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This is a€?Executing Strategy through Organizational Designa€?, chapter 9 from the book Strategic Management: Evaluation and Execution (v.
This content was accessible as of December 29, 2012, and it was downloaded then by Andy Schmitz in an effort to preserve the availability of this book.
PDF copies of this book were generated using Prince, a great tool for making PDFs out of HTML and CSS. For more information on the source of this book, or why it is available for free, please see the project's home page. DonorsChoose.org helps people like you help teachers fund their classroom projects, from art supplies to books to calculators. What are the key legal forms of business, and what implications does the choice of a business form have for organizational structure? General Electrica€™s logo has changed little since its creation in the 1890s, but the company has grown to become the sixth largest in the United States. In February 2011, General Electric (GE) reached an agreement to acquire the well-support division of John Wood Group PLC for $2.8 billion. While many executives would struggle to integrate three new companies into their firms, experts expected GEa€™s leaders to smoothly execute the transitions.
In addition to the six product divisions, GE also had a division devoted to Global Growth & Operations. Finally, like many large companies, GE also provided some centralized services to support all its units.
Growing concerns about the environmental effects of drilling, for example, made it likely that GEa€™s oil well services operations would need the help of GEa€™s public relations and legal departments in the future. In the context of business, execution refers to how well a firm such as GE implements the strategies that executives create for it. Distinguish between vertical and horizontal linkages and know what functions each fulfills in an organizational structure. General Electric (GE) offers a dizzying array of products and services, including lightbulbs, jet engines, and loans. The leaders at the top of organizations have long known that division of labor can improve efficiency.
Division of labor allowed eighteenth-century pin factories to dramatically increase their efficiency. While division of labor fuels efficiency, it also creates a challengea€”figuring out how to coordinate different tasks and the people who perform them. Division of labor was central to Henry Forda€™s development of assembly lines in his automobile factory. Most organizations use a diagram called an organizational chartA diagram that depicts how firmsa€™ structures are built using two basic building blocks: vertical linkages and horizontal linkages. Most executives rely on the unity of commandThe principle that each person within an organization should only report directly to one supervisor. Committee meetings can be boring, but they are often vital for coordinating efforts across departments. Organic grocery store chain Whole Foods Market is a company that relies heavily on horizontal linkages. Informal linkagesUnofficial relationships such as personal friendships, rivalries, and politics. The concept of division of labor (dividing organizational activities into smaller tasks) lies at the heart of the study of organizational structure. What are some formal and informal linkages that you have encountered at your college or university? Within most firms, executives rely on vertical and horizontal linkages to create a structure that they hope will match the needs of their firma€™s strategy.
Many organizations start out with a simple structureAn arrangement that does not rely on formal systems of division of labor, often because one person performs all the tasks that the organization needs to accomplish.. There is a good reason most sole proprietors do not bother creating formal organizational charts.
If the firm consists of more than one person, tasks tend to be distributed among them in an informal manner rather than each person developing a narrow area of specialization. As a small organization grows, the person in charge of it often finds that a simple structure is no longer adequate to meet the organizationa€™s needs. Within a functional structure, employees are divided into departments that each handle activities related to a functional area of the business, such as marketing, production, human resources, information technology, and customer service (Figure 9.5 "Functional Structure").
Using a functional structure also has a significant downside: executing strategic changes can be very slow when compared with other structures.
If the publisher is organized using a functional structure, however, every department in the organization will have to be intimately involved in the creation of the new textbooks. The specific functional departments that appear in an organizational chart vary across organizations that use functional structures. The Scranton branch of Dunder Mifflin may be a dysfunctional organization, but it relies on a functional structure. Of course, empowering divisions to act quickly can backfire if people in those divisions take actions that do not fit with the companya€™s overall strategy. Another downside of multidivisional structures is that they tend to be more costly to operate than functional structures. GEa€™s organizational chart highlights a way that firms can reduce some of these expenses: the centralization of some functional services.
Within functional and multidivisional structures, vertical linkages between bosses and subordinates are the most elements.
The potential for conflicts arising between project managers within a matrix structure is another concern.
Given these problems, not every organization is a good candidate to use a matrix structure. You wona€™t need to choose between a red pill and a blue pill within a matrix structure, but you will have multiple bosses. Office Space illustrates the importance of organizational design decisions to an organizationa€™s culture and to employeesa€™ motivation levels.
Within a poorly organized firm like Initech, simply keeping possession of a treasured stapler is a challenge.
An illustration of how removing barriers can be valuable has its roots in a very unfortunate event. In 2005, boundaries between organizations hampered rescue efforts following Hurricane Katrina.
