Business International Text Book Chap 08

8/10/2019 Business International Text Book Chap 08

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*Chapter Eight

AdaptingOrganizations

to TodaysMarkets

Copyright 2010 by the McGraw-Hill Companies, Inc. All rights resere!.McGraw-Hill"Irwin


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*Profile

Started as a field salesrepresentative and moved upthroughXerox.

When she was chosen as thenew CEO, Xerox was in badshape.

She cut the debt and built upcash reserves.

Follows her motto - Work hard.Measure the results. Tell the

truth.

ANNE MULCAHYXerox

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http://www.xerox.com/http://www.xerox.com/


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*EveryonesOrganizing

Many companies are reorganizing, especiallythose in decline. Including:

-Auto makers- Homebuilders

- Banks

Adjusting to changing markets is normal in

capitalist economies.

Companies must go back to basicorganizational principles and firm up the

foundation.

REORGANIZATION is forEVERYONE

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General Electric (GE)must restructure due to the

financial crisis.

Some international units, like the GE Money unit,may need to be sold to cut costs.

Reorganized from six business segments to four.

1.Technology Infrastructure

2.Energy Infrastructure

3.GE Capital

4.NBC Universal

GE LOOKS for MORE PROFITS(Reaching Beyond Our Borders)

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http://www.ge.com/company/index.htmlhttp://www.ge.com/company/index.htmlhttp://www.ge.com/company/index.html


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*Building anOrganization fromthe Bottom Up

Create a division of labor

Set up teams or departments

Allocate resources

Assign tasks

Establish procedures

Adjust to new realities

STRUCTURING an ORGANIZATION

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You own a lawn-mowing business and are aware ofthe hazards in the job. But, youve seen othercompanies save money by eliminating safetyequipment. Youd also like to make more money.

SAFETY vs. PROFIT(Making Ethical Decisions)

What do you do?

Save money with lesssafety precautions?

What are theconsequences?

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*The ChangingOrganization

Often change in organizations is due to evolvingbusiness environments:- More global competition

- Declining economy- Faster technological change

- Pressure to protect the environment

Customer expectations have also changed--Consumers today want high-quality productswith fast, friendly service and all at low cost.

THE CHANGING ORGANIZATION

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*The Developmentof OrganizationDesign

Mass production of goods led to complexities inorganizing businesses.

PRODUCTION CHANGEDORGANZIATION DESIGN

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Economies of Scale --Companies can reducetheir production costs bypurchasing raw materials

in bulk.

The average cost ofgoods decrease asproduction levels rise.

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*Fayols Principlesof Organization

Unity of command

Hierarchy of authority

Division of labor

Subordination of individualinterests to the general

interest

Authority

FAYOLS PRINCIPLES

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Degree ofcentralization

Clear communicationchannels

Order

Equity

Esprit de corps

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*Fayols Principlesof Organization

Organizations in whichemployees have no

more than one boss;lines of authority areclear.

ORGANIZATIONS BASED onFAYOLS PRINCIPLES

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Rigid organizations thatoften dont respond tocustomers quickly.

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*Max Weber andOrganizationalTheory

Employees just need to do whattheyre told.

In addition to Fayols principles,

Weber emphasized:- Job descriptions.

- Written rules, decisionguidelines and detailed records.

- Consistent procedures,regulations and policies.

- Staffing and promotion basedon qualifications.

WEBERS PRINCIPLES

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*TurningPrinciples intoOrganizationDesign

When following Fayol and Weber, managerscontrolworkers.

Hierarchy --A system in which one person is at thetop of an organization and there is a ranked orsequential ordering from the top down.

Chain of Command --The line of authority thatmoves from the top of the hierarchy to the lowestlevel.

HIERARCHIES and COMMAND

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TYPICAL ORGANIZATION CHART

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Bureaucracy --An organization with many layers ofmanagers who set rules and regulations and overseeall decisions.

It can take weeks or months to have informationpassed down to lower-level employees.

Bureaucracies can annoy customers.

BUREAUCRATIC ORGANIZATIONSLG2

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*Choosing theAppropriateSpan of Control

Span of Control --The optimal number ofsubordinates a manager supervises or shouldsupervise.

