Download The Changing Organization - McGraw Hill Higher Education

Chapter 08
Structuring
Organizations
for Today’s
Challenges
McGraw-Hill/Irwin
Copyright © 2014 by The McGraw-Hill Companies, Inc. All rights reserved.
Chapter Eight
LEARNING GOALS
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 organizational culture can help
businesses adapt to change.
8-2
Building an
Organization from
the Bottom Up
STRUCTURING an ORGANIZATION
LG1
• Create a division of labor
• Set up teams or departments
• Allocate resources
• Assign tasks
• Establish procedures
• Adjust to new realities
8-3
The Changing
Organization
THE CHANGING ORGANIZATION
LG2
• Often change in organizations is due to evolving
business environments:
-
More global competition
Declining economy
Faster technological change
Pressure to protect the environment
• Customer expectations have also changed -Consumers today want high-quality products
with fast, friendly service and all at low cost.
8-4
The Development
of Organization
Design
LG2
PRODUCTION CHANGED
ORGANZIATION DESIGN
• Mass production of goods led to complexities in
organizing businesses.
• Economies of Scale -Companies can reduce
their production costs by
purchasing raw materials
in bulk.
• The average cost of
goods decreases as
production levels rise.
8-5
Fayol’s Principles
of Organization
LG2
ORGANIZATIONS BASED on
FAYOL’S PRINCIPLES
• Organizations in which
employees have no
more than one boss;
lines of authority are
clear.
• Rigid organizations that
often don’t respond to
customers quickly.
8-6
Max Weber and
Organizational
Theory
WEBER’S PRINCIPLES
LG2
• Employees just need to do what
they’re told.
• In addition to Fayol’s principles,
Weber emphasized:
- Job descriptions
- Written rules, decision
guidelines and detailed records
- Consistent procedures,
regulations and policies
- Staffing and promotion based
on qualifications
8-7
Turning
Principles into
Organization
Design
HIERARCHIES and COMMAND
LG2
• When following Fayol and Weber, managers
control workers.
• Hierarchy -- A system in which one person is
at the top of an organization and there is a
ranked or sequential ordering from the top
down.
• Chain of Command -- The line of authority
that moves from the top of the hierarchy to the
lowest level.
8-8
Turning
Principles into
Organization
Design
BUREAUCRATIC ORGANIZATIONS
LG2
• Bureaucracy -- An organization with many layers of
managers who set rules and regulations and oversee
all decisions.
• It can take weeks or months to have information
passed down to lower-level employees.
• Bureaucracies can annoy customers.
8-9
Choosing
Centralized
or
Decentralized
Authority
LG3
CENTRALIZATION or
DECENTRALIZATION?
• Centralized Authority -- When decision-making is
concentrated at the top level of management.
• Decentralized
Authority -- When
decision-making is
delegated to lower-level
managers and employees
more familiar with local
conditions than
headquarters is.
8-10
Choosing the
Appropriate
Span of Control
SPAN of CONTROL
LG3
• Span of Control -- The optimal number of
subordinates a manager supervises or should
supervise.
• When work is standardized, broad spans of
control are possible.
• Appropriate span narrows at higher levels of the
organization.
• The trend today is to reduce middle managers
and hire better low-level employees.
8-11
Choosing Tall
versus Flat
Organization
Structures
ORGANIZATIONAL STRUCTURES
LG3
• Structures determine the way the company
responds to employee and customer needs.
• Tall Organization Structures -- An organizational
structure in which the organization chart would be tall
because of the various levels of management.
• Flat Organization Structures -- An organizational
structure that has few layers of management and a
broad span of control.
8-12
Weighing the
Advantages and
Disadvantages of
Departmentalization
LG3
DEPARTMENTALIZATION
• Departmentalization -- Divides organizations
into separate units.
• Workers are grouped by skills and expertise
to specialize their skills.
• Has advantages and disadvantages
• Various ways to departmentalize
8-13
Organization
Models
LG4
FOUR WAYS to STRUCTURE an
ORGANIZATION
1. Line Organizations
2. Line-and-Staff
Organizations
3. Matrix-Style
Organizations
4. Cross-Functional SelfManaged Teams
8-14
Line
Organizations
LINE ORGANIZATIONS
LG4
• Line Organization -- Has direct two-way lines of
responsibility, authority and communication running
from 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 discipline
and adjust the organization to changes.
8-15
Line-and-Staff
Organizations
PERSONNEL
LG4
• Line Personnel -- Workers responsible for directly
achieving organizational goals, and include production,
distribution and marketing employees.
