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Chapter 9: Designing Adaptive Organizations
Pedagogy Map
This chapter begins with the learning outcome summaries and terms covered in the chapter, followed by a
set of lesson plans for you to use to deliver the content in Chapter 9.
• Lesson Plan for Lecture (for large sections)
• Lesson Plan for Group Work (for smaller classes)
• Assignments with Teaching Tips and Solutions
What Would You Do Case Assignment – Eli Lilly
Self-Assessment – Flexibility and Structure
Management Decision – Dressing Up (or Down) for Work
Highlighted Assignments
Key Points
What Would You Do?
Eli Lilly needs to grow its drug pipeline or face significant
losses with the expiration of several patents.
Management Decision
Students must decide if a company should institute a dress
policy.
Management Team Decision
General Motors must decide if it should shift its focus to the
Chinese auto market.
Practice Being a Manager
In this role-play exercise students experience the work
dynamics surrounding the grouping of workers and the
design of jobs.
Develop Your Career Potential
Students are encouraged to spend a day at their firm doing
Reel to Real Video Assignment – Biz
In Rendition, Anwar El-Ibrahimi disappears when he is sent
to a secret detention facility in North Africa after being
named as a suspected terrorist.
Supplemental Resources
Where to Find Them
Course Pre-Assessment
IRCD
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Course Post-Assessment
IRCD
Learning Outcomes
1 Describe the departmentalization approach to organizational structure.
There are five traditional departmental structures: functional, product, customer, geographic, and matrix.
Functional departmentalization is based on the different business functions or expertise used to run a
2 Explain organizational authority.
Organizational authority is determined by the chain of command, line versus staff authority, delegation,
and the degree of centralization in a company. The chain of command vertically connects every job in the
3 Discuss the different methods for job design.
Companies use specialized jobs because they are economical and easy to learn and don’t require highly
paid workers. However, specialized jobs aren’t motivating or particularly satisfying for employees.
4 Explain the methods that companies are using to redesign internal organizational processes
(that is, intraorganizational processes).
Today, companies are using reengineering and empowerment to change their intraorganizational
processes. Reengineering changes an organization’s orientation from vertical to horizontal and its work
Who Wants to Be a Manager game
IRCD and online
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5 Describe the methods that companies are using to redesign external organizational
processes (that is, interorganizational processes).
Organizations are using modular and virtual organizations to change interorganizational processes.
Because modular organizations outsource all noncore activities to other businesses, they are less
Terms
authority
autonomy
behavioral formality
behavioral informality
centralization of authority
chain of command
empowering workers
empowerment
feedback
functional departmentalization
interorganizational process
intraorganizational process
job characteristics model
(JCM)
job design
job enlargement
matrix departmentalization
mechanistic organization
modular organization
open office systems
pooled interdependence
private spaces
product departmentalization
reciprocal interdependence
reengineering
sequential interdependence
standardization
task identity
task interdependence
task significance
Lesson Plan for Lecture
Pre-Class Prep for You:
Pre-Class Prep for Your Students:
• Review chapter and determine what points to
cover.
• Bring PPT slides.
Bring book.
Begin Chapter 9 by asking your students the following series of questions:
“Is how a company is structured important?”
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Lecture slides: Make note of where you stop so you can pick up at the next class
meeting. Slides have teaching notes on them to help you as you lecture.
Topics
PowerPoint Slides
Activities
Designing Adaptive
Organizations
1 Departmentalization
1.1 Functional
1.2 Product
1.3 Customer
1.4 Geographic
1.5 Matrix
1: Designing Adaptive
Organizations
2: What Would You Do?
3: Organizational
Structure
4: Organizational
Structure
5: Designing
Organizational Structures
Departmentalization
13: Geographic
Departmentalization
14: Geographic
Departmentalization
15: Matrix
Departmentalization
16: Matrix
Departmentalization
After you lecture on
Section 1 (through slide
16), ask students if they can
think of any other ways to
organize a company.
