Chap 008 Chap 008 Chap 008

8/20/2019 Chap 008 Chap 008 Chap 008

1/10

5/21/201

StructuringOrganizations

for Today’s

Challenges

Chapter 08

McGraw-Hill/Irwin Copyright © 2013 by The M cGraw-Hill Companies, Inc. Al l rights reserved.

1. Outline the basic principles of organization

management.

2. Compare the organizational theories of Fayol andWeber.

3. Evaluate the choices managers make in structuring

organizations.

4. Contrast the various organizational models.

5. Identify the benefits of inter-firm cooperation andcoordination.

6. Explain how organizational culture can helpbusinesses adapt to change.

LEARNING GOALSChapter Eight

8-2

Profile

• Started as a summer intern andmoved up through Xerox.

• The only female African-American CEO among

Fortune’s Top 150 Companies.

• Serves on many boards andhas been placed on councils by

President Obama and Vice-President Biden.

URSULA BURNSXerox

8-3

This sport’s equipment company studied the CDindustry and learned to use ultraviolet inks toprint graphics on skis. It went to the cable

television industry to learn how to braid layersof fiberglass and carbon, and adapted thatknowledge to make its products.

Name that company!

NAME that COMPANYChapter Eight

8-4

Everyone’sReorganizing

• Many companies are reorganizing, especiallythose in decline. Including:

- Auto makers

- Homebuilders

- Banks

• Adjusting to changing markets is normal incapitalist economies.

• Companies must go back to basic

organizational principles and firm up the

foundation.

REORGANIZATION is for

EVERYONELG1

8-5

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 ORGANIZATIONLG1

8-6

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

8/20/2019 Chap 008 Chap 008 Chap 008

2/10

5/21/201

You own a lawn-mowing business and are aware of

the hazards in the job. But you’ve seen othercompanies save money by eliminating safety

equipment. You’d also like to make more money.

SAFETY vs. PROFIT (Making Ethical Decisions)

• What do you do?

• Save money with lesssafety precautions?

• What are the

consequences?

8-7

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

LG2

8-8

Source: NewsWeek, July 26, 2010 and Fast Company, March 2010.

HOW MUCH CHANGESin a DECADE? LG2

The ChangingOrganization

What? 2000 2010

Amount of cell phone use 34% 89%

Number of active blogs 12,000 141,000,000

Amount of reality shows 4 320

Daily emails sent 12 billion 247 billion

Number of hours spent online per week 2.7 18

Number of daily newspapers 1,480 1,302

Number of daily letters mailed 207 billion 175 billion

Amount of books published 282,242 1,052,803

iTunes downloads 0 10 billionPercentage of obese Americans 26% 34%

8-9

The Developmentof OrganizationDesign

• Mass production of goods led to complexities inorganizing businesses.

PRODUCTION CHANGEDORGANZIATION DESIGN

• Economies of Scale --Companies can reducetheir production costs by purchasing raw materialsin bulk.

•

The average cost ofgoods decreases asproduction levels rise.

LG2

8-10

Fayol ’s Principlesof Organization

• Unity of command

• Hierarchy of authority

• Division of labor

• Subordination of individualinterests to the generalinterest

• Authority

FAYOL

S PRINCIPLES

• Degree ofcentralization

• Clear communicationchannels

• Order

• Equity

• Esprit de corps

LG2

8-11

• Organizations in whichemployees have no

more than one boss;lines of authority are

clear.

ORGANIZATIONS BASED on

FAYOL

S PRINCIPLES

• Rigid organizations that

often don’t respond tocustomers quickly.

LG2

Fayol ’s Principlesof Organization

8-12

8/20/2019 Chap 008 Chap 008 Chap 008

3/10

5/21/201

Max Weber andOrganizationalTheory

• Employees just need to do what

they’re told.

• In addition to Fayol’s principles,Weber emphasized:

- Job descriptions

- Written rules, decisionguidelines and detailed records

- Consistent procedures,regulations and policies

- Staffing and promotion basedon qualifications

WEBER

S PRINCIPLESLG2

8-13

TurningPrinciples intoOrganizationDesign

• When following Fayol and Weber, managerscontrol workers.

• Hierarchy -- A system in which one person isat the top of an organization and there is aranked or sequential ordering from the topdown.

• Chain of Command -- The line of authoritythat moves from the top of the hierarchy to thelowest level.

HIERARCHIES and COMMANDLG2

8-14

TYPICAL ORGANIZATION CHARTLG2


8-15

• 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


8-16

Progress Assessment

• What do the terms division of labor and jobspecialization mean?

• What are the principles of management outlined

by Fayol?

• What did Weber add to the principles of Fayol?

PROGRESS ASSESSMENT

8-17

ChoosingCentralizedorDecentralized

Authority

• Centralized Authority -- When decision-making isconcentrated at the top level of management.

CENTRALIZATION orDECENTRALIZATION?

• Decentralized

Authority -- Whendecision-making isdelegated to lower-levelmanagers and employeesmore familiar with localconditions thanheadquarters is.

