1. Structuring Organizations for Today’s Challenges
CHAPTER 8
Structuring Organizations for Today’s Challenges
McGraw-Hill/Irwin
Copyright © 2015 by the McGraw-Hill Companies, Inc. All rights reserved.

2. STRUCTURING an ORGANIZATION
LO 8-1
Create a division of labor
Set up teams or departments
Allocate resources
Assign tasks
Establish procedures
Adjust to new realities
See Learning Objective 1: Outline the basic principles of organization management.
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3. HOW MUCH CHANGES in a DECADE?
LO 8-2
What?
2000
2010
Amount of cell phone use
34%
89%
Number of active blogs
12,000
141,000,000
Amount of reality shows 4
320
Daily s sent
12 billion
247 billion
Number of hours spent online per week
2.7 18
Number of daily newspapers
1,480
1,302
Number of daily letters mailed
207 billion
175 billion
Amount of books published
282,242
1,052,803
iTunes downloads
10 billion
Percentage of obese Americans
26%
See Learning Objective 2: Compare the organizational theories of Fayol and Weber.
How Much Changes in a Decade?
This slide shows just how much our country has changed since 2000.
Clearly the digital revolution is shown here with the amount of blogs, cell usage, s sent, etc. Ask students: Do you expect these numbers to continue to grow? What may this table look like in 2020?
The number of daily newspapers and letters sent has dropped. Ask students: Do you think we will lose more daily newspapers? What about letters? How many still receive letters/cards from grandparents opposed to s or Facebook posts?
Source: Fast Company, accessed March 2014.
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4. CREATING ORGANIZATIONAL STRUCTURE
LO 8-2
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 level.
Organization Chart -- A visual device that shows relationships among people and divides the organization’s work; it shows who reports to whom.
See Learning Objective 2: Compare the organizational theories of Fayol and Weber.
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5. TYPICAL ORGANIZATION CHART
See Learning Objective 2: Compare the organizational theories of Fayol and Weber.
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6. BUREAUCRATIC ORGANIZATIONS
LO 8-2
Bureaucracy -- An organization with many layers of managers who set rules and regulations and oversee all decisions.
It can take weeks or months to have information passed down to lower-level employees.
Bureaucracies can annoy customers.
See Learning Objective 2: Compare the organizational theories of Fayol and Weber.
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7. KEY ORGANIZATIONAL CONSIDERATIONS
LO 8-2
Job design
Divide work into parts or tasks and assign positions to those parts
Departmentalization
Group the positions into manageable units or departments
Delegation
Assign part of a manager’s work and power to other workers
Span of management
The number of workers who report directly to one manager (wide vs. narrow)
Degree of Centralization
The extent to which decision-making power is held by a small number of people at the top of the organization (tall vs. flat)
Chain of command
Designate the positions with direct authority and those that are support positions (i.e. create LINE and STAFF hierachy)
See Learning Objective 2: Compare the organizational theories of Fayol and Weber.
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8. JOB DESIGN: ASSIGNING POSITIONS TO TASKS OR DUTIES
LO 8-2
BROAD JOB RESPOSIBILITY VS. JOB SPECIALIZATION
Many jobs or tasks (BROAD) or single or few jobs (SPECIALIZATION)?
Which is better? Does it matter? Cost and work considerations?
See Learning Objective 2: Compare the organizational theories of Fayol and Weber.
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9. DEPARTMENTALIZATION
LO 8-3
Departmentalization -- Divides organizations into separate units (i.e. grouping positions into manageable units or departments).
Workers are grouped by skills and expertise to specialize their skills.
See Learning Objective 3: Evaluate the choices managers make in structuring organizations.
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10. WAYS to DEPARTMENTALIZE
LO 8-3
See Learning Objective 3: Evaluate the choices managers make in structuring organizations.
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11. WAYS to DEPARTMENTALIZE
LO 8-3
See Learning Objective 3: Evaluate the choices managers make in structuring organizations.
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12. DELEGATION
Delegation—assigning part of a manager’s work and power to other workers
Steps in delegation
Responsibility—the duty to do a job or perform a task
Authority—the power, within an organization, to accomplish an assigned task
Accountability—the obligation to accomplish an assigned job or task
Barriers to delegation
Fear the work will not get done
Fear the work will be done too well
Inability to plan and assign work effectively
See Learning Objective 3: Evaluate the choices managers make in structuring organizations.
The manager assigns responsibility.
The subordinate is empowered to do the task.
Ultimate accountability remains with the manager.
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13. SPAN of MANAGEMENT (CONTROL)
LO 8-3
Span of Management (Control) -- The optimal number of subordinates a manager supervises or should supervise.
When work is standardized, broad spans of control are possible.
Appropriate span narrows at higher levels of the organization.
The trend today is to reduce middle managers and hire better low-level employees.
See Learning Objective 3: Evaluate the choices managers make in structuring organizations.
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14. ORGANIZATIONAL STRUCTURES
LO 8-3
Structures determine the way the company 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 structure that has few layers of management and a broad span of control.