Consider linking to the
Starbucks company fact
sheet, which lists
2 Organizational
Authority
17: Organizational
Authority
18: Chain of Command
Ask students if chain of
command is more
important for certain
3 Job Design
3.1 Job Specialization
3.2 Job Rotation,
24: Job Design
25: Job Specialization
26: Rotation,
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3.3 Job
Characteristics
27: Job Characteristics
Model
Designing
Organizational Processes
4 Intraorganizational
Processes
30: Designing
Organizational Processes
31: Intraorganizational
Processes
32: Reengineering
Ask students if they’ve ever
5 Interorganizational
Processes
5.1 Modular
Organizations
36: Interorganizational
Processes
37: Modular
Organizations
Ask students if they think a
company can outsource
Adjust lecture to include the activities in the right column. Some activities should be
done before introducing the concept, some after.
Spark a debate among your students by asking them to respond to the following
statement:
“Most people want to move up the corporate ladder, so a defined hierarchy is a good tool
to help employees excel.”
Possible assignments:
Remind students about any upcoming events.
Lesson Plan for Group Work
Pre-Class Prep for You:
Pre-Class Prep for Students:
• Review material to cover and modify your
Bring book.
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Begin Chapter 9 by asking your students the following questions:
“Is how a company is structured important?”
“Why?” “Why not?”
Ask students about any corporate restructurings they have read or heard about in the
press.
“So when companies say they’re going to restructure, what are they talking about?”
Rather than lecturing on Departmentalization (Section 1), try the following approach:
“What do you think determines how a company decides to structure itself?”
Break for the following group activity:
“Pick a Structure”
Divide the class into small groups of 3 to 5 students. Give each group a list of 3
different well-known companies of interest to students (Starbucks, Vans, Sephora,
Apple, Google, Toyota, Capital One, etc.). For each company on their list, students
Lecture on Organizational Authority and Job Design (Sections 2 & 3)
Segue into the sections on organizational process by asking, “So far we’ve focused on
how companies organize people to get the company’s work done. What else do
companies need to organize?”
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how many would prefer working in a formal environment versus an informal
environment. Or give them a Likert scale and ask them to raise their hands to indicate
preferences. Use an Excel spreadsheet or even the chalkboard to create a frequency
count.
“What to Outsource”
Put students back in the groups you used for “Pick a Structure” and present them with
the same list of companies as previously. Consider having each group choose only
Assignments:
1. If you have finished covering Chapter 9, assign students to review Chapter 9 and
read the next chapter on your syllabus.
Remind students about any upcoming events.
Assignment with Teaching Tips and Solutions
Case Assignment – What Would You Do?
What Really Happened? Solution
ELI LILLY
In the opening case, you learned that pharmaceutical firm Eli Lilly stood to lose 75% of its revenues over
the next seven years as seven of its most profitable drugs came out of patent protection. When patent
With those short-term steps behind you, the long-term challenge is to grow Lilly’s drug pipeline? But
how? You need to encourage faster, less expensive innovation, which is never easy. Some think that
large budgets, centralized approval for allocating research dollars, and siloed research (where few know
and understand what others in the company are working on) stifle innovation and slow decision making.
If that’s the case, what might Lilly do internally to restructure itself to improve communication in product
development teams and speed up the entire drug development process?
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Behavioral formality refers to workplace situations characterized by routine and regimen, specific
rules about how to behave, and impersonal detachment. By contrast, behavioral informality refers to
The advantage of an open office with extensive shared space is that it dramatically increases the
amount of unplanned, spontaneous, and chance communication among employees. People are much
communication.
At Lilly CEO John Lechleiter restructured the company to significantly improve communication in
product development teams and speed up the entire drug development process. One of his first steps was
While Lilly used behavioral informality to increase communication in product development teams, it
reengineered internal processes to significantly increase the speed with which it completed the formal
phases of drug development and testing.
