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Organization Development and

Change

Chapter Fourteen:
Restructuring Organizatio

Thomas G. Cummings
Christopher G. Worley
Learning Objectives
for Chapter Fourteen
To understand the basic principles of
technostructural design
To understand the three basic structural
choices and two advanced structural
choices available to organizations
To understand the process of
downsizing and reengineering

Cummings & Worley, 9e (c) 14-2


Contingencies Influencing
Structural Design
Environment

Organization Worldwide
Size Structural Operations
Design

Organization
Technology Goals

Cummings & Worley, 9e (c) 14-3


Functional Organization

P r e s id e n t

V P R e s e a rc h V P O p e r a tio n s V P H um an V P M a r k e tin g V P F in a n c e
R e s o u rc e s

Cummings & Worley, 9e (c) 14-4


The Functional Form
Advantages Disadvantages
Promotes skill specialization Emphasizes routine tasks;
encourages short time
Reduces duplication of horizons
scarce resources and uses
resources full time Fosters parochial
Enhances career perspectives by managers
development for specialists and limits capacity for top-
within large departments management positions
Facilitates communication
and performance because
Multiplies
superiors share expertise interdepartmental
with their subordinates dependencies; increases
coordination and
Exposes specialists to
others within same specialty scheduling difficulties
Obscures accountability for
overall results
Cummings & Worley, 9e (c) 14-5
The Divisional Organization
C h ie f E x e c u tiv e
O ffic e r

C h ie f F in a n c ia l V P R e s e a rc h
O ffic e r

D iv is io n M a n a g e r D iv is io n M a n a g e r D iv is io n M a n a g e r
A s ia N o r th A m e r ic a E u ro p e

V P H um an V P O p e r a tio n s V P S a le s a n d
R e s o u rc e s M a rk e tin g

Cummings & Worley, 9e (c) 14-6


The Divisional Form
Advantages Disadvantages
Recognizes May use skills and resource
interdepartmental inefficiently
interdependencies Limits career advancement
Fosters an orientation by specialists
toward overall outcomes
and clients
Impedes specialists
exposure to others within
Allows diversification and same specialties
expansion of skills/training Puts multiple-role demands
Ensures accountability by upon people and creates
departmental managers stress
and promotes delegation
May promote departmental
Heightens departmental objectives as opposed to
cohesion and involvement overall organizational goals
in work

Cummings & Worley, 9e (c) 14-7


The Matrix Organization
P r e s id e n t
C E O

V P F in a n c e V P H u m a n R e s o u rc e s

S e n io r V P S e n io r V P
P ro g ra m s O p e r a tio n s

V P R e s e a rc h V P E n g in e e r in g V P M a n u fa c tu r in g V P M a r k e tin g

P ro g ra m M a n a g e r
A irc r a ft

P ro g ra m M a n a g e r
N a v ig a tio n S y s te m s

P ro g ra m M a n a g e r
S p a c e S y s te m s

Cummings & Worley, 9e (c) 14-8


The Matrix Structure
Advantages Disadvantages
Makes specialized, Can be difficult to
functional knowledge implement
available to all projects Increases role ambiguity,
stress, and anxiety
Use people flexibly
Performance is lowered
Maintains consistency by without power balancing
forcing communication between projects and
between managers functions
Recognizes and provides Makes inconsistent
mechanisms for dealing demands and can
promote conflict and
with legitimate, multiple short-term crisis
sources of power orientation
Can adapt to May reward political skills
environmental changes over technical skills

Cummings & Worley, 9e (c) 14-9


Characteristics of
Process-Based Structures
Processes drive structure
Work adds value
Teams are fundamental
Customers define performance
Teams are rewarded for performance
Teams are tightly linked to suppliers and
customers
Team members are well informed and
trained
Cummings & Worley, 9e (c) 14-10
The Process-Based Structure
S e n io r M a n a g e m e n t T e a m
C h a ir a n d K e y S u p p o r t P r o c e s s O w n e r s

D e v e lo p in g N e w P r o d u c ts P r o c e s s
P ro c e s s O w n e r
C r o s s F u n c t io n a l T e a m M e m b e r s

A c q u ir in g a n d F illin g C u s to m e r O r d e r s P r o c e s s
P ro c e s s O w n e r
C r o s s F u n c t io n a l T e a m M e m b e r s

S u p p o r tin g C u s to m e r U s a g e P r o c e s s
P ro c e s s O w n e r
C r o s s F u n c t io n a l T e a m M e m b e r s

Cummings & Worley, 9e (c) 14-11


The Process-Based Form
Advantages Disadvantages
Focuses resources on Can threaten middle
customer satisfaction managers and staff
Improves speed and specialists
efficiency Requires changes in
Adapts to environmental command-and-control
change rapidly mindsets
Reduces boundaries
Duplicates scarce resources
between departments Requires new skills and
Increases ability to see knowledge to manage
lateral relationships and
total work flow
teams
Enhances employee May take longer to make
involvement decisions in teams
Lowers costs dues to Can be ineffective if wrong
overhead processes are identified

Cummings & Worley, 9e (c) 14-12


The Customer Centric Structure

Cummings & Worley, 9e (c) 14-13


The Customer Centric Form
Advantages Disadvantages
Customer teams can be too
Presents one integrated
face to the customer inwardly focused
Sharing learnings and
Generates a deep
understanding of developing
customer requirements functional skills is difficult
Managing lateral relations
Enables organization to
between customer-facing
customize and tailor
and
solutions for customers
back office units is
Builds a robust difficult
customer response Developing common
capability processes
front and back is
Cummings & Worley, 9e (c) 14-14
problematic
The Network Organization

Designer Producer
Organizations Organizations

Broker
Organization

Supplier Distributor
Organizations Organizati
ons

Cummings & Worley, 9e (c) 14-15


Types of Networks
Internal Market Network
Vertical Market Network
Intermarket Network
Opportunity Network

Cummings & Worley, 9e (c) 14-16


The Network-Based Form
Advantages Disadvantages
Enables highly flexible Difficulty managing lateral
and adaptive responses relationships across
Creates a best of the autonomous organizations
best firm to focus Difficulty motivating
resources on customer members to relinquish
and market needs autonomy to join network
Each organization can Sustaining membership
leverage a distinctive and benefits can be
competency
problematic
Permits rapid global
response
May give partners access
to proprietary knowledge
Can produce and technology
synergistic results
Cummings & Worley, 9e (c) 14-17
The Downsizing Process
Clarify the organizations strategy
Assess downsizing options and make
relevant choices
Implement the changes
Address the needs of survivors and
those who leave
Follow through with growth plans

Cummings & Worley, 9e (c) 14-18


Downsizing Tactics

Cummings & Worley, 9e (c) 14-19


The Reengineering Process
Prepare the organization
Specify the organizations strategy and
objectives
Fundamentally rethink the way work gets
done
Identifyand analyze core business
processes
Define performance objectives
Design new processes
Restructure the organization around the
new business processes.
Cummings & Worley, 9e (c) 14-20
Characteristics of
Reengineered Organizations
Work units change from functional departments to
process teams
Jobs change from simple tasks to multidimensional
work
Peoples roles change from controlled to empowered
The focus of performance measures and
compensation shifts from activities to results.
Organization structures change from hierarchical to
flat
Managers change from supervisors to coaches;
executives change from scorekeepers to leaders
Cummings & Worley, 9e (c) 14-21

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