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CHAPTER 8 – ADAPTING ORGANIZATIONS TO TODAY’S MARKETS
LEARNING GOALS
After you have read and studied this chapter, you should be able to:
1. Outline the basic principles of organization management.2. Compare the organizational theories of Fayol and Weber.3. Evaluate the choices managers make in structuring organizations.4. Contrast the various organizational models.5. Identify the benefits of inter-firm cooperation and coordination.6. Explain how restructuring, organizational culture, and informal organizations
can help businesses adapt to change.
LEARNING THE LANGUAGE
Listed below are important terms found in the chapter. Choose the correct term for each definition and write it in the space provided.
Benchmarking Flat organization structure Organizational (or corporate) culture
Bureaucracy Formal organization Real timeCentralized authority Hierarchy RestructuringChain of command Informal organization Span of controlCore competencies Inverted organization Staff personnelCross-functional self managed teams
Line organization Tall organization structure
Decentralized authority Line personnel TransparencyDepartmentalization Matrix organization Virtual corporationDigital natives NetworkingEconomies of scale
1. Groups of employees from different departments who work together on a long- term basis are called ______________________.
2. A ________________ is a system in which one person is at the top of the organization and there is a ranked or sequential ordering from the top down of managers who are responsible to that person.
3. Using communications technology and other means to link organizations, or ______________, allows them to work together on common objectives.
4. Redesigning an organization so that it can more effectively and efficiently serve its customers is known as ______________.
5. Widely shared values within an organization, or the _______________________, provide unity and cooperation to achieve common goals.
6. The _____________________ is the system of relationships and lines of authority that develop spontaneously as employees meet and form relationships, and lines of authority outside the formal organization.
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7. Those functions that the organization can do as well as or better than any other organization in the world are called _______________________.
8. A ___________________ is an organization with many layers of managers who set rules and regulations and oversee all decisions.
9. An organization in which decision-making authority is maintained at the top level of management at the company’s headquarters utilizes __________________________.
10. In a(n) __________________ contact people are at the top and the chief executive officer is at the bottom of the organization chart.
11. The ________________ refers to the optimum number of subordinates a manager supervises or should supervise.
12. The line of authority that moves from the top of the hierarchy to the lowest level is called the __________________________.
13. Employees known as _____________________are part of the chain of command that is responsible for achieving organizational goals.
14. When a company is using _______________________, it is comparing its practices,
processes, and products against the world's best.
15. When decision-making authority is delegated to lower-level managers more familiar with local conditions than headquarters’ management could be, a company is said to have ______________.
16. A____________________ has few layers of management and a broad span of control.
17. Dividing organizational functions into separate units is commonly called _____________________.
18. The __________________ is the structure that details lines of responsibility, authority, and position and is shown on the organizational chart.
19. A _____________________ is one in which specialists from different parts of the organization are brought together to work on specific projects but still remain part of a traditional line and staff structure.
20. Employees known as ____________________ advise and assist line personnel in meeting their goals.
21. The concept of ___________________describes a situation in which companies can reduce their production costs if they can purchase raw materials in bulk, so the average cost of goods goes down as production levels increase.
22. An organizational structure in which the pyramidal organization chart would be quite tall because of the various levels of management would be called a __________________________.
23. A ____________________is one that has direct two-way lines of responsibility, authority, and communication running from the top to the bottom of the organization, with all people reporting to only one supervisor.
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24. The present moment or the actual time in which something takes place is called _____________.
25. The term _______________ is used to describe young people who grew up using the Internet.
26. A _________________is a temporary, networked organization made up of replaceable firms that join the network and leave it as needed.
ASSESSMENT CHECK
Learning Goal 1Everyone’s Organizing
1. According to the text the key to success for organizations is: ________________________________
_____________________________________________________________________________________.
2. Describe:
a. Division of labor: _________________________________________________
b. Job specialization: _________________________________________________
3. Structuring an organization consists of:
a. __________________________________________________________________
b. __________________________________________________________________
c. __________________________________________________________________
d. __________________________________________________________________
e. __________________________________________________________________
f. __________________________________________________________________
4. What does an organization chart show?
5. What has created so much change in organizations?
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Learning Goal 2The Changing Organization
6. Identify and briefly describe 10 of Fayol's "principles" of organizing:
a.________________________________________________________________________
b.________________________________________________________________________
c.________________________________________________________________________
d.________________________________________________________________________
e.________________________________________________________________________
f.________________________________________________________________________
g.________________________________________________________________________
h.________________________________________________________________________
i_________________________________________________________________________
j._________________________________________________________________________
7. The process of rule making often led to __________________________________________.
8. Identify four characteristics of Max Weber's bureaucracy.
a.__________________________________________________________________________
b.__________________________________________________________________________
c.__________________________________________________________________________
d.__________________________________________________________________________
9. How do workers today differ from those during the time that Weber was writing, and how did that affect management?
10. In a company with many layers of management, what is the process for an employee to introduce a work change? What did Weber mean by the term “bureaucrat”?