To avoid similar problems from arising in the future, barriers between the National Guard and active-duty military units are being bridged by special military officers called dual-status commanders. Although it was created to emphasize the need for unity among the American colonies, this famous 1754 graphic by Ben Franklin also illustrates a fundamental truth about structure: If the parts that make up a firm do not work together, the firm is likely to fail. Searsa€™s new structure organized the firm around five types of divisions: (1) operating businesses (such as clothing, appliances, and electronics), (2) support units (certain functional areas such as marketing and finance), (3) brands (which focus on nurturing the firma€™s various brands such as Landsa€™ End, Joe Boxer, Craftsman, and Kenmore), (4) online, and (5) real estate.
Because it competes in fast-changing high-tech markets, Cisco needs to be able to make competitive moves quickly.
Executives must select among the four types of structure (simple, functional, multidivisional, and matrix) available to organize operations. In addition to creating an appropriate organizational structure, effectively executing strategy depends on the skillful use of organizational control systems. While most scholarships require a high GPA, comedian David Letterman created a scholarship for a a€?Ca€? student at Ball State University. While output control focuses on results, behavioral controlA focus on specifying the actions that ultimately lead to results.
Outside the classroom, behavioral control is a major factor within college athletic programs. Creating an effective reward structure is key to effectively managing behavior because people tend to focus their efforts on the rewarded behaviors.
Although some behavioral controls are intended for employees and not customers, following them is beneficial to everyone.
Instead of measuring results (as in outcome control) or dictating behavior (as in behavioral control), clan controlRelying on shared traditions, expectations, values, and norms to lead people to work toward the good of their organization. As part of the team-building effort at Google, new employees are known as Noogles and are given a propeller hat to wear.
Some executives look to clan control to improve the performance of struggling organizations.
The emergence and disappearance of fads appears to be a predictable aspect of modern society. Fads also seem to be a predictable aspect of the business world (Figure 9.9 "Managing Management Fads").
Beyond the striking similarities between cultural and business fads, there are also important differences. While the quality circle fad depicted quality as the key driver of productivity, it quickly became apparent that this perspective was too narrow.
Improving clan control was the aim of sensitivity-training groups (or T-groups)Groups of people that meet to discuss emotions, feelings, beliefs, and biases about workplace issues to gain greater understanding of themselves and others.
Research on social psychology has found that groups are often far crueler than individuals. Improving clan control was the basis for the fascination with organizational cultureValues and norms embraced by an organization that determine how people interact with other organizational members as well as external stakeholders. Spirited games of kickball can help build an organizationa€™s culture, but such events should not substitute for holding employees accountable for delivering results.
The history of fads allows us to make certain predictions about todaya€™s hot ideas, such as empowerment, a€?good to great,a€? and viral marketing.
Just as executives in the 1980s could not treat In Search of Excellence as a recipe for success, todaya€™s executives should avoid treating James Collinsa€™s 2001 best-selling book Good to Great: Why Some Companies Make the Leapa€¦and Others Dona€™t as a detailed blueprint for running their companies. Organizational control systems are a vital aspect of executing strategy because they track performance and identify adjustments that need to be made.
What are some common business practices that you predict will be considered fads in the future? How could you integrate each type of control intro a college classroom to maximize student learning?
The legal form a firm chooses to operate under is an important decision with implications for how a firm structures its resources and assets. In a partnershipA legal form of business wherein two or more partners share ownership of a firm., two or more partners share ownership of a firm.
From a practical standpoint, a partnership allows a person to take time off without closing down the business temporarily. A specialized type of corporation called an S corporationA special type of corporation wherein the firma€™s profits and losses are reported on ownersa€™ personal tax returns in proportion with each ownera€™s share of the firm. The price of this item includes a contribution to a Product recycling fund to ensure that waste electrical and electronic equipment is collected and recycled in a responsible manner. Use an opal light bulb if you have an ordinary lamp shade or lamp and want an even, diffused distribution of light.May be completed with other lamps in the same series. We have clear requirements for all the wood we use, including a ban on illegally harvested wood.
Dining table with 2 pull-out leaves seats 4; makes it possible to adjust the table size according to need. Sorry, this product is not for sale on our website or over the phone, check if it is available in your local store. Only the latest version of the documents is available for download.This means that there maybe a difference in this version and the printed version. Get prices, sizes, colours, stock availability and find out where to pick them up in the store. See the license for more details, but that basically means you can share this book as long as you credit the author (but see below), don't make money from it, and do make it available to everyone else under the same terms.