Reengineering is the fundamental rethinking and radical redesign of business processes to achieve
dramatic improvements in performance measures, such as cost, quality, service and speed. When
According to CEO John Lechleiter, the Development Center of Excellence is “implementing a project
management methodology called ‘Critical Chain,’ developed by physicist Eli Goldratt. Critical Chain was
actually first applied at Lilly in a completely different context by our IT group. They, in turn, helped our
Timothy Garnett, Lilly’s chief medical officer, explained that Critical Chain aims to eliminate the
delays that occur in a process when a task is completed by one person and then handed off to the next
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In essence, reengineering changes work by changing task interdependence, the extent to which
collective action is required to complete an entire piece of work. In sequential interdependence, work, like
Also, if the traditional company structure used by pharmaceutical firms, typically functional, product, or
matrix structures, haven’t been successful at encouraging drug development, are their nontraditional
organizational structures that Lilly use to do so that can also help to speed development and lower costs?
The most common organizational structure is functional departmentalization. Functional
departmentalization organizes work and workers into separate units responsible for particular business
Product departmentalization organizes work and workers into separate units responsible for producing
particular products or services. With hundreds of different drugs under development at Lilly at any one
time, organizing by product, or type of drugs, has appeal. Indeed, one of the advantages of product
Matrix departmentalization is a hybrid structure in which two or more forms of departmentalization
are used together. The most common matrix combines the product and functional forms of
departmentalization, but other forms may also be used. Several things distinguish matrix
departmentalization from the other traditional forms of departmentalization. Most employees report to
So, if the traditional company structure used by pharmaceutical firms, typically functional, product, or
matrix structures, haven’t been successful at encouraging drug development, are their nontraditional
organizational structures that Lilly could use to speed development and lower costs?
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dropped as needed, much like adding pieces to a three-dimensional puzzle. Because modular
organizations pay for outsourced labor, expertise, or manufacturing capabilities only when needed, they
As part of its move toward becoming a modular organization, Lilly created a group within the company
Why did Lilly turn to a modular organization structure? “Trying to do everything yourself won’t work.
The odds of owning everything and being at the right place at the right time are not high,” said Peter
Johnson, Lilly’s vice president of corporate strategic planning.
How well is Chorus working? Thus far, 25% of the molecules the Chorus has had other research
companies investigate have proved worthy of further study. And one discovery, a treatment for
Finally, to what extent should Lilly outsource parts of its drug development process to outside vendors
and companies? Because you risk creating new competitors with your own dollars when you outsource, a
general guideline is to only outsource noncore business activities But, when you’re a pharmaceutical
firm, drug development is the core of your business. Is there a way for Lilly to effectively outsource drug
development that gets around those risks? Tick tock. Tick tock. The clock is running.
By choosing to become a modular organization which significantly relies on outsourcing, Lilly was
hoping to significantly reduce costs while simultaneously increasing the speed with which it was able to
test and bring drugs to market. The downside of modular organizations, as discussed above, is the loss of
So, is Lilly risking its future by outsourcing the core function of researching and testing new drugs?
It turns out that contract research organizations (CROs), which do this kind of research, have been around
The advantage to Lilly is that by outsourcing drug testing, it can test two to three times as many drugs
at the same time for half of the cost. Robert Armstrong, Lilly’s vice president of global external Research
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While CROs may help pharmaceutical companies do a faster job of determining which drugs don’t
deserve more expensive late-phase testing, some critics doubt whether they can help firms like Lilly
uncover the blockbuster drugs they need to replace the drugs that are coming out of patent protection.
How well is Lilly’s restructuring working? As intended, costs have been significantly reduced. And,
combined with moderate increases in revenue, profits are up 28% from the year before. It’s too soon,
however, to know if Lilly will be successful in replacing the seven blockbuster drugs that are set to fall
out of patent protection in the next seven years. Likewise, this is being written in May of 2011, or
roughly six months before the alarm on CEO John Lechleiter’s Zyprexa clock goes off on October 23,
2011.
