Prepared By : Ir.

Haery Sihombing/IP & Rohanna Abdullah

Pensyarah
Fakulti Kejuruteraan Pembuatan
Universiti Teknologi Malaysia Melaka
¾ ORGANIZATIONS
 ORGANIZING

„ Organization is the deployment of

resources to achieve strategic goals.
„ It is reflected in
„ Division of labor into specific departments &
jobs
„ Formal lines of authority
„ Mechanisms for coordinating diverse
organizational tasks

HAERY SIHOMBING
Designing Adaptive Organizations

„ Organizing Principles and Concepts

„ Organizing the Vertical Structure
„ Using Mechanisms for Horizontal
Coordination
„ Tailoring Various Elements of Structural
Design to Organizational Situations

HAERY SIHOMBING
 ORGANIZATION STRUCTURE

Defines how tasks are divided, resources are

deployed, and departments are coordinated
●Set of formal tasks assigned
●Formal reporting relationships

The design of systems to ensure effective

coordination of employees across department

HAERY SIHOMBING
THE ORGANIZATION CHART

Visual representation
“The Home Depot is the world's largest home
improvement retailer currently operating
Set of formal tasks 1,363 stores.

Framework for vertical control

Formal reporting relationships

HAERY SIHOMBING
 ORGANIZATIONAL STRATEGY
Resources are critical to
organizational strategy because they
can help companies create and sustain
an advantage over competitor

‰ Resources
The assets, capabilities, processes, information, and
knowledge that an organization uses to improve its
effectiveness and efficiency and to create and sustain an
advantage over competitors and to fulfill a need or solve
a problem
HAERY SIHOMBING
 ORGANIZATIONAL STRATEGY

‰ Competitive Advantage
Providing greater value for customers than competitor
can

‰ Sustainable Competitive Advantage

A competitive advantage that other companies have
tried unsuccessfully to duplicate and have, for the
moment, stopped trying to duplicate

HAERY SIHOMBING
 CERTAIN CONDITION
Firm’s resources are to be used to achieved
a sustainable competitive advantage :
‰ valuable resources
allows companies to improve efficiency and effectiveness
‰ rare resources
not controlled or possessed by many competing firms
‰ imperfectly imitable resource
impossible or extremely costly or difficult for other
firms to duplicate
‰ nonsustitutable resources
without equivalent substitutes or replacements that
produces value or competitive advantage HAERY SIHOMBING
 WORK SPECIALIZATION
Division of labor concept

„ Tasks are subdivided into individual

jobs
„ Employees perform only the tasks
relevant to their specialized function
„ Jobs tend to be small, but they can be
performed efficiently

HAERY SIHOMBING
 CHAIN of COMMAND

9 Unbroken line of authority that links all

persons in an organization
9 Shows who reports to whom

Associated with two underlying principles

‰ Unity of Command
‰ Scalar Principle

HAERY SIHOMBING
 AUTHORITY
„ Formal and legitimate right of a manager
to make decisions and issue orders
„ Allocate resources to achieve
organizationally desired outcomes
„ Authority is distinguished by three
characteristics
c Authority is vested in organizational positions,
not people
d Authority is accepted by subordinates
e Authority flows down the vertical hierarchy

HAERY SIHOMBING
 RESPONSIBILITY

„ The duty to perform the task or activity

an employee has been assigned

„ Managers are assigned authority

commensurate with responsibility

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 ACCOUNTABILITY

● Mechanism through which authority and

responsibility are brought into alignment
● People are subject to reporting and
justifying task outcomes to those above
them in the chain of command
● Can be built into the organization
structure

HAERY SIHOMBING
 DELEGATION

¾ Process managers use to transfer

authority and responsibility

¾ Organizations encourage managers to

delegate authority to lowest possible level

HAERY SIHOMBING
 DELEGATION
Give Maintain Evaluate and reward
thorough feedback performance
instructions

Techniques for Delegation

Ensure that
Delegate the authority equals Select the right
whole task responsibility person
HAERY SIHOMBING
 Line and Staff Authority
„ Line Authority =
individuals in management positions have
the formal power to direct and control
immediate subordinates

