Question: Company tasks are organized to provide customers with goods and services. The functional structure stands as the foundation of horizontal differentiation by creating a division of labor that leads to core competences. Functional structures face control problems as an organization grows and becomes more complex: lack of communication, inability to measure performance, and lack of customer responsiveness. To resolve these issues, a company adopts a more complex structure by increasing vertical differentiation, horizontal differentiation, and integration.
Trends in structure include network organizations, outsourcing, and the boundaryless organization, each with advantages and disadvantages. A key issue in organizational design is how to group tasks and coordinate activities to create a competitive advantage. Organizational structure fosters coordination, motivation, and control. The appropriate structure depends on the complexity of activities, the amount of coordination needed, the number of products marketed, the geographical location, and the customer served. Reengineering an organization can increase performance.
Every company has two main groups of stakeholders: (1) inside stakeholders-shareholders, managers, and the workforce; and (2) outside stakeholders-customers, suppliers, the government, trade unions, local communities, and the general public. Although stakeholders have competing interests, an organization must minimally satisfy them all. Satisfying stakeholders creates problems due to competing goals, allocating rewards, and choosing a time frame to measure effectiveness. Difficulties arise in measuring organizational effectiveness even if stakeholders have shared goals. An organization must select the best way to achieve goals. Agency theory explains the relationship between top management and the board of directors. Ethics and ethical behavior are discussed, including the sources of ethics, moral hazard, and how to create an ethical organization.
Traditionally organization theory has offered managers two dichotomous views: the right way and the wrong way to integrate people into purposeful structures. The famed Theory X and Theory Y address the two camps or views on human resources-or so the usual wisdom goes. Today, thanks to scholars and practitioners with new understandings, managers are learning that either/or propositions may not be the only way to view the dilemmas that arise when human beings collaborate. Power is distributed to more people in more places than ever before and those people are increasingly diverse, educated, mobile, and concerned with quality of work and life issues.
It always seems that organizations react to change rather than lead change. How can a manager turn that dynamic around?