When work is standardized, broad spans ofcontrol are possible.

Appropriate span narrows at higher levels of the

organization.

The trend today is to reduce middle managersand hire better low-level employees.

SPAN of CONTROLLG3

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*Choosing Tallversus FlatOrganizationStructures

Structures determine the way the companyresponds to employee and customer needs.

Tall Organization Structures --An organizationalstructure in which the organization chart would be tall

because of the various levels of management.

Flat Organization Structures --An organizationalstructure that has few layers of management and abroad span of control.

ORGANIZATIONAL STRUCTURESLG3

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*Choosing Tallversus FlatOrganizationStructures

FLAT ORGANIZATIONALSTRUCTURE

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*Weighing the

Advantages andDisadvantages ofDepartmentalization

Departmentalization --Divides organizations intoseparate units.

Workers are grouped by skills and expertise tospecialize their skills.

DEPARTMENTALIZATION

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*Weighing the


Employees develop skills and progress within adepartment as they master skills.

The company can achieve economies of scale.

Employees can coordinate work within thefunction and top management can easily direct

activities.

ADVANTAGES ofDEPARTMENTALIZATION

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*Weighing the


Departments may not communicate well.

Employees may identify with their departments goalsrather than the organizations.

The companys response to external changes may beslow.

People may not be trained to take different

managerial responsibilities, instead they becomespecialists.

Department members may engage in groupthink andmay need outside input.

DISADVANTAGES ofDEPARTMENTALIZATION

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*Looking atAlternate Ways toDepartmentalize

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WAYS to DEPARTMENTALIZE

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*Looking atAlternate Ways toDepartmentalize

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WAYS to DEPARTMENTALIZE

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*ProgressAssessment

Why are organizations becoming flatter?

What are some reasons for having a narrow span

of control in an organization? What are the advantages and disadvantages ofdepartmentalization?

What are the various ways a firm candepartmentalize?

PROGRESS ASSESSMENT

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*OrganizationModels

1.Line Organizations

2.Line-and-Staff Organizations

3.Matrix-Style Organizations

4.Cross-Functional Self-Managed Teams

FOUR WAYS to STRUCTURE anORGANIZATION

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*LineOrganizations

Line Organization --Has direct two-way lines ofresponsibility, authority and communication runningfrom the top to the bottom. Everyone reports to one

supervisor.

There are no specialists, legal, accounting,human resources or information technology

departments.

Line managers issue orders, enforce disciplineand adjust the organization to changes.

LINE ORGANIZATIONS

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*Line-and-StaffOrganizations

Line Personnel --Workers responsible for directlyachieving organizational goals, and includeproduction, distribution and marketing employees.

Line personnel have authority to make policydecisions.

LINE PERSONNEL

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Staff Personnel --Employees who advise and assistline personnel in meeting their goals, and includemarketing research, legal advising, IT and human

resource employees.

STAFF PERSONNEL

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SAMPLE LINE-and-STAFFORGANIZATION

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*Matrix-StyleOrganizations

Matrix Organization --Specialists from differentparts of the organization work together temporarily onspecific projects, but still remain part of a line-and-staff

structure.

MATRIX ORGANIZATIONS

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Emphasis is onproduct development,

creativity, specialprojects,communication andteamwork.

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*Matrix-StyleOrganizations

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SAMPLE MATRIXORGANIZATION

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*Cross-FunctionalSelf-ManagedTeams

A way to fix the problem of matrix-style teams isto establish long-term teams.

Empower teams to work closely with suppliers,customers and others to figure out how to createbetter products.

Cross-Functional Self-Managed Teams --Groups of employees from different departments whowork together on a long-term basis.

CROSS-FUNCTIONALSELF-MANAGED TEAMS

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*Going BeyondOrganizationalBoundaries

Cross-functional teams work best when the voiceof the customer is heard.

Teams that include customers, suppliers anddistributors goes beyond organizationalboundaries.

Government coordinators may assist in sharingmarket information beyond national boundaries.

GOING BEYONDORGANIZATIONAL BOUNDARIES

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Source: CIO Magazine, www.cio.com,.