„ Staff Authority =
granted to staff specialists in their area of
expertise

HAERY SIHOMBING
Span of Management/Span of
Control
„ Number of employees who report to a
supervisor
„ Traditional view = seven subordinates per
manager
„ Lean organizations today = 30+ subordinates
„ Supervisor Involvement
„ must be closely involved with subordinates, the
span should be small
„ need little involvement with subordinates, it can
be large
HAERY SIHOMBING
 Factors Associated With Less
Supervisor Involvement
„ Work is stable and routine
„ Subordinates perform similar work tasks
„ Subordinates are concentrated in a single location
„ Subordinates are highly trained
„ Rules and procedure defining task activities are
available
„ Support systems and personnel are available for the
manager
„ Little time is required in non-supervisory activities
„ Managers’ preferences and styles favor a large span
 Tall versus Flat Structure

„ Span of Control used in an organization

determines whether the structure is tall or flat
„ Tall structure has a narrow span and more
hierarchical levels
„ Flat structure has a wide span, is horizontally
dispersed and fewer hierarchical levels
„ The trend has been toward wider spans of
control
HAERY SIHOMBING
Centralization vs. Decentralization

„ Greater change and uncertainty in the

environment are usually associated with
decentralization
„ The amount of centralization or
decentralization should fit the firm’s strategy
„ In times of crisis or risk of company failure,
authority may be centralized at the top

HAERY SIHOMBING
 DEPARTMENTALIZATION
The basis on which individuals are grouped into departments

n Vertical functional approach. People

are grouped together in departments by
common skills.
o Divisional approach. Grouped together
based on a common product, program, or
geographical region.
p Horizontal matrix approach. Functional
and divisional chains of command. Some
employees report to two bosses
q Team-based approach. Created to
accomplish specific tasks HAERY SIHOMBING
 DEPARTMENTALIZATION
The basis on which individuals are grouped into departments

r Network approach. Small, central hub

electronically connected to their other
organizations that perform vital functions.
Departments are independent, and can be
located anywhere.
s Virtualapproach. Brings people together
temporarily to exploit specific opportunities
then disbands

HAERY SIHOMBING
5 Approaches to Structural
Design

HAERY SIHOMBING
5 Approaches to Structural
Design
VERTICAL FUNCTIONAL APPROACH

„ Grouping of positions into departments

based on similar skills, expertise, and
resource use
● Information flows up and down
● Chain of command converges at the top
● Managers and employees are compatible
because of similar training and expertise
● Rules and procedures governing duties and
responsibilities

HAERY SIHOMBING
DIVISIONAL STRUCTURE ADVANTAGES

„ Efficient use of resources

„ Skill specialization development
„ Top management control
„ Excellent coordination
„ Quality technical problem solving

HAERY SIHOMBING
DIVISIONAL STRUCTURE DISADVANTAGES

„ Poor communications
„ Slow response to external changes
„ Decisions concentrated at top
„ Pin pointing responsibility is difficult
„ Limited view of organizational goals by
employees

HAERY SIHOMBING
 Horizontal Matrix Advantages
„ More efficient use of resources than single
hierarchy
„ Adaptable to changing environment
„ Development of both general and specialists
management skills
„ Expertise available to all divisions
„ Enlarged tasks for employees

HAERY SIHOMBING
Dual Authority Structure in a Matrix
Organization
Horizontal Matrix Disadvantages

„ Dual chain of command

„ High conflict between two sides of matrix
„ Many meetings to coordinate activities
„ Need for human relations training
„ Power domination by one side of matrix

HAERY SIHOMBING
 TEAM ADVANTAGES

„ Same advantages as functional structure

„ Reduced barriers among departments
„ Quicker response time
„ Better morale
„ Reduced administrative overhead

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 TEAM DISADVANTAGES

„ Dual loyalties and conflict

„ Timeand resources spent on
meetings
„ Unplanned decentralization

HAERY SIHOMBING
NETWORK APPROACH ADVANTAGES

„ Global competitiveness
„ Work force flexibility
„ Reduced administrative overhead

HAERY SIHOMBING
NETWORK APPROACH DISADVANTAGES

„ No hands-on control
„ Loss of part of the organization
severely impacts remainder of
organization
„ Employee loyalty weakened

HAERY SIHOMBING
Task Forces, Teams, Project Management

„Task Force
= temporary team/committee designed to
solve a short-term problem involving
several departments

