Appunti Business Organization - EV

GROUPING

Object of the Decision:

- What are the appropriate criteria to group the working positions/ organizational units?

- How necessary is it to develop the structure “vertically”?

There is no single answer to these questions. In fact:

- Grouping methods are different and they work well under different conditions

- Horizontal development is often praised, but it does not always attract or produce the expected

results.

Grouping choices concern different levels and different areas of the same organizational structure.

Therefore, all the bases of grouping, seen before, can coexist at a different hierarchical levels and in

different "sectors" of the organization.

The choice of the level is immediately dependent on Top Management and defines the global face of

the macro organizational structure.

COORDINATION

To coordinate: to put together, integrate, harmonize the work of several people, belonging to the same

organizational unit or different units. The need grows with the following factors:

- Differentiation

- Dimension

- Interdependence

- Uncertainty

Subject of the decision: How can we make sure the coordination tools are in line with our specific

business needs?

Coordination choices are crucial for an organization to work at its best, as they are aimed at optimizing

global results. Suitable coordination also means avoiding unnecessary activities, duplication, loss of

time and inefficiencies.

DECENTRALIZATION

This is the dissemination of decision-making powers within the organizational structure, in particular

between the various hierarchical levels, through DELEGATION.

An organization can have different degrees of decentralization. An organization is defined as

“decentralized”, where delegating power is widely practiced:

- continuously;

- not on marginal issues;

- at lower levels.

While coordination is related to horizontal relations, decentralization refers to vertical relationships.

The real problem is not so much the existence or not of a hierarchy, but rather the risk of RIGIDITY OF

VERTICAL BOUNDARIES with the following consequences:

- slow response;

- staff dissatisfaction especially at lower levels;

- customer dissatisfaction.

Subject of the decision: how can we mitigate the vertical boundaries between the organization’s

different levels?

The answer to this question assumes that attenuating boundaries is a good choice, because it can

"capture" a company’s potential and make more timely decisions. 9

Generally speaking, this is true, even if there are situations where a high degree of centralization is

appropriate. Eg.:

- when a company is going through a crisis;

- in case of unproductive conflicts within a company;

- when personnel lack decision making power.

The “correct” degree and type of decentralization is the goal. Therefore, central to the topic is

RESPONIBILITY.

FORMALIZATION

To formalize make official in writing.

à

“who” carries out a task

à

“what” a certain employee does

à

“how” tasks and processes are carried out.

à

Subject of the decision: how much is it appropriate to formalize the organization?

To answer this question, we should also consider the risk that formalization involves:

- losing sight of goals, because priority is given to complying with the rules;

- suffocating innovation;

- mistreating customers;

- creating a demotivating climate for employees.

For these reasons, it is better to limit formalization in small companies.

UNIT SIZE

Subject of the decision: how many people are needed in any specific organizational unit?

More correctly, the problem must be faced at the level of every specific process, which - as we know -

is a sub-company system consisting of "inter-organizational units."

It also involves breaking down the organizational unit or the process’s specific “activities”.

Adding slides

What is a business process?

Business is group of people that coordinate their work to create a value. People do this activity in a

given sequence.

Business process is a sequence of activities designed to create something of value or is a

collection of related, structured activities or tasks that in a specific sequence produces a

service or product for a particular customer or customers.

A business process may often be visualized as a flowchart (diagram) of a sequence of activities with

interleaving decision points or as a process matrix of sequence of activities with relevance rules based

on data in the process.

The benefits of using business processes include improves customer satisfaction and improved agility

for reacting to rapid market change. 10

LESSON 3 Includes: CEO – OTHER OFFICERS (CFO,

CIO, COO) – OWNERS or BOARD OF

DIRECTORS.

STRATEGIC APEX

Higher level decision of

organization

Technostructure Support

staff

Middle line

Operating core

What is the core of organization?

Production in general,marketing,

sales, supply management &

logistics.

Between strategic apex and operating core there is a middle line, which linked them directly.

SUPPORT STAFF is constituted by the people which do not create directly the product, but help to do

that. So help to solve the problem arose. Sometimes is OUTSOURCED.

