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 Outline the basic principles of organizational management Compare the organizational/management theories of Fayol and Weber Evaluate the choices managers make in structuring organizations Contrast the various organizational/management models Identify the benefits of inter-firm cooperation and coordination Explain how organizational culture can help businesses adapt to change 8-2 Profile URSULA BURNS Xerox • Started as a summer intern and moved up through Xerox • The only female AfricanAmerican CEO among Fortune’s Top 150 Companies • Serves on many boards and has been placed on councils by President Obama and VicePresident Biden 8-3 Chapter Eight NAME that COMPANY This sport’s equipment company studied the CD industry and learned to use ultraviolet inks to print graphics on skis It went to the cable television industry to learn how to braid layers of fiberglass and carbon, and adapted that knowledge to make its products Name that company! 8-4 Everyone’s Reorganizing LG1 REORGANIZATION is for EVERYONE • Many companies are reorganizing, especially those in decline Including: - Auto makers - Homebuilders - Banks • Adjusting to changing markets is normal in capitalist economies - More global competition - Faster technological change - Pressure to protect the environment • Companies must go back to basic organizational principles and firm up the foundation, and attending to service needs of customers 8-5 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 8-6 SAFETY vs PROFIT (Making Ethical Decisions) You own a lawn-mowing business and are aware of the hazards in the job But you’ve seen other companies save money by eliminating safety equipment You’d also like to make more money • What you do? • Save money with less safety precautions? • What are the consequences? 8-7 The Development of Organization Design LG2 PRODUCTION CHANGED ORGANZIATIONAL 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 8-8 Fayol’s Principles of Management LG2 HENRI FAYOL’S - 14 PRINCIPLES of MANAGEMENT • Unity of command • Degree of centralization • Hierarchy of authority • Clear communication channels • Division of labor • Order • Subordination of individual • Equity interests to the general interest • Esprit de corps • Authority 8-9 Fayol’s Principles of Management 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 not respond to customers quickly Video: http://www.youtube.com/watch?v=sJrlOfDi2rU 8-10 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 8-36 Progress Assessment PROGRESS ASSESSMENT • What’s the difference between line and staff personnel? • What management principle does a matrix-style organization challenge? • What’s the main difference between a matrixstyle organization’s structure and the use of cross-functional teams? 8-37 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 8-38 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 8-39 Transparency and Virtual Organizations A VIRTUAL CORPORATION LG5 8-40 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 as well as or better than any other organization in the world • K2 Skis researched other companies’ practices in order to create the best possible skis and snowboards 8-41 Adapting to Change LG5 KEEP in TOUCH 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? 8-42 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 8-43 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 8-44 Restructuring for Empowerment LG5 TRADITIONAL and INVERTED ORGANIZATIONS 8-45 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 8-46 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 8-47 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 8-48 Managing the Informal Organization LG6 GROUP NORMS Examples of Informal Group Norms • Do your job but don’t produce more than the rest of your group • Don’t tell off-color 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 8-49 Progress Assessment PROGRESS ASSESSMENT • What’s an inverted organization? • Why organizations outsource functions? • What’s organizational culture? 8-50 ... departmentalize? 8- 24 Organization Models LG4 FOUR WAYS to STRUCTURE an ORGANIZATION Line Organizations Line-and-Staff Organizations Matrix-Style Organizations Cross-Functional SelfManaged Teams 8- 25 Line Organizations. .. advising, IT and human resource employees 8- 28 Line-and-Staff Organizations LG4 SAMPLE LINE-and-STAFF ORGANIZATION 8- 29 Matrix-Style Organizations MATRIX ORGANIZATIONS LG4 • Matrix Organization... accounting, human resources or information technology departments • Line managers issue orders, enforce discipline and adjust the organization to changes 8- 26 Line-and-Staff Organizations LINE PERSONNEL