Nickels

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Nickels Cover

• Nickels
• McHugh
• McHugh

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Chapter
8
Adapting Organizations to Todays Markets
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Learning Objectives

• 1.) Organization Structure
• 2.) Organizational Design Choices
• 3.) Common Organizational Design
  Models
• 4.) Virtual Corporation
• 5.) How Corporation Changes to Adapt

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Organization Structure

• Who can tell who what to do
• Who does what
• What are the rules and procedures for how we work
  together

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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

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Organizational Design

• Organization
• Division
• Department
• Group
• Individual

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Division of Labor

• Division of Labor Organizing, or structuring
  begins with determining what work needs to be
  done (mowing, edging, trimming, etc.), and then
  dividing up tasks among people.

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Departmentalization

• Departmentalization Your business might evolve
  into a company with several different departments
  production, marketing, accounting, repair, etc.
  The process of setting up individual departments
  to do specialized tasks is called
  departmentalization.

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Mass Production

• Mass Production Introduced in the early 1900s,
  it is efficiently producing large quantities of
  goods.

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Economies of Scale

• Is the situation in which companies can reduce
  their production costs of they can purchase raw
  materials in bulk, the average cost of goods goes
  down as production levels increase.

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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

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Unity of Command

• Unity of Command Each worker is to report to
  one, and only one, boss. The benefits are
  obvious. What happens if two different bosses
  give you different assignments? Which one should
  you follow?

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Hierarchy of Authority

• Hierarchy of Authority - All workers should know
  to whom they should report. Mangers should have
  the right to give orders and expect others to
  follow.

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Webers Organizational Principles

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

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Layers of Authority

• Top Managers- Decision Makers
• Middle Managers- Developed Rules Procedures
• Workers and Supervisors

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Fundamentals of Bureaucracy

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

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Hierarchy (Organizational Chart)

• A system in which one person is at the top of the
  organization and there is a ranked or sequential
  ordering from the to top down of mangers who are
  responsible to that person.

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Chain of Command

• Chain of Command The line of authority that
  moves from the top of a hierarchy to the lowest
  level.

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Bureaucracy

• Bureaucracy An organization with many layers of
  managers who set rules and regulations and
  oversee all decisions.

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Organizational Design Choices

• Centralized Authority An organization structure
  in which decisions-making authority is maintained
  at the top level of management at the companys
  headquarters.

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Centralization (No Delegation)

• Advantages
• Increased Uniformity
• Less Duplication
• Maximum Control

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

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Organizational Design Choices

• Decentralized authority An organization
  structure in which decision-making authority is
  delegated to lower-level managers more familiar
  with local conditions than headquarters
  management could be.

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Decentralization (Delegate Authority)

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

• Disadvantages
• Loss of Control
• Possible Duplication

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Span of Control

• Span of Control The optimum number of
  subordinates a manger supervises or should
  supervise.

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Span of Control

• Capabilities of Subordinates Manager
• Complexity of Job
• Geographically Close
• Functional Similarity
• Need for Coordination
• Planning Demands
• Functional Complexity

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Organizational Structures

• Tall Organizational Structure The pyramidal
  organization chart would be quite tall because of
  the various level of management.
• Flat Organizational Structure Has few layers of
  management and a broad span of control.

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Organizational Structures

• Flat Organizations
• Current Trend
• Creation of Teams

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

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Departmentalization

• Customer
• Location
• Process

• Product
• Function

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Line Organization

• An organization 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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Line 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

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Line and Staff Organization

• Line Personal Employees who are part of the
  chain of command that is responsible for
  achieving organizational goals.
• Staff Personal Employees who advise and assist
  line personal in meeting their goals.

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Line/Staff Organizations

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

• Staff Personnel
• Advise
• Assist Line Personnel

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Matrix Organization

• An organization in which 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.

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Matrix Organizations

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

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

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Cross-Functional Self-Managed Teams

• Groups of employees from different departments
  who work together on a long term basis.

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Virtual Corporation

• A temporary networked organization made up of
  replaceable firms that join and leave as needed.

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A Virtual Corporation
Production Firm
Distribution Firm
Accounting Firm
Core Firm
Legal Firm
Advertising Agency
Design Firm
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Benchmarking

• Comparing an organizations practices, processes,
  and products against the worlds best.

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Core-Competencies

• Those functions that the organization can do as
  well as or better than any other organization in
  the world.

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Outsourcing

• Assigning various functions, such as accounting,
  production, security, maintenance, and legal
  work, to outside organizations.

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Reasons to Outsource
Source CIO, 2003 Outsourcing Trends
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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

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Top Five Outsourced Business Categories
Source BusinessWeek, July 8, 2002
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Corporations Adapt to Change

• Restructuring Residing an organization so that
  it can more effectively and efficiently serve its
  customers.
• Inverted Organization Has contact people at the
  top and the chief executive officer at the bottom
  of the organization chart.

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Corporations Adapt to Change

• Reengineering The fundamental rethinking and
  radical redesign of organizational processes to
  achieve dramatic improvements in critical
  measures of performance.
• Organizational Culture Widely shared values
  within an organization that provide unity and
  cooperation to achieve goals.

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Formal Organization

• Formal organization The structure that details
  lines of responsibility, authority, and position,
  that is, the structure shown on organizational
  charts.

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Informal Organization

• The system of relationships and lines of
  authority that develops spontaneously as
  employees meet and from power centers, that is,
  the human side of the organization that does not
  appear on any organizational chart.

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Inverted Organization Structure
Empowered front-line workers
Support Personnel
Top Mgmt.