Chapter 11   Adaptive Organizational Design

In the last chapter, the basic options for organizational structure were discussed.  In this chapter, we continue to address the issue of structure with an emphasis on the new designs that companies are implementing to deal with an increasingly competitive environment that focuses on efficiency.

LEARNING OUTCOMES 
11.1 Describe contemporary organizational designs.
11.2 Discuss how organizations organize for collaboration.
11.3 Explain flexible work arrangements used by organizations.
11.4 Discuss organizing issues associated with a contingent workforce.
11.5 Describe today’s organizational design challenges.

A MANAGER’S DILEMMA 

While not everyone is given the opportunity to create or redesign an organization’s structure, the reasons for structure and the benefits of certain types of structure are important lessons for anyone in business. As a business owner, it sounds like a dream come true – employees working for free!  In this Manager’s Dilemma, the authors explore this novel concept from a manager’s perspective.  Habitat for Humanity has years of experience building homes with volunteers.  The concept of free labor is now being explored by Verizon’s e-commerce unit where volunteers who are passionate about their products, (i.e. high speed internet, telephone, and television service) help answer customer questions. While this sounds like a win-win (people who are knowledge experts working for free), it has the potential to create a lot of problems for the organization.  Have students explore the concept of management control and structure for this new type of arrangement.  Questions that might arise include: How do you make sure people show up for ‘work?’  What if these volunteers make a mistake that puts the company at risk for a lawsuit?  What if they are rude to customers?

CHAPTER  OUTLINE 

11.1 Contemporary Organizational Designs
Many of today’s organizations are finding that traditional hierarchical organizational designs are not appropriate for their increasingly dynamic and complex business environments. See Exhibit 11-1 for a summary of these designs.
. A. Team structures
One of the newer concepts in organizational design is team structure, an organizational structure in which the entire organization is made up of work groups or teams.
 B. Matrix and project structures
Other variations in organizational arrangements are based on the fact that many of today’s organizations deal with work activities of different time requirements and magnitude.
1. One of these arrangements is the matrix structure, an organizational structure that assigns specialists from different functional departments to work on one or more projects. (See Exhibit 11-2)
2. Another of these designs is the project structure, an organizational structure in which employees continuously work on projects.
C. The Boundaryless Organization
 Another approach to organizational design is the boundaryless organization, an organization whose design is not defined by, or limited to, the horizontal, vertical, or external boundaries imposed by a predefined structure.
1. The Virtual Organization
A virtual organization operates with a small core of full-time employees, while hiring outside specialists to work on projects temporarily as needed. 
2. The Network Organization
A network organization uses its own employees to do some work activities, while using networks of outside suppliers to provide other needed product components or work processes.
D. The Learning Organization
Many organizations have adopted the organizational philosophy of a learning organization, which is an organization that has developed the capacity to continuously learn, adapt, and change.