11. When employees have to ask their manager for permission to make a change __________________
______________________________________________________________________________________.
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12. How are companies reorganizing to make customers happy?
Learning Goal 3Decisions to Make in Structuring Organizations
13. What are the advantages and disadvantages of centralized authority?
Advantages Disadvantages
a. _______________________________ a. __________________________________
b. _______________________________ b. __________________________________
c. _______________________________ c. __________________________________
d. _______________________________ d. __________________________________
14. What are the advantages and disadvantages of decentralized authority?
Advantages Disadvantagesa. _______________________________ a. __________________________________
b. _______________________________ b. __________________________________
c. _______________________________ c. __________________________________
d. _______________________________ d. __________________________________
15. Why does span of control narrow at higher levels of the organization?
16. What is the trend in today’s organizations regarding span of control?
17. Compare span of control in tall and flat organizational structures.
18. Why can flat structures respond more readily to customer demands?
19. What are the advantages and disadvantages of the traditional functional structure?
Advantages Disadvantages
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a. _______________________________ a. ____________________________________
b. _______________________________ b. ____________________________________
c. _______________________________ c. ____________________________________
d. ____________________________________
e. ____________________________________
20. What are five methods of grouping, or departmentalizing, workers?
a._______________________________ d.___________________________________
b._______________________________ e.___________________________________
c._______________________________
21. The decision about which way to departmentalize depends on ___________________________
__________________________________________________________________________________.
22. A hybrid form of departmentalization is being used when _______________________________
__________________________________________________________________________________,
Learning Goal 4Organization Models
23. Name four types of organizational structures.
a.______________________________ c.____________________________
b.______________________________ d.____________________________
24. What are the disadvantages of a line organization, for a larger organization?
a. ___________________________________________________________________________
b. ___________________________________________________________________________
c. ___________________________________________________________________________
d. ___________________________________________________________________________
25. What is the difference between line and staff personnel?
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26. In a matrix system, a product manager can: ____________________________________________
___________________________________________________________________________________.
This is important in industries in which the emphasis is on ________________________________
____________________________________________________________________________________.
27. What are the advantages and disadvantages of a matrix structure?Advantages:
a. _________________________________________________________
b. _________________________________________________________
c. _________________________________________________________
d. _________________________________________________________
Disadvantages:
a. _________________________________________________________
b. _________________________________________________________
c. _________________________________________________________
d. _________________________________________________________
28. A potential problem with the teams created by matrix management is _____________________
___________________________________________________________________________________.
An answer to the disadvantage of the teams created by matrix management is: ______________
___________________________________________________________________________________.
29. Describe the characteristics of cross-functional teams.
30. Why should cross functional teams include customers, suppliers and distributors?
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Learning Goal 5Managing the Interactions Among Firms
31. What is meant by the concept of transparency?
32. How have the networking, real time and the concept of transparency, changed the way information is shared between organizations?
33. What is the result of those changes on organizational design and structure?
34. How does benchmarking lead to outsourcing, and ultimately to a firm’s core competencies?
Learning Goal 6Adapting to Change
35. Why is introducing change in an organization difficult?
36. How are companies using the Internet to help adapt to changes?
37. Illustrate and describe an inverted organization.
38. What is a manager’s job in an inverted organization?
39. How does the inverted organization support front line personnel? How does this change the requirements for front-line personnel?
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40. How is the culture of an organization reflected?
41. Describe the kind of organizational cultures that the best organizations have, including the key to a productive culture.
42. What are two organizational systems that all companies have?
a. _______________________________ b. _______________________________
43. What is a drawback of the formal organization? What is a benefit of the formal organization?
44. What is the drawback of the informal organization? What is the benefit?
45. Describe the importance of the “grapevine” in the organization.
46. How have managers’ views toward the informal organization changed in the new more open organizations?
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CRITICAL THINKING EXERCISES
Learning Goal 1
1. Consider an organization with which you are familiar. This could be the school you attend, or the company you work for, or a charitable organization with which you have worked. Can you identify the manner in which this organization is “organized”? How is the work divided? Are there teams? Is the organization departmentalized? Are the positions of authority clear? What are the various types of tasks that need to be accomplished? Are there clear procedures for doing work? Is there an organization chart?
