Nickels 6e/Copyright © 2007 McGraw-Hill Ryerson Chapter 9 Adapting Organizations to Today’s Markets

Nickels 6e/Copyright © 2007 McGraw-Hill Ryerson Learning Goals 1. Explain the historical organizational theories of Henri Fayol and Max Weber. 2. Discuss the various issues involved in structuring organizations. 3. Describe and differentiate the various organizational models. 4. List the concepts involved in inter-firm co- operation and coordination. 5. Explain how restructuring, organizational culture, and informal organizations can help businesses adapt to change.

Nickels 6e/Copyright © 2007 McGraw-Hill Ryerson Purpose of an Organizational Chart  Shows the activities of the organization  Highlights subdivisions of the organization  Identifies different types of work performed  Provides information about different management levels  Shows the lines of authority and the flow of organizational communications

Nickels 6e/Copyright © 2007 McGraw-Hill Ryerson Fayol’s Principles of Organization  Unity of command  Hierarchy of authority  Division of labor  Subordination of individual interest  Authority  Degree of centralization  Communication channels  Order  Equity  Esprit de corps

Nickels 6e/Copyright © 2007 McGraw-Hill Ryerson Weber’s Organizational Principles  Job descriptions  Written rules, decision guidelines, and detailed records  Consistent procedures, regulations, and policies  Staffing and promotions based on qualifications

Nickels 6e/Copyright © 2007 McGraw-Hill Ryerson Fundamentals of Bureaucracy o Chain of command o Rules and regulations o Set up by function o Communication between departments is minimal

Nickels 6e/Copyright © 2007 McGraw-Hill Ryerson Variables To Consider in Span of Control  Capabilities of the manager  Capabilities of the subordinates  Geographical proximity  Functional similarity  Need for coordination  Planning demands  Functional complexity

Nickels 6e/Copyright © 2007 McGraw-Hill Ryerson Organizational Structures Tall Organizations o Many layers of management o Span of control limited o Costly to maintain o Lots of paperwork o Inefficient communication and decision making Flat Organizations o Few layers of management o Broad span of control o Highly responsive to customer demands due to increased employee empowerment

Nickels 6e/Copyright © 2007 McGraw-Hill Ryerson Advantages o Skill development o Economies of scale o Better coordination of activities Departmentalization by Function

Nickels 6e/Copyright © 2007 McGraw-Hill Ryerson Departmentalization by Function Disadvantages o Lack of communication o Employees identify with department instead of company o Slow response to external demands o Narrow specialists o Silos of knowledge - groupthink

Nickels 6e/Copyright © 2007 McGraw-Hill Ryerson Departmentalization  By product  By function  By customer  By