OUTSOURCING: means that – for example – if you want to help someone which helps your employees,

you can make a contract with an external company that provides services as support.

TECHNOSTRUCTURE indicates all those people that do not produce something, but give rules and

instructions to others. They tell people what to do. Technostructure has much more power. It can

comprise:

H.R:

• Organ

• Audit

• Control

•

ORGANIZATION can be studied as a social organism.Between all the elements above, we can remove

from the company the support staff, technostructure and middle line.

Depending on which is the structure of the company, they can be classified with these framework

(above).

What is organizational configuration?

A structure’s different parameters can be combined with each other and other organizational variables

(managerial system and management style). There are some typical forms of organization, called

configuration, not to be confused with a structure’s operational schemes (multi-functional, multi-

divisional, etc.).

Configuration is therefore a conceptual model, identified as follows:

a) Prevalence of one of the organization’s five components (next slide) for business success;

b) Relevance of a particular system of coordination and characteristics of the management

control system;

c) Prevalence of a particular model of management and organizational culture. 11

The main configurations are:

1. The entrepreneurial organization

2. The machine organization (bureaucracy)

3. The professional organization.

4. The divisional organization

5. The innovative organization (“adhocracy”).

1. ENTREPRENEURIAL ORGANIZATION Notes

Key part of Main coordination Management

organization mechanism style and culture Small company, with

strong centralization,

Startegic Direct supervision Authoritarian/ limited formalization,

Apex paternalistic high flexibility.

Strategic apex is formed by two or more entrepreneurs. Here we do not have technostructure.

Positive aspects:

STRATEGIC APEX - low cost

- flexible

Negative aspects:

Middle line it is possibile to

develop a big

company in this

Operating core situation.

2. THE MACHINE ORGANIZATION (BUREAUCRACY)

Key component Notes

Main coordination Management

mechanism style and culture

Technostructure Large company with mass

production, oriented to

Operative Bureacuratic/ efficiency, not

processes formal rationality decentralized, operating

standardization in stable environment.

They create a system of rules to help the people about what they have to do.

STRATEGIC APEX

Technostructure Support

staff

Middle line

Operating core 12

In the machine organization the technostructure is really important. The operational processes

(making an order f. example) are typically standardized to procedures.

3. DIVISIONAL ORGANIZATION

We have a certain number of structures that depends on the strategic apex.

key part of organization: middle line

→ main coordination mechanism: goals

→ and sub-goals system

management style and culture:

→ participatory/ flexible method

notes: large diversified businesses,

→ with strong decentralization towards

the top and middle management.

The strategic apex needs the technostructure staff in order to achieve goals.

When you create a division, there is a specific manager for each of them: General manager of certain

division.

Here we always have strategic apex and support staff, and inside we have different sub organization,

linked to the strategic apex.

This structure is typical for big companies, because is costly.

4. THE PROFESSIONAL ORGANIZATION

It has a significant number of professional into the operating core. Professionals are those people with

skills, and high level of autonomy in order to

have tasks. For example, a doctor is a

professional.

Key part of organization: operating core

→ Main coordination mechanisms:

→ knowledge / skills standardization

Management style and culture:

→ independency

Notes: companies (or sub-business

→ system) consists of professionals with a

high degree of training, which often

produces services by drawing on

“standard programs”. 13

5. THE INNOVATIVE ORGANIZATION

This type of organization emerges

around projects.

The technostructure is so small

because is the project that tells the

people what to do.

Key part: “all parts”

→ (innovative adhocracy)

Main coordinating mechanisms:

→ mutual adjustment

Management style and culture:

→ culture of learning and

innovation

Notes: companies that operate on a “project” of the client (operating adhocracy); companies

→ that innovate on their own initiative (adhocracy innovative) in very unstable environment.

Notes

In practice the organizational configuration is often mixed. For example:

Symphony orchestra (entrepreneurial organization director

à

• and professional organization orchestra)

à

Newspaper (professional organization journalists

à

• Bureaucracy printers)

à

ORGANIZATIONAL STRUCTURE

We have to make different decisions based on the structures different parameters, as shown here:

Specialization

• Grouping divide activities by input and output or by process

à

• Decentralization delegation selected power or parallel power to the ma