However, the publisher has asked for the customary Creative Commons attribution to the original publisher, authors, title, and book URI to be removed. This was GEa€™s third acquisition of a company that provides services to oil wells in only five months. In describing the acquisition of John Wood Group PLC, for example, one Wall Street analyst noted, a€?This is a nice bolt-on deal for GE.a€?Layne, R. This division was responsible for all sales of GE products and services outside the United States. These support areas included public relations, business development, legal, global research, human resources, and finance. This involves the creation and operation of both an appropriate organizational structure and an appropriate organizational control processes. One way that GE could produce its lightbulbs would be to have individual employees work on one lightbulb at a time from start to finish. Thousands of years ago, for example, Mosesa€™s creation of a hierarchy of authority by delegating responsibility to other judges offered perhaps the earliest known example (Figure 9.2 "Hierarchy of Authority"). The solution is organizational structureHow tasks are assigned and grouped together with formal reporting relationships., which is defined as how tasks are assigned and grouped together with formal reporting relationships. As noted on their website, a€?At Whole Foods Market we recognize the importance of smaller tribal groupings to maximize familiarity and trust. Understanding vertical, horizontal, and informal linkages helps managers to organize better the different individuals and job functions within a firm.
In a family-run restaurant or bed and breakfast, for example, each person must contribute as needed to tasks, such as cleaning restrooms, food preparation, and serving guests (hopefully not in that order). On the plus side, the flexibility offered by simple structures encourages employeesa€™ creativity and individualism. Organizations become more complex as they grow, and this can require more formal division of labor and a strong emphasis on hierarchy and vertical links. Each of these five areas would be headed up by a manager who coordinates all activities related to her functional area. An important benefit of adopting a functional structure is that each person tends to learn a great deal about his or her particular function. Suppose, for example, that a textbook publisher decides to introduce a new form of textbook that includes a€?scratch and sniffa€? photos that let students smell various products in addition to reading about them. Because the new product lies outside each departmenta€™s routines, it may become lost in the proverbial shuffle. In the example offered earlier in this section, a firm was divided into five functional areas: (1) marketing, (2) production, (3) human resources, (4) information technology, and (5) customer service. When GE makes a strategic move such as acquiring the well-support division of John Wood Group PLC, only the relevant division (in this case, Energy) needs to be involved in integrating the new unit into GEa€™s hierarchy. McDonalda€™s top executives were angered when an ad by their French division suggested that children should only eat at their restaurants once a week.
While a functional structure offers the opportunity to gain efficiency by having just one department handle all activities in an area, such as marketing, a firm using a multidivisional structure needs to have marketing units within each of its divisions. As shown in the organizational chart, departments devoted to important aspects of public relations, business development, legal, global research, human resources, and finance are maintained centrally to provide services to the six product divisions and the geographic division. In 2011, for example, the Coca-Cola Company created an Office of Sustainability to coordinate sustainability initiatives across the entire company. One concern is that using a matrix structure violates the unity of command principle because each employee is assigned multiple bosses. Chances are that you have had some classes with professors who are excellent speakers while you have been forced to suffer through a semester of incomprehensible lectures in other classes.
Organizations such as engineering and consulting firms that need to maximize their flexibility to service projects of limited duration can benefit from the use of a matrix.
For Peter Gibbons, an employee at information technology firm Initech in the 1999 movie Office Space, the answer was zero.
Joanna, a waitress at nearby restaurant Chotchkiea€™s, had only one managera€”a stark contrast to Gibbonsa€™s eight bosses. A matrix structure can facilitate resource sharing and collaboration but may also create complicated working relationships and impose excessive stress on employees.

The value of a much different approach was highlighted by former GE CEO Jack Welch when he created the term boundaryless organizationWhen the usual barriers between parts of the organization as well as barriers between the organization and others are removed.. During 2005a€™s Hurricane Katrina, rescue efforts were hampered by a lack of coordination between responders from the National Guard (who are controlled by state governments) and from active-duty military units (who are controlled by federal authorities).
These individuals will be empowered to lead both types of units during a disaster recovery effort, helping to ensure that all areas receive the attention they need in a timely manner.
Executives must revisit an organizationa€™s structure over time and make changes to it if certain danger signs arise. Each structure has unique advantages, and the selection of structures involves a series of trade-offs.
What are some other scenes or themes from movies that provide examples or insights relevant to understanding organizational structure?
Executives create strategies to try to achieve their organizationa€™s vision, mission, and goals. In early 2011, Delta Air Lines was forced to face some facts as part of its use of output control.
Ball State later named a new communications and media building after its very famous alumnus. An illustrative (although perhaps unpleasant) example is penalizing students for not attending class. The National Collegiate Athletic Association (NCAA) governs college athletics using a huge set of rules, policies, and procedures. Problems can arise when people are rewarded for behaviors that seem positive on the surface but that can actually undermine organizational goals under some circumstances. Employees are permitted to spend 20 percent of their workweek on their own innovative projects.
In 2005, Florida officials became fed up with complaints about surly clerks within the statea€™s drivera€™s license offices. Philanthropic and social organizations such as clubs, fraternities, and sororities often revolve around shared values and team spirit. A fad arises when some element of popular culture becomes enthusiastically embraced by a group of people.