11.2 Organizing for Collaborating
Organizations need to be more flexible in how work gets done.  Throw in the fact that innovation and the ability to bring innovations to market quickly is critical and you can begin to appreciate how traditional top-down decision making that strictly follows the chain of command and narrowly defined functional arrangements might not be the best structural mechanisms to do this.  Exhibit 11-3 lists some of the benefits and drawbacks of working collaboratively.
 A. Internal Collaboration
When managers believe that collaboration among employees is needed for more coordinated and integrated work efforts, they can use several different structural options. Some of the more popular include cross-functional teams, task forces, and communities of practice.
1. Cross-Functional Teams. Organizations are using team-based structures because they’ve found that teams are more flexible and responsive to changing events than are traditional departments or other permanent work groups.
2. Task Forces. Another structural option organizations might use is a task force (also called an ad hoc committee), which is a temporary committee or team formed to tackle a specific short-term problem affecting several departments.
3. Communities of Practice.  These are “groups of people who share a concern, a set of problems, or a passion about a topic, and who deepen their knowledge and expertise in that area by interacting on an ongoing basis.  Exhibit 11-4 lists some suggestions for making such communities work.
 B. External Collaboration
When managers seek out customers to help solve problems, they are in engaging in external collaboration.  External collaboration comes in two forms: open innovation and strategic partnerships. Each of these can provide organizations with needed information, support, and contributions to getting work done and achieving organizational goals.
1. Open Innovation.  This form of innovation opens up the search for new ideas beyond the organization’s boundaries and allows innovations to easily transfer inward and outward.  Exhibit 11-5 describes some of the benefits and drawbacks of open innovation.
2. Strategic Partnerships.  This type of structure involves collaborative relationships between two or more organizations that combine their resources and capabilities for some business purpose.
11.3  Flexible Work Arrangements
As organizations adapt their structural designs to fit a diverse workforce, growing competition, customer demands and new technology, we see more of them adopting flexible working arrangements. Such arrangements not only exploit the power of technology, but give organizations the flexibility to deploy employees when and where needed.
A. Telecommuting
Telecommuting is a work arrangement in which employees work at home and are linked to the workplace by computer.
1. Telecommute provides the company a way to grow without having to incur any additional fixed costs such as office buildings, equipment, or parking lots. In addition, some companies view the arrangement as a way to combat high gas prices and to attract talented employees who want more freedom and control.
2. Some managers are reluctant to have their employees become “laptop hobos.” They argue that employees will waste time surfing the Internet or playing online games instead of working, that they’ll ignore clients, and work responsibilities.
3. Employees often express the same concerns about working remotely, especially when it comes to the isolation of not being “at work
4. Managing the telecommuters then becomes a matter of keeping employees feeling like they’re connected and engaged, a topic we delve into at the end of the chapter as we look at today’s organizational design challenges.
B. Compressed Workweeks, Flextime, and Job Sharing
1. Compressed workweek, which is a workweek where employees work longer hours per day but fewer days per week.
2. Flextime (also known as flexible work hours), which is a scheduling system in which employees are required to work a specific number of hours a week but are free to vary those hours within certain limits.
3. Job sharing—the practice of having two or more people split a full-time job.

11.4 Contingent Workers
Contingent Workers are temporary, freelance, or contract workers whose employment is contingent upon demand for their services.
A. As organizations eliminate full-time jobs through downsizing and other organizational restructurings, they often rely on a contingent workforce to fill in as needed.
B. One of the main issues businesses face with their contingent workers, especially those who are independent contractors or freelancers, is classifying who actually qualifies as one.
1. Companies don’t have to pay Social Security, Medicare, or unemployment insurance taxes on workers classified as independent contractors. And those individuals also aren’t covered by most workplace laws.
2. The federal government is also looking at increased power to penalize employers that misclassify workers. So, there is an incentive to be totally above-board in classifying who is and is not an independent contractor.
C. Another issue with contingent workers is the process for recruiting, screening, and placing these contingent workers where their work skills and efforts are needed.
D. As with full-time employees, it’s important that managers have a method of establishing goals, schedules, and deadlines with the contingent employees

LEADERS WHO MAKE A DIFFERENCE 
CEO John T. Chambers has created an organizational structure at Cisco that relies on cross-functional teams. While complicated to explain to outsiders, Chambers feels that the “speed, skill, and flexibility” of his team base structure is a way react to a changing environment.  At the end of the 2001 downturn, Cisco wrote off some $2.2 billion in losses. Chambers realized that the “company’s hierarchical structure precluded it from moving quickly into new markets.”  The move to cross-functional teams hasn’t been easy, some couldn’t handle working with unfamiliar colleagues; others were upset with the new team-based compensation structure.

