8-1 NickelsMcHughMcHugh Nickels Cover

8-2 Chapter 88 Adapting Organizations to Today’s Markets 8-2

8-3 Learning Objectives 1.) Organization Structure1.) Organization Structure 2.) Organizational Design Choices2.) Organizational Design Choices 3.) Common Organizational Design Models3.) Common Organizational Design Models 4.) Virtual Corporation4.) Virtual Corporation 5.) How Corporation Changes to Adapt5.) How Corporation Changes to Adapt

8-4 Organization Structure Who can tell who what to doWho can tell who what to do Who does whatWho does what What are the rules and procedures for how we work togetherWhat are the rules and procedures for how we work together

8-5 Purpose of an Organizational Chart Show the activities of the organizationShow the activities of the organization Highlight subdivisions of the organizationHighlight subdivisions of the organization Identify different types of work performedIdentify different types of work performed Provide information about different management levelsProvide information about different management levels Show the lines of authority and the flow of organizational communicationsShow the lines of authority and the flow of organizational communications

8-6 Organizational Design  Organization  Division  Department  Group  Individual

8-7 Division of Labor Division of Labor – Organizing, or structuring begins with determining what work needs to be done (mowing, edging, trimming, etc.), and then dividing up tasks among people.Division of Labor – Organizing, or structuring begins with determining what work needs to be done (mowing, edging, trimming, etc.), and then dividing up tasks among people.

8-8 Departmentalization Departmentalization – Your business might evolve into a company with several different departments : production, marketing, accounting, repair, etc. The process of setting up individual departments to do specialized tasks is called departmentalization.Departmentalization – Your business might evolve into a company with several different departments : production, marketing, accounting, repair, etc. The process of setting up individual departments to do specialized tasks is called departmentalization.

8-9 Mass Production Mass Production – Introduced in the early 1900s, it is efficiently producing large quantities of goods.Mass Production – Introduced in the early 1900s, it is efficiently producing large quantities of goods.

8-10 Economies of Scale Is the situation in which companies can reduce their production costs of they can purchase raw materials in bulk, the average cost of goods goes down as production levels increase.Is the situation in which companies can reduce their production costs of they can purchase raw materials in bulk, the average cost of goods goes down as production levels increase.

8-11 Fayol’s Principles of Organization Unity of CommandUnity of Command Hierarchy of AuthorityHierarchy of Authority Division of LaborDivision of Labor Subordination of Individual InterestSubordination of Individual Interest AuthorityAuthority Degree of Centralization Communication Channels Order Equity Esprit de Corps

8-12 Unity of Command Unity of Command – Each worker is to report to one, and only one, boss. The benefits are obvious. What happens if two different bosses give you different assignments? Which one should you follow?Unity of Command – Each worker is to report to one, and only one, boss. The benefits are obvious. What happens if two different bosses give you different assignments? Which one should you follow?

8-13 Hierarchy of Authority Hierarchy of Authority - All workers should know to whom they should report. Mangers should have the right to give orders and expect others to follow.Hierarchy of Authority - All workers should know to whom they should report. Mangers should have the right to give orders and expect others to follow.

8-14 Weber’s Organizational Principles Job DescriptionsJob Descriptions Written RulesWritten Rules Procedures, Regulations, PoliciesProcedures, Regulations, Policies Staffing/Promotions based on QualificationsStaffing/Promotions based on Qualifications

8-15 Layers of Authority Top Managers- Decision MakersTop Managers- Decision Makers Middle Managers- Developed Rules & ProceduresMiddle Managers- Developed Rules & Procedures Workers and SupervisorsWorkers and Supervisors

8-16 Fundamentals of Bureaucracy  Chain of Command  Rules & Regulations  Set Up by Function  Communication is Minimal

8-17 Hierarchy (Organizational Chart) A system in which one person is at the top of the organization and there is a ranked or sequential ordering from the to top down of mangers who are responsible to that person.A system in which one person is at the top of the organization and there is a ranked or sequential ordering from the to top down of mangers who are responsible to that person.

8-18 Chain of Command Chain of Command – The line of authority that moves from the top of a hierarchy to the lowest level.Chain of Command – The line of authority that moves from the top of a hierarchy to the lowest level.

8-19 Bureaucracy Bureaucracy – An organization with many layers of managers who set rules and regulations and oversee all decisions.Bureaucracy – An organization with many layers of managers who set rules and regulations and oversee all decisions.

8-20 Organizational Design Choices Centralized Authority – An organization structure in which decisions-making authority is maintained at the top level of management at the company’s headquarters.Centralized Authority – An organization structure in which decisions-making authority is maintained at the top level of management at the company’s headquarters.

8-21 Centralization (No Delegation) Advantages Increased UniformityIncreased Uniformity –Less Duplication –Maximum Control Disadvantages –Lots of Policies & Procedures –Many Layers/Slower

8-22 Organizational Design Choices Decentralized authority – An organization structure in which decision-making authority is delegated to lower-level managers more familiar with local conditions than headquarters management could be.Decentralized authority – An organization structure in which decision-making authority is delegated to lower-level managers more familiar with local conditions than headquarters management could be.