Wide Organization Structure – An organizational structure where a manager manages many subordinates
Narrow Organizational Structure – An organizational structure where a manager manages only one or few subordinates
Trend today – FLAT and WIDE
See Learning Objective 3: Evaluate the choices managers make in structuring organizations.
Many organizations have moved from tall organizations to flat organizations in an effort to increase nimbleness in the marketplace.
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15. FLAT ORGANIZATIONAL STRUCTURE
LO 8-3
See Learning Objective 3: Evaluate the choices managers make in structuring organizations.
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16. ADVANTAGES and DISADVANTAGES of the DIFFERENT SPANS of CONTROL
LO 8-3
See Learning Objective 3: Evaluate the choices managers make in structuring organizations.
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17. CENTRALIZATION or DECENTRALIZATION?
LO 8-3
Centralized Authority -- When decision-making is concentrated at the top level of management.
Decentralized Authority -- When decision-making is delegated to lower-level managers and employees more familiar with local conditions than headquarters is.
See Learning Objective 3: Evaluate the choices managers make in structuring organizations.
Centralization can be defined as an organizational structure that focuses on retaining control of authority with higher level managers. One of the disadvantages of this type of management style is slower decisions because of layers of management. Ask the students: What specific problems do you see with this type of management? (Slower decision-making means the company is less responsive to both internal an external customers needs.) Share with the students a simple rule to follow when dealing with centralized authority: Decisions regarding overall company policy and establishment of goals and strategies should be made at the top.
Decentralization is an organizational structure that focuses on delegating authority throughout the organization to middle and lower-level managers. The most significant advantage of this form of management style is the empowerment of the employees. Statistics indicate when delegation is practiced in a company, absenteeism, injuries, loyalty and production improve. Share with the students a simple rule to follow when dealing with decentralized authority: The closer an employee interacts with the customer, the more decentralized the decision-making should be. For example, a customer service manager must have the authority to make a decision that will satisfy a customer immediately, not wait until the home office makes a decision.
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18. CENTRALIZATION and DECENTRALIZATION
LO 8-3
See Learning Objective 3: Evaluate the choices managers make in structuring organizations.
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19. FOUR WAYS to STRUCTURE an ORGANIZATION
LO 8-4
Line Organizations
Line-and-Staff Organizations
Matrix-Style Organizations
Cross-Functional Self- Managed Teams
See Learning Objective 4: Contrast the various organizational models.
Traditional business models, such as line organizations and line-and-staff organizations, are giving way to new structures.
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20. 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.
There are no specialists, legal, accounting, human resources or information technology departments.
Line managers issue orders, enforce discipline and adjust the organization to changes.
See Learning Objective 4: Contrast the various organizational models.
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21. LINE PERSONNEL
LO 8-4
Line Personnel -- Workers responsible for directly achieving organizational goals, and include production, distribution and marketing employees.
Line personnel have authority to make policy decisions.
See Learning Objective 4: Contrast the various organizational models.
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22. STAFF PERSONNEL
LO 8-4
Staff Personnel -- Employees who advise and assist line personnel in meeting their goals, and include marketing research, legal advising, IT and human resource employees.
See Learning Objective 4: Contrast the various organizational models.
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23. SAMPLE LINE-and-STAFF ORGANIZATION
LO 8-4
See Learning Objective 4: Contrast the various organizational models.
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24. MATRIX ORGANIZATIONS
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.
Emphasis is on product development, creativity, special projects, communication and teamwork.
See Learning Objective 4: Contrast the various organizational models.
The creation of matrix organizations was in response to the inflexibility of other more traditional organizational structures. This structure brings specialists from different parts of the organization to work together temporarily on specific projects.
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25. SAMPLE MATRIX ORGANIZATION
LO 8-4
See Learning Objective 4: Contrast the various organizational models.
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26. 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.
A way to fix the problem of matrix-style teams is to establish long-term teams.
Empower teams to work closely with suppliers, customers and others to figure out how to create better products.
See Learning Objective 4: Contrast the various organizational models.
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27. GOING BEYOND ORGANIZATIONAL BOUNDARIES
LO 8-4
Cross-functional teams work best when the voice of the customer is heard.
Teams that include customers, suppliers and distributors go beyond organizational boundaries.
Government coordinators may assist in sharing market information beyond national boundaries.
See Learning Objective 4: Contrast the various organizational models.
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28. BUILDING SUCCESSFUL TEAMS Important Conditions for Small Teams
LO 8-4
Clear purpose
Clear goals
Correct skills
Mutual accountability
Shift roles when appropriate
See Learning Objective 4: Contrast the various organizational models.
Important For Small Teams
This slide presents five important conditions for garnering the maximum benefits of small teams, according to Jon Katzenbach, co-author of The Wisdom of Teams.
Ask the students: Which of these five conditions do you believe would be most important in your team experience? Why? (The most critical factor of these five conditions, according to Katzenbach, is a clear performance purpose for the team.)
Source: CIO Magazine, accessed November 2014.
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29. REAL-TIME BUSINESS
LO 8-5
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.
Real Time -- The present moment or actual time in which something takes place.
