PART FOUR ORGANIZATION MANAGEMENT 9 Learning Objectives United and Continental 1 Identify the vertical and horizontal Airlines Announce dimensions of organization structure. a Merger In 2010 United Airlines and Continental Airlines 2 Apply the three basic approaches— announced their intention to merge their operations in a functional, divisional, and matrix—to $3 billion deal to form the world’s largest airline. merged combination of the two airlines will account for 40 percent of the U. passenger traffic across the Atlantic 3 Develop coordination across departments and 53 percent of all traffic on Pacific routes.
In the and hierarchical levels. the two airlines have overlapping nonstop flights in 13 markets. United is buying Continental, and the 4 Use organization structure and the three combined company will keep the United name and be basic organization designs—mechanistic, based in Chicago. Smisek, Continental’s chief organic, and boundaryless—to achieve executive, would run the merged company.
airline industry in the first decade of the 21st century has accumulated $60 billion in losses and shed 5 Develop an awareness of strategic events 160,000 jobs, according to the Air Transport Association, a that are likely to trigger a change in the Washington trade group. United and Continental each suf- structure and design of an organization. fered losses for the past two years, and as borrowers they have both received poor credit ratings. airline industry has been plagued by a necessity to book over capacity, which has led to clogged airports and delays on the tarmac as planes wait to take off and for landing slots to open up.
Mergers are one way that airline executives can improve efficiency. The synergy of an airline combining United and Continental could lead to improvements in 254 Managing the Structure and Design of Organizations determines which pilots get to operate higher-paying air- craft assignments and better working hours, sorting out the seniority roster can result in strong resistance from the pilots who fare worse under the combined roster. US Airways, for instance, continues to fail to get workers to agree to unified contracts, five years after its merger with America West. Maintaining two sets of work rules has kept US Airways from profiting from some of the planned economies of this merger.
The two chief executives of United and Continental revenue and costs, and give the airline better access to Airlines claim that the combined carrier should benefit credit and equity markets. from savings of at least $1 billion a year and from substan- The logistics of running the merged airline can be tial extra revenues once operational integration is com- expected to be enormously challenging. The main fleets of pleted in 2013. the two carriers consist of 700 aircraft.
Continental flies Sources: “Love is in the Air: UAL and Continental Agree to Merge,” only Boeing planes, while United flies both Boeing and The Economist, May 8, 2010, p. Bliss, “United and Continental Reach for the Sky,” Airbus planes. Flying planes from different manufacturers Bloomberg BusinessWeek, May 10–16, 2010, pp. Barrett, “The requires separate maintenance procedures, staff training, Departed: A Merger of United and Continental Makes Sense, but Can it Bring Back the Business of Flying? Bloomberg BusinessWeek, May 10–16, and spare parts.
The combined workforces of the two carri- 2010, pp. de la Merced, “United and Continental Said to Merge,” The New York Times, May 2, 2010. ers amount to more than 88,000 employees. Other than www.
the consolidation of administrative personnel, management does not plan to have large cuts in staff. Yet it still could CRITICAL THINKING QUESTIONS face difficult negotiations with the unions that represent 1. What changes in the structure of the organization pilots, flight attendants, and maintenance workers which formed by the two combined airlines are related to the can create major stumbling blocks to a successful merger. reasons for the merger? A key task in implementing a merger between airlines 2.
Which coordination mechanisms will be useful to align has been to synchronize work rules and consolidate union the units of the merged companies into a more coherent seniority lists into a single worker roster. Since seniority and unified organization? 255 256 PART 4 • ORGANIZATION MANAGEMENT SKILLS FOR MANAGING 9.1 Organization Structure and Design 䊉 Understanding the chain of command. Some organiza- zation include size (large or small), emphasis on teams or tions are structured in a hierarchical fashion. In these individuals, degree of change in the work environment, organizations, employees are expected to respect and fol- and broad versus narrow spans of supervisory control.
By low the chain of command, that is, the directives of top understanding the key dimensions of organization struc- managers. Other organizations are less hierarchical and ture, you can get an idea of what it would be like to permit individuals in the lower ranks to initiate and imple- work in an organization so that you can choose a work ment ideas without the approval of their bosses. environment in which you can make your most valuable 䊉 Understanding the dimensions of organization structure. Some of the factors that affect the design of an organi- At the end of the chapter in our Concluding Thoughts, we will revisit the critical thinking ques- tions regarding the decision to merge United and Continental Airlines.
Many strategies and key business decisions have profound effects on the structures and designs of various organizations. A change in strategic direction due to a merger or acquisition or a change in competitive strategy requires the management team to rethink how to deploy company organizing resources. Organizing is the deployment of resources to achieve strategic goals, and is reflected The management function that in: (1) the organization’s division of labor that forms jobs and departments, (2) formal lines of determines how the firm’s resources authority, and (3) the mechanisms used for coordinating diverse jobs and roles in the organization. are arranged and coordinated; the Organizing follows the formulation of strategy.