As with cultural fads, many provocative business ideas go through a life cycle of creating buzz, captivating a group of enthusiastic adherents, and then giving way to the next fad.
Most cultural fads are harmless, and they rarely create any long-term problems for those that embrace them. For example, one of the best-known fads was an attempt to use output control to improve performance. Companies that attempted to create an objective for every aspect of employeesa€™ activities eventually discovered that this was unrealistic. Quality circles began in Japan in the 1960s and were first introduced in the United States in 1972. Instead, quality is just one of four critical dimensions of the production process; speed, cost, and flexibility are also vital. Unfortunately, this meant that the candid nature of T-group discussions could easily degenerate into accusations and humiliation.
Before long, both the popular press and academic research revealed that many of Peters and Watermana€™s a€?excellenta€? companies quickly had fallen on hard times. Executives who distill and act on basic lessons from these fads are likely to enjoy performance improvements.
Overall, executives should understand that management fads usually contain a core truth that can help organizations improve but that a balance of output, behavioral, and clan control is needed within most organizations.
A partnership is similar to a sole proprietorship in that the partners are the only beneficiaries of the firma€™s profits, but they are also responsible for any losses and debts.
A key difference between a corporationA legal form of ownership wherein shares of ownership are publicly traded in stock markets, and management is performed by professional executives. By 2020, we want all our wood to come from more sustainable sources, defined as certified or recycled.Renewable material (wood). If you oil, wax, lacquer or stain the untreated solid wood surface it will be more durable and easy to care for. By 2020, we want all our wood to come from more sustainable sources, defined as certified or recycled.At least 50% (weight) of this product is made from renewable materials. The mirror comes with safety film on the back, which reduces the risk of injury if the glass is broken. You may also download a PDF copy of this book (134 MB) or just this chapter (16 MB), suitable for printing or most e-readers, or a .zip file containing this book's HTML files (for use in a web browser offline).
In October 2010, GE added the deepwater exploration capabilities of Wellstream Holdings PLC for $1.3 billion.
Rather than having the entire organization involved with integrating John Wood Group PLC, Wellstream Holdings PLC, and Dresser into GE, these three newly acquired companies would simply be added to the Oil & Gas subdivisions within the Energy division. By having entire units of the organization devoted to these functional areas, GE hoped not only to minimize expenses but also to create consistency across divisions.
In particular, would the organizational cultures of John Wood Group PLC, Wellstream Holdings PLC, and Dresser mesh with the culture of GE?
Executives who skillfully orchestrate structure and control are likely to lead their firms to greater levels of success. This would be very inefficient, however, so GE and most other organizations avoid this approach. In the eighteenth century, Adam Smitha€™s book The Wealth of Nations quantified the tremendous advantages that division of labor offered for a pin factory. Creating a structure that effectively coordinates a firma€™s activities increases the firma€™s likelihood of success. These organizational charts show how firmsa€™ structures are built using two basic building blocks: vertical linkages and horizontal linkages.
In the long-running comedy series The Simpsons, Homer Simpson is a low-levela€”and very low-performinga€”employee at a nuclear power plant. Simple structures do not rely on formal systems of division of labor (Figure 9.4 "Simple Structure").
In many cases, these firms evolve from using a simple structure to relying on a functional structureAn organizational arrangement whereby employees are divided into departments that each handle activities related to an area of the business, such as marketing, production, human resources, information technology, and customer service.. Everyone in a company that works on marketing the companya€™s products, for example, would report to the manager of the marketing department. By being placed in a department that consists entirely of marketing professionals, an individual has a great opportunity to become an expert in marketing. If the publisher relies on a simple structure, the leader of the firm can simply assign someone to shepherd this unique new product through all aspects of the publication process. And unfortunately for the booksa€™ authors, the publication process will be halted whenever a functional area does not live up to its responsibilities in a timely manner. In the TV show The Office, a different approach to a functional structure is used at the Scranton, Pennsylvania, branch of Dunder Mifflin. In contrast, if GE was organized using a functional structure, the transition would be much slower because all the divisions in the company would need to be involved. In particular, the French division of McDonalda€™s ran a surprising advertisement in a magazine called Femme Actuelle.
By consolidating some human resource activities in one location, for example, GE creates efficiency and saves money.
Bea Perez was named Coca-Colaa€™s chief sustainability officer and was put in charge of the Office of Sustainability. Specifically, any given individual reports to a functional area supervisor as well as one or more project supervisors. This mix of experiences reflects a fundamental reality of management: in any organization, some workers are more talented and motivated than others. Matrix structures are also used to organize research and development departments within many large corporations.
Initecha€™s use of a matrix structure meant that each employee had multiple bosses, each representing a different aspect of Initecha€™s business.
