John H.) • Specialization & Market Responsiveness(Brenda) • Span of Control(John M.) • Span of Attention(Oh)

  5. Agenda • Organizational Structure(Duncan) • Accountability (John H.) • Specialization & Market Responsiveness (Brenda) • Span of Control (John M.) • Span of Attention (Oh)

  6. Organizational structure • Structure supports: • Facilitation of work flows • Focus of attention

  7. Organizational structure, cont. • Work Units • Accountability for: • Outputs of the unit • Performance standards

  8. Organizational structure, cont. • Basic Design Choices: • by Work Process • by Specific Market • by Customer • by Geography

  9. Organizational structure, cont. • By Work Process • Specialization • Function Gen. Manager Accounting Manufacturing Engineering Human Resources

  10. Organizational structure, cont. • By Specific Market • Example: IBM (by product) Mainframes Personal Computing Networking

  11. Organizational structure, cont. • By Customer • when there are customers who represent a large share of business or are critical in some other way Top management Customer A (60%) Customer B (30%) Others (10%)

  12. Organizational structure, cont. • By Geographic Region Top Management North American Division Asia Division European Division

  13. Organizational structure, cont. • Combinations (hybrid or matrix structures) • Example: Asea Brown Boveri (ABB) The Matrix Organization Region Strategic Task: Combine customer satisfaction with core competencies Business

  14. Agenda • Organizational Structure (Duncan) • Accountability (John H.) • Specialization & Market Responsiveness (Brenda) • Span of Control (John M.) • Span of Attention (Oh)

  15. President Production Marketing Distribution Accounting H/R Functional Organization Most basic design that groups resources by specialty

  16. President Production Marketing Distribution Accounting H/R Sales North Sales South Sales West Sales East Hybrid Organization The marketing department is organized by geography. Other hybrids organizing by product or customer are also common

  17. Matrix Organization Product Mgr Region 1 Salesperson 1 Region 2 Salesperson 2 Salesperson 3 Region 3

  18. Agenda • Organizational Structure (Duncan) • Accountability (John H.) • Specialization & Market Responsiveness(Brenda) • Span of Control (John M.) • Span of Attention (Oh)

  19. Specialization & Market Responsiveness Work-Unit Design Generalizations • At the highest level, all firms, regardless of their structure, are Market-Focused • At the lowest level, all activity is grouped by Function to allow specialization. Intermediate Organization Structure Top Management ? Marketing Production R&D Finance & Admin Consumer Radio Market

  20. Specialization & Market Responsiveness Intermediate Levels– When should managers choose to group people and resources based on ? ? Work Process Market Focus

  21. Function/Work-Process Benefits of Specialization Economies of Scale/Scope: Production R&D Marketing Distribution Improved Effectiveness & Efficiency Reflected in lower costs &/or higher quality Market Focus Increase Responsiveness Customers Competitors Ex: Colgate-Palmolive responds to changing market conditions & defend market share with New Product Launches Price Adjustments Promotions & Packaging Specialization & Market Responsiveness Tradeoff:A unit can be either as efficient as possible or as responsive as possible, but not both!

  22. Specialization & Market Responsiveness How do managers choose between grouping by function or market focus? • Managers Choose a Functional Organization as long as: the Benefits of Specialization> Benefits of Market Responsiveness

  23. Functionally Organized at the Lowest Levels, Market at the Top Divisional Manager Marketing R&D Finance Production Product Mgmt Y Sales X Y X Y Z X Assembly Z Joe Fred Sue Worker 1 Worker 2 Worker 3 Prod A Prod B Prod C Salespeople Assembly line workers Product managers Most Manufacturing Plants are Functionally Organized

  24. Specialization & Market Responsiveness • At higher levels in any organization, the demands of market forces prevail • Managers group work units by Market Focus (products, customers, or geography) when: the Benefits of Market Responsiveness> Benefits of Market Specializations The Firm interacts with its competitive environment & is always Market-Focused

  25. Coordination Requirements • Specialization/Function: • Need coordination between units • Sales Forecasts integrated with Production • Marketing Programs coordinated with Inventory levels • Coordination of inputs, outputs, and information achieved through formal operating plans/budgets. Risk:Use of separate stand-along units may stifle innovation. Creativity & learning may be sacrificed for efficiency

  26. Coordination Requirements • Market Responsiveness: • Performance Measures taken from market • Market Share • Revenue Growth • Gross Margin • Results in a high need for coordination between market-based units • Requires an investment to transfer information: • Vertically to higher management • Horizontally to other organizational units

  27. Agenda • Organizational Structure (Duncan) • Accountability (John H.) • Specialization & Market Responsiveness (Brenda) • Span of Control(John M.) • Span of Attention (Oh)

  28. Focus on the Manager • Three different spans hidden in the organizational chart: • Span of Control • Span of Accountability • Span of Attention

  29. Span of Control • The number of resources that report to a manager. Wide Span of Control

  30. Span of Control • The number of resources that report to a manager. Narrow Span of Control

  31. Span of Accountability • “the range of performance measures used to evaluate a manager’s achievements” • How much of the operation’s performance is a manager accountable for? • Cost Center Accountability • Profit Center Accountability

  32. Span of Accountability (cont.) • Cost Center Accountability • only financially responsible for costs • goal is to meet the budget • Profit Center Accountability • financially responsible for costs and revenues • must balance revenue vs. cost to maximize profit • may also be responsible for asset utilization

  33. Agenda • Organizational Structure (Duncan) • Accountability (John H.) • Specialization & Market Responsiveness (Brenda) • Span of Control (John M.) • Span of Attention(Oh)

  34. Span of Attention What employees/managers care about and pay attention to Span of Attention

  35. Work Unit Design Span of Control Span of Accountability The span of attention for any individual manager is determined by Span of Attention

  36. Factors influence the Span of Attention • Work Unit Design -People pay a great deal of attention to the work of their own unit, but relatively little attention to work that is outside their field of view -People in the unit work toward shared goals • Span of Control -Managers use the resources under their direct control to achieve their business goals -Goals must be set, resources must be allocated, performances must be monitored, and progress must be evaluated • Span of Accountability -Managers pay attention to what they are measured on -“What gets measured, get managed”

  37. Centralization “Narrow spans of attention” Units are grouped by functional specialty Accountability for coordination is at higher levels Speed of decision making is not important Decentralization “Wide spans of attention” Business units are market-based Accountability for coordination is at lower levels Need quick responsiveness to customers and market (no time to allow upper levels to coordinate and make the trade-offs) Span of Attention & Organizational Design

  38. Summary Span of Control Span of Accountability Design of Work Units

  39. If you want to see more of him ...

  40. Look at what’s “behind” him ...

  41. Attention Span of Control Design of Work Units Span of Accountability

  42. Main Point • ORGANIZATIONS NEED TO BE STRATEGICALLY DESIGNED SO THAT ATTENTION IS FOCUSED ON THE COMPANY’S MISSION AND OBJECTIVES

  43. Group 2 - Chapter 3 Thank you for your rapt attention

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