Nickels_12e_UB_PPT_Student_Ch081.pptx

Chapter 8

Structuring Organizations for Today’s Challenges

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Learning Objectives

LO 8-1 Outline the basic principles of organizational management.

LO 8-2 Compare the organizational theories of Fayol and Weber.

LO 8-3 Evaluate the choices managers make in structuring organizations.

LO 8-4 Contrast the various organizational models.

LO 8-5 Identify the benefits of interfirm cooperation and coordination.

LO 8-6 Explain how organizational culture can help businesses adapt to change.

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Organizing for Success

LO 8-1

Building an Organization from the Bottom Up

Create a division of labor.

Divide tasks through job specialization.

Set up teams or departments (departmentalization).

Allocate resources.

Assign specific tasks.

Establish procedures.

Develop an organization chart.

Adjust to new realities.

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The Changing Organization 1 of 5

LO 8-2

Often change in organizations is due to evolving business environments:

More global competition, declining economy, faster technological change’ and 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.

The Development of Organizational Design

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.

Mass production of goods led to complexities in organizing businesses.

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The Changing Organization 2 of 5

LO 8-2

Fayol’s Principles of Organization

Unity of command

Hierarchy of authority

Division of labor

Subordination of individual interests to the general interest

Authority

Degree of centralization

Clear communication channels

Order

Equity

Esprit de corps

Characteristics of organizations based on the 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.

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The Changing Organization 3 of 5

LO 8-2

Max Weber and Organizational Theory

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

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The Changing Organization 4 of 5

LO 8-2

Turning Principles into Organizational Design

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.

Organization chart

A visual device that shows relationships among people and divides the organization’s work; it shows who reports to whom.

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Figure 8.1 Typical Organization Chart

LO 8-2

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The Changing Organization 5 of 5

LO 8-2

Bureaucratic Organizations

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.

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Decisions to Make in Structuring Organizations 1 of 5

LO 8-3

Choosing Centralized or Decentralized Authority

Centralized authority

When decision-making authority is maintained at the top level of management at the company’s headquarters.

Decentralized authority

When decision-making authority is delegated to lower-level managers more familiar with local conditions than headquarters management could be.

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Figure 8.2 Advantages and Disadvantages of Centralized versus Decentralized Authority

LO 8-3

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Decisions to Make in Structuring Organizations 2 of 5

LO 8-3

Choosing the Appropriate Span of Control

Span of control — The optimum number of subordinates a manager supervises or should supervise.

When work is standardized, broad spans of control are possible.

The appropriate span narrows at higher levels of the organization.

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

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Decisions to Make in Structuring Organizations 3 of 5

LO 8-3

Choosing between Tall and Flat Organizational Structures

Tall organization structure — An organizational structure in which the pyramidal organization chart would be quite tall because of the various levels of management.

Flat organization structure — An organizational structure that has few layers of management and a broad span of control.

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Figure 8.3 A Flat Organizational Structure

LO 8-3

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Figure 8.4 Advantages and Disadvantages of a Narrow versus a Broad Span of Control

LO 8-3

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Decisions to Make in Structuring Organizations 4 of 5

LO 8-3

Weighing the Advantages and Disadvantages of Departmentalization

Departmentalization — The dividing of organizational functions into separate units.

Workers are grouped by skills and expertise to specialize their skills.

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Decisions to Make in Structuring Organizations 5 of 5

LO 8-3

Advantages:

Employees develop skills and progress within a department as they master skills.

The company can achieve economies of scale.

Employees can coordinate work within the function, and top management can easily direct activities.

Disadvantages:

Departments may not communicate well.

Employees may identify with their department’s goals rather than the organization’s.

The company’s response to external changes may be slow.

People may not be trained to take different managerial responsibilities; instead they become specialists.

Department members may engage in groupthink and may need outside input.

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Figure 8.5 Ways to Departmentalize 1 of 5

LO 8-3

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Figure 8.5 Ways to Departmentalize 2 of 5

LO 8-3

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Figure 8.5 Ways to Departmentalize 3 of 5

LO 8-3

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Figure 8.5 Ways to Departmentalize 4 of 5

LO 8-3

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Figure 8.5 Ways to Departmentalize 5 of 5

LO 8-3

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Organizational Models 1 of 5

LO 8-4

Line Organizations

Line organization

Has direct two-way lines of responsibility, authority, and communication running from the top to the bottom, with all people reporting to only one supervisor.

There are no specialists or legal, accounting, human resource, or information technology departments.

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

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Organizational Models 2 of 5

LO 8-4

Line-and-Staff Organizations

Line personnel

Employees who are part of the chain of command that is responsible for achieving organizational goals.

Line personnel have authority to make policy decisions.

Staff personnel

Employees who advise and assist line personnel in meeting their goals.

Staff personnel includes marketing research, legal advising, IT, and human resource management.

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Figure 8.6 A Sample Line-and-Staff Organization

LO 8-4

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Organizational Models 3 of 5

LO 8-4

Matrix-Style Organizations

Matrix organization — Specialists from different parts of the organization are brought together to work on specific projects but still remain part of a line-and-staff structure. Emphasis is on product development, creativity, special projects, rapid communication, and interdepartmental teamwork.

Advantages

Managers have flexibility in assigning people to projects.

Interorganizational cooperation and teamwork is encouraged.

Creative solutions to product development problems are produced.

Organizational resources are used efficiently.

Disadvantages

It’s costly and complex.