Learning Goal 22. Many organizations today have been organized around principles developed by
Henri Fayol and Max Weber. Read the following and determine whose ideas are being described.
a. ____________ Introduced several "principles" of organizing.
b. ____________ Believed workers should think of themselves as coordinated teams, and that the goal of the team is more important than individual goals.
c. ____________ Promoted a bureaucratic organization.
d.____________ Believed that large organizations demanded clearly established rules and guidelines, which were to be precisely followed.
e. ___________ Wrote that each worker should report to only one boss.
f.____________ Said that managers should treat employees and peers with respect
g. ___________ Wrote that functions are to be divided into areas of specialization such as production, marketing and so on.
h. ___________ Believed in written rules, decision guidelines and detailed records.
i. ____________ Said that staffing and promotions should be based solely on qualifications.
j. ____________ Proposed that an organization should consist of three layers of authority: top managers, middle managers, and supervisors.
k. ____________ Believed the less decision-making employees had to do, the better.
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l. ____________ Believed that managers have the right to give orders and expect obedience.
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Learning Goal 33. You are a manager for Sun-2-Shade, a company that makes a self-darkening
windshield for automobiles using the same technology that is used for prescription eyeglasses. Sun-2-Shade is a small company right now, with just a few workers. Eric is the CEO and founder of the company. You are the plant manager. The customers for Sun-2-Shade for right now are automobile manufacturers. Do you think a centralized or decentralized authority structure would be most effective? Why?
4. As companies are moving away from traditional methods of organizing, and taking different perspectives regarding span of control, how are companies changing in the area of centralization versus decentralization, and tall versus flat organizational structures?
5. There are a number of ways companies have tried to departmentalize to better serve customers:
Product Customer group ProcessFunction Geographic location
The hybrid structure is an organization that has used several forms of departmentalization
Match each of the following to the correct form:
a. ________________ General Motors has the Chevrolet and Buick, divisions, each employing separate staffs for design, engineering, product development and so on.
b. ________________ At the highest corporate levels, G.E. has a corporate strategic planning staff, production staff, human resources staff, technical resources staff and finance staff.
c. ________________ Apple Computer, in manufacturing the Mac Computer System, begins with an assembly line that makes the logic board; another line makes the analog board. Once assembled, the boards go through diagnostic tests before being assembled into a computer unit.
d. ________________ When Wendy's made the decision to expand into the European market, the company created a separate European division.
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e. _________________ Most banks have commercial loan officers who deal only with business customers and consumer loan specialists for personal loans.
Learning Goal 46. There are 4 types of organizational structures:
Line MatrixLine and Staff Cross-functional self-managed teams
Read below brief descriptions of several companies and decide which form of organizational structure would be most suitable for each.
a. _________________ A small company, Dynalink, is in the biotechnology industry. Competition is fierce, and new product development is of highest importance. The field is changing and growing so rapidly that new product ideas must come fast and furious. The firm employs highly skilled, very creative people.
b. _________________ Another small firm is Cleanem Up, a dry cleaning establishment, with one owner and one store. They are located in a suburban area and have a loyal clientele. The store is known for its quality and courteous service.
c. _________________ Wells Industries is a medium sized firm employing about 1500 people. Wells makes a variety of business- related products such as stationary, forms, and so forth. They have a good sales force, which knows the product very well. While this is a fairly competitive industry, new product development happens as the need arises, such as when firms went from sophisticated word processing machines to even more sophisticated computerized office management.
d. _________________ Mitsubishi wants to develop a new luxury car to compete with Lexus, Infiniti, and others. Time is important, as they want to enter the market within 18 months.
Learning Goals 4, 57. How will cross functional self managed teams impact organizational designs of the
future?
8. How does the inverted organizational structure relate to the other kinds of changes we have read about in this chapter, such as wider spans of control, decentralization, cross functional teams, outsourcing, benchmarking, and so on?
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Learning Goals 5, 6
9. What is the relationship between leadership style, the organizational structure (such as tall vs flat organizations, span of control, delegation, teams) and the creation of an organizational culture?
Learning Goals 1-510. Think about the organizational design of the school you are attending, or an
organization with which you are familiar, such as where you work. Can you identify the "hierarchy"? Identify how many layers of management come between the front-line workers and the highest level of management. Are there separate departments for various functions (instruction, bookstore, and so on)? Are there rules and regulations that seem to keep workers organized and are meant to make the organization run efficiently? (Hint - perhaps your instructor will have a copy of the organizational chart for your school, or your manager may have one for the company for which you work.)
