Adapting Organizations to Todays Markets

1
Chapter
8
Adapting Organizations to Todays Markets
8-1
2
Management Pyramid
CEO, Comptroller, Vice Pres.
Top
Sales Mgrs Plant Mgrs.
Mid-Level
Supervisors Foremen
Front Line/Supervisory
3
Inverted Organization Structure
Empowered front-line workers
Support Personnel
Top Mgmt.
4
Workers in Large Companies in the Last 5 Years
Have Undergone...
500 Employees
Source Gallup for Carlson Marketing Group
5
Historical Perspective-Purpose of an
Organizational Chart

• Show the activities of the organization
• Highlight subdivisions of the organization
• Identify different types of work performed

• Provide information about different management
  levels
• Show the lines of authority and the flow of
  organizational communications

6
Historical Perspective - Fayols Principles of
Organization

• Unity of Command
• Hierarchy of Authority
• Division of Labor
• Subordination of Individual Interest
• Authority

• Degree of Centralization
• Communication Channels
• Order
• Equity
• Esprit de Corps

7
Historical Perspective- Webers Organizational
Principles

• Job Descriptions
• Written Rules
• Procedures, Regulations, Policies
• Staffing/Promotions based on Qualifications

8
Weber and Fundamentals of Bureaucracy

• Chain of Command
• Rules Regulations
• Set Up by Function
• Communication is Minimal

9
Issues involved in Structuring Organizations-

• Centralization vs. Decentralization
• Span of control
• Tall vs. Flat organizations

10
Centralization (No Delegation)

• Advantages
• Increased Uniformity
• Less Duplication
• Maximum Control

• Disadvantages
• Lots of Policies Procedures
• Many Layers/Slower

11
Decentralization (Delegate Authority)

• Advantages
• Informed Decisions
• Worker Responsibility
• Few Layers/Faster

• Disadvantages
• Loss of Control
• Possible Duplication

12
Span of Control

• Definitions optimum number of employees a
  manger supervises
• Variables
• Capabilities of Subordinates Manager
• Complexity of Job
• Geographically Close
• Functional Similarity
• Need for Coordination
• Planning Demands
• Functional Complexity

13
Organizational Structures

• Flat Organizations
• Current Trend
• Creation of Teams

• Tall Organizations
• Many Layers of Management
• High Cost of Management

14
Departmentalization by Function

• Advantages
• Skill Development
• Economies of Scale
• Good Coordination

15
Departmentalization by Function

• Disadvantages
• Lack of Communication
• Employees Identify with Department
• Slow Response to External Demands
• Narrow Specialists

16
Traditional Form of OrganizationsLine
Organizations

• Advantages
• Clear Authority Responsibility
• Easy to Understand
• One Supervisor per Employee

• Disadvantages
• Inflexible
• Few Specialists for Advice
• Long Line of Communication
• Difficult to Handle Complex Decisions

17
Traditional Form of Organizations Line/Staff
Organizations

• Line Personnel
• Perform Functions
• Contribute Directly to Organizational Goals

• Staff Personnel
• Advise
• Assist Line Personnel

18
New organizations are based on the principle of
Customer -Focused Design

• Information
• Build teamwork
• cross-functional
• integration
• Self-management autonomy

• Bottom-up relationships
• Outsource
• Global orientation
• Internal vs. external customers

19
New Forms of OrganizationsMatrix Organizations

• Advantages
• Flexibility
• Cooperation Teamwork
• Creativity
• More Efficient Use of Resources

• Disadvantages
• Costly/Complex
• Confusion in Loyalty
• Requires Good Interpersonal Skills Cooperation
• Not Permanent

20
New Forms of OrganizationsCross Functional Self
Managed Teams

• Groups form different departments work together
  on a long term basis
• Empowered to make decisions on their own without
  management approval
• Eliminated barriers between design, engineering,
  marketing, distribution, etc.

21
Managing the Interaction of FirmsNetworking

• Networking
• Real Time
• Transparency
• Virtual Corporations

22
A Virtual Corporation
Production Firm
Distribution Firm
Accounting Firm
Core Firm
Legal Firm
Advertising Agency
Design Firm
23
Outsourcing
Benefits
Downside

• Time to focus on companys primary function
• Increased level of expertise
• Cost effectiveness
• Decreased overhead
• Risk reduction
• Flexibility
• Technology

• Less personal approach
• Less control by owner in planning, implementing
  carrying out companys future
• Potential for competing for the outsourcing
  firms time

24
Outsourcing Possibilities
Source BusinessWeek, February 3, 2003
25
How to ImproveOrganizational Structure

• Break business into smaller units
• Build teamwork
• Impose autonomy
• Create meaningful incentives
• Outsource non-operating activities
• Share business capabilities across units

26
Formal Organization and Informal Organization

• Formal Organization- the structure shown
  organizational charts, formal procedures and
  routines.
• Informal Organization- system of relationships
  that develop spontaneously among employees,
  camaraderie, cliques, grapevine.
• Both are necessary, both can be a help or a
  hindrance.

27
Examples ofInformal Group Norms(contd)

• Never side with managers in a dispute
  involving group members.
• Respect/help your fellow group members on the
  job.
• Criticize the organization only among group
  members- never among strangers.
• Drinking is done off-the-job-
  Never at work!