11.5 Today’s Organizational Design Challenges
Many of today’s organizations are finding that traditional hierarchical organizational designs are not appropriate for their increasingly dynamic and complex business environments.
A. Keeping employees connected
Today’s managers face the major challenge of keeping their employees connected to the organization, since these employees are often situated in widely dispersed locations and are constantly moving.
B. Managing global structural issues
1. Researchers have concluded that although structures of organizations around the globe are similar, cultural uniqueness is maintained because of differences in behavior within companies in different areas of the world.
2. These differences imply that managers must be aware and respectful of the values and practices of different cultures in today’s worldwide business environment.

LET’S GET REAL
Richard “Dickie” Townley
Sr. Manager Product Terminals and Marketing
Holly Energy Partners, L.P.
Artesia, NM
According to Mr. Townley, Verizon’s example of using unpaid volunteers is not entirely new (i.e. candy stripers at hospitals). What make this situation unique is the Web-based structure and boundaryless nature of Web forums. While managers may see the potential benefit of this program, the technological challenges for personnel with the experience may be difficult.  Richard suggest Verizon use a multiphase approach to setting up a volunteer organizational structure that provides Verizon with some degree of control over volunteer responses and matching volunteers to the areas where they are best suited.

Answers to Review and Discussion Questions 

1. Describe the four contemporary organizational designs. How are they similar? Different?
In a team structure, the entire organization is made up of work teams. The matrix structure assigns specialists from different functional departments to work on one or more projects being led by project managers. A project structure is one in which employees continuously work on projects. A virtual organization consists of a small core of fulltime employees and outside specialists temporarily hired as needed to work on projects. A network organization is an organization that uses its own employees to do some work activities and networks of outside suppliers to provide other needed product components or work processes. A learning organization is one that has developed the capacity to continuously learn, adapt, and change. It has certain structural characteristics including an emphasis on sharing information and collaborating on work activities, minimal structural and physical barriers, and empowered work team.

2. Differentiate between matrix and project structures.
A project structure, unlike the matrix structure, has no formal departments where employees return at the completion of a project. Instead, employees take their specific skills, abilities, and experiences to other projects. Also, all work in project structures is performed by teams of employees.

3. How can an organization operate without boundaries?
While the term ‘boundaryless’ may imply something akin to chaos, it refers to the idea that organizations can operate effectively by remaining flexible and unstructured.  There are two types: (1) internal—the horizontal ones imposed by work specialization and departmentalization and the vertical ones that separate employees into organizational levels and hierarchies; and (2) external—the boundaries that separate the organization from its customers, suppliers, and other stakeholders. To minimize or eliminate these boundaries, managers might use virtual or network structural designs.

4. The boundaryless organization has the potential to create a major shift in the way we work. Do you agree or disagree? Explain.
Students’ responses to this will vary. This question could serve as an interesting springboard for a class debate. Students could break into teams, with each team taking the opposite position in the debate. Give students an opportunity to discuss their strategy as a team before presenting their viewpoints to the class.

5. What types of skills would a manager need to effectively work in a project structure? In a boundaryless organization? In a learning organization?
In all of these types of organizations, flexibility and adaptability are critical. In the project structure, conflict management skills are particularly useful. In a boundaryless organization, the ability to interact effectively with people at all levels and in all areas of the organization is crucial to success. In a learning organization, a manager needs the ability to communicate both by listening and by speaking because of the frequency and importance of sharing information in this type of organization.

6. How does each of the different types of collaboration (both internal and external) contribute to more coordinated and integrated work efforts?
An organization’s collaboration efforts can be internal meaning among employees within the organization. Or those efforts can be external collaborations with any stakeholders. In both types, it’s important that managers recognize how such collaborative efforts “fit” with the organization’s structure and the challenges of making all the pieces work together successfully.

7. What structural issues might arise in managing employees’ flexible work arrangements? Think about what you’ve learned about organizational design. How might that information help a manager address those issues?
Although an organization’s work may be done anywhere at any time, organizing remains a vital managerial function because the work that must be accomplished still must be divided, grouped, and coordinated. When organizations become more flexible, control and authority become important issues. Without direct supervision (in the case of telecommuting), lines of authority are weak and managers may feel that a loss of control.  On the other hand, in the case of telecommuting, employees may feel left out of important organizational decisions or like they are not considered for important assignments.