Unfortunately, Joannaa€™s manager had an unhealthy obsession with the a€?flaira€? (colorful buttons and pins) used by employees to enliven their uniforms. Chotchkiea€™s organizational structure involved simpler working relationships, but these relationships were strained beyond the breaking point by a managera€™s eccentricities. According to one National Guard officer, a€?It was just like a solid wall was between the two entities.a€?Elliott, D.
For example, a structure might need to be adjusted if decisions with the organization are being made too slowly or if the organization is performing poorly. Lampert noted that a€?by creating smaller focused teams that are clearly responsible for their units, we [will] increase autonomy and accountability, create greater ownership and enable faster, better decisions.a€?Sears restructures business units. The companya€™s CEO, John Chambers, has moved Cisco away from a hierarchical emphasis toward a focus on horizontal linkages. In late 2007, Hewlett-Packard (HP) started promoting a warranty service that provides free support and upgrades within the computer network switches market. Organizational control systemsAllow executives to track how well the organization is performing, identify areas of concern, and then take action to address the concerns. Examples from the business world include the number of hits a website receives per day, the number of microwave ovens an assembly line produces per week, and the number of vehicles a car salesman sells per month (Figure 9.6 "Output Controls"). Data gathered by the federal government revealed that only 77.4 percent of Deltaa€™s flights had arrived on time during 2010.
If you perform badly on a test, you might take corrective action by studying harder or by studying in a group for the next test. In particular, various rules and procedures are used to standardize or to dictate behavior (Figure 9.7 "Behavioral Controls").
Professors grade attendance to dictate studentsa€™ behavior; specifically, to force students to attend class. The NCAAa€™s rulebook on behavior is so complex that virtually all coaches violate its rules at one time or another. For example, restaurant servers are highly motivated to serve their tables quickly because doing so can increase their tips.
Specifically, clan control relies on shared traditions, expectations, values, and norms to lead people to work toward the good of their organization (Figure 9.8 "Clan Controls").
The company offers an a€?a€?ideas mailing lista€™a€™ for employees to submit new ideas and to comment on othersa€™ ideas. The solution was to look for help with training employees from two companies that are well-known for friendly, engaged employees and excellent customer service. More broadly, many campuses have treasured traditions that bind alumni together across generations.
Over the past few decades, for example, fashion fads have included leisure suits (1970s), a€?Members Onlya€? jackets (1980s), Doc Martens shoes (1990s), and Crocs (2000s).
Bookstore shelves offer a seemingly endless supply of popular management books whose premises range from the intriguing to the absurd.
Management by objectives (MBO)A process wherein managers and employees work together to create goals.
The creation of explicit goals can conflict with activities involving tacit knowledge about the organization. A quality circleA formal group of employees that meet regularly to brainstorm solutions to organizational problems. Maximizing any one of these four dimensions often results in a product that simply cannot satisfy customersa€™ needs.
This fad involved gatherings of approximately eight to fifteen people openly discussing their emotions, feelings, beliefs, and biases about workplace issues. Eventually, the T-group fad gave way to recognition that creating potentially hurtful situations has no place within an organization. This fad was fueled by a best-selling 1982 book titled In Search of Excellence: Lessons from Americaa€™s Best-Run Companies. Basic themes such as customer service and valuing onea€™s company are quite useful, but these clan control elements often cannot take the place of holding employees accountable for their performance. Empowerment, for example, builds on important research findings regarding employeesa€”many workers have important insights to offer to their firms, and these workers become more engaged in their jobs when executives take their insights seriously.
Each involves a different approach to dealing with profits and losses (Figure 9.10 "Business Forms").
Partnerships can be especially attractive if each persona€™s expertise complements the others. When Lawrence suffered a serious injury a few years ago, Sander was able to take over supervising his projects and see them through to completion.
Pull-out extra leaves give you a practical utility surface and are stored within easy reach under the table top.
Indeed, GEa€™s CEO Jeffrey Immelt expected that countries other than the United States will account for 60 percent of GEa€™s sales in the future, up from 53 percent in 2010. Most acquisitions in the business world fail to deliver the results that executives expect, and the incompatibility of organizational cultures is one reason why. In contrast, those executives who fail to do so are likely to be viewed by stakeholders such as employees and owners in much the same way Coach McKay viewed his offense: as worthy of execution. Instead, organizations rely on division of laborA process of splitting up a task into a series of smaller tasks, each of which is performed by a specialist. If a worker performed all the various steps involved in making pins himself, he could make about twenty pins per day. Meanwhile, a structure that does not match well with a firma€™s needs undermines the firma€™s chances of prosperity.
