1. ****** 8-1 Nickels McHugh McHugh 1-1 McGraw-Hill/Irwin Understanding Business, 8e © 2008 The McGraw-Hill Companies, Inc., All Rights Reserved. ** Adapting Organizations to Today’s Markets 8 CHAPTER * **

2. ****** Building an Organization from the Bottom Up  Organizing or Structuring: Determine what work needs to be done.  Division of Labor: Divide the tasks among others.  Job Specialization: Dividing the tasks into smaller jobs.  Departmentalization: The process of setting up individual departments to do specialized tasks.  Assign Authority & Responsibility:  Organization Chart/Organogram  Allocating Resources:  Assigning Specific Tasks:  Establishing Procedures: 8-2

3. ****** The Development of Organization Design  The shift from small business to large company  Mass Production: Method for efficiently producing large quantities of goods.  Economies of Scale: The situation in which companies can reduce theirs production costs if they can purchase raw materials in bulk; the average cost of goods goes down as production levels increase. 8-3

4. ****** Fayol’s Principles of Organization  Unity of Command  Hierarchy of Authority  Division of Labor  Subordination of Individual Interests to the General Interest  Authority  Degree of Centralization  Clear Communication Channels  Order  Equity  Esprit de Corps 8-4

5. ****** Max Weber’s Organizational Principles 8-5  Job Descriptions  Written Rules, Decision guidelines and detailed records  Consistent Procedures, Regulations, Policies  Staffing/Promotions Based on Qualifications

6. ****** Turning Principles into Organization Design 8-6  Hierarchy: A system in which one person is at the top of the organization and there is a ranked or sequential ordering from the top down of managers who are responsible to that person.  Chain of Command: The line of authority that moves from the top of a hierarchy to the lowest level.  Bureaucracy: An organization with many layers of managers who set rules and regulations and oversee all decisions.

7. ****** Decisions to Make in Structuring Organizations 8-7  Centralized Authority: An organization structure in which decision-making authority is maintained at the top level of management.  Decentralized Authority: An organization structure in which decision-making authority is delegated to lower-level managers who are more familiar with local conditions than headquarters management could be.  Span of Control: The optimal number of subordinates a manager supervises or should supervise.

8. ****** Centralization (No Delegation) 8-8 Advantages  Greater Top-Management Control  More Efficiency  Simpler Distribution System  Stronger Brand/Corporate Image Disadvantages  Less Responsiveness to Customers  Less Empowerment  Interorganizational Conflict  Lower Morale Away from Headquarters

9. ****** Decentralization (Delegate Authority) 8-9 Advantages  Better Adaptation to Customer Wants  More Empowerment of Workers  Faster Decision Making  Higher Morale Disadvantages  Less Efficiency  Complex Distribution System  Less Top-Management Control  Weakened Corporate Image

10. ****** Organization Structures 8-10  Tall organization: An organizational structure in which the pyramidal organization chart would be quite tall because of the various levels of management.  Flat organization: An organization structure that has few layers of management and a broad span of control.

11. ****** Organizational Structures 8-11 Tall Organizations  Many Layers of Management  High Cost of Management  Narrow Span of Control Flat Organizations  Current Trend  Creation of Teams  Broad Span of Control

12. ****** Span of Control - Narrow 8-12 Advantages  More Control by Top Management  More Chances for Advancement  Greater Specialization  Closer Supervision Disadvantages  Less Empowerment  Higher Costs  Delayed Decision Making  Less Responsiveness to Customers

13. ****** Span of Control - Broad 8-13 Advantages  Reduced Costs  More Responsiveness to Customers  Faster Decision Making  More Empowerment Disadvantages  Fewer Chances for Advancement  Overworked Managers  Loss of Control  Less Management Expertise

14. ****** Departmentalization and its advantage/disadvantage 8-14  Departmentalization: The dividing of organizational functions into separate units.

15. ****** Departmentalization by Function 8-15 Advantages  Skill Development  Economies of Scale  Good CoordinationDisadvantages Lack of CommunicationLack of Communication Employees Identify with DepartmentEmployees Identify with Department Slow Response to External DemandsSlow Response to External Demands Narrow SpecialistsNarrow Specialists GroupthinkGroupthink

16. ****** Ways of Departmentalization 8-16  By Product  By Function  By Customer Group  By Geographic Location  By Process

17. ****** Organizational Models 8-17  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.  Line-and-staff organization: An organization that has both line and staff personnel.

18. ****** Organizational Models (cont…) 8-18  Line personnel: Employees who are part of the chain of command that is responsible for achieving organizational goals.  Staff personnel: Employees who advise and assist line personnel in meeting their goals.  Matrix-style 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.

19. ****** Line Organizations 8-19 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

20. ****** Line/Staff Organizations 8-20 Line Personnel  Formal Authority  Make Policy Decisions Staff Personnel  Advise Line Personnel  Assist Line Personnel

21. ****** Matrix Organizations 8-21 Advantages  Flexibility  Cooperation & Teamwork  Creativity  More Efficient Use of Resources Disadvantages  Costly/Complex  Confusion in Loyalty  Requires Good Interpersonal Skills & Cooperation  Not Permanent

22. ****** Cross Functional Self-Managed Teams 8-22  Groups of employees from different departments who work together on a long-term basis. Self-managed means they are empowered to make decisions without management approval.  Cross functional team works better when it includes customers, suppliers, and distributors too.

23. ****** Managing the Interactions among Firms  Networking: Using communications technology and other means to link organizations and allow them to work together on common objectives.  Real Time: The present moment or the actual time in which something takes place.  Virtual Corporations: A temporary networked organization made up of replaceable firms that join and leave as needed. 8-23

24. ****** Benchmarking and Core Competencies  Benchmarking: Comparing an organization’s practices, processes, and products against the world’s best.  Core Competencies: Those functions that the organization can do as well as or better than any other organization in the world. 8-24

25. ****** Adapting to Change  Digital Natives: Young people who have grown up using the internet and social networking.  Restructuring: Redesigning an organization so that it can more effectively and efficiently serve its customers.  Inverted Organization: An organization that has contact people at the top and the chief executive officer at the bottom of the organization chart. 8-25

26. ****** Creating a Change-Oriented Organizational Culture  Organizational (Corporate) Culture: Widely shared values within an organization that provide unity and cooperation to achieve common goals.  Myths, stories, traditions, values etc are part of corporate culture 8-26

27. ****** Managing the Informal Organization  Formal Organization: the structure that details lines of responsibility, authority, and position; that is, the structure shown on organization charts.  Informal Organization: The system that develops spontaneously as employees meet and form cliques, relationships, and lines of authority outside the formal organization. 8-27