Self-Assessment
FLEXIBILITY AND STRUCTURE
Every organization needs some degree of flexibility to adapt to new situations, and some degree of
standardization to make routine tasks and decisions as efficient and effective as possible. One of the key
In-Class Use
Have students open their books to page 354 of the text and give them 5 to 7 minutes to complete the
inventory. Use the Self-Assessment PowerPoint slides and have students raise their hands as you read off
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Scoring
For this exercise, lower scores indicate a rather informal organization where rules and regulations are rare
or rarely enforced, and higher scores indicate that set rules and procedures are frequently used and applied
Management Decision
DRESSING UP (OR DOWN) FOR WORK
Purpose
Every manager must make decisions on a daily basis. Sometimes it’s large-scale decisions like creating a
new strategic plan to increase sales. At other times, it’s smaller-scale decisions like smoking policies, or
Setting It Up
You can introduce this case to students by asking them to imagine a very formal workplace, one in which
employees are given a dress code. What would be the pros and cons of such a workplace? Next, ask
students to imagine a very informal workplace, with no dress code, or titles, or hierarchy. What would be
the pros and cons of such a workplace?
Questions
1. What are the advantages and disadvantages of having an informal work place? What are the
advantages and disadvantages of having a formal work place?
In an informal setting, employees feel more relaxed, less pressured, and less constrained by the
need to adhere to hierarchical relationships. Compared with formal work atmospheres, the
language in informal workplaces is often slurred (“Whatcha doin’?”), elliptical (“Coffee?” versus
“Would you like some coffee?”), and filled with slang terms and vivid descriptions. People also
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look formal.
2. As the manager of this firm, would you institute a formal dress code?
Student’s responses will vary, but they should incorporate the advantages and disadvantages
Management Team Decision
CHINA––THE FUTURE OF GENERAL MOTORS?
Purpose
The purpose of this exercise is to have students thoughtfully consider what functions and elements a
company can outsource effectively and how an organization can change its design to take advantage of
new opportunities.
Setting It Up
This activity can be used as group work or as an individual assignment. One way to introduce the activity
is to ask students what a company should do when it struggles in one market but finds success in another.
Should it change its design to focus on the potentials of the new market? Should it try to maintain a hold
in the old market? Should it try to balance out investments in both?
Questions
1. The text describes a number of different approaches concerning organizational structure. Which do
you think would be ideal for GM’s success in China? Which of the structures would help GM expand
to other foreign markets?
Students’ responses will vary, but in their responses, they should recognize that there are clear
advantages and disadvantages to each of the departmentalization structures presented in the text.
The most common organizational structure is functional departmentalization. Companies tend to
Product departmentalization organizes work and workers into separate units responsible for
producing particular products or services. One of the advantages of product departmentalization is
Customer departmentalization organizes work and workers into separate units responsible for
particular kinds of customers. The primary advantage of customer departmentalization is that it
focuses the organization on customer needs rather than on products or business functions.
Furthermore, creating separate departments to serve specific kinds of customers allows companies to
specialize and adapt their products and services to customer needs and problems. The primary
disadvantage of customer departmentalization is that, like product departmentalization, it leads to
duplication of resources. It can be difficult to achieve coordination across different customer
departments, as is also the case with product departmentalization. Finally, the emphasis on meeting
customers’ needs may lead workers to make decisions that please customers but hurt the business.
Geographic departmentalization organizes work and workers into separate units responsible for
Matrix departmentalization is a hybrid structure in which two or more forms of
departmentalization are used together. The most common matrix combines the product and functional
forms of departmentalization, but other forms may also be used. Several things distinguish matrix
departmentalization from the other traditional forms of departmentalization. First, most employees
report to two bosses, one from each core part of the matrix. Second, by virtue of their hybrid design,
matrix structures lead to much more cross-functional interaction than other forms of
complex tasks. Because of the ability to pull in expert help from all the functional areas of the
company quickly, matrix project managers have a much more diverse set of expertise and experience
at their disposal than do managers in the other forms of departmentalization. The primary
disadvantage of matrix departmentalization is the high level of coordination required to manage the
2. What are the advantages and disadvantages of promoting decentralization in GM’s operations in
China?