Business lecture CHAPTER 8

REORGANIZATION is for  EVERYONE LO 8­1 • Many companies are reorganizing, especially those  in decline. Including: - Auto makers - Homebuilders - Banks • Adjusting to changing markets is normal in capitalist  economies.  • Companies must go back to basic organizational  principles and firm up the foundation 8-1 STRUCTURING an ORGANIZATION LO 8­1 • Create a division of labor • Set up teams or departments • Allocate resources • Assign tasks • Establish procedures • Adjust to new realities 8-2 THE CHANGING ORGANIZATION LO 8­2 • 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 high­quality products  with fast, friendly service and all at low cost 8-3 PRODUCTION CHANGED  ORGANZIATION DESIGN LO 8­2 • 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 8-4 Two Major Organizational Theorists HENRI FAYOL MAX WEBER HENRI FAYOL FAYOL’S PRINCIPLES • Unity of command • Hierarchy of authority • Division of labor • Subordination of  individual interests to  the general interest • Authority LO 8­2 • Degree of  centralization • Clear communication  channels • Order • Equity • Esprit de corps 8-7 ORGANIZATIONS BASED on  FAYOL’S PRINCIPLES LO 8­2 • 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 8-8 MAX WEBER WEBER’S PRINCIPLES LO 8­2 • 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 8-10 Benchmarking and Outsourcing Benchmarking Comparing an organization’s practices, processes, and products against the world’s best Benchmarking and Outsourcing If a company can’t match the benchmark, they may try to outsource Benchmarking and Outsourcing Outsourcing Assigning various functions, such as accounting, production, security, billing, maintenance, and legal work to outside organizations WHICH JOBS are most often OUTSOURCED? Source: USA Today LO 8­5 8-46 ADAPTING to  MARKET CHANGES LO 8­5 • 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 8-47 KEEP in TOUCH LO 8­5 Amazon and its Customer Database Amazon uses information stored in databases to  reach out to customers. The company emails  customers letting them know about music, DVDs  or books they might like based on past purchases • Have you ever received an email like this from Amazon or another  company? • What benefits would a database of personal information, like past  purchases, provide Amazon? • Do you think these databases are helpful for both companies and  consumers or are they an invasion of privacy? 8-48 RESTRUCTURING LO 8­5 • 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 8-49 TRADITIONAL and INVERTED  ORGANIZATIONS LO 8­5 8-50 ORGANIZATIONAL CULTURE LO 8­6 • 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 8-51 The Formal and Informal Organization Each organization is composed of  two organizations – the Formal  organization and the Informal  organization FORMAL ORGANIZATION LO 8­6 • 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 8-53 INFORMAL ORGANIZATION LO 8­6 • Informal Organization ­­ The system of  relationships that develop spontaneously as  employees meet and form relationships • Informal organization  helps foster  camaraderie and  teamwork among  employees 8-54 LIMITATIONS of INFORMAL  ORGANIZATIONS LO 8­6 • The informal system is  too unstructured and  emotional on its own • Informal organization  may also be powerful in  resisting management  directives 8-55 GROUP NORMS LO 8­6 Examples of Informal Group Norms • Do your job but don’t produce more than the rest  of your group • Don’t tell off­color jokes or use profanity • Everyone is to be clean and organized at the  workstation • Respect and help your fellow group members • Drinking is done off the job – NEVER at work Source: CIO Magazine, www.cio.com, accessed November 2014 8-56 TEST PREP • What is an inverted organization? • Why do organizations outsource functions? • What is organizational culture? 8-57 ... managerial responsibilities, instead they become  specialists 8- 25 WAYS to DEPARTMENTALIZE LO 8 3 8- 26 WAYS to DEPARTMENTALIZE LO 8 3 8- 27 TEST PREP • Why are organizations becoming flatter? • What are some reasons for having a narrow span ... structure that has few layers of management and a  broad span of control 8- 20 FLAT ORGANIZATIONAL  STRUCTURE LO 8 3 8- 21 DEPARTMENTALIZATION LO 8 3 • Departmentalization ­­ Divides organizations into  separate units... departmentalize? 8- 28 FOUR WAYS to STRUCTURE an  ORGANIZATION LO 8 4 Line Organizations Line­and­Staff  Organizations Matrix­Style  Organizations Cross­Functional Self­ Managed Teams 8- 29 LINE ORGANIZATIONS