11. Sun-2-Shade is in a growth state and Eric, the CEO and founder, wants to be sure to build on a good foundation. The product is a windshield that darkens automatically when your car goes into a sunny area, much like the eyeglasses. This is a small company, with a educated and well trained workers, and Eric is very concerned about customer service. What suggestions can you give Eric about organizational design, knowing what you already know about the company and its employees?
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PRACTICE TEST
MULTIPLE CHOICE – Circle the best answer
Learning Goal 11. The first step in the process of organizing a business is to:
a. determine the work that needs to be done.b. divide people into teams.c. grouping workers into departments based on skills or expertise.d. develop an organization chart.
2. The process of setting up individual departments to do specialized tasks is called:a.. division of labor.b. job specialization.c. departmentalization.d. planning
Learning Goal 23. The evolving business environment has made ____________ a critical managerial function.
a. controlling employeesb. managing changec. finding new employeesd. division of labor
4. The principle of _______________ means that each person should know to whom they report, and that managers should have the right to give orders and expect others to follow.a. unity of commandb. division of laborc. orderd. hierarchy of authority
Learning Goal 35. Robin Banks is in a supervisor for a large, bureaucratic organization on the West
Coast. According to the views of a bureaucratic organization, this means that Robin should:a. be included on decision making when decisions affect her workers.b. do her work and let middle and upper level managers do the decision
making.c. try to get her workers organized into cross-functional teams.d. have a wide span of control.
6. A manager’s span of control:a. can narrow as subordinates need less supervision.b. will narrow as the manager gets to higher levels in the organization and work
becomes less standardized.c. will decrease as employees become more professional.d. is generally the same in most organizations.
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7. Who Dunnit is a new firm that makes murder mystery games for sale in retail stores and through catalogs. The company has very few management positions, and most everybody pitches in when they need to, to get the job done. It is really a “team” effort, with very few layers of management. Who Dunnit is an example of a:a. tall organization.b. bureaucratic organization.c. centralized organization. d. flat organization.
8. Dewey, Cheatum, and Howe is a car company that makes four models, a hybrid sport utility, a sports car, a four door sedan, and a compact car. Workers at Dewey basically work on only one type of vehicle, and separate marketing and product development processes are designed for each type of vehicle, to better serve the customers for each type of vehicle. Dewey, Cheatum, and Howe is departmentalized by:a. product.b. function.c. process.d. customer.
9. In order to more quickly respond to customer needs, Hewlett Packard is changing it’s organizational structure to give more authority and responsibility to field managers located across the country. These managers spend time with customers and know what the customers need right away. It appears that H-P is moving toward a _______________ structure.a. more decentralizedb. more centralizedc. more bureaucraticd. more traditional
Learning Goal 410. The form of organizational structure that is most flexible, and allows the organization to
take on new projects without adding to the organizational structure is the:a. Line.b. Line and staff.c. Matrix.d. Cross-functional self managed team.
11. Maria Escobar works as an attorney for a large East Coast consulting firm. Maria’s job is to act as an advisor to the consultants, to be sure that they do not confront any legal issues when they are working at the various clients’ job sites. Maria’s position would be classified as a __________ position.a. lineb. middle managementc. first lined. staff
12. Banana Computers is restructuring, and intends to implement cross-functional
teams.All of the following are likely to serve on a cross-functional team except:a. a Banana engineer.b. an employee of Peelit, Inc. one of Banana’s competitors.c. an employee of Monkeyshine, one of Banana’s suppliers.d. a Banana salesperson.
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13. One of the advantages of the matrix organization is:a. It is less costlyb. It can result in creative solutions to problems.c. There is less need for interpersonal skills because there is constant communication.d. It is a long term solution to problems.
Learning Goal 514. When a firm is rating its processes and products against the best in the world, the
firm is practicing:a. total quality management.b. outsourcing.c. their core competencies.d. benchmarking.
15. An auto assembly plant in suburban Detroit is “connected” to its seat supplier in a way that the seat supplier has the information it needs to schedule its production to coordinate with the production of cars at the plant. The seat supplier knows, for example, that B. Goode’s cherry red compact with tan leather interior is scheduled for production, so that it can make sure that the correct seats are in the process when the car is made. This type of system is known as:a. a cross functional team.b. a virtual corporation.c. Transparency.d. Benchmarking
Learning Goal 616. In an inverted organization, the managers’ job is to:
a. maintain direct contact with customers.b. direct and closely monitor employee performance.c. look for the best ways to outsource functions.d. assist and support sales personnel and other employees who work directly
withcustomers.