See Learning Objective 5: Identify the benefits of inter-firm cooperation and coordination.
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30. TRANSPARENCY and VIRTUAL CORPORATIONS
LO 8-5
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.
See Learning Objective 5: Identify the benefits of inter-firm cooperation and coordination.
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31. A VIRTUAL CORPORATION LO 8-5 8-31
See Learning Objective 5: Identify the benefits of inter-firm cooperation and coordination.
A Virtual Corporation
This slide illustrates the concept of a virtual corporation as an organizational model that could propel American businesses into the next century.
The theory behind the virtual corporation can be understood by picturing a company stripped to its core competencies. All other business functions will be accomplished by:
Forming joint ventures
Forming temporary alliances with other virtual companies with different areas of expertise
Hiring consulting services
Outsourcing or subcontracting of services
Share with the students some other interesting concepts of a virtual corporation:
On-demand knowledge workers who operate independently
Skill-selling professionals such as engineers, accountants, human resource experts who manage your projects from their homes through worldwide telecommunications
Team-building will change as companies hire individuals with expertise in various areas to solve business problems. As a solution is identified, the team will cease to exist.
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32. CUTTING BACK WHILE CUTTING COSTS
Hiring workers is a major expense for small business owners.
This has led to more offshore outsourcing.
The increase can be partly attributed to the presence of online job marketplaces like ODesk.
See Learning Objective 6: Explain how organizational culture can help businesses adapt to change.
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33. 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.
K2 Skis researched other companies’ practices in order to create the best possible skis and snowboards.
See Learning Objective 5: Identify the benefits of inter-firm cooperation and coordination.
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34. BENEFITS and CONCERNS of HEALTHCARE OUTSOURCING
LO 8-5
Benefits
Concerns
Provides enough staff to operate the facility
Lower employee morale
Cost savings
Liability
Should patients be informed
Confidentiality and security
See Learning Objective 5: Identify the benefits of inter-firm cooperation and coordination.
Benefits and Concerns of Healthcare Outsourcing
This slide identifies the benefits and concerns of healthcare outsourcing.
Have the students identify the possible countries to which healthcare can be outsourced. (India is used by many hospitals and healthcare organizations due to availability of knowledge workers.)
Ask students: Why do you think these countries represent a threat to U.S. jobs? (Lower wages will result in lower costs.)
Ask the students about another country: What could be outsourced to South Africa? Why? (South Africa is considered a good choice for customer service centers for French, English, and German speaking customers. Work force is trained to speak several different languages while wages are low. As a global company dealing with consumer inquiries, the central location of a call center may reduce cost significantly.)
Source: Healthcare Financial Management.
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35. WHICH JOBS are most often OUTSOURCED?
LO 8-5
See Learning Objective 5: Identify the benefits of inter-firm cooperation and coordination.
Which Jobs Will Be Outsourced Next?
This slide supports the previous discussion of outsourcing by identifying the most common functional areas for whichU.S. companies plan on hiring outside organizations. The results are from the TEC International’s survey of 1,091 CEOs.
As mentioned in previous discussion, the number-one reason companies outsource is to reduce cost. This slide shows Manufacturing, Information Technology and Customer Support as the largest planned outsourced business categories.
Ask the students: Why do you think these categories are outsourced more often? (Manufacturing can be done a lot cheaper in a country with lower wages; IT and customer support represent functional areas that provide basic or routine types of job performance; unlike sales and marketing, where specific strategies are closely aligned to meet specific customer needs.)
Source: USA Today.
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36. ADAPTING to MARKET CHANGES
LO 8-5
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.
See Learning Objective 5: Identify the benefits of inter-firm cooperation and coordination.
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37. 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.
Some of the best organizational cultures emphasize service.
Culture is shown in stories, traditions and myths.
See Learning Objective 6: Explain how organizational culture can help businesses adapt to change.
When you search for a job, make sure the organizational culture is one you can thrive in.
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38. FORMAL ORGANIZATION
LO 8-6
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.
See Learning Objective 6: Explain how organizational culture can help businesses adapt to change.
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39. INFORMAL ORGANIZATION
Informal Organization -- The system of relationships that develop spontaneously as employees meet and form relationships.
Informal organization helps foster camaraderie and teamwork among employees.
See Learning Objective 6: Explain how organizational culture can help businesses adapt to change.
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40. 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.
See Learning Objective 6: Explain how organizational culture can help businesses adapt to change.
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41. GROUP NORMS Examples of Informal Group Norms
LO 8-6
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.
See Learning Objective 6: Explain how organizational culture can help businesses adapt to change.
Examples of Informal Group Norms
Group norms are an interesting topic to discuss in teaching organizational structure. This slide illustrates some informal group norms.
Ask students: Have you ever felt pressure to conform to such informal norms? If you gave in to group pressure not to produce more than the rest of the group, did you feel good about yourself? (Focus on the self-gratification feeling of a job well-done and the corresponding compensation.)
Discuss the importance of informal groups in an organization that become somewhat formal themselves (i.e. labor unions).
Source: CIO Magazine, accessed November 2014.
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