8. Does the idea of a flexible work arrangement appeal to you? Why or why not?
Students may respond several ways to this question.  Flexible work arrangements are not for everyone.  An analogy is internet classes.  While these classes offer the student greater flexibility and help with scheduling issues, some students find that they do not get as much from the class or that they lose focus and let the class assignments build up.

9. What structural issues might arise in managing contingent workers? Again, think about what you’ve learned about organizational design. How might that information help a manager address those issues?
Organizing issues include classifying who actually qualifies as an independent contractor; setting up a process for recruiting, screening, and placing contingent workers; and having a method in place for establishing goals, schedules, and deadlines and for monitoring work performance.

10. Why is it a challenge to “keep employees connected” in today’s organizations?
This question seems strange with all of the communication technology available today (i.e. cell-phones, e-mail, electronic meeting software, etc…). However, with organizations adopting more flexible structures and flexible work arrangements, employees are dispersed throughout the organization and the world. In addition, with the introduction of team and project environments, it is possible that employees will be working on so multiple projects at once.  Considering these factors, it is difficult to make sure everyone has the necessary information when and where they need it.

ETHICS DILEMMA 

You hear it in the news every week, a hacker (or hackers) has gained access to personal data of thousands of customers or employees.  In the dilemma described here, a security hole in an AT&T website allowed Goatse Security to retrieve the email addresses for thousands of new iPad users.  The head of Goatse Security pointed out they were doing AT&T a favor by identifying the problem. On the other hand, the information released by Goatse could have helped hackers break into AT&T’s website. In this dilemma, ask students if there such a thing as “ethical hacking?” What ethical issues they see in the case?  And what are the implications for various stakeholders in this situation?

SKILLS EXERCISE:  DEVELOPING YOUR  ACQUIRING POWER SKILLS 

Managers need to know how to acquire and use power if they are perform in their job.  When a manager has power, he or she is not as dependent on others for critical resources. And if the resources a manager controls are important, scarce, and nonsubstitutable, her power will increase because others will be more dependent on her for those resources.  In this exercise, students are given eight behaviors for the effective acquisition and use of power.  Students are then asked to keep a journal and identify their own use of power and to identify the use of power by a business executive.

WORKING TOGETHER:  TEAM EXERCISE 

In this exercise, students should form small groups of three to four individuals and then find current information on learning organizations.  Students should limit their report to what they consider to be the best sources of information on the topic. Using this information, they should then write a one-page bulleted list discussing reactions to the statement – “A company’s future may well depend on how well it’s able to learn.”  Students may want to include in their research The Fifth Discipline, by Peter Senge. 

Your Turn to be a Manager 

• Since you may be a telecommuter some time during your career (or may manage employees who are telecommuters), do some research on tips for making telecommuting work.

• Find the most current list of Fortune’s Best Companies to Work For (usually published in early February). Look through the list and tally how many of the top 50 provide some type of flexible work arrangements for their employees and the type of flexible work arrangements they use.

• Using current business periodicals, do some research on open innovation efforts by companies. Choose three examples of businesses using this and describe and evaluate what each is doing.

• Create a chart describing each adaptive organizational design discussed in this chapter along with what you perceive as potential advantages and disadvantages of each.

• Steve’s and Mary’s suggested readings: Richard Donkin, The Future of Work (Palgrave Macmillan, 2010); Philip Kotler and John A. Caslione, Chaotics: The Business of Managing and Marketing in the Age of Turbulence (Amacom, 2009); Paul Osterman, The Truth About Middle Managers (Harvard Business School Press, 2008); and Gary Hamel, The Future of Management (Harvard Business School Press, 2007).

• In your own words, write down three things you learned in this chapter about being a good manager.

• Self-knowledge can be a powerful learning tool. Go to mymanagementlab and complete these self-assessment exercises: How Well Do I Handle Ambiguity? Do I Trust Others? Do Others See Me as Trustworthy? How Well Do I Respond to Turbulent Change? Using the results of your assessments, identify personal strengths and weaknesses. What will you do to reinforce your strengths and improve your weaknesses?

ANSWERS TO CASE APPLICATION QUESTIONS 

In the Driver’s Seat
1. Describe and evaluate what Alan Mulally did at Ford Motor Company.
 Mulally has come in and established a turnaround strategy for Ford.  By creating a new set of priorities and giving the company a new focus (no pun intended), the new CEO of Ford is telling stakeholders that the company wants to break from the traditional company structure and begin with a new vision.  From the slogan, “One Ford . . . One Team . . . One Plan . . . One Goal,” we can assume that the new Ford will be a more flexible company with the team concept used as a structural component.

2. What structural implications arise from Mulally’s description of Ford being world-class?
From the chapter on international management, we can assume that Mulally will move Ford toward a boundaryless (or transnational) company.  This means that Ford will attempt to eliminate artificial geographic boundaries and integrate its operations around the world.

3. What types of adaptive organizational designs discussed in this chapter might be needed as Ford continues to pursue its vision of One Ford. . . One Team. . . One Plan. . . One Goal? For each design that you think is appropriate, describe what it is and how the company might use it.
A team structure is one in which the entire organization is made up of work teams that do the organization’s work.  Ford could organize several of its key functions into teams, such as design and sales.  The matrix structure assigns specialists from different functional departments to work on projects being led by a project manager.  Ford could implement the matrix structure in manufacturing where single manufacturing plants produce multiple designs (the plant would retain a functional design with project managers for the models coming off of the same line).  Finally, boundaryless organization, which is an organization whose design is not defined by, or limited to, the horizontal, vertical, or external boundaries imposed by a predefined structure. Ford may use this structure as it attempts to break down geographic barriers and produce cars that have world, rather than geographic, appeal. Ford could implement a variety of adaptive designs simultaneously and is not limited to only one design.

4. What does this case story tell you about how a company’s vision and plans affect its structure?
Students should see that structure is a product of the organization’s mission and strategy.  As the vision and mission of the organization changes, so does the structure, albeit more slowly.

Virus Hunters
1. How might the nature of what the virus hunters do affect the most appropriate structure for getting work done efficiently and effectively?
The situation for Symantec is one that necessitates a highly flexible and adaptive structure.  Because viruses attack different parts of the system, are spread differently, and are written by different programmers, work is less structured.  With the changing technology of viruses and the unexpected nature of their appearance, programmers have to operate in a decentralized and less formal work environment. 

2. In fighting the onslaught of computer viruses, what will be the challenges of managing a team of professionals and a group of customer “volunteers”?
Similar to the case of Verizon and the Manager’s Dilemma, managers will have problems controlling the actions of the volunteers in that they are not as reliable as paid employees.  It will be difficult to get these ‘free employees’ to follow organizational policies in that there are no financial rewards (or punishments) for not conforming.  Evaluating performance is also difficult in that there is little motivation for free employees to work. It is even possible that some of these free employees are the very ones responsible for writing viruses.

3. What types of adaptive organizational designs discussed in this chapter might be most appropriate for Symantec to most effectively manage its professionals and its customer volunteers? Explain your choices.
Symnatec is probably using a project structure to work on analyzing and resolving particular viruses.  In addition, it is obvious that Symnatec is utilizing a boundaryless/global structure as the case indicates that work is handed off from Japan, to Ireland, to the United States at different points in the day.  To handle the work of volunteers, Symnatec would use a community of practice that allows people who are passionate about a topic to share their expertise.  In addition, given the nature of work (computer software), it is possible that some employees could work from home. This could arrangement could also allow for flexibility regarding the time employees put in daily.