Vertical linkagesRelationships within an organizational structure that show the lines of responsibility through which a supervisor delegates authority to subordinates, oversees their activities, evaluates their performance, and guides them toward improvement when necessary. If employees have multiple bosses, they may receive conflicting guidance about how to do their jobs. Horizontal linkages are important when close coordination is needed across different segments of an organization.
Most teams have between 6 and 100 Team Members and the larger teams are divided further into a variety of sub-teams. In one episode, Homer gains power and influence with the planta€™s owner, Montgomery Burns, which far exceeds Homera€™s meager position in the organization chart, because Mr. When creating a structure for their firm, executives will take one of these types and adapt it to fit the firma€™s unique circumstances.
If the firm is a sole proprietorship, one person performs all the tasks the organization needs to accomplish.
Important tasks may be ignored if no one person is specifically assigned accountability for them.
The marketing managers and the managers in charge of the other four areas in turn would report to the chief executive officer. More generally, because functional structures are slow to execute change, they tend to work best for organizations that offer narrow and stable product lines. As of 2009, the branch was divided into six functional areas: (1) sales, (2) warehouse, (3) quality control, (4) customer service, (5) human resources, and (6) accounting.
The ad included a quote from a nutritionist that asserted children should not eat at a McDonalda€™s more than once per week. At the time, Coca-Colaa€™s chief executive officer Muhtar Kent noted that Coca-Cola had a€?made significant progress with our sustainability initiatives, but our current approach needs focus and better integration.a€?McWilliams, J. This creates confusion for employees because they are left unsure about who should be giving them direction. Within a matrix structure, each project manager naturally will want the best people in the company assigned to her project because their boss evaluates these managers based on how well their projects perform. In each of these settings, the benefits of organizing around teams are so great that they often outweigh the risks of doing so.
High-tech firms often use matrix to gain the flexibility needed to manage multiple projects simultaneously.
A series of mixed messages about the restauranta€™s policy on flair led Joanna to emphatically proclaima€”both verbally and nonverballya€”her disdain for the manager.

In a more general sense, Office Space shows that all organizational structures involve a series of trade-offs that must be carefully managed. Both these problems plagued Sears Holdings in 2008, leading executives to reorganize the company.
Because Ciscoa€™s response to this initiative had to work its way through multiple committees, the firm did not take action until April 2009. In each of these cases, executives must decide what level of performance is acceptable, communicate expectations to the relevant employees, track whether performance meets expectations, and then make any needed changes.
This performance led Delta to rank dead last among the major US airlines and fifteenth out of eighteen total carriers.Yamanouchi, K.
At most colleges and universities, a student is put on academic probation when his grade point average drops below a certain level.
In most states, for example, signs are posted in restaurant bathrooms reminding employees that they must wash their hands before returning to work. Meanwhile, if you were to suggest that a rule should be created to force professors to update their lectures at least once every five years, we would not disagree with you.
Critics suggest that the behavioral controls instituted by the NCAA have reached an absurd level. But if a server devotes all his or her attention to providing fast service, other tasks that are vital to running a restaurant, such as communicating effectively with managers, host staff, chefs, and other servers, may suffer.
Clan control is often used heavily in settings where creativity is vital, such as many high-tech businesses. Google executives routinely make themselves available two to three times per week for employees to visit with them to present their ideas. The first was The Walt Disney Company, which offers world-famous hospitality at its Orlando theme parks.
Within the topic of leadership, for example, various books promise to reveal the a€?leadership secretsa€? of an eclectic array of famous individuals such as Jesus Christ, Hillary Clinton, Attila the Hun, and Santa Claus. As our quote from Colin Powell suggests, relying on sound business practices is much more likely to help executives to execute their organizationa€™s strategy than are generic words of wisdom from Old St. Intangible notions such as a€?providing excellent customer service,a€? a€?treating people right,a€? and a€?going the extra milea€? are central to many organizationsa€™ success, but these notions are difficult if not impossible to quantify.
Many products with perfect quality, for example, would be created too slowly and at too great a cost to compete in the market effectively.
In stark contrast to the rigid nature of MBO, the T-group involved free-flowing conversations led by a facilitator.
Hints of the softer side of T-groups can still be observed in modern team-building fads, however. Authors Tom Peters and Robert Waterman studied companies that they viewed as stellar performers and distilled eight similarities that were shared across the companies. For example, an accountant who specializes in preparing individual tax returns and another who has mastered business taxes might choose to join forces to offer customers a more complete set of tax services than either could offer alone. Corporations sell shares of ownership that are publicly traded in stock markets, and they are managed by professional executives. First, profits and losses tend to be reflected in whether the firma€™s stock price rises or falls. By spending more than $7 billion on these acquisitions, GE executives made it clear that they had big plans within the oil well services business.
By breaking the process into multiple steps, however, ten workers could make forty-eight thousand pins a day. For example, most business schools revise their undergraduate curriculum every five or so years to ensure that students are receiving an education that matches the needs of current business conditions.