Employees may be confused where their loyalty belongs.

Good interpersonal skills and cooperative employees are a must.

It may only be a temporary solution to a long-term problem.

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Figure 8.7 A Matrix Organization

LO 8-4

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Organizational Models 4 of 5

LO 8-4

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-lived teams.

Teams are empowered to make decisions without management approval.

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Organizational Models 5 of 5

LO 8-4

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 across national boundaries.

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Managing the Interactions among Firms 1 of 2

LO 8-5

Networking — Using communications technology and other means to link organizations and allow them to work together on common objectives.

Transparency and Virtual Organizations

Real time — The present moment or actual time in which something takes place.

Most companies are no longer self-sufficient; they’re part of a global business network.

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Managing the Interactions among Firms 2 of 2

LO 8-5

Transparency and Virtual Organizations continued

Transparency occurs 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.

Benchmarking

Compares an organization’s practices, processes, and products against the world’s best.

If a company can’t do as well as the best, they can try to outsource the function.

Core competencies —Functions that the organization can do as well as or better than any other organization in the world.

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Figure 8.8 A Virtual Corporation

LO 8-5

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Adapting to Change 1 of 4

LO 8-5

Change

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.

Digital natives — Young people who have grown up using the Internet and social networking.

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Adapting to Change 2 of 4

LO 8-5

Restructuring for Empowerment

Restructuring

Redesigning an organization so that 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 organization chart.

The manager’s job is to assist and support frontline people, not boss them around.

Figure 8.9 Comparison of an Inverted Organizational Structure and a Traditional Organizational Structure

LO 8-5

Adapting to Change 3 of 4

LO 8-6

Creating a Change-Oriented Organizational Culture

Organizational or corporate culture

Widely shared values within an organization that provide unity and cooperation to achieve common goals.

Culture is shown in stories, traditions and myths.

Some of the best organizational cultures emphasize service.

Managing the Informal Organization

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.

Adapting to Change 4 of 4

LO 8-6

Managing the Informal Organization continued

Informal organization

The system that develops spontaneously as employees meet and form cliques, relationships, and lines of authority outside the formal organization.

The informal organization helps foster camaraderie and teamwork among employees.

The informal system is too unstructured and emotional on its own.

The informal organization may also be powerful in resisting management directives.

Appendix of Long Image Descriptions

Appendix 1 Figure 8.1 Typical Organization Chart

The chart has four levels. At the bottom level are the employees who report to the first-line supervisors. The first-line supervisors report to a specific manager such as a production manager, a marketing manager, or a finance manager. These managers, in turn, report to the president, who is the top level of the organization.

Appendix 2 Figure 8.2 Advantages and Disadvantages of Centralized versus Decentralized Authority

Advantages of centralized authority:

Greater top-management control

More efficiency

Simpler distribution system

Stronger brand/corporate image

Disadvantages of centralized authority:

Less responsiveness to customers

Less empowerment

Interorganizational conflict

Lower morale away from headquarters

Advantages of decentralized authority:

Better adaptation to customer wants

More empowerment of workers

Faster decision making

Higher morale

Disadvantages of decentralized authority:

Less efficiency

Complex distribution system

Less top-management control

Weakened corporate image

Appendix 3 Figure 8.4 Advantages and Disadvantages of a Narrow versus a Broad Span of Control

Advantages of a broad span of control:

Reduced costs

More responsiveness to customers

Faster decision making

More empowerment

Disadvantages of a broad span of control:

Fewer chances for advancement

Overworked managers

Loss of control

Less management expertise

Advantages of a narrow span of control:

More control by top management

More chances for advancement

Greater specialization

Closer supervision

Disadvantages of a narrow span of control:

Less empowerment

Higher costs

Delayed decision making

Less responsiveness to customers

Appendix 4 Figure 8.5 Ways to Departmentalize 4 of 5

A vice president of international operations oversees the Canadian division, the Japanese division, the European division, and the Korean division.

Appendix 5 Figure 8.6 A Sample Line-and-Staff Organization

The chief executive officer is at the top. Directly reporting to the CEO is the plant manager. Three supervisors report directly to the plant manager, and each of the three supervisors have assembly line workers reporting to them. All of these employees are considered line personnel. Three staff personnel departments (human resources, legal, and marketing research) are shown on the chart between the CEO and plant manager but without directly reporting to any one individual.

Appendix 6 Figure 8.7 A Matrix Organization

The president is at the top. Directly reporting to the president are the vice presidents of project management, manufacturing, marketing, finance, and engineering.

Each vice president has employees that report directly to them in a line structure. Three project managers report directly to the vice president of project management but are also shown as staff personnel to the other departments.

Appendix 7 Figure 8.8 A Virtual Corporation

In the center is the core firm. Surrounding the core firm are the production firm, distribution firm, advertising agency, design firm, legal firm, and accounting firm.

Appendix 8 Figure 8.9 Comparison of an Inverted Organizational Structure and a Traditional Organizational Structure

The organization chart in a traditional organization is shown as a pyramid sectioned from top to bottom in the following order:

Top management

Middle management

Supervisory management

Frontline workers

The organization chart in an inverted organization chart is shown as an upside-down pyramid sectioned from top to bottom in the following order:

Empowered frontline workers (often in teams)

Support personnel

Top management

Nickels_12e_UB_PPT_Student_Ch081.pptx

Nickels_12e_UB_PPT_Student_Ch081.pptx

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