Understanding business 11th by mchugh nickels chap008

ORGANIZATIONAL CHARTS LO 8-2• Organization Chart -- A visual device that shows relationships among people and divides the organization’s work; it shows who reports to whom... BUREA

Structuring Organizations for

Today’s Challenges

CHAPTER 8

LEARNING OBJECTIVES

1 Outline the basic principles of organization management.

2 Compare the organizational theories of Fayol and Weber.

3 Evaluate the choices managers make in structuring

organizations.

4 Contrast the various organizational models.

5 Identify the benefits of inter-firm cooperation and

coordination.

JENNA LYONS

J Crew

• Joined J Crew in 1990 as a junior

designer

• Worked her way up the ladder by

emphasizing her commitment to

quality

• Her management style is

NAME that COMPANY

This company maintains strict written rules and

decision guidelines Those rules enable the firm

to deliver packages quickly because employees don’t have to pause to make decisions –

procedures are clearly spelled out for them

Name that company!

STRUCTURING an ORGANIZATION LO 8-1

WOULD YOU SACRIFICE SAFETY for PROFITS?

• What do you do?

• Save money with less

safety precautions?

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

THE CHANGING ORGANIZATION LO 8-2

business environments:

- More global competition

- Declining economy

- Faster technological change

- Pressure to protect the environment

HOW MUCH CHANGES

in a DECADE?

LO 8-2

• Mass production of goods led to complexities in

Companies can reduce

their production costs by

purchasing raw materials

in bulk.

•

ORGANIZATIONS BASED on

FAYOL’S PRINCIPLES

LO 8-2

employees have no more

than one boss; lines of

authority are clear

don’t respond to customers

quickly

- Written rules, decision guidelines

and detailed records

- Consistent procedures,

HIERARCHIES and COMMAND LO 8-2

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

ORGANIZATIONAL CHARTS LO 8-2

• Organization Chart

A visual device that

shows relationships

among people and

divides the organization’s

work; it shows who

reports to whom.

TYPICAL ORGANIZATION CHART LO 8-2

BUREAUCRATIC ORGANIZATIONS LO 8-2

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

passed down to lower-level employees

• Centralized Authority When decision-making is

concentrated at the top level of management.

CENTRALIZATION or DECENTRALIZATION?

managers and employees

more familiar with local

CENTRALIZATION and

DECENTRALIZATION

LO 8-3

SPAN of CONTROL LO 8-3

• Span of Control The optimal number of

subordinates a manager supervises or should

supervise.

control are possible

organization

ORGANIZATIONAL STRUCTURES LO 8-3

responds to employee and customer needs

• Tall Organization Structures An organizational

structure in which the organization chart would be tall because of the various levels of management.

• Flat Organization Structures An organizational

FLAT ORGANIZATIONAL

STRUCTURE

LO 8-3

ADVANTAGES and DISADVANTAGES of

the DIFFERENT SPANS of CONTROL

LO 8-3

DEPARTMENTALIZATION LO 8-3

• Departmentalization Divides organizations into

separate units.

specialize their skills

ADVANTAGES of DEPARTMENTALIZATION

LO 8-3

1) Employees develop skills and progress within a

department as they master skills

2) The company can achieve economies of scale

3) Employees can coordinate work within the

function and top management can easily direct

DISADVANTAGES of DEPARTMENTALIZATION

LO 8-3

1) Departments may not communicate well.

2) Employees may identify with their department’s goals

rather than the organization’s.

3) The company’s response to external changes may

be slow.

4) People may not be trained to take different

managerial responsibilities, instead they become

WAYS to DEPARTMENTALIZE LO 8-3

WAYS to DEPARTMENTALIZE LO 8-3

TEST PREP

of control in an organization?

departmentalization?

FOUR WAYS to STRUCTURE an

LINE ORGANIZATIONS LO 8-4

• Line Organization Has direct two-way lines of

responsibility, authority and communication running

from the top to the bottom Everyone reports to one

supervisor.

human resources or information technology

departments

LINE PERSONNEL LO 8-4

• Line Personnel Workers responsible for directly

achieving organizational goals, and include

production, distribution and marketing employees.

decisions

SAMPLE LINE-and-STAFF

ORGANIZATION

LO 8-4

• Matrix Organization Specialists from different

parts of the organization work together temporarily on specific projects, but still remain part of a line-and-staff structure.

SAMPLE MATRIX

ORGANIZATION

LO 8-4

problems are produced.

• It’s costly and complex.

loyalty belongs

employees are a must

CROSS-FUNCTIONAL SELF-MANAGED TEAMS

LO 8-4

• Cross-Functional Self-Managed Teams

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

to establish long-term teams

GOING BEYOND ORGANIZATIONAL BOUNDARIES

LO 8-4

of the customer is heard

distributors go beyond organizational boundaries

BUILDING SUCCESSFUL TEAMS

Important Conditions for Small Teams

organization’s structure and the use of

cross-REAL-TIME BUSINESS LO 8-5

• Networking Using communications technology to link organizations and allow them to work together.

they’re part of a global business network

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

TRANSPARENCY and VIRTUAL

CORPORATIONS

LO 8-5

other companies that electronic information is shared

as if the companies were one.

organization made up of replaceable firms that join

and leave as needed.

A VIRTUAL CORPORATION LO 8-5

CUTTING BACK WHILE

CUTTING COSTS

expense for small business

owners

outsourcing

attributed to the presence of

BENCHMARKING and CORE COMPETENCIES

LO 8-5

• Benchmarking Compares an organization’s

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

• Core Competencies The functions an

organization can do as well as or better than any

other organization in the world.

BENEFITS and CONCERNS of

HEALTHCARE OUTSOURCING

LO 8-5

WHICH JOBS are most often

OUTSOURCED?

LO 8-5

ADAPTING to MARKET CHANGES

facilities and equipment

KEEP in TOUCH

Amazon and its Customer Database

LO 8-5

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?

MAKING the CHANGE LO 8-5

• Digital Natives

Young people who

have grown up using

the Internet and

social networking.

Photo Credit: Marc Wathieu

WHEN OPEN COMMUNICATION

SHOULD NOT BE SO OPEN

technology and work has been

helpful to business

on the traditional work-life

boundaries

responded that receive

work-RESTRUCTURING LO 8-5

• Restructuring Redesigning an organization so it

can more effectively and efficiently serve its

TRADITIONAL and INVERTED

ORGANIZATIONS

LO 8-5

ORGANIZATIONAL CULTURE LO 8-6

• Organizational or Corporate

Culture The widely shared

values within an organization that

foster unity and cooperation to

achieve common goals.

cultures emphasize service

FORMAL ORGANIZATION LO 8-6

• Formal Organization Details lines of

responsibility, authority and position

bureaucratic, but it helps guide the lines of

authority.

• Informal Organization The system of

relationships that develop spontaneously as

employees meet and form relationships.

LIMITATIONS of INFORMAL

ORGANIZATIONS

LO 8-6

too unstructured and

emotional on its own

may also be powerful in

resisting management

directives

workstation.

TEST PREP