The leaders of each team are also members of the Store Leadership Team and the Store Team Leaders are members of the Regional Leadership Team. As they do this, executives must realize that the choice of structure will influences their firma€™s strategy in the future. For example, on the TV series The Simpsons, both bar owner Moe Szyslak and the Comic Book Guy are shown handling all aspects of their respective businesses. Because there is little emphasis on hierarchy within a simple structure, organizations that use this type of structure tend to have very few rules and regulations. A lack of clear guidance from the top of the organization can create confusion for employees, undermine their motivation, and make them dissatisfied with their jobs. Second, grouping everyone that serves a particular function into one department tends to keep costs low and to create efficiency.
A functional structure was a good fit for the branch at the time because its product line was limited to just selling office paper.
As a result, many firms abandon the use of a functional structure as their offerings expand. In the summer of 2011, for example, GEa€™s Capital division started to make real-estate loans after exiting that market during the financial crisis of the late 2000s.Jacobius, A. Executives at McDonalda€™s headquarters in suburban Chicago were concerned about the message sent to their customers, of course, and they made it clear that they strongly disagreed with the nutritionist.
Violating the unity of command principle also creates opportunities for unsavory employees to avoid responsibility by claiming to each supervisor that a different supervisor is currently depending on their efforts. Because the best people are a scarce resource, infighting and politics can easily flare up around which people are assigned to each project. Successfully using a matrix structure requires excellent communication among various managersa€”however, excellence that Initech could not reach. During the delay, Ciscoa€™s share of the market dropped as customers embraced HPa€™s warranty. Three basic types of control systems are available to executives: (1) output control, (2) behavioral control, and (3) clan control. In an ironic example, a group of post office workers in Pensacola, Florida, were once disappointed to learn that their paychecks had been losta€”by the US Postal Service! If the studenta€™s performance does not improve, he may be removed from his major and even dismissed.
The dress codes that are enforced within many organizations are another example of behavioral control. Nevertheless, some degree of behavioral control is needed within virtually all organizations.
These informal meetings have generated a number of innovations, including personalized home pages and Google News, which might otherwise have never been adopted.
The second was regional supermarket chain Publix, a firm whose motto stressed that a€?shopping is a pleasurea€? in its stores. The uniqueness (or even outrageousness) of a fashion, toy, or hairstyle creates a€?buzza€? and publicity but also ensures that its appeal is only temporary.This discussion of management fads is adapted from Ketchen, D. These goals guide employeesa€™ behaviors and serve as the benchmarks for assessing their performance. Thus, in some cases, getting employees to embrace certain values and other aspects of clan control is more effective than MBO. As the name a€?quality circlea€? suggests, identifying behaviors that would improve the quality of products and the operations management processes that create the products was the formal charge of many quality circles. These discussions were thought to lead individuals to greater understanding of themselves and others. Perhaps the best known is the a€?trust game,a€? which claims to build trust between employees by having individuals fall backward and depend on their coworkers to catch them. Most of the similarities, including staying a€?close to the customera€? and a€?productivity through people,a€? arose from powerful corporate cultures. Over time, a series of fads intended to improve organizational control processes have emerged. On the plus side, this means that all profits are the property of the owner (after taxes are paid, of course). However, a person who chooses to be part of a partnership rather than operating alone as a sole proprietor also takes on some risk; your partner could make bad decisions that end up costing you a lot of money. These executives may own a significant portion of the corporationa€™s stock, but this is not a legal requirement. When a shareholder sells her stock, the firma€™s performance while she has owned the stock will influence whether she makes a profit relative to her stock purchase.
Division of labor is a process of splitting up a task (such as the creation of lightbulbs) into a series of smaller tasks, each of which is performed by a specialist.
In other words, the pin factory was a staggering 240 times more productive than it would have been without relying on division of labor.
These linkages show the lines of responsibility through which a supervisor delegates authority to subordinates, oversees their activities, evaluates their performance, and guides them toward improvement when necessary.
In the case of General Electric, for example, the head of the Energy division reports only to the chief executive officer.
Typically, a committee consisting of at least one professor from every academic area (such as management, marketing, accounting, and finance) will be appointed to perform this task. This interlocking team structure continues all the way upwards to the Executive Team at the highest level of the company.a€?John Mackeya€™s blog. Homer tries to use his newfound influence for his own personal gain and naturally the organization as a whole suffers.
The process of evaluating and rewarding employeesa€™ performance also tends to be informal.
Thus when relying on a simple structure, the owner of a firm must be sure to communicate often and openly with employees. Also, because all the people in a particular department share the same background training, they tend to get along with one another. When Gibbons forgot to put the appropriate cover sheet on his TPS report, each of his eight bossesa€”and a parade of his coworkersa€”admonished him. This problem and others created by Ciscoa€™s overly complex structure were so severe that one columnist wondered aloud a€?has Ciscoa€™s John Chambers lost his mind?a€?Blodget, H.