LG3

8-18

8/20/2019 Chap 008 Chap 008 Chap 008

4/10

5/21/201

Choosing the AppropriateSpan of Control

• Span of Control -- The optimal number ofsubordinates a manager supervises or should

supervise.

• 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

8-19

Choosing Tallversus Flat

OrganizationStructures

• 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

8-20

FLAT ORGANIZATIONALSTRUCTURELG3

Choosing Tallversus Flat

OrganizationStructures

8-21

Weighing the Advantages andDisadvantages ofDepartmentalization

• Departmentalization -- Divides organizations intoseparate units.

• Workers are grouped by skills and expertise tospecialize their skills.

DEPARTMENTALIZATIONLG3

8-22

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

2) The company can achieve economies of scale.

3) Employees can coordinate work within the

function and top management can easily directactivities.

ADVANTAGES of



8-23

1) Departments may not communicate well.2) Employees may identify with their department’s

goals rather than the organization’s.

3) The company’s response to external changes maybe slow.

4) People may not be trained to take differentmanagerial responsibilities, instead they become

specialists.

5) Department members may engage in groupthink and

may need outside input.

DISADVANTAGES of



8-24

8/20/2019 Chap 008 Chap 008 Chap 008

5/10

5/21/201

Looking at Alternate Ways toDepartmentalize WAYS to DEPARTMENTALIZE

LG3

8-25

WAYS to DEPARTMENTALIZE

LG3

Looking at Alternate Ways toDepartmentalize

8-26

Progress Assessment

• Why are organizations becoming flatter?

• What are some reasons for having a narrow spanof control in an organization?

• What are the advantages and disadvantages of

departmentalization?

• What are the various ways a firm candepartmentalize?

PROGRESS ASSESSMENT

8-27

OrganizationModels

1. Line Organizations

2. Line-and-StaffOrganizations

3. Matrix-StyleOrganizations

4. Cross-Functional Self-Managed Teams

FOUR WAYS to STRUCTURE anORGANIZATIONLG4

8-28

LineOrganizations

•

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

• There are no specialists, legal, accounting,

human resources or information technologydepartments.

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

LINE ORGANIZATIONSLG4

8-29

Line-and-StaffOrganizations

•

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

• Line personnel have authority to make policydecisions.

LINE PERSONNELLG4

8-30

8/20/2019 Chap 008 Chap 008 Chap 008

6/10

5/21/201

• Staff Personnel -- Employees who advise and assistline personnel in meeting their goals, and include

market ing research ,(wrong!!!) legal advising, IT andhuman resource employees.

STAFF PERSONNELLG4


8-31

SAMPLE LINE-and-STAFFORGANIZATIONLG4


8-32

Matrix-StyleOrganizations

• Matrix Organization -- Specialists from different parts of the organization work together temporarily onspecific projects, but still remain part of a line-and-staffstructure.

MATRIX ORGANIZATIONS

• Emphasis is onproduct development,

creativity, specialprojects,

communication andteamwork.

LG4

8-33

SAMPLE MATRIXORGANIZATIONLG4


8-34

• Managers have flexibility in assigning people toprojects.

• Interorganizational cooperation and teamwork is

encouraged.

• Creative solutions to product developmentproblems are produced.

• Efficient use of organizational resources.

ADVANTAGES of the

MATRIX STYLELG4


8-35

• It’s costly and complex.

• Employees may be confused about where theirloyalty belongs.

• Good interpersonal skills and cooperativeemployees are a must.

DISADVANTAGES of theMATRIX STYLELG4


• It’s a temporary

solution to a possible

long-term problem.

• Teams are not

permanent.

8-36

8/20/2019 Chap 008 Chap 008 Chap 008

7/10

5/21/201

Cross-FunctionalSelf-ManagedTeams

• Cross-Functional Self-Managed Teams --

Groups of employees from different departments whowork together on a long-term basis.

• 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-FUNCTIONALSELF-MANAGED TEAMSLG4

8-37

Going BeyondOrganizationalBoundaries

• Cross-functional teams work best when the voice

of the customer is heard.

• Teams that include customers, suppliers and

distributors go beyond organizational boundaries.

• Government coordinators may assist in sharingmarket information beyond national boundaries.

GOING BEYONDORGANIZATIONAL BOUNDARIES

LG4

8-38

Source: CIO Magazine, www.cio.com.

• Clear purpose

• Clear goals

• Correct skills

• Mutual accountability

• Shift roles whenappropriate

BUILDING SUCCESSFUL TEAMS Important Conditions for Small TeamsLG4

Going BeyondOrganizationalBoundaries

8-39

Progress Assessment

• What’s the difference between line and staffpersonnel?

• What management principle does a matrix-styleorganization challenge?

• What’s the main difference between a matrix-

style organization’s structure and the use of

cross-functional teams?

PROGRESS ASSESSMENT

8-40

Transparencyand VirtualOrganizations

• Networking -- Usingcommunications technologyto link organizations andallow them to work together.

