Week 7:

Restructuring Organisations

Acknowledgement of sources
Text: Waddell, Cummings & Worley (2000).
 Learning Objectives

• To understand the basic principles of

technostructural design
• To understand the three basic
structural choices and two advanced
structural choices available to
organisations
• To understand the process of
downsizing and reengineering
Contingencies Influencing
Structural Design
Environment

Organisation Worldwide
Size Operations
Structural
Design

Organisation
Technology Goals
 Functional Organisation

P r e s id e n t

V P R e se a rc h V P O p e r a tio n s VP Hum an V P M a r k e tin g V P F in a n c e

R e so u rc e s
 Advantages of the Functional
Structure
• Promotes skill specialisation
• Reduces duplication of scarce resources and
uses resources full time
• Enhances career development for specialists
within large departments
• Facilitates communication and performance
because superiors share expertise with their
subordinates
• Exposes specialists to other within same
specialty
Disadvantages of the Functional
Structure
• Emphasises routine tasks and encourages
short time horizons
• Fosters parochial perspectives by
managers and limits capacity for top-
management positions
• Multiplies interdepartmental dependencies
and increases coordination and scheduling
difficulties
• Obscures accountability for overall results
 Functional Organisation
Contingencies
• Stable and certain environment
• Small to medium size
• Routine technology, key
interdependencies within functions
• Goals of efficiency and technical
quality
The Self-Contained Organisation

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

VP Hum 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 r k e tin g
 Advantages of Self-Contained
Structures
• Recognises interdepartmental interdependencies
• Fosters an orientation toward overall outcomes and
clients
• Allows diversification and expansion of skills and
training
• Ensures accountability by departmental managers
and promotes delegation of authority and
responsibility
• Heightens departmental cohesion and involvement
in work
 Disadvantages of
Self-Contained Structures
• May use skills and resource inefficiently
• Limits career advancement by specialists
to movements out of their departments
• Impedes specialists’ exposure to others
within same specialties
• Puts multiple-role demands upon people
and creates stress
• May promote departmental objectives as
opposed to overall organisational goals
 Self-Contained Structural
Contingencies
• Unstable and uncertain environments
• Large size
• Technological interdependencies
across functions
• Goals of product specialisation and
innovation
 The Matrix Organisation

P re s id e n t
CEO

V P F in a n c e V P H u m a n R e so 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 se a rc h V P E n g in e e r in g V P M a n u fa c tu rin 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
 Advantages of the Matrix Structure
• Makes specialised, functional knowledge available to
all projects
• Use people flexibly, since departments maintain
reservoir of specialists
• Maintains consistency between different departments
and projects by forcing communication between
managers
• Recognises and provides mechanisms for dealing with
legitimate, multiple sources of power in the
organisation
• Can adapt to environmental changes by shifting
emphasis between project and functional aspects
 Disadvantages of the
Matrix Structure
• Can be difficult to implement
• Increases role ambiguity, stress, and anxiety by
assigning people to more than one project
• Performance is lowered without power balancing
between projects and functions
• Makes inconsistent demands and can promote
conflict and short-term crisis orientation
• May reward political skills over technical skills
Matrix Organisation Contingencies

• Requires dual focus on unique product

demands and technical specialisation

• Demands for high information processing

capacity

• Requires pressure for shared and scarce

resources
 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
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
 Advantages of a
Process-Based Structure
• Focuses resources on customer satisfaction
• Improves speed and efficiency
• Adapts to environmental change rapidly
• Reduces boundaries between departments
• Increases ability to see total work flow
• Enhances employee involvement
• Lowers costs dues to overhead
 Disadvantages of
Process-Based Structures
• Can threaten middle managers and staff specialists
• Requires changes in command-and-control mindsets
• Duplicates scarce resources
• Requires new skills and knowledge to manage lateral
relationships and teams
• May take longer to make decisions in teams
• Can be ineffective if wrong processes are identified
 Process-Based Structure
Contingencies
• Uncertain and changing environments
• Moderate to large size
• Nonroutine and highly
interdependent technologies
• Customer-oriented goals
 The Network Organisation
Designer Producer
Organisations Organisations

