****** 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 * **
****** 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
****** 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
****** 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
****** 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
****** 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.
****** 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.
****** 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
****** 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
****** 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.
****** 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
****** 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
****** 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
****** Departmentalization and its advantage/disadvantage 8-14 Departmentalization: The dividing of organizational functions into separate units.
****** 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
****** Ways of Departmentalization 8-16 By Product By Function By Customer Group By Geographic Location By Process
****** 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.
****** 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.
****** 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
****** Line/Staff Organizations 8-20 Line Personnel Formal Authority Make Policy Decisions Staff Personnel Advise Line Personnel Assist Line Personnel
****** 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
****** 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.
****** 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
****** 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
****** 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
****** 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
****** 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