PowerPoint Presentation by Charlie Cook Copyright © 2005 South-Western. All rights reserved. Module 1 The “New” Organization: Taking Action in an Era of Organizational Transformation

Copyright © 2005 South-Western. All rights reserved.1–2 “Old” Model of the Organization Bureaucracy—classic model of formal organization identified by Weber; features include:  Specialized individual positions and jobs  A formal hierarchy with a clear line of authority (“chain of command”)  Formal rules and standard operating procedures  Set boundaries for each department and subunit, and clear boundaries between the organization itself and its environment  Standardized training and training requirements, career paths, and reward systems, based on the development of expertise Class Notes: Changing Organizational Models

Copyright © 2005 South-Western. All rights reserved.1–3 “Old” Model of the Organization (cont’d) Strengths of the classic model:  Predictability and reliability  Impartiality  Expertise  Clear lines of control Class Notes: Changing Organizational Models

Copyright © 2005 South-Western. All rights reserved.1–4 “New” Model of the Organization Key features of the “new” model:  Networked  Flat  Flexible  Diverse  Global Class Notes: Changing Organizational Models

Copyright © 2005 South-Western. All rights reserved.1–5 Key Features of the “New” Model Importance of networks results from:  Availability of new telecommunications and information technologies to connect people and organization units  Competitive need for rapid response to customer needs, changing environments, demands for innovation  Need for increasingly complex and diverse resources to develop and deliver value to customers  New approach of dealing with volatility by linking source of volatility with part of organization most affected by it

Copyright © 2005 South-Western. All rights reserved.1–6 Key Features of the “New” Model (cont’d) Flattening of the hierarchy necessary because:  Organizations must respond more rapidly and flexibly to changes in markets and technology  Changes in information technology remove the need for layers of middle managers whose main tasks were organizing and transmitting information  Organizations face intense pressure to cut costs

Copyright © 2005 South-Western. All rights reserved.1–7 Key Features of the “New” Model (cont’d) Need for flexibility driven by:  Intensifying competition  Increasingly diverse labor force  Increasingly complex and unpredictable external environment

Copyright © 2005 South-Western. All rights reserved.1–8 Key Features of the “New” Model (cont’d) Diversity is necessary because of:  Growing diversity of the workforce in demographic terms  A greater need for innovation and creative approaches to solving problems  Growing volatility in the business environment  “Requisite variety”—the diversity that matches the diversity of key elements of the environment

Copyright © 2005 South-Western. All rights reserved.1–9 Key Features of the “New” Model (cont’d) Key factors driving globalization:  Greatly reduced costs of international transportation and communications  Growing equalization across markets of “advanced factor endowments”  Globalization of markets Class Notes: Changing Organizational Models

Copyright © 2005 South-Western. All rights reserved.1–10 Key Features of the “New” Model (cont’d) Key factors driving globalization (cont’d):  Continuing differences in cost structures across countries  Cross-border learning that expands capabilities of firms  Pressures from international nongovernmental organizations (NGOs) Class Notes: Changing Organizational Models

Copyright © 2005 South-Western. All rights reserved.1–11 Figure 1.1a Summary of Features of Old and New Models of Organization Old ModelNew Model Individual position/job as basic unit of Team as a basic unit organization Relations with environment handled by Densely networked with environment specialist boundary-spanners Vertical flows of information Horizontal and vertical flows of information Decisions come down, information flows up Decisions made where information resides Tall (many layers of management) Flat (few layers of management) Emphasis on structures Emphasis on processes Emphasis on rules and standard Emphasis on results and outcomes procedures Fixed hours Flexible workday, part-time workers Class Notes: Changing Organizational Models

Copyright © 2005 South-Western. All rights reserved.1–12 Figure 1.1b Summary of Features of Old and New Models of Organization (cont’d) Old ModelNew Model Career paths upward, linearCareer paths lateral, flexible Standardized evaluation and Customized evaluation and reward systems reward systems Single strong culture with strongDiversity viewpoints and behaviors expectations of homogeneous behavior Ethnocentric mindsetInternational/global mindset Specialist international managersBoundary-crossers at all levels Local value chainsValue chains crossing borders Environment defined in terms ofEnvironment seen as global country of location Class Notes: Changing Organizational Models

Copyright © 2005 South-Western. All rights reserved.1–13 Figure 1.2 Framework for Taking Action in the New Organization Transparency 1.4 Class Notes: Changing Organizational Models

Copyright © 2005 South-Western. All rights reserved.1–14 Search for the Organization of Tomorrow Figure 1.3a Sources/Authorities Number of Quotes Managers: Lawrence Bossidy, CEO, Allied Signal 5 H. James Maxmin, CEO, Laura Ashley 1 Philip Jarrosiak, Manager/HRM, GE 2 Herman Simon, plant manager, Gaines 1 William Buehler, Senior VP, Xerox 1 Richard Palermo, VP, Xerox 1 Don Fletcher, VP, Hallmark 1 Paul Allaire, CEO, Xerox 1 Consultants: David Nadler, Delta Consulting 2 Doug Smith, McKinsey 5 Frank Ostroff 3 Mike Hammer, CSC Index 2 James Champy, CSC Index 2 Class Notes: Reading the Business Press

Copyright © 2005 South-Western. All rights reserved.1–15 The Organization of Tomorrow (cont’d) Figure 1.3b Sources/Authorities Number of Quotes Academics/Researchers: Peter Drucker 1 Marvin Weisbord 1 Shoshanna Zuboff 1 Quinn Mills 1 Robert Reich 1 Workers: Robert Brookhouse, Kodak “Zebra” 1 Class Notes: Reading the Business Press

Copyright © 2005 South-Western. All rights reserved.1–16 Figure 1.4a A New View of Organization Class Notes: The Search for the Organization of Tomorrow

Copyright © 2005 South-Western. All rights reserved.1–17 A new view of organization by McKinsey consultants Frank Ostroff and Doug Smith is meant to help clients hung up by the old template. Says Ostroff: “They needed a clear architecture” to show how a functional pyramid (previous slide) could become a process- oriented, horizontal organization. A New View of Organization (cont’d) Figure 1.4b Class Notes: The Search for the Organization of Tomorrow

Copyright © 2005 South-Western. All rights reserved.1–18 McKinsey’s Plan Organize primarily around process, not task Flatten hierarchy by minimizing subdivision of processes Give senior leaders charge of processes and process performance Link performance objectives and evaluation of all activities to customer satisfaction Make teams, not individuals, the focus of organization performance and design Combine managerial and non- managerial activities Each employee should develop several competencies Inform and train on a just-in- time, need-to-perform basis Maximize supplier and customer contact with everyone in the organization Reward individual skill development and team performance instead of individual performance alone Class Notes: The Search for the Organization of Tomorrow

Copyright © 2005 South-Western. All rights reserved.1–19 Contrasting Views of the Corporation Class Notes: Management by Web Data: Business Week. Table 1

Copyright © 2005 South-Western. All rights reserved.1–20 Features of 21st Century Corporations Management by Web More about bits, less about atoms Mass customization Dependent on intellectual capital Global Increased speed of actions, deliberations, information Class Notes: Management by Web