Broker
Organisation

Supplier Distributor
Organisations Organisations
 Types of Networks
• Internal Market Network

• Vertical Market Network

• Intermarket Network

• Opportunity Network
Advantages of Network Structures
• Enables highly flexible and adaptive response to
dynamic environments
• Creates a “best of the best” organisation to focus
resources on customer and market needs
• Each organisation can leverage a distinctive
competency
• Permits rapid global response
• Can produce “synergistic” results
 Disadvantages of
Network Structures
• Managing lateral relationships across
autonomous organisations is difficult
• Motivating members to relinquish
autonomy to join network is difficult
• Sustaining membership and benefits can be
problematic
• May give partners access to proprietary
knowledge and technology
Network Structure Contingencies
• Highly complex and uncertain
environments
• All size organisations
• Goals of organisational specialisation and
innovation
• Highly uncertain technologies
• Worldwide operations
 Downsizing Process

• Clarify the organisation’s 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
 Downsizing Tactics
Tactic Characteristic Examples
• Reduces headcount • Attrition
Workforce • Short-term focus • Retirement/buyout
Reduction • Fosters transition • Layoffs

• Changes • Eliminate functions,

Organization organization layers, products
Redesign • Medium-term focus • Merge units
• Fosters transition & • Redesign tasks
transformation

• Changes culture • Change

Systemic • Long-term focus responsibilities
• Fosters • Foster continuous
transformation improvement
• Downsizing is normal
 Reengineering Process
• Prepare the organisation

• Specify the organisation’s strategy and objectives

• Fundamentally rethink the way work gets done

– Identify and analyse core business processes
– Define performance objectives
– Design new processes

• Restructure the organisation around the new

business processes.
 Characteristics of
Reengineered Organisations
• Work units change from functional departments to
process teams
• Jobs change from simple tasks to multidimensional
work
• People’s roles change from controlled to empowered
• The focus of performance measures and compensation
shifts from activities to results.
• Organisation structures change from hierarchical to flat
• Managers change from supervisors to coaches;
executives change from scorekeepers to leaders
ORGANISATION DEVELOPMENT & CHANGE

Employee Involvement
 Learning Objectives

• To understand the principle

characteristics of employee
involvement interventions
• To understand the three predominant
applications of employee
involvement
 Employee Involvement
• Power
– Extent to which influence and authority are pushed
down into the organisation
• Information
– Extent to which relevant information is shared with
members
• Knowledge and Skills
– Extent to which members have relevant skills and
knowledge and opportunities to gain them
• Rewards
– Extent to which opportunities for internal and
external rewards are tied to effectiveness
 EI and Productivity
Improved
Communication
and Coordination

Employee Improved
Improved Productivity
Involvement
Motivation
Intervention

Improved
Capabilities
 Secondary Effects of EI on
Productivity

Employee
Attraction and
Well-being and Productivity
Retention
Satisfaction

Employee
Involvement Productivity
Intervention
 Employee Involvement
Applications
Knowledge/
Application Power Information Skill Rewards
Parallel
Structures Low Moderate Moderate Low

High
Involvement High High High High
Organizations
Total Quality
Management High High High High
 Parallel Structure
Application Stages
• Define the parallel structure’s purpose and
scope
• Form a steering committee
• Communicate with organisation members
• Form employee problem-solving groups
• Address the problems and issues
• Implement and evaluate the changes
 High Involvement
Organisation Features
• Flat, lean organisation • Extensive training
structures programs
• Enriched work designs • Advanced reward
• Open information systems
systems • Participatively
• Sophisticated designed personnel
selection and career practices
systems • Conducive physical
layouts
 TQM Application Stages
• Gain long-term senior management
commitment
• Train members in quality methods
• Start quality improvement projects
• Measure progress
• Rewarding accomplishment
 Deming’s Quality Guidelines
• Create a constancy of • Drive out fear
purpose • Break down barriers between
• Adopt a new philosophy departments
• End lowest cost purchasing • Take action to accomplish
practices transformation
• Institute leadership • Improve processes constantly
• Eliminate empty slogans and forever
• Eliminate numerical quotas • Cease dependence on mass
• Institute on-the-job inspection
training • Remove barriers to pride in
• Retrain vigorously workmanship
 Deming’s Seven Deadly Sins
• Lack of constancy of purpose
• Emphasising short-term profits and
immediate dividends
• Evaluation of performance, merit rating, or
annual review
• Mobility of top management
• Running a company only on visible figures
• Excessive medical costs
• Excessive costs of warranty
ORGANISATION DEVELOPMENT & CHANGE