Clear purpose

Clear goals

Correct skills

Mutual accountability

Shift roles when

appropriate

BUILDING SUCCESSFUL TEAMSImportant Conditions for Small Teams

Going BeyondOrganizationalBoundaries

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*ProgressAssessment

Whats the difference between line and staffpersonnel?

What management principle does a matrix-styleorganization challenge?

Whats the main difference between a matrix-styleorganizations structure and the use of cross-

functional teams?

PROGRESS ASSESSMENT

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*Transparencyand VirtualOrganizations

Most companies are nolonger self-sufficient;

theyre part of a globalbusiness network.

Real Time --The presentmoment or actual time inwhich something takesplace.

REAL TIME BUSINESS

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Transparency --When a company is so open toother companies that electronic information is shared

as if the companies were one.

Virtual Corporation --A temporary networkedorganization made up of replaceable firms that join

and leave as needed.

TRANSPARENCY and VIRTUALCORPORATIONS

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A VIRTUAL CORPORATION

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Source: Healthcare Financial Management.

Benefits Concerns

Provides enough staff

to operate the facility

Lower employee morale

Cost savings Liability

Should patients be

informed

Confidentiality andsecurity

BENEFITS and CONCERNS ofHEALTHCARE OUTSOURCING

Transparencyand VirtualOrganizations

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Source: USA Toda.

WHICH JOBS will beOUTSOURCED NEXT?

Transparencyand VirtualOrganizations

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*Benchmarkingand CoreCompetencies

Benchmarking --Compares an organizationspractices, processes and products against the worldsbest.

Core Competencies --The functions anorganization can do as well as or better than anyother organization in the world.

If a company cant match a competitor, they maytry to outsource.

BENCHMARKING andCORE COMPETENCIES

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KEEP in TOUCHAmazon and its Customer Database

Adapting toChange

Amazon.comuses information stored in databases

to reach out to customers. The company emailscustomers letting them know about CDs, DVDs or

books they might like based on past purchases.

Have you ever received an email like this from Amazon oranother company?

What benefits would a database of personal information, likepast purchases, provide Amazon?

Do you think these databases are helpful for both companiesand consumers or are they an invasion of privacy?

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*Restructuring forEmpowerment

Restructuring --Redesigning an organization so itcan more effectively and efficiently serve itscustomers.

Inverted Organization --An organization that hascontact people at the top and the CEO at the bottomof the organizational chart.

RESTRUCTURING

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The managers job is toassistandsupportfrontline workers, notboss them.

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*Restructuring forEmpowerment

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TRADITIONAL and INVERTEDORGANIZATIONS

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*Creating aChange-OrientedOrganizationalCulture

OrganizationalorCorporate Culture --Thewidely shared values within an organization thatfoster unity and cooperation to achieve common

goals

Some of the best organizational culturesemphasize service.

Culture is shown in stories, traditions and myths.

ORGANIZATIONAL CULTURE

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*Managing theInformalOrganization

Formal Organization --Details lines ofresponsibility, authority and position.

The formal system is often slow andbureaucratic but it helps guide the lines ofauthority.

No organization can be effective without formaland informal organization.

FORMAL ORGANIZATION

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Managing theInformalOrganization

The informal system istoo unstructured andemotional on its own.

Informal organizationmay also be powerful

in resistingmanagementdirectives.

LIMITATIONS of INFORMALORGANIZATIONS

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Source: CIO Magazine, www.cio.com,.

Do your job but dont produce more than the restof your group.

Dont tell off-color jokes or use profanity. Everyone is to be clean and organized at theworkstation.

Respect and help your fellow group members. Drinking is done off the job NEVER at work.

GROUP NORMSExamples of Informal Group Norms

Managing theInformalOrganization

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Informal networks are easier to maintain in smallbusinesses.

Communication among large corporate units isntmanaged as well, inhibiting innovation.

Large corporations could form cross-

departmental sports teams or sponsor cross-departmental parties to get ideas flowing in moreinformal settings.

KEEPING THATSMALL-COMPANY FEELING

(Spotlight on Small Business)

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ProgressAssessment

Whats an inverted organization?

Why do organizations outsource functions?

Whats organizational culture?

PROGRESS ASSESSMENT

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Business International Text Book Chap 08