17. When IBM changed its organizational design, the company gave more authority to lower level employees, to become more flexible in responding to customer needs. The company broke down barriers between functions, and ended top-down management. This process is known as:a. creating an informal organization.b. changing span of control.c. restructuring.d. becoming more bureaucratic.
18. Which of the following would not be used to describe a company with a positive corporate culture?
a. Emphasizes service to others, especially customers.b. People enjoy working together to provide good products at reasonable prices.c. Less need for policy manuals, formal rules and procedures.d. Closer supervision of employees.
19. The corporate structure shown on the organizational chart, which details lines of responsibility, is known as the:
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a. informal structure.b. bureaucratic structure.c. formal structure.d. grapevine.
20. Mr. Bilko is the one to see in the company when there is something you need. He will obtain what you need quickly, and can avoid the red tape that often delays action. Mr. Bilko is the one to see if you need advice or help. Mr. Bilko is an important member of the firm’s:a. purchasing deportment.b. informal structure.c. formal structure.d. bureaucratic structure.
TRUE-FALSE
Learning Goal 11. _____ Many U.S. firms have been reorganizing in an effort to adjust to the changing
business climate.
2. _____ Structuring an organization consists of devising a division of labor, setting up teams or departments to do specific tasks and assigning responsibility and authority to people.
Learning Goal 23. _____ A bureaucratic organizational system is a good when workers are relatively
well educated and trained to make decisions.
4. _____ It has basically been proved that an organization with many rules, procedures and policies is more effective because employees can respond quickly to problems by simply referring to a rule or policy guideline.
5. _____ To make customers happier, some companies are reorganizing to give upper management the primary power to make more decisions and to have strict rules and regulations.
Learning Goal 36. _____ A company that must focus on regional or global differences in customer
tastes should use decentralized authority.
7. _____ Today’s rapidly changing markets tend to favor centralization of authority, so decisions can be made quickly.
8. _____ The trend today is to expand the span of control as organizations reduce the number of middle managers.
9. _____ An organization with many layers of management, such as the U.S. Army or a large corporation, is a good example of a flat organization.
10. ____ The decision about which way to departmentalize depends greatly on the nature of the product and the customers served.
11. ____ Firms should not use more than one form of departmentalization.
Learning Goal 4
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12. ____ Human resource management and legal advising are examples of staff positions in a manufacturing firm.
13. ____ Companies that create cross-functional self-managed teams empower the teams to make decisions on their own without seeking the approval of management.
14. ____ One of the advantages of the matrix form of organizing is that it gives managers flexibility in assigning people to projects
Learning Goal 515. ____ When a company can’t perform a certain function as well as the best, the
company may outsource that function, in order to concentrate on the functions at which they are the best.
16. ____ Cross functional teams should definitely not include customers or suppliers, as they could leak sensitive product information to competitors.
17. ____ The term “digital natives” is used to describe young people who have grown up with the Internet.
Learning Goal 618. ____ In general, an organizational culture cannot be negative.
19. ____ The informal organization in most organizations is not particularly powerful.
You Can Find It on the Net
Visit the website http://www.organizedchange.com/index.htm
Click on Teams and Facilitation
What is meant by 360 degree feedback?
What kinds of groups are defined?
Click on “Ten Commonly Asked Questions”.
What are some indicators of poor teamwork?What are the group causes of poor teamwork?What are the organizational causes of poor teamwork?What can be done to encourage teamwork?
What types of seminars and training does this company provide that corresponds to the material related in this and previous chapters?
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ANSWERS
LEARNING THE LANGUAGE
1. Cross-functional self managed teams
10. Inverted organization 19. Matrix organization
2. Hierarchy 11. Span of control 20. Staff personnel3. Networking 12. Chain of command 21. Economies of scale4. Restructuring 13. Line personnel 22. Tall organization
structure5. Organizational (or corporate) culture
14. Benchmarking 23. Line organization
6. Informal organization 15. Decentralized authority 24. Real time7. Core competencies 16. Flat organization
structure25. Digital natives
8. Bureaucracy 17. Departmentalization 26.Virtual corporation9. Centralized authority 18. Formal organization
ASSESSMENT CHECK
Learning Goal 1Everyone’s organizing
1. According to the text the key to success for organizations is remaining flexible and adapting to the changing times. Often that means going back to basic organizational principles.