Work Design
 Learning Objectives

• To explore work design as a central

component of many EI interventions
• To approach work design from three
different perspectives: engineering,
motivational, and socio-technical
• To understand how different approaches
align with different technical and social
conditions
 Work Design Approaches
• Engineering: Traditional Jobs &
Groups
– High specification and routinisation
– Low task variety and discretion
• Motivational: Enriched Jobs
– High task variety and discretion
– Feedback of results
• Socio-Technical: Self-Managing Teams
– Control over total task
– Multi-skilled, flexible, and self-regulating
Traditional Jobs & Workgroups
• Based on Scientific Management
– Highly specified behaviours
– Narrow range of skills
– Low levels of authority and discretion
– Highly repetitive
• Huge Benefits
– Low selection and training costs
– High productivity
– High levels of control
 Enriched Jobs
Critical
Core Job Psychological
Characteristics Outcomes
States

Skill variety Experienced • Hi internal

Task identity Meaningfulness work motivation
Task significance of the Work • Hi growth
satisfaction
Autonomy Experienced • Hi job
Responsibility satisfaction
• Hi work
Feedback from Knowledge of effectiveness
work Actual Results

Moderators
 Core Job Dimensions
• Skill Variety - extent to which multiple
skills are used
• Task Identity - extent to which an
individual works on a “whole” task
• Task Significance - impact of the work on
others
• Autonomy - amount of discretion in the
work
• Feedback from the Work Itself - extent to
which work provides information on
effectiveness
 Job Enrichment
Application Stages
• Perform a thorough diagnosis
• Form natural work units
• Combine tasks
• Establish client relationships
• Vertical loading
• Opening feedback channels
Self Managed Teams Application
Stages
• Sanction the design effort
• Diagnose the work system
• Generate appropriate designs
• Specify support systems
• Implement and evaluate the work design
• Continual change and improvement
 Technological Requirements
Low
Task Uncertainty

High

Low High
Technical Interdependence
 Technological Requirements
High Task Uncertainty Low

Traditional Traditional
Job Design Work Groups

Self-Regulating
Job Enrichment Work Groups

Low Technical Interdependence High

Social/Psychological Requirements
High
Growth Needs
Low

Low Social Needs High

Social/Psychological Requirements
Growth Needs Low

Traditional Traditional
Job Design Work Groups

Job Enrichment Self-Regulating

Work Groups
High

Low Social Needs High

 Socio-Technical
Systems Diagnosis

• Define the Work System

• Conduct an Environmental
Analysis
• Conduct a Technical Analysis
• Conduct a Social Analysis
 Socio-Technical
Systems Design
• Can work system be designed to
better fit with the environment?
• Can work system be designed to
better operate conversion process
and control variances?
• Can work system be designed to
better satisfy members’ needs?
 High Performance Team Model
Team Task
Design and
Development
• Team
Team Process Team Performance
Intervention Functioning • Member
Satisfaction
Organisation
Support
System
 Team Task Design &
Development
• Whole and interdependent tasks
• Common mission and goals
• Requisite multi-skills
• Task and boundary control
• Feedback of results
• Minimum specification design
• Develop from narrow to broad boundaries
for discretion
 Team Process Intervention
• Promoting healthy interpersonal
relationships
• Coordinating efforts
• Weighting member inputs and sharing
knowledge
• Making good decisions
• Confronting and resolving conflicts
 Organisation Support Systems

• Performance management systems

• Training systems
• Information systems
• Selection systems
• Management systems
 NEXT WEEK

• Overview of interventions - continued

• Reading: Chapters 19 & 20

• Additional reading: Pedler, M., Burgoyne, J. &

Boydell, T. (1997) The learning company: A
strategy for sustainable development (2nd ed).
London: McGraw Hill.