8-23 Decentralization (Delegate Authority) Advantages –Informed Decisions –Worker Responsibility –Few Layers/Faster Disadvantages –Loss of Control –Possible Duplication

8-24 Span of Control Span of Control – The optimum number of subordinates a manger supervises or should supervise.Span of Control – The optimum number of subordinates a manger supervises or should supervise.

8-25 Span of Control Capabilities of Subordinates & ManagerCapabilities of Subordinates & Manager Complexity of JobComplexity of Job –Geographically Close –Functional Similarity –Need for Coordination –Planning Demands –Functional Complexity

8-26 Organizational Structures Tall Organizational Structure – The pyramidal organization chart would be quite tall because of the various level of management.Tall Organizational Structure – The pyramidal organization chart would be quite tall because of the various level of management. Flat Organizational Structure – Has few layers of management and a broad span of control.Flat Organizational Structure – Has few layers of management and a broad span of control.

8-27 Organizational Structures Tall Organizations -Many Layers of Management -High Cost of Management Flat Organizations -Current Trend -Creation of Teams

8-28 Departmentalization ProductProduct FunctionFunction Customer Location Process

8-29 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.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.

8-30 Line Organizations 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

8-31 Line and Staff Organization Line Personal – Employees who are part of the chain of command that is responsible for achieving organizational goals.Line Personal – Employees who are part of the chain of command that is responsible for achieving organizational goals. Staff Personal – Employees who advise and assist line personal in meeting their goals.Staff Personal – Employees who advise and assist line personal in meeting their goals.

8-32 Line/Staff Organizations Line Personnel –Perform Functions –Contribute Directly to Organizational Goals Staff Personnel –Advise –Assist Line Personnel

8-33 Matrix 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.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.

8-34 Matrix Organizations Advantages –Flexibility –Cooperation & Teamwork –Creativity –More Efficient Use of Resources Disadvantages –Costly/Complex –Confusion in Loyalty –Requires Good Interpersonal Skills & Cooperation –Not Permanent

8-35 Cross-Functional Self-Managed Teams Groups of employees from different departments who work together on a long term basis.Groups of employees from different departments who work together on a long term basis.

8-36 Virtual Corporation A temporary networked organization made up of replaceable firms that join and leave as needed.A temporary networked organization made up of replaceable firms that join and leave as needed.

8-37 A Virtual Corporation CoreFirm Accounting Firm Production Firm Distribution Firm Advertising Agency Design Firm Legal Firm

8-38 Benchmarking Comparing an organization’s practices, processes, and products against the world’s best.Comparing an organization’s practices, processes, and products against the world’s best.

8-39 Core-Competencies Those functions that the organization can do as well as or better than any other organization in the world.Those functions that the organization can do as well as or better than any other organization in the world.

8-40 Outsourcing Assigning various functions, such as accounting, production, security, maintenance, and legal work, to outside organizations.Assigning various functions, such as accounting, production, security, maintenance, and legal work, to outside organizations.

8-41 Reasons to Outsource Source: CIO, “2003 Outsourcing Trends”

8-42 Outsourcing +Time to focus on company’s primary function +Increased level of expertise +Cost effectiveness +Decreased overhead +Risk reduction +Flexibility +Technology -Less personal approach -Less control by owner in planning, implementing & carrying out company’s future -Potential for competing for the outsourcing firm’s time BenefitsDownside

8-43 Top Five Outsourced Business Categories Source: BusinessWeek, July 8, 2002

8-44 Corporations Adapt to Change Restructuring – Residing an organization so that it can more effectively and efficiently serve its customers.Restructuring – Residing an organization so that it can more effectively and efficiently serve its customers. Inverted Organization – Has contact people at the top and the chief executive officer at the bottom of the organization chart.Inverted Organization – Has contact people at the top and the chief executive officer at the bottom of the organization chart.

8-45 Corporations Adapt to Change Reengineering – The fundamental rethinking and radical redesign of organizational processes to achieve dramatic improvements in critical measures of performance.Reengineering – The fundamental rethinking and radical redesign of organizational processes to achieve dramatic improvements in critical measures of performance. Organizational Culture – Widely shared values within an organization that provide unity and cooperation to achieve goals.Organizational Culture – Widely shared values within an organization that provide unity and cooperation to achieve goals.

8-46 Formal Organization Formal organization – The structure that details lines of responsibility, authority, and position, that is, the structure shown on organizational charts.Formal organization – The structure that details lines of responsibility, authority, and position, that is, the structure shown on organizational charts.

8-47 Informal Organization The system of relationships and lines of authority that develops spontaneously as employees meet and from power centers, that is, the human side of the organization that does not appear on any organizational chart.The system of relationships and lines of authority that develops spontaneously as employees meet and from power centers, that is, the human side of the organization that does not appear on any organizational chart.

8-48 Inverted Organization Structure Empowered front- line workers Support Personnel Top Mgmt.