The Challenge Case at the beginning of this chapter generally describes how Microsoft has reorganized to be more competitive. Concepts in this chapter would be useful to a manager such as Microsoft’s CEO in charge of the reorganization, Satya Nadella, and to his successor in meeting organizing challenges similar to those discussed in the case.

In contemplating how Microsoft should be organized, a manager such as Nadella should focus on answering several important questions. These questions should be aimed at establishing an orderly use of Microsoft’s organizational resources. Because these resources represent an investment on which the company must get a return, Nadella should ask questions geared toward gaining information that will be used to maximize this return. Overall, such questions should focus on determining which use of Microsoft’s resources will best accomplish its goals.

Some preliminary questions could be as follows:

1. What organizational objectives exist at Microsoft? For example, does Microsoft want to focus more on currently successful products such as operating systems or on new technologies such as mobile devices and cloud computing? Does Microsoft want to grow or maintain its present size?

2. What plans does Microsoft have to accomplish these objectives? Is the company going to invest more in product development? Will it shed divisions that are no longer growing?

3. What are the major tasks Microsoft must carry out to establish profitable linkages among its divisions? For example, how many steps are involved in launching a new product line?

4. What resources does Microsoft have to run its operations? Answers to this question focus on items such as the number of employees, financial resources available, equipment being used, and so on.

To develop a sound organizing effort, a manager should take classical organizing theory into consideration. Nadella’s effort started with an organization structure for Microsoft that was based primarily on product categories. In its most recent restructuring, the company brought together work that unites families of devices and services, such as operating systems or cloud computing. A manager typically uses an organization chart to represent organization structure. Such a chart would allow Nadella not only to see the lines of authority and responsibility at Microsoft but also to understand the broad working relationships among the company’s employees.

In developing the most appropriate way to organize Microsoft employees, a manager can reflect on another major element in classical organizing theory: division of labor. Nadella could decide, for example, that instead of having one person do all the work involved in managing operating systems across devices, the labor could be divided so that different managers oversee operating systems for particular devices, and they would report to the divisional manager who has the larger picture in mind. In this way, the managers of particular products could focus on the issues that arise with those products, while the divisional manager could focus on larger strategic issues.

In considering the appropriateness of division of labor at Microsoft, a manager could also consider creating a mechanism for enhancing coordination. To develop such a mechanism, Nadella and his vice presidents must have a thorough understanding of how various Microsoft business processes occur so that they can divide various tasks and maintain coordination among the various divisions. In addition, managers like Microsoft executives must stress communication as a prerequisite for coordination. Unless Microsoft employees continually communicate with one another, coordination will be virtually impossible. In enhancing organization coordination, Microsoft’s executives must also continually plan for and take action toward maintaining such coordination.

The last two major elements in classical organizing theory that a manager could reflect on are span of management and scalar relationships. Span of management focuses on the number of subordinates that managers in various roles at Microsoft can supervise effectively. In thinking about span of management, Nadella might explore several important situational factors such as similarities among various Microsoft activities in each division, the extent to which Microsoft’s workers are physically separated, and the complexity of the company’s work activities. For example, Nadella should keep in mind that the technical requirements of Microsoft’s products are extremely complex and that market demands shift rapidly. Given the complexity of this work, managing a large number of workers is difficult, so the span of management for technical employees should generally be relatively small. Other important factors that Nadella and his vice presidents should consider when determining spans of management are the amounts of time managers must spend coordinating workers’ activities and the amount of time managers spend planning. With all this information, Microsoft’s executives should be capable of determining the appropriate spans of management for their managers.