• Line personnel have authority to make policy
decisions.
• Staff Personnel -- Employees who advise and assist line
personnel in meeting their goals, and include marketing
research, legal advising, IT and human resource
employees.
8-16
Matrix-Style
Organizations
MATRIX ORGANIZATIONS
LG4
• Matrix Organization -- Specialists from different
parts of the organization work together temporarily on
specific projects, but still remain part of a line-and-staff
structure.
• Emphasis is on
product development,
creativity, special
projects,
communication and
teamwork.
• Advantages and
disadvantages
8-17
Cross-Functional
Self-Managed
Teams
LG4
CROSS-FUNCTIONAL
SELF-MANAGED TEAMS
• Cross-Functional Self-Managed Teams -Groups of employees from different departments who
work together on a long-term basis.
• A way to fix the problem of matrix-style teams is
to establish long-term teams.
• Empower teams to work closely with suppliers,
customers and others to figure out how to create
better products.
8-18
Going Beyond
Organizational
Boundaries
LG4
GOING BEYOND
ORGANIZATIONAL BOUNDARIES
• 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 sharing
market information beyond national boundaries.
8-19
Going Beyond
Organizational
Boundaries
BUILDING SUCCESSFUL TEAMS
LG4
Important Conditions for Small Teams
•
•
•
•
•
Clear purpose
Clear goals
Correct skills
Mutual accountability
Shift roles when
appropriate
Source: CIO Magazine, www.cio.com.
8-20
Transparency
and Virtual
Organizations
REAL-TIME BUSINESS
LG5
• Networking -- Using
communications technology
to link organizations and
allow them to work together.
• Most companies are no
longer self-sufficient;
they’re part of a global
business network.
Photo Courtesy of: Marc Wathieu
• Real Time -- The present moment or actual time in
which something takes place.
8-21
Transparency
and Virtual
Organizations
LG5
TRANSPARENCY and VIRTUAL
CORPORATIONS
• Transparency -- When a company is so open to
other companies that electronic information is shared
as if the companies were one.
• Virtual Corporation -- A temporary networked
organization made up of replaceable firms that join
and leave as needed.
8-22
Benchmarking
and Core
Competencies
LG5
BENCHMARKING and
CORE COMPETENCIES
• Benchmarking -- Compares an organization’s
practices, processes and products against the
world’s best.
• Core Competencies -- The functions an
organization can do as well as or better than any
other organization in the world.
• Benefits: Cost Savings; Optimizes human
resources needs
• Concerns: Lower employee moral; liability;
security and confidentiality
8-23
Adapting to
Change
LG5
ADAPTING to
MARKET CHANGES
• Change isn’t easy.
Employees like to do
things the way they
always have.
• Get rid of old, inefficient
facilities and equipment.
• Use the Internet to get
to know your customers
and sell directly to them.
8-24
WHEN TWITTER and FACEBOOK
are OLD SCHOOL
(Social Media in Business)
• 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 be
improvements, others will be revolutionary.
• This can lead to more people working from home
and more companies interacting directly with their
customer base.
8-25
Restructuring
for
Empowerment
RESTRUCTURING
LG5
• Restructuring -- Redesigning an organization so it
can more effectively and efficiently serve its
customers.
• Inverted Organization -- An organization that has
contact people at the top and the CEO at the bottom
of the organizational chart.
• The manager’s job is to assist and support
frontline workers, not boss them.
8-26
Creating a
Change-Oriented
Organizational
Culture
ORGANIZATIONAL CULTURE
LG6
• Organizational or Corporate
Culture -- The widely shared
values within an organization that
foster unity and cooperation to
achieve common goals.
• Some of the best organizational
cultures emphasize service.
• Culture is shown in stories,
traditions and myths.
8-27
Managing the
Informal
Organization
FORMAL ORGANIZATION
LG6
• Formal Organization -- Details lines of
responsibility, authority and position.
• The formal system is often slow and
bureaucratic, but it helps guide the lines of
authority.
• No organization can be effective without formal
and informal organization.
8-28
Managing the
Informal
Organization
INFORMAL ORGANIZATION
LG6
• Informal Organization -- The system of
relationships that develop spontaneously as
employees meet and form relationships.
• Informal organization
helps foster
camaraderie and
teamwork among
employees.
8-29
Managing the
Informal
Organization
LG6
LIMITATIONS of INFORMAL
ORGANIZATIONS
• The informal system is
too unstructured and
emotional on its own.
• Informal organization
may also be powerful
in resisting
management
directives.
8-30