2. a. Division of labor refers to dividing up tasks among workersb. Job specialization is dividing tasks into smaller jobs
3. Structuring an organization consists of: a. devising a division of laborb. setting up teams or departments to do specific tasksc. assigning responsibility and authority to peopled. allocating resourcese. assigning specific tasksf. establishing procedures for accomplishing organizational objectives
4. An organization chart shows relationships among people: who is accountable for the completion of specific work and who reports to whom.
5. The change in organizations is due to the changing business environment – more global competition, a declining economy, faster technological change, and pressure to do more about the environment. Consumer expectations have also changed, and consumers expect the highest quality products and fast, friendly service at a reasonable cost.
Learning Goal 2The Changing Organization
6. a. Unity of command – reporting to only one boss b. Hierarchy of authority – workers should know to whom they report
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c. Division of labor – functions are divided into areas of specialization d. Subordination of individual interests to the general interest – team work e. Authority – managers have the right to give orders and power to enforce obedience f. Degree of centralization – The amount of decision making power given to top
management g. Clear communication channels – worker should be able to easily contact each other h. Order – people and materials should be in the proper location i. Equity – managers should treat employees with respect and justice j. Esprit de corps – a spirit of pride and loyalty should be created
7. The process of rule making often led to rigid organizations that didn’t always respond quickly to consumer requests.
8. Four characteristics of Weber’s bureaucracy are:a. Job descriptions
b. Written rules, decision guidelines and detailed records c. Consistent procedures, regulations and policies d. Staffing and promotions based on qualifications
9. Workers during Weber’s time were much less educated and trained than today’s workers. Weber felt that a firm would do well if employees would do what managers told them to do. The less decision making employees had to do, the better.
10. In a company with many layers of management, if employees want to introduce work changes, they ask a supervisor, who asks a manager, who asks a manager at the next level up, and so on. Eventually a decision is made and passed down from manager to manager until it reaches the employee. Decisions can take weeks or months to be made.
Weber used the term bureaucrat to describe a middle manager whose function it was to implement top management’s orders.
11. When employees have to ask their manager for permission to make a change, the process may take so long that customers become annoyed. This can happen in both large and small organizations. Since customers want efficient, quick service, slow service is not acceptable.
11. To make customers happy, organizations are giving employees more power to make decisions on their own and to please the customer no matter what.
Learning Goal 3Decisions to Make in Structuring Organizations
13. Centralized authorityAdvantages Disadvantagesa. Greater management control a. Less responsiveness to customersb. More efficiency b. Less empowermentc. Simpler distribution system c. Interorganizational conflictd. Stronger brand/corporate image d. Lower morale away from headquarters
14. Decentralized authority
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Advantages Disadvantagesa. Better adaptation go customer wants a. Less efficiencyb. More empowerment of workers b. Complex distribution systemc. Faster decision making c. Less top-management control d. Higher morale d. Weakened corporate image
15. At levels where work is standardized, span of control can be broad. The appropriate span gradually narrows at higher levels of the organization because work becomes less standardized and managers need more face-to-face communication.
16. The trend is to expand the span of control by reducing the number of middle managers and hiring more educated and talented lower level employees.
17. In a tall organization there are many levels of management, and span of control is small. In a flat organization, there are fewer layers of management, and the span of control gets broader.
18. A flat structure can respond more readily to customer demands because lower-level employees have authority and responsibility for making decision s, and managers can be spared some day-to-day tasks.
19. The advantages and disadvantages of the traditional functional structure are:
Advantagesa. Skills can be developed in depth and employees can progress as skills
are developed. b. Economies of scale because resources can be centralized.
c. Coordination with the function.
Disadvantagesa. Lack of communication among departments.b. Employees identify with the department and not with the corporation as a
whole.c. Response to change is slow.d. People trained too narrowly. e. People in the same department tend to think alike – groupthink.
20. Five methods of grouping, or departmentalizing, workers are:a. Product d. Geographic location
b. Function e. Process c. Customer group
21. The decision about which way to departmentalize depends upon the nature of the product and the customers served.
22. A hybrid form of departmentalization is being used when companies use a combination of departmentalization techniques.
Learning Goal 4Organization Models
23. Four organizational structures are:a. Line organizations c. Matrix-style organizations
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b. Line and staff organizations d. Cross-functional self-managed teams
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24. In a large business, a line organization may have the disadvantages ofa. being too inflexibleb. having too few specialistsc. having long lines of communication d. being unable to handle complex decisions necessary in a large organization.
25. The difference between line and staff personnel is authority. Line personnel have formal authority to make policy decisions. Staff personnel have the authority to advise the line personnel and make suggestions, but they can’t make policy changes themselves.
26. In a matrix system a product manager can borrow people from different departments to help design and market new product ideas.