While strategy indicates what needs to be deployment of resources to achieve done, organizing shows how to do it. This chapter begins by examining the vertical and horizon- strategic goals. tal dimensions of organization structure. It then examines ways to coordinate organizational units so that they move in the same direction toward meeting organization goals.
Finally, it iden- tifies different approaches to organization design. Skills for Managing 9.1 lists the key skills for managing organizing. The Vertical Dimension of Organization Structure organization structure Organization structure is a formal system of relationships that determines lines of authority The formal system of relationships (who reports to whom) and the tasks assigned to individuals and units (who does what task and that determines lines of authority with which department). The vertical dimension of organization structure indicates who has the and the tasks assigned to individuals authority to make decisions and who is expected to supervise which subordinates.
The and units. horizontal dimension is the basis for dividing work into specific jobs and tasks and assigning vertical dimension those jobs into units such as departments or teams. The element of who has the authority to make decisions and Unity of Command who supervises which subordinates. The concept of unity of command is based on one of Fayol’s 14 principles of management (see horizontal dimension Chapter 1): a subordinate should have only one direct supervisor.
Multiple bosses may give a The element of dividing work into subordinate conflicting instructions or goals. In unity of command, a decision can be traced back specific jobs and tasks and assigning jobs into units. from the subordinates of the manager who made it. Exceptions to the unity of command principle are sometimes necessary.
For example, com- unity of command puter programmers in software firms are often assigned to different projects as the need arises. The management concept that a subordinate should have only one They are supervised by a project manager who coordinates the people and resources on the proj- direct supervisor. ect and by a functional manager, the manager of information technology (IT), who supervises the IT department. This violation of the unity of command principle makes it critical for both man- agers to coordinate goals and priorities to avoid causing confusion.
authority Authority, Responsibility, and Accountability The formal right of a manager to Managers, teams, and employees have varying amounts of authority, responsibility, and accountabil- make decisions, give orders, and ity based on where they are in the vertical structure of the organization. Authority is the formal right expect the orders to be carried out. of a manager to make decisions, give orders, and expect those orders to be carried out. A manager is CHAPTER 9 • MANAGING THE STRUCTURE AND DESIGN OF ORGANIZATIONS 257 an agent of the owners of the business.
The role of the manager encompasses decision- making authority to manage the workforce, resources, and assets of the business in the owners’ best interests. Authority is given to the position of the manager, not the per- son. It originates at the top of the organization based on the property rights of the own- ers and flows down the vertical organizational hierarchy from top executives to middle managers to supervisors and operative employees. Consequently, positions at the top of the hierarchy have more authority than positions at lower levels.
Responsibility is the duty to perform assigned tasks. All employees are expected to accept these responsibilities as a condition of employment. Ideally, a manager’s responsibilities are matched with the appropriate amount of authority so that the manager is in “control” of the task. The manager may delegate, or transfer responsibility to a subordinate or team, but the manager is still in control because the subordinate or team is subject to his or her authority.
Managers delegate decision-making authority for some tasks in order to give themselves more time to focus on the most important tasks and decisions. Chapter 6, on decision making, listed the steps that lead to effective delegation skills. Management Is Everyone’s Business 9.1 offers some advice on how you can manage your work responsibili- ties more effectively given a limited amount of time to do them. Sometimes managers are given responsibility without equal levels of authority.
This situation is common in organizations in which managers must work with man- agers of other units or with customers outside of the organization. For example, the vice president of global learning solutions at Alcatel-Lucent, a manufacturer of telecommunications equipment, is responsible for disseminating employee devel- New York City Mayor Michael R. opment courses to various business units throughout the large corporation. This Bloomberg promised voters an overhaul of the city’s troubled public school system, but his MANAGEMENT IS EVERYONE’S BUSINESS 9.1 subsequent dismantling of the system’s central bureaucracy was WORKING AS A MANAGER Here are some suggestions that should help you manage your work controversial.
The principals’ responsibilities more effectively. union opposed the mayor’s plan 䊉 Establish priorities. Priorities include both urgent and important tasks. Spend as much time as on the grounds that it stripped possible doing things that are important but not urgent.
Otherwise you will find you have principals of their authority. neglected important tasks such as training and learning opportunities (and your skills become obsolete) because you’ve only attended to the urgent tasks as you “put out fires.” Schedule responsibility self-improvement and other learning opportunities as priorities in your weekly or monthly The manager’s duty to perform schedule. If you don’t, you’ll find yourself attending to the less critical but more urgent activities assigned tasks. that arise that will preclude improving your skills.
䊉 Delegate lower priority tasks to subordinates. Tasks that are of a lower priority can be delegated to subordinates which frees up time for you to concentrate on more demanding ones. However, it is important to be able to identify the right subordinates who have the skills and work habits to do the delegated task effectively with a minimum amount of your supervision. Otherwise you may end up spending more time reworking the delegated task, which is counterproductive.
䊉 Give yourself thinking time.