„Project Manager
= responsible for coordinating activities of
several departments on a full-time basis
for the completion of a specific project
HAERY SIHOMBING
 REENGINEERING

Radical redesign of business processes to

achieve dramatic improvements in cost,
quality, service, and speed

„ Process = organized group of related

tasks and activities that work together to
transform inputs into outputs and create
value

HAERY SIHOMBING
FACTORS SHAPING STRUCTURE

„ STRUCTURE
z Follows Strategy
z Reflects the Environment
z Fits the Technology
„Service Technology
„Digital Technology

HAERY SIHOMBING
 THE
ORGANIZATIONAL
ENVIRONMENT

HAERY SIHOMBING
 ORGANIZATIONAL ENVIRONMENT
„ Organizational Environment: those forces
outside its boundaries that can impact it.
„ Forces can change over time and are made up of
Opportunities and Threats.
„ Opportunities: openings for managers to
enhance revenues or open markets.
„ New technologies, new markets and ideas.
„ Threats: issues that can harm an organization.
„ economic recessions, oil shortages.
„ Managers must seek opportunities and avoid
threats. HAERY SIHOMBING
Forces in the Organizational Environment

General
Environment
Technological Task Sociocultural
Environment
Forces Forces
Competitors

Global Suppliers Firm Customers Economic

Forces Forces

Distributors

Political & Demographic

Legal Forces Forces

HAERY SIHOMBING
 TASK ENVIRONMENT
Task Environment: forces from suppliers,
distributors, customers, and competitors.
„ SUPPLIERS: provide organization with inputs
„ Managers need to secure reliable input sources.
„ Suppliers provide raw materials, components,
and even labor.
„ Working with suppliers can be hard due to shortages, unions, and
lack of substitutes.
„ Suppliers with scarce items can raise the price and are in a good
bargaining position.
„ Managers often prefer to have many, similar
suppliers of each item.
HAERY SIHOMBING
 TASK ENVIRONMENT
„ DISTRIBUTORS: organizations that help
others to sell goods.
„ Compaq Computer first used special computer
stores to sell their computers but later sold
through discount stores to reduce costs.
„ Some distributors like Wal-Mart have strong
bargaining power.
„ They can threaten not to carry your product.

„ CUSTOMERS: people who buy the goods.

„ Usually,there are several groups of customers.
„ For Compaq, there are business, home, &
government buyers.
HAERY SIHOMBING
 TASK ENVIRONMENT
„ COMPETITORS: other organizations that
produce similar goods.
„ Rivalry between competitors is usually the most
serious force facing managers.
„ High levels of rivalry often means lower prices.
„ Profits become hard to find.

„ Barriers to entry keep new competitors out and

result from:
„ Economies of scale: cost advantages due to
large scale production.
„ Brand loyalty: customers prefer a given
product. HAERY SIHOMBING
 INDUSTRY LIFE CYCLE
Reflects the changes that take place in
an industry over time.
¾ Birth stage: firms seek to develop a winning
technology.
„ VHS vs. Betamax in video, or 8-track vs.
cassette in audio.
¾ Growth stage: Product gains customer
acceptance and grows rapidly.
„ New firms enter industry, production improves,
distributors emerge.

HAERY SIHOMBING
 INDUSTRY LIFE CYCLE
„ Shakeout stage: at end of growth, there is a
slowing customer demand.
„ Competitor rivalry increases, prices fall.
„ Least efficient firms fail and leave industry.
„ Maturity stage: most customers have bought
the product, growth is slow.
„ Relationships between suppliers, distributors
more stable.
„ Usually, industry dominated by a few, large
firms.
„ Decline stage: falling demand for the product.
„ Prices fall, weaker firms leave the industry.
 THE GENERAL ENVIRONMENT
„ Consists of the wide economic,
technological, demographic and similar
issues.
„ Managers usually cannot impact or control these.
„ Forces have profound impact on the firm.

1. Economic forces: affect the national economy

and the organization.
„ Includes interest rate changes, unemployment rates,
economic growth.
„ When there is a strong economy, people have more
money to spend on goods and services.
HAERY SIHOMBING
 THE GENERAL ENVIRONMENT
2. Technological forces: skills & equipment used
in design, production and distribution.
„ Result in new opportunities or threats to managers.
„ Often make products obsolete very quickly.
„ Can change how we manage.
3. Socialcultural forces: result from changes in the
social or national culture of society.
„ Social structure refers to the relationships between people
and groups.
„ Different societies have vastly different social structures.
„ National culture includes the values that characterize a
society.
„ Values and norms differ widely throughout the world.