This is important in industries where competition is stiff, and the life cycle of new ideas is short, and where the emphasis is on new product development, creativity, special projects, rapid communication, and interdepartmental teamwork.
27. The advantages and disadvantages of a matrix structure are:
Advantagesa. Flexibility in assigning people to projects.
b. Encourages cooperation among departments. c. Can produce creative solutions to problems. d. Allows for efficient use of resources.
Disadvantages a. Costly and complex. b. Can cause confusion among employees as to where their loyalty belongs. c. Requires good interpersonal skills and cooperative managers and employees. d. Temporary solution to long term problem.
28. A potential problem with teams created by matrix management is that the project teams are not permanent. After a problem is solved or a product developed, the team breaks up, so there is little opportunity for cross-functional training.
An answer to the disadvantage of the temporary teams created by matrix management is to develop permanent teams and to empower them to work closely with suppliers, customers, and others to quickly and efficiently bring out new, high-quality products while giving great service.
29. Cross- functional teams consist of groups of employees from different departments who work together on a long term basis. These teams are empowered to make decisions without having to seek the approval of management. Barriers between functions fall when these interdepartmental teams are created.
30 When cross functional teams include customers, suppliers and distributors it goes beyond the boundaries of the organization, and market information can be shared.
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Learning Goal 5Managing the Interactions Among Firms
31. Transparency occurs when a company is so open to other companies that electronic information is shared as if the companies were one company.
32. Organizations are so closely linked via networking that each organization knows what the others are doing, in real time. Since data is so readily available to organizational partners, companies are so open to one another that the solid walls between them have become transparent. Because of this integration, two companies can now work together so closely that they operate as two departments within one company.
Most organizations are no longer self-sufficient or self-contained. Many modern organizations are part of a vast network of global businesses. An organizational chart showing what people do within any one organization may not be complete because the company is actually part of a larger system of firms.
33. Organizational structures tend to be flexible and changing. Experts from one company may work for one company one year, and another the next year. Organizations deal with each other on a temporary basis and the ties between organizations are no longer permanent. These are often called virtual corporations because they are made up of replaceable firms or individuals that join the network and leave it as needed.
34. Benchmarking demands that organizations compare each function against the best in the world. If an organization can’t do as well as the best in a particular area, it often will try to outsource the function to an organization that is the best. Outsourcing is assigning various functions to outside organizations. When a firm has completed the outsourcing process, the remaining functions are the firm’s core competencies, which are functions that the organization can do as well as, or better than, any other organization in the world.
Learning Goal 6Adapting To Change
35. Introducing change in an organization is difficult because managers and employees may have a tendency to “get stuck” in their old ways, and resist the efforts to change.
36. The Internet has created new opportunities to ask customers questions and provide them with information. Companies are coordinating the efforts of traditional departments with their Internet staff to create easy-to-manage interactions. Companies are also training older employees to be more tech savvy to become familiar with social networking sites such as Facebook and Twitter as well as other applications.
37. Empowered front-line workers
Support personnel
Top Management
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An inverted organization has contact people at the top and the chief executive officer at the bottom. There are few layers of management.
38. A manager’s job in an inverted organization is to assist and support front line people, not boss them around.
39. Companies based upon an inverted organization structure support front-line personnel with internal and external databases, advance communication systems and professional assistance.
This means that front line personnel have to be better educated, better trained and better paid than in the past.
40. The culture of an organization is reflected in stories, traditions, and myths.
41. The best organizations have cultures that emphasize service to others, especially customers. The atmosphere is one of friendly, concerned, caring people who enjoy working together to provide a good product at a reasonable price. Those companies have less need for close supervision of employees, and fewer policy manuals, organization charts and formal rules, procedures and controls. These companies stress high moral and ethical values such as honesty, reliability, fairness, environmental protection, and social involvement. The key to a productive culture is mutual trust.
42. All companies have a(n)a. formal organization b. informal organization
43. The drawback of the formal organization is that it is often too slow and bureaucratic to enable an organization to adapt quickly. The benefit of a formal organization is that it provides helpful guidelines and lines of authority to follow in routine situations.
44. The drawback of the informal organization is that it is often too unstructured and emotional to allow careful, reasoned decision-making on critical matters. But the informal organization is very effective in generating creative solutions to short-term problems and providing a feeling of camaraderie and teamwork among employees.
45. The grapevine is the nerve center of the informal organization. It is the system through which unofficial information flows between employees and managers. Key people in the grapevine have considerable influence.