Different organizations emphasize different types of control, but most organizations use a mix of all three types. The corrective action was simple: they started receiving their pay via direct deposit rather than through the mail. To try to prevent employee theft, many firms have a rule that requires checks to be signed by two people.
For example, waitstaff who consistently behave as team players could be assigned to the most desirable and lucrative shifts, such as nights and weekends. The creativity of a research scientist would be likely to be stifled, for example, if she were given a quota of patents that she must meet each year (output control) or if a strict dress code were enforced (behavioral control). The goal of the training was to build the sort of positive team spirit Disney and Publix enjoy. After athletic victories, Auburn University students throw rolls of toilet paper into campus oak trees. Following the presentation of MBO in Peter Druckera€™s 1954 book The Practice of Management, many executives embraced the process as a cure-all for organizational problems and challenges.
The book quickly became an international sensation; more than three million copies were sold in the first four years after its publication. Although these fads tend to be seen as cure-alls initially, executives eventually realize that an array of sound business practices is needed to create effective organizational controls. On the minus side, however, the owner is personally responsible for the firma€™s losses and debts. Shareholders can also benefit from profits if a firma€™s executives decide to pay cash dividends to shareholders. In the early twentieth century, Smitha€™s ideas strongly influenced Henry Ford and other industrial pioneers who sought to create efficient organizations. Every supervisor except for the person at the very top of the organization chart also serves as a subordinate to someone else. If problems were to arise with executing the strategic move discussed in this chaptera€™s opening vignettea€”joining the John Wood Group PLC with GEa€™s Energy divisiona€”the head of the Energy division reports would look to the chief executive officer for guidance.
This approach helps ensure that all aspects of business are represented appropriately in the new curriculum.
Informal linkages such as this one do not appear in organizational charts, but they nevertheless can have (and often do have) a significant influence on how firms operate. If a firma€™s structure is designed to maximize efficiency, for example, the firm may lack the flexibility needed to react quickly to exploit new opportunities. In particular, these structures create cross-functional teams that each work on a different project. Eliminating all internal and external barriers is not possible, of course, but making progress toward being boundaryless can help an organization become more flexible and responsive. As of July 2011, Searsa€™s stock was worth just over half what it had been worth five years earlier.
A very high grade point average can lead to placement on the deana€™s list and graduating with honors.
And in a somewhat bizarre example, some automobile factories dictate to workers how many minutes they can spend in restrooms during their work shift.
The statea€™s highway safety director summarized the need for clan control when noting that a€?wea€™ve just got to change a little culture out there.a€?Bousquet, S. At Clark University, Rollins College, and Emory University, time-honored traditions that involve spontaneously canceling classes surprise and delight students. Unfortunately, for shareholders, corporate profits and any dividends that these profits support are both taxed.
In the typical business school, for example, a department chair supervises a set of professors.
This offers several benefits: maximizing the organizationa€™s flexibility, enhancing communication across functional lines, and creating a spirit of teamwork and collaboration. These examples and thousands of others spread across the countrya€™s colleges and universities help students feel like they belong to something special.
If a sole proprietor is on the losing end of a significant lawsuit, for example, the owner could find his personal assets forfeited. Gore, a maker of fabrics, medical implants, industrial sealants, filtration systems, and consumer products. For example, poor coordination caused the evacuation of thousands of people from the New Orleans Superdome to be delayed by a full day. The councils reported to an operating committee consisting of Chambers and fifteen other top executives.
In particular, the airline added to its ability to service airplanes and provided more customer service training for its employees.
In particular, a person without managerial experience can be put in charge of a relatively small project as a test to see whether the person has a talent for leading others. This firm avoids organizational charts, management layers, and supervisors despite having approximately nine thousand employees across thirty countries. Four of the forty-seven boards bypassed the councils and reported directly to the operating committee. Because some delays are inevitable, Delta also announced plans to staff a Twitter account called Delta Assist around the clock to help passengers whose flights are delayed. In most towns, for example, there are a number of self-employed repair people, plumbers, and electricians who work alone on home repair jobs.
These arrangements are so complex and time consuming that some top executives spend 30 percent of their work hours serving on more than ten of the boards, councils, and the operating committee. Time will tell whether these structural changes will boost Ciscoa€™s stock price, which remained flat between 2006 and mid-2011. Also, many sole proprietors run their businesses from their homes to avoid expenses associated with operating an office. For the second quarter of 2011, Delta enjoyed a $198 million profit, despite having to absorb a $1 billion increase in its fuel costs due to rising prices.Yamanouchi, K.

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