MCS UNS

Organizing for
Performance

Chapter Review Notes

Organizing for Performance

Organization Design:
Organizing for Performance
Why

do we care about organizational

structures in a class on planning & control?

There

are many ways to organize, which is

best? Two objectives to keep in mind:
Best Way to Facilitate Work Flow
Focus Attention

Three Basic Choices in

Organization Design
1)

Functional vs Market Focus Work

Design

2)

Wide vs Narrow Span of Control

3)

How to Measure Performance

1) Work Design
Units

clustered by Work-Processes

Units

clustered by Market Focus

By Product
By Customer
By Geography

1) Units Clustered by WorkProcesses

The Functional Organization
Leader
Robin Hood
Intelligence/Scouting

Finances

Will Scarlett

Scarlock

Training/Discipline

Provisioning

Little John

Much the Millers Son

1) Units clustered by Market

Focus
Product-Based Divisions
Pepsi Corporate HQ Level
Taco Bell
Division

Pizza Hut
Division

KFC
Division

Beverage
Division

Business Unit
Level

Business Unit
Level

Business
Unit Level

Business
Unit Level

Marketing
Functional
Level

Production
Functional
Level

HR
Functional
Level

Finance
Functional
Level

Purchasing
Functional
Level

1) Units clustered by Market

Focus
Customer-Based Divisions
Managing-Director

Restaurants
and Fast
Food

Specialty
Food Shops

Convenience
Stores

1) Units clustered by Market

Focus
Geographical-Based Divisions
CEO

VP Asia-Pacific

VP Europe

VP Africa

1) Is it Functional or Market
Focus?
Its the middle that counts
Sr. Mgmt

Market Focus

Middle Mgmt

Lowest work unit

Specialization Focus

2) Span of Control
How

many individuals/functions a
manager directly supervises (number of
direct reports)

Narrow Span of Control

Wider Span of Control

Accounting
Supervisor

CFO

Payroll-2

Payables-1

Treasury-1
Accounting-5
Budget/Planning-1

Tax-3
Benefits-2
Internal Audit-3

3) Span of Accountability
On

what basis do we evaluate the

performance of the unit manager?

Revenues only (revenue centre)

Costs only (cost centre)
Revenue-Costs (profit centre)
Revenue-Costs and Investments (profit
and investment centre)

Three Tools to Manipulate a

Managers Attention
Work

Unit Design Functional or Market

Focus?

Span
Span

of Control Narrow or Broad?

of Accountability Cost, Rev or

Investment centers?

Example: Centralized vs
Decentralized Organizations
Organizations that
Organizations that are
are centralized want
decentralized want
focus to ensure max
to be able to
efficiency:
respond quickly:
- Functional design
- Market focus design
- Narrow spans of
- Wider spans of control
control
- Profit and investment
- Cost or profit
responsibility
responsibility only