„ These forces differ between cultures and over time.

THE INDUSTRY LIFE CYCLE

Birth Growth Shakeout Maturity Decline

HAERY SIHOMBING
 THE INDUSTRY LIFE CYCLE

„ Demographic forces: result from

changes in the nature, composition and
diversity of a population.
„ These include gender, age, ethnic origin, etc.
„ For example, during the past 20 years, women have
entered the workforce in increasing numbers.

„ Currently, most industrial countries are aging.

„ This will change the opportunities for firms
competing in these areas.
„ New demand for health care, assisting living can be
forecast. HAERY SIHOMBING
 THE INDUSTRY LIFE CYCLE
„ Political-legal forces: result from changes in
the political arena.
„ These are often seen in the laws of a society.
„ Today, there is increasing deregulation of many
state-run firms.
„ Global forces: result from changes in
international relationships between countries.
„ Perhaps the most important is the increase in
economic integration of countries.
„ Free-trade agreements (GATT, NAFTA, EU)
decreases former barriers to trade.
„ Provide new opportunities and threats to managers.
 MANAGING THE ORGANIZATION
ENVIRONMENT
™ Managers must measure the complexity of the
environment and rate of environmental
change.
™ Environmental complexity: deals with the
number and possible impact of different forces
in the environment.
„ Managers must pay more attention to forces with
larger impact.
„ Usually, the larger the organization, the greater
the number of forces managers must oversee.
™ The more forces, the more complex the
manager’s job becomes. HAERY SIHOMBING
MANAGING THE ORGANIZATION
ENVIRONMENT
™ Environmental change: refers to the degree to
which forms in the task and general
environments change over time.
„ Change rates are hard to predict.
„ The outcomes of changes are even harder to
identify.

™ Managers thus cannot be sure that actions

taken today will be appropriate in the future
given new changes.
HAERY SIHOMBING
 REDUCING ENVIRONMENT
IMPACT
„ Managers can counter environmental
threats by reducing the number of
forces.
„ Many firms have sought to reduce the number of
suppliers it deals with which reduces uncertainty.
„ All levels of managers should work to
minimize the potential impact of
environmental forces.
„ Examples include reduction of waste by first line
managers, determining competitor’s moves by middle
managers, or the creation of a new strategy by top
managers.
HAERY SIHOMBING
 ORGANIZATIONAL STRUCTURE
„ Managers can create new organizational
structures to deal with change.
„ Many firms use specific departments to respond to each
force.
„ Managers also create mechanistic or organic
structures.
„ Mechanistic structures have centralized authority.
„ Roles are clearly specified.
„ Good for slowly changing environments.

„ Organic structures authority is decentralized.

„ Roles overlap, providing quick response to change.
HAERY SIHOMBING
 BOUNDARY SPANNING
„ Managers must gain access to information
needed to forecast future issues.
„ Rod Canion’s forecast of Compaq’s future was wrong
due to his incorrect view of the environment.
„ Boundary spanning is the practice of relating
to people outside the organization.
„ Seek ways to respond and influence stakeholder
perception.
„ By gaining information outside, managers can make
better decisions about change.
„ More management levels involved in spanning,
yields better overall decision making.
HAERY SIHOMBING
BOUNDARY SPANNING ROLES

Managers in boundary
spanning roles feedback
information to other managers
HAERY SIHOMBING
 SCANNING & MONITORING

o Environmental scanning is an important

boundary spanning activity.
„ Includes reading trade journals, attending trade shows,
and the like.
o Gatekeeping: the boundary spanner decides
what information to allow into organization
and what to keep out.
„ Must be careful not to let bias decide what comes in.
o Interorganizational Relations: firms need
alliances globally to best utilize resources.
„ Managers can become agents of change and impact the
environment.
HAERY SIHOMBING
CHANGE AS 2-Way PROCESS

Change in Environment affects

Environment Organization

Managerial actions impact

HAERY SIHOMBING
THANK YOU

HAERY SIHOMBING