46. In more traditional organizations, managers and employees were often at odds, and the informal structure often hindered management. In the new, more open organizations, managers and employees work together and the informal structure is viewed as an asset that promotes harmony among workers and establishes a positive corporate culture.
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CRITICAL THINKING
Learning Goal 11. Obviously the answer to these questions will depend upon the organization you are
evaluating. A college or university for example, will be divided by various functions that have to do with either administration or student issues. Then there will be the various academic departments, such as Accounting, Marketing and Finance. The lines of authority will be visible through department chair and dean positions. There are usually very clear procedures in colleges and universities for things such as applying for financial aid, obtaining on-campus housing, and registering for classes. In general, an academic institution will be very organized, and is often a good example of a bureaucracy.
Learning Goal 22. a. Fayol e. Fayol i. Weber
b. Fayol f. Fayol j. Weberc. Weber g. Fayol k. Weberd. Weber h. Weber l. Fayol
Learning Goal 33. Sun-2-Shade is very small with a customer base where most of the needs are
similar. In other words, there is no need to customize products to meet different regional needs, only shapes and sizes for different automobile brands. This company could use centralized authority because it is small and decision-making can still be made quickly. Employees probably have easy access to Eric, the founder and CEO of the company, who may want to retain control over his new company for the time being.
4. Changes in the areas we have been discussing are closely related to the changes we are seeing in the area of decision making. As spans of control widen and non-traditional ways of grouping workers emerge, decision-making is being delegated to lower levels of management, or even to non-management levels. Cross functional Self-managed teams, which are at the "lowest levels" of the organization, for example, are being given decision-making authority. Today's rapidly changing markets and differences in consumer tastes are favoring a more decentralized structure, flatter organizational structures, with wider spans of control and a team based structure.
5. a. Product and function (hybrid) d. Geographic locationb. Function e. Customer groupc. Process
Learning Goal 46. a. The best answer is most likely a matrix system. b. Line c. Line and staff d. Cross-functional self-managed teams
Learning Goals 3, 47. Cross functional self managed teams will have a major impact on organizational
designs of the future. Companies will be linked with customers, suppliers, and distributors through these teams, often through virtual corporations, creating an integrated system of firms working together to create products and services designed to quickly and exactly meet customers needs. Firms designed in such a
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manner will have a real competitive edge over corporations that are more traditional in their organizational structure.
Learning Goal 58. These organizational changes are focused on designing the organization with
meeting the needs of the customer as the most important objective. Inverted organizations empower front-line workers, who deal directly with the customers, and provide them with the information and support to satisfy customers. There is a focus on customer service and an emphasis on the firm’s core competencies, outsourcing the functions at which the company is less proficient. Those functions that are not outsourced are benchmarked against the best in the world. The Internet makes it possible for firms to link with suppliers and customers to bring the “voice of the customer into the organization. The common theme is customer service.
9. The best organizations have positive corporate cultures that emphasize service to customers, have a relaxed atmosphere and concerned employees who enjoy working together to provide the best product at the best price. Companies that have good organizational cultures have less need for close supervision of employees, organization charts and formal rules, procedures and controls. That would indicate broad spans of control, empowered employees, flatter organizations, and a participative leadership style. Employees who need minimal supervision will flourish in self-managed teams, and there is mutual trust between workers and management.
Learning Goals 1-510. There will obviously be many different answers to this question. A typical hierarchy
in a community college for example may be President, Dean of Instruction, Associate Deans, Department Chairs, and faculty for instruction. For non-instruction areas, there may be Associate Deans, Directors, and non-management positions. There are often many layers of management between the lowest levels and the higher levels, and functional areas are well defined. There will be similar kinds of structures in a company.
11. How you would design the organization is up to you. Many of the ideas presented in the chapter will be helpful. This is a small company, so a line organization might be appropriate. We noted earlier that the workers are well educated and trained and don't need a lot of supervision, so close monitoring could prove to be counter-productive. There doesn't seem to be an immediate need for new product development, so a matrix structure wouldn't be necessary. The emphasis on customer service has been apparent throughout the chapter, so however you design the company, the focus should be on whatever design will most effectively help the company to meet customer needs using such tools as the Internet, to develop strong ties with both customers and suppliers.
PRACTICE TEST
MULTIPLE CHOICE TRUE-FALSE
1. a 11. d 1. T 11. F2. c 12. b 2. T 12. T3. c 13. b 3. F 13. T4. d 14. d 4. F 14. T
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5. b 15. c 5. F 15. T6. b 16. d 6. T 16. F7. d 17. c 7. F 17. T8. a 18. d 8. T 18. F9. a 19. c 9. F 19. F10. c 20. b 10. T
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