1. PRINCIPLES OF MANAGEMENT
LESSON 1
With material from Business Process Management Institute (BPMI), Rummler, Brache And Schermerhorn

2. PowerPoint Presentation to Accompany Chapter 11 of Management, 8/e John R. Schermerhorn, Jr.
Prepared by: Michael K. McCuddy
Valparaiso University
Published by: John Wiley & Sons, Inc.

3. Systems and the Organizational Value Chain
Organization as a
transformation system
Management of the
value chain
Resources &
materials
flow in
Materials
received &
organized
for use
People &
technology
create
products
Finished
products
distributed
Customers
served
Management 8/e - Chapter 11

4. Organizations as Networks of Subsystems
Organizational
network of subsystems
Purchasing &
inventory
systems
Marketing,
sales and
distribution
systems
Operations and
service
management
systems
Outputs
Inputs
Accounting
& financial
systems
Information
& technology
systems
Suppliers
Customers
Management 8/e - Chapter 11

5. Processes cut across Functional Departments
Management 8/e - Chapter 11

6. Organization Chart for Philip’s Vintage Auto Parts
Management 8/e - Chapter 11

7. Relationship Map for Philip’s Vintage Auto Parts
Invoice
Invoice
Finance
Payment
Payment
Parts
Manufacturers
Back-Orders
Till Cash
Auto Parts
Customers
Shortage
Notifications
Auto Parts
Sales
(Counter Reps)
Auto Parts
Inventory
Purchasing
Payment
Back-Orders
Auto Parts
Phone Sale Notification
Auto Parts
Auto Parts
Fed Ex
Custom
Workshops
Auto Parts
Sales
(Phone Reps)
Auto Parts
Phone
Orders
Management 8/e - Chapter 11

8. Management 8/e - Chapter 11
BPMN with “Swim Lanes”
Management 8/e - Chapter 11

9. Business Process Modeling Notation Example
Management 8/e - Chapter 11

10. Study Question 4: How can work processes be reengineered?
Process reengineering
Systematic and complete analysis of work processes.
Design of new and better work processes.
Work process
“A related group of tasks that create a result of value for the customer.” (Michael Hammer)
Workflow
Movement of work from one point to another in the manufacturing or service delivery process.
Management 8/e - Chapter 11

11. Study Question 4: How can work processes be reengineered?
Steps in reengineering core processes:
Identify core processes.
Map core processes in respect to workflows.
Evaluate all tasks for core processes.
Search for ways to eliminate unnecessary tasks or work.
Search for ways to eliminate delays, errors, and misunderstandings.
Search for efficiencies in how work is shared and transferred among people and departments.
Management 8/e - Chapter 11

12. Study Question 1: What are the essentials of organizational design?
Choosing and implementing structures that best arrange resources to serve the organization’s mission and objectives.
A problem-solving activity that should be approached from a contingency perspective.
Management 8/e - Chapter 11

13. Study Question 1: What are the essentials of organizational design?
Short-run, medium-run and long-run criteria for evaluating organizational effectiveness:
Short-run focus.
Goal accomplishment.
Performance efficiency in resource utilization.
Stakeholder satisfaction.
Medium-run focus.
Adaptability in the face of changing environments.
Development of people and systems to meet new challenges.
Long-run focus.
Survival under conditions of uncertainty.
Management 8/e - Chapter 11

14. Study Question 1: What are the essentials of organizational design?
Bureaucracy
A form of organization based on logic, order, and the legitimate use of formal authority.
Bureaucratic designs feature …
Clear-cut division of labor.
Strict hierarchy of authority.
Formal rules and procedures.
Promotion based on competency.
Management 8/e - Chapter 11

15. Study Question 1: What are the essentials of organizational design?
Contingency perspective on bureaucracy asks the questions:
When is a bureaucratic form a good choice for an organization?
What alternatives exist when it is not a good choice?
Environment determines the answers to these questions.
A mechanistic design works in a stable environment
An organic design works in a rapidly changing and uncertain environment.
Management 8/e - Chapter 11

16. Study Question 1: What are the essentials of organizational design?
Structural characteristics associated with design alternatives:
Goal  predictability versus adaptability.
Authority  centralized versus decentralized.
Rules and procedures  many versus few.
Spans of control  narrow versus wide.
Tasks  specialized versus shared.
Teams and task forces  few versus many.
Coordination  formal and impersonal versus informal and personal.
Management 8/e - Chapter 11

17. Study Question 1: What are the essentials of organizational design?
Mechanistic Designs
Predictable goals
Centralized authority
Many rules and procedures
Narrow spans of control
Specialized tasks
Few teams and task forces
Formal and impersonal means of coordination
Organic Designs
Adaptable goals
Decentralized authority
Few rules and procedures
Wide spans of control
Shared tasks
Many teams and task forces
Informal and personal means of coordination
Management 8/e - Chapter 11

18. Contingencies in Organization Design
Environment
Organization design
aligns structures
with situational
contingencies
People
Strategy
Size
Technology
Management 8/e - Chapter 11

19. Management 8/e - Chapter 11
Study Question 2: How do contingency factors influence organization design?
Checklist for identifying contingency factors in organizational design:
Does the design fit well with the major problems and opportunities of the external environment?
Does the design support implementation of strategies and the accomplishment of key operating objectives?
Does the design support core technologies and allow them to be used to best advantage?
Can the design handle changes in organizational size and different stages in the organizational life cycle?
Does the design support and empower workers and allow their talents to be used to best advantage?
Management 8/e - Chapter 11