• Most companies are nolonger self-sufficient;

they’re part of a globalbusiness network.

REAL-TIME BUSINESSLG5

Photo Courtesy of: MarcWathieu

• Real Time -- The present moment or actual time inwhich something takes place.

8-41

• Transparency -- When a company is so open toother companies that electronic information is sharedas if the companies were one.

• Virtual Corporation -- A temporary networkedorganization made up of replaceable firms that joinand leave as needed.

TRANSPARENCY and VIRTUAL

CORPORATIONSLG5


8-42

http://www.cio.com/http://www.cio.com/http://www.cio.com/

8/20/2019 Chap 008 Chap 008 Chap 008

8/10

5/21/201

A VIRTUAL CORPORATIONLG5


8-43

• Douglas Pick launched DAP World from his

apartment, but couldn’t produce all that was

needed.

WHEN YOUR WORKERSWORK for SOMEONE ELSE

(Spotlight on Small Business)

• Started working with NewHorizons to help produce

and ship his earplugs.

• Now he sells millions ofearplugs to major outlets

like Walgreens and RiteAid.

8-44

Benchmarkingand CoreCompetencies

• Benchmarking -- Compares an organization’s practices, processes and products against theworld ’s best.

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

•

K2 Skis researched other companies’ practicesin order to create the best possible skis and

snowboards.

BENCHMARKING andCORE COMPETENCIESLG5

8-45

Source: Healthcare Financial Management.

Benefits Concerns

• Provides enough staffto operate the facility

• Lower employeemorale

• Cost savings • Liability

• Should patients beinformed

• Confidentiality and

security

BENEFITS and CONCERNS ofHEALTHCARE OUTSOURCINGLG5


8-46

Source: USA Today.

WHICH JOBS will be

OUTSOURCED NEXT?LG5


8-47

Adapting toChange

•Change isn

’t easy.

Employees like to do

things the way theyalways have.

• Get rid of old, inefficient

facilities and equipment.

• Use the Internet to getto know your customers

and sell directly to them.

ADAPTING toMARKET CHANGES

LG5

8-48

8/20/2019 Chap 008 Chap 008 Chap 008

9/10

5/21/201

KEEP in TOUCHAmazon and its Customer Database

Amazon uses information stored in databases toreach out to customers. The company emails

customers letting them know about music, DVDsor books they might like based on pastpurchases.

• Have you ever received an email like this from Amazon or anothercompany?

• What benefits would a database of personal information, like pastpurchases, provide Amazon?

• Do you think these databases are helpful for both companies andconsumers or are they an invasion of privacy?

LG5

Adapting toChange

8-49

• People will become so used to having social

media at their fingertips, it’ll no longer be news.

• There will be new gadgets; some will beimprovements, others will be revolutionary.

• This can lead to more people working from home

and more companies interacting directly with theircustomer base.

WHEN TWITTER and FACEBOOKare OLD SCHOOL

(Social Media in Business)

8-50

RestructuringforEmpowerment

• 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.

•

The manager’s job is to assist and supportfrontline workers, not boss them.

RESTRUCTURINGLG5

8-51

TRADITIONAL and INVERTEDORGANIZATIONSLG5

RestructuringforEmpowerment

8-52

Creating aChange-OrientedOrganizationalCulture

• Organizational or CorporateCulture -- The widely sharedvalues within an organization thatfoster unity and cooperation toachieve common goals.

• Some of the best organizationalcultures emphasize service.

• Culture is shown in stories,traditions and myths.

ORGANIZATIONAL CULTURELG6

8-53

Managing theInformalOrganization

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

• The formal system is often slow and

bureaucratic, but it helps guide the lines ofauthority.

• No organization can be effective without formaland informal organization.

FORMAL ORGANIZATIONLG6

8-54

http://www.amazon.com/http://www.amazon.com/

8/20/2019 Chap 008 Chap 008 Chap 008

10/10

5/21/201

• Informal Organization -- The system of

relationships that develop spontaneously asemployees meet and form relationships.

INFORMAL ORGANIZATION

• Informal organizationhelps foster

camaraderie andteamwork amongemployees.

LG6


8-55

• The informal system is

too unstructured andemotional on its own.

• Informal organizationmay also be powerful

in resistingmanagement

directives.

LIMITATIONS of INFORMAL

ORGANIZATIONSLG6


8-56

Source: CIO Magazine.

• Do your job but don’t produce more than therest of your group.

• Don’t tell off-color jokes or use profanity.

• Everyone is to be clean and organized at the

workstation.

• Respect and help your fellow group members.

• Drinking is done off the job – NEVER at work.

GROUP NORMS Examples of Informal Group Norms

LG6


8-57

Progress Assessment

• What’s an inverted organization?

• Why do organizations outsource functions?

• What’s organizational culture?

PROGRESS ASSESSMENT

8-58
http://www.cio.com/http://www.cio.com/http://www.cio.com/

Documents

Chap 008 Chap 008 Chap 008