Chapter 9: Implementing Strategy Through Organizational Design

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Organizational Design – The process through which managers select the combination of organizational structure and control systems that they believe will enable the company to create and sustain a competitive advantage.

Coordinate and motivate employees
To create valueand
Obtain a competitive advantage

Koontz and O’Donnell The Process School of Management
Planning
Organizing
Staffing
Directing
Controlling

Building blocks of organizational structure
Differentiation
Vertical – how much authority to delegate
Horizontal – how to divide people
Into functions and divisions
Integration – coordinate people and functions
To accomplish organizational goals and tasks

Tall structure (7 – 10 levels)
Flat structure (2 – 4 levels)

Tall Structure Problems
Coordination
Information distortion
Motivation
Too many middle managers

McKinsey Consulting Company
Increased height of company organization structures
Presidents Office President of each division

Centralization or Decentralization (tending toward)

Decentralization
1.Delegate decision making authority to middle and lower level managers 2.Adapt to local conditions. Promotes flexibility
3.Fewer managers needed

Centralization
1.Facilitates coordination and planning
2.Decisions fit broad organizational objectives

Management Policy – Guidelines for decision making are made at highest levels
And passed down to lower levels
Horizontal Differentiation – How to group tasks and activities to meet strategies

Functional Structure – Grouping by expertise. Most U. S. firms have a functional structure
Advantages
Good place to learn
Easy to control
Effective and efficient
Disadvantages
Geographical diversion causes duplication of people and costs
Communication problems
Measurement problems
Location problems
Strategic problems

Product Structure – Group by product line.

Product Team structure
Matrix...
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