20. Management 8/e - Chapter 11
Study Question 2: How do contingency factors influence organization design?
Environment and organizational design —
Certain environment …
Relatively stable and predictable elements.
Bureaucratic organizations and mechanistic designs are appropriate.
Uncertain environment …
More dynamic and less predictable elements.
Adaptive organizations and organic designs are appropriate.
Management 8/e - Chapter 11

21. Management 8/e - Chapter 11
Study Question 2: How do contingency factors influence organization design?
Strategy and organizational design —
Structure follows strategy.
Stability strategy is supported by:
Bureaucratic organizations using mechanistic designs.
Growth strategies are is supported by:
Adaptive organizations using organic designs.
Management 8/e - Chapter 11

22. Management 8/e - Chapter 11
Study Question 2: How do contingency factors influence organization design?
Technology
The combination of knowledge, skills, equipment, computers, and work methods used to transform resource inputs into organization outputs.
Management 8/e - Chapter 11

23. Management 8/e - Chapter 11
Study Question 2: How do contingency factors influence organization design?
Core manufacturing technologies:
Small-batch production.
A variety of custom products are tailor-made to order.
Mass production.
A large number of uniform products are made in an assembly-line system.
Continuous-process production.
A few products are made by continuously feeding raw materials through a highly automated production system with largely computerized controls.
Management 8/e - Chapter 11

24. Management 8/e - Chapter 11
Study Question 2: How do contingency factors influence organization design?
Technology and organization design —
The technological imperative
Technology is a major influence on organizational structure.
The best small-batch and continuous process plants have more flexible organic structures.
The best mass-production plants have more rigid mechanistic structures.
Management 8/e - Chapter 11

25. Management 8/e - Chapter 11
Study Question 2: How do contingency factors influence organization design?
Core service technologies:
Intensive technology
Focuses the efforts of many people with special expertise on the needs of patients or clients.
Mediating technology
Links together parties seeking a mutually beneficial exchange of values.
Long-linked technology
Functions like mass production, where a client is passed from point to point for various aspects of service delivery.
Management 8/e - Chapter 11

26. Management 8/e - Chapter 11
Study Question 2: How do contingency factors influence organization design?
Organization size, life cycle, and design —
Larger organizations tend to have more mechanistic designs, but it is not always best.
Organizational life cycle:
Birth stage — small size, simple structure.
Youth stage — rapid growth in size, simple structure experiences stress.
Midlife stage — growing to large size, more complex and formal structure.
Maturity stage — stabilizes at large size, mechanistic structure.
Management 8/e - Chapter 11

27. Management 8/e - Chapter 11
Study Question 2: How do contingency factors influence organization design?
Coping with the disadvantages of large size:
Downsizing.
Reducing the scope of operations and number of employees.
Intrapreneurship.
The pursuit of entrepreneurial behavior by individuals and subunits within large organizations.
Simultaneous structures.
Organizations that combine mechanistic and organic designs.
Management 8/e - Chapter 11

28. Management 8/e - Chapter 11
Study Question 2: How do contingency factors influence organization design?
Human resources and good organization design —
Provides people with supporting structures needed for both high performance and work satisfaction.
Produces a good “fit” between organization structures and human resources.
Allows the expertise and talents of organization members to be unlocked and utilized.
Management 8/e - Chapter 11

29. Managing the “Tight / Loose Dilemma”
Organizations must be –
Tight and focused
around objectives and values.
Organizations must also be –
Loose but disciplined
in actions and contributions .
Management 8/e - Chapter 11

30. High Performance Organizational Designs
Objectives
&
Values
TIGHT and Focused
Actions
&
Contributions
LOOSE but Disciplined
Management 8/e - Chapter 11

31. High Performance Organizational Designs
Objectives
&
Values
TIGHT and Focused
What it takes:
shared purpose
clear goals
talent
accountability
Management 8/e - Chapter 11

32. High Performance Organizational Designs
Support needed:
teamwork
participation
decentralization
freedom
accountability
Actions
&
Contributions
LOOSE but Disciplined
Management 8/e - Chapter 11

33. Study Question 3: What are the major issues in subsystems design?
Basics of subsystem design …
Subsystem —
A department or work unit headed by a manager.
Operates as a smaller part of the larger organization.
Ideally, each subsystem supports other subsystems, working toward interests of entire organization.
Management 8/e - Chapter 11

34. Study Question 3: What are the major issues in subsystems design?
Lawrence and Lorsch’s findings on subsystems design …
The total system structures of successful firms match the challenges of their environments.
The subsystems structures of successful firms match the challenges of their respective subenvironments.
Subsystems in successful firms worked well with each other.
Management 8/e - Chapter 11

35. Study Question 3: What are the major issues in subsystems design?
Managing subsystem differentiation:
Differentiation is the degree of difference that exists among the internal components of an organization.
Common sources of subsystems differentiation:
Time orientation
Objectives
Interpersonal orientation
Formal structure
Management 8/e - Chapter 11

36. Study Question 3: What are the major issues in subsystems design?
Managing subsystem integration:
Integration is the level of coordination achieved among an organization’s internal components.
Organization design paradox —
Increased differentiation creates the need for greater integration.
Integration is more difficult to achieve as differentiation increases.
Management 8/e - Chapter 11

37. Study Question 3: What are the major issues in subsystems design?
Mechanisms for achieving subsystem integration:
Rules and procedures
Hierarchical referral
Planning
Direct contact
Liaison role
Task forces
Teams
Matrix organizations
Management 8/e - Chapter 11

38. COPYRIGHT
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