Deck 7: Designing Organizational Structure

Question 1

Which contingencies are most important in explaining how the organization is organized? Do you think it is organized in the right way?

Answer 1

According to the contingency theory, the managers respond to the most critical factors or circumstances affecting the organization or causing most uncertainty to them. Organization structures are developed in response to these contingencies. These contingency factors are the organizational environment, technology, strategy, and human resources.
Consider a major automobile manufacturer of Japan in this context. The company is well-established in Japan as well as in global automobile market at least from last 30 years. The company is famous for developing small and medium sized affordable cars in the market in a small lead time of introduction. The success of the company is leveraged primarily on the efficiency improvement, lean operations, cost reduction, and economies of scale. The company is not too innovative is adopting new technology or developing new models equipped with such technologies. The target market has been primarily the middle-class customers who are not willing to pay too high for owning a car.
Therefore, the contingencies that are most crucial for this company are:
1. The increased competition in the same segment (low-cost cars) in every country where the company operates.
2. Scarcity of low-cost labour in its home country Japan.
3. Lack of competitive advantages and unique resources to retain the same.
4. Expanding global operations requires higher control in management and hence higher cost which, in turn, increases the product cost.
The company has traditionally followed a strong hierarchical structure with little room to flexibility. It is a functional structure. With the present expansion of the business in different market and geography, the functional structure may not be effective and efficient for this company.

Question 2

Discuss ways in which you can improve the way the current functional structure operates to speed website development.

Answer 2

In a functional structure, th departments are organized according to the functions in order to produce the required goods and services. As organizations grow in size and product diversity, the strategy and task environment change and the functional structures become less effective and efficient. The functional structure, at this point, takes the shape of divisional structures where divisions are formed by the collection of similar functions together.
Even the divisional structure fails to maintain good communication and coordination among the managers if the external environment is too dynamic, unpredictable, or uncertain. At this situation, enough flexibility is provided by a matrix structure or a product team structure.
As per the case information, the company is in a business of website design, production, and hosting services. It presently has a functional structure. It has aimed to reduce the development lead time for its products which are websites. The existing functional structure is becoming an impediment for the quick release of products because of the lack of communication and coordination among the employees in that there exist artificial barriers among different functions.
Note that designing, producing, and hosting of each single website can be realized as a project. For each of these projects, all the functional requirements will be executed. In this situation, a matrix or a product team structure can be more suitable. For example, if a matrix structure is used, each website project will be leaded by a product manager.
The employees will be reporting dually to the product managers and their respective functional mangers. The product managers will ensure that the team is working in sync required for the product to be launched at the required time. The functional managers will ensure the efficiency of the functional requirement for all of the products. In this way, the problem of high lead time due to lack of coordination can be resolved.

Question 3

Why are GSK and Pfizer creating a new "specialist" organization to manage the sales and development of their HIV drugs?

Answer 3

Case summary:
Two major pharmaceutical firms Company PF and Company GS are joining hands to create a new company in order to serve to the battle of fighting against the HIV disease. In this venture, GS will have 85% stake, while the remaining will be owned by PF. After announcing this partnership, GS's CEO Person AW and PF's CEO Person RM stated that this will give the industry a new beginning to focus on smaller business infrastructure and to serve particular area of medicines instead of getting bigger with multiple mergers and acquisitions.
In this case, the reason why Company PF and Company GS has created a new "specialist" organization in order to manage the sale and development of their HIV drugs is because the firms wish to provide proper and exclusive concentration towards providing effective drugs to fight HIV. As the disease is quite fatal, it is necessary that pharma firms like PF and CS pay extra attention towards the medicines that treat this disease. Apart from this, PF has mentioned that it is the ongoing trend for big firms to narrow down its operations by giving exclusive attention towards alarming areas rather than growing bigger by mergers and acquisitions. When pharma firms undertake research and development at mega level and research for several medicines together, it fails to provide for effective results. The research becomes haywire, and unaccountable and thereby fails to provide effectiveness.
However, when pharma firms will have concentrated research and will focus on particular medicine to fight against one particular disease at a time, then this helps the firm to develop and distribute required medicine with ease and contribute in the fight against that disease. When large firms will undertake smaller actions, it not only reduces the risks the firm faces in research, development and distribution of the medicine, but also reduces the cost of those medicines. This is the reason why Company PF and Company GS has created a new "specialist" organization in order to manage the sale and development of their HIV drugs.

Question 4

What ethical rules (see Chapter 3) should managers use to decide which employees to terminate when redesigning their hierarchy?

Question 5

You are a team of local consultants that Bob has called in to advise him as he makes this crucial choice. Which structure do you recommend? Why?

Question 6

Would a flexible or a more formal structure be most appropriate for each of these organizations: (a) a large department store (b) a Big Five accountancy firm (c) a biotechnology company? Explain your reasoning.

Question 7

In what specific ways has Yahoo's new CEO, Carol Bartz, changed the company's organizational structure?

Question 8

Using the job characteristics model, how motivating do you think the job of a typical employee in this organization is?

Question 9

Discuss the pros and cons of moving to a (a) multidivisional, (b) matrix, and (c) product-team structure to reduce website development time.

Question 10

How will the new company be organized? In what ways will it help speed the development of new drugs and reduce costs?

Question 11

Some people argue that employees who have worked for an organization for many years have a claim on the organization at least as strong as its shareholders. What do you think of the ethics of this position? Can employees claim to own their jobs if they have contributed significantly to its past success? How does a socially responsible organization behave in this situation?

Question 12

Using the job characteristics model, discuss how a manager can enlarge or enriched a subordinate's job.

Question 13

Why did she make these changes? In what ways does she expect the new structure to benefit Yahoo's strategy and performance?

Question 14

Can you think of any ways in which a typical job could be enlarged or enriched?

Question 15

Which of these structures do you think is most appropriate and why?

Question 16

How might a salesperson's job or a secretary's job be enlarged or enriched to make it more motivating?

Question 17

What kind of organization structure does the organization use? If it is part of a chain, what kind of structure does the entire organization use? What other structures might allow the organization to operate more effectively? For example, would the move to a product team structure lead to greater efficiency or effectiveness? Why or why not?

Question 18

When and under what conditions might managers change from a functional to (a) product (b) geographic, or (c) market structure?

Question 19

How many levels are there in the organization's hierarchy? Is authority centralized or decentralized? Describe the span of control of the top manager and of middle or first-line managers.

Question 20

How do matrix structure and product team structure differ? Why is product team structure more widely used?

Question 21

Is the distribution of authority appropriate for the organization and its activities? Would it be possible to flatten the hierarchy by decentralizing authority and empowering employees?

Question 22

Find and interview a manager and identify the kind of organizational structure that his or her organization uses to coordinate its people and resources. Why is the organization using that structure? Do you think a different structure would be more appropriate?Which one?

Question 23

What are the principal integrating mechanisms used in the organization? Do they provide sufficient coordination among people and functions? How might they be improved?

Question 24

With the same or another manager, discuss the distribution of authority in the organization. Does the manager think that decentralizing authority and empowering employees is appropriate.

Question 25

Now that you have analyzed the way this organization is organized, what advice would you give to its managers to help them improve the way it operates?

Question 26

Interview some employees of an organization. Ask them about the organization's values, norms, the typical characteristics of employees, its ethical values, and socialization practices. Using this information, try to describe the organization's culture and the way it affects the way people and groups behave.