ECON 308 Employment Decisions Chapters 13 Week 12 April 12 2010 1 Structure of Decision Rights Ch 13 BUNDLING TASKS INTO JOBS Specialized versus Broad Task Assignment Productive Bundling of Tasks BUNDLING OF JOBS INTO SUBUNITS Grouping Jobs by Function Grouping Jobs by Product or Geography Trade offs between Functional and Product or Geographic Subunits Environment Strategy Architecture Matrix Organizations Mixed Designs Network Organization Organizing within Subunits 2 Bundling Tasks into Job Subunits Example FinWare Financial Software Distributor Function Individuals Sales Service Task 1 Task 2 Customer Type Firms Task 3 Task 4 3 Methods of grouping jobs U form of organization unitary Smokestack by functional specialty Sales Finance Engineering Marketing Manufacturing each primary function in one major sub unit 4 Finware as functional organization 5 Specialized task assignment Assign by function Benefits Comparative Advantage Different Skill sets Sales Technicians Lower Cross Training Costs Costs Foregone complementarities Car door Latch Coordination Costs Insurance sales underwritting Functional Myopia Reduced Flexibility 6 Incentive Issues Cost of monitoring Broad Bundling and compensation Faculty Teaching Research Incentive effects Sales Commission Technicians Customer Satisfaction 7 Bundling of Jobs into Sub units Group by Function Benefits Coordination within the functional area Promotes functional expertise Hiring and reward structure easier to define Problems Management must coordinate Information flows poorly across departments Difficult to compensate profitability Wasted time Airport Security 4 per flight 8 Bundling of Jobs into Sub units Group by Geography Benefits Decentralized decision making authority Managers compensated on performance of division Problems May ignore interdependencies 9 Where Functional Subunits Work Well Small firms Homogeneous products Stable underlying technology 10 Methods of grouping jobs U form of organization unitary M form of organization multidivisional Matrix organization intersecting lines of authority functional departments address performance reviews and professional development product geographic subunits address customer client needs 11 Matrix Organizations Multidemensional Sales Division Business Products Team Consumer Products Team Service Division Business Sales Department Business Service Department Consumer Sales Department Consumer Service Department 12 Chrysler Original Functional Revised Product teams Engineers Finance Marketing Assembly line production Ex Moon roof control on cheaper model 13 Case Study IBM Credit Valued at 10 billion in 1993 Reduced the time needed to process credit applications from 6 days to 4 hours Old task assignment system Functionally organized Credit Checkers Contract preparers Loan Pricing Document preparation Reorganized task assignment Case workers 14 IBM Credit s Old Functional Organization General Manager Credit Department Contracts Department Pricing Department Documents Department 15 IBM Credit s Revised Organization General Manager Case Worker Case Worker Case Worker Case Worker 16
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