Lesson 4- Organizational Design ( Imprimir) PDF

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DISEÑO ORGANIZATIVO EN INGLÉS - PROFESOR: ESTEBAN GARCÍA CANAL...

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ORGANIZATIONAL DESIGN

LESSON 4: DESIGN OF LATERAL LINKAGES • Introduction Lateral linkages: mechanisms for obtaining interdepartmental coordination without using direct supervision. Design of lateral linkages can be done through:  P&C systems: bureaucratic and centralizing means of inter-unit coordination. It is based on norms standards and budgets imposed by top managers. If people follow the rules, coordination is ensured.  Liaison devices: organic and de-centralizing means of inter-unit coordination. It facilitates mutual adjustment between departments. We should take into account that mutual adjustment can end up being a chaos because maybe there’s not a consensus reached. If both interdepartmentalizations can be used (feasible), we may choose P&C systems.

4.1 Planning and control systems Definition: norms that regulate, directly or indirectly, the activity of organizational units (departments).  Imposing ex-ante decisions/actions to be carried out at specific points in time: action planning (main feature).  After the fact monitoring of results (imposing performance standards over a period of time, with no reference to specific actions): performance control. P&C systems involve activities that cannot be separated. In order to control something, you have to make a plan before. • Action planning Definition: ex-ante specification of the decisions and actions to be carried out by each unit (department), with the aim of accomplishing specific goals; norms and rules specify determined actions to be done by the departments  SWP (standardization of work processes).  A system that integrates the non-routine decisions and actions of an entire organization for a specific period of time: programs and specifications.  Impose specific actions to each department whose compliance guarantees interdepartmental coordination and (hopefully) goal fulfillment.  The autonomy of departmental units is reduced.  A system to be used in functional departments (difficult to coordinate through just performance standards).  And in stable (foreseeable and certain) and simple environments. Action planning fits on functional grouping  you are forcing the departments to go in the right way. Action planning is not the solution for a company following a market grouping criteria.

MARÍA TERESA GONZÁLEZ DE LUIS 3º ADE BILINGÜE

ORGANIZATIONAL DESIGN Long-term plan: 5 years’ period, which is divided in a short-term, which will be adapted to the different departments. Each department has a specific budget in order to develop their tasks properly (each department has a specific task).

• Performance control systems - Definition: used to regulate the overall results of a given unit (by specifying performance requirements). Accomplishing specific outputs without determining the actions to achieve (freedom in the means of getting the output). Identifying what is the expected outcome of a task but without telling the department how to do it  SO (standardization of outputs). o Main differences with action planning:  Indirect regulation of the actions of the department: by saying them what to accomplish, you are influencing them in an indirect way.  Each unit has its own requirements: different goals for each department. You can’t expect each department to have the same results (different planning for different departments). o Used where the interdependencies between units are primarily of a pooled nature- namely, where the units are grouped on the basis of market:  Each unit has its own workflow  accurate and independent performance measurements.  Market departments are less efficient  PSC force them to keep costs under control. They can gain this efficiency lost because of the separation of the different workflows by coordinating themselves. o To be used in stable (foreseeable, certain) and simple environments. - PCS can serve two purposes: o Inform (measure): to signal when the performance of a unit has deteriorated… You want to condition the behavior. If people know their performance is measured, motivation increases (by putting pressure) with the objective of improving it. o Motivate: to induce higher performance. Can be the basis of “pay for performance” systems (P4P)  management by objectives (MBO). Incentives in the form of promotion (bonus)  if performance is not increased, they can be fired. - Problems: o Should unit managers have a say in goal planning? No, they can’t fixed the goals even they know performance of their department. o Length of the planning period: short or long term? MARÍA TERESA GONZÁLEZ DE LUIS 3º ADE BILINGÜE

ORGANIZATIONAL DESIGN  Short-term goal can have better results (side effects): people prefer shortterm period at the cost of long-term performance.  Long-term period: lack of pressure in order to accomplish the goal. o Exogenous factors (beyond manager’s control). o Information distortion and other dysfunctional behaviors: managers can disturb information in order to look better facing clients  performance based just on one parameter. • New perspective on performance measurement: Balance Scorecard (Cuadro de Mando Integral) Integrated control system that combines (and balance) financial performance measurements with other non-financial measures related to the key strategic factors for organizational success. Four major elements in control systems to ensure “balanced” performance: o Financial performance. o Customer service performance. o Internal processes-efficiencies. o Innovations/growth/learning. - The components of scorecard are designed in an integrative manner so that they reinforce one another and link short-term actions with long-term strategic goals. Result is “balanced” performance. - Information technologies make easier the adoption of the BS.

4.2 Liaison (linking) devices - Definition: decisions make on a department taking into account not only information but also criteria of other departments. - Characteristics: o Promote inter-departmental coordination through mutual adjustment. o A second-best alternative to planning and control systems  dynamic and/or complex environments. o Do not guarantee coordination (they require consensus among people involved). o Typology:  With formal power: removing formal authority from the current directors of the department in order to assign it to new people introduced in the formal structure of the company.  Integrating managers.  Matrix structures.  Without formal power: we don’t remove formal power.  Liaison positions.  Task forces.  Standing committees. MARÍA TERESA GONZÁLEZ DE LUIS 3º ADE BILINGÜE

ORGANIZATIONAL DESIGN Including additional criteria in the decision-making process of the department (in order to change the inertia of the decisions-making process). • Liaison positions (without formal power) - Route information and channel communication between departments, by passing the vertical channels  they just collect and transfer information. - They can join: o Line departments (functional or market). o Line and staff departments. - They lack formal authority (informal power). - They solve simple coordination problems. - NOT USE OF VERTICAL POSITIONS. - Examples: o Marketing department: information obtained from customers is transferred to people in the department. o Purchasing Department: reducing costs by using low quality inputs  returned good increase (company or department punished in the future). • Task forces & Standing committees (institutionalizing committee-based decision making) (without formal power) Task forces: cross-department group formed to accomplish a particular task (solve a particular/one-off/temporary interdepartmental coordination problem) and then disband. Example: several departments but you don’t know what the problem is; launching a new product (taking decisions about components, how much to produce, purchases…). Standing committees: cross-department group that meets regularly to discuss issues of common interest (to solve recurrent problems). Example: different departments’ components discuss about R&D issues (new discoveries that can require regular meetings…you don’t fix them once). o Many exist at middle levels and also at the strategic apex. o Permanent committees but not its representative (good to change these people). - Difference: nature of the problem to solve (temporary vs. recurrent). Expected duration of the group  task forces are created to solve problems that appear once; by contrast, standing committees deal with problems that appear on a regular basis on an organization. - Groups formed by the representative of each department (cross-unit group) that puts together information obtained in the department in order to reach (or not) a consensus and make joint decisions (common philosophy). - These groups propose solutions. - Decision making based in consensus. • Integrating managers (with formal power)  we do alter the structure MARÍA TERESA GONZÁLEZ DE LUIS 3º ADE BILINGÜE

ORGANIZATIONAL DESIGN - New managerial positions included in the hierarchy with formal authority over some aspects of the decisions processes that cut across the affected departments. They overlap with the existing superstructure assuming part of their competences. - Their formal authority never extends to the personnel of the affected departments. - They have the following means to solve coordination problems: o Formal authority, that ranges from having power to:  Approve or reject the budget of the affected departments (minimum).  Distribute their own budget to across units (maximum). o Informal power stemming from persuasion and negotiation capabilities as well as their knowledge and information. - As the other liaison devices, they can be used both in functional and market departments. - We remove competences and assign them to a new manager (that now forms part of the organization), which is responsible/ have formal authority over decision-making processes that were responsibility of the other managers. • Matrix structures (with formal power) - Type of grouping criteria or can be seen as a type of liaison devices (based on removing competences and assign them to other positions). - The chain of command splits into two (or more) branches and a different departmentalization is applies in each branch (usually one functional and one market): o The organization avoids choosing one basis of grouping over another; instead, it chooses both. o The organization sets up a dual authority structure  matrix structure sacrifices the principle of unity of command. - You can use geographical areas and use the products in the other area (2 way matrix in market departmentalization). Some companies use three way matrix structures (products, region and function): we pay attention to several sources of interdependences at the same time. - Each subordinate must respond just to one supervisor in other structures; but once you are in the matrix structure, you’ve two bosses. - Types: o Permanent: the interdependencies remain more-or-less stable and so do the units and the people in them. People assigned to the different departments are more stable. Example: university. o Variable (shifting): geared to project work, the interdependencies, the market units, and the people in them shift around frequently (people assigned to the departments are continuously changing  once the project is finished, people are assigned to other project). It provides flexibility and adaptation to change. MARÍA TERESA GONZÁLEZ DE LUIS 3º ADE BILINGÜE

ORGANIZATIONAL DESIGN * In order to know if the structure is permanent or variable, we’ve to see the stability of the organization after finishing offering the output.

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Advantages of matrix structures: o They promote cross-department negotiations and consensus: mutual adjustment is institutionalized. o Flexibility in situations of change and uncertainty that require a multidisciplinary approach. - Disadvantages of matrix structures: o They do no guarantee coordination: coordination require consensus “among equals”. o They are a source of conflicts and stress:  Matrix structures internalize and institutionalize the dilemma of confronting two sources of interdependence.  They require from its participants highly developed interpersonal skills and considerable tolerance for ambiguity. o Maintaining an adequate balance of power between the different sorts of managers is extremely difficult. o High costs of administration and communication. • Liaison devices and distribution of decision making power (*) grouping criteria or final outcome arising of removing formal power

100% of the decisions in the hands of functional managers

(*)

100% of the decisions are made based on market criteria

Progressive adoption of liaison devices reduces the decision-making power (informal) in the hands of the former managers. MARÍA TERESA GONZÁLEZ DE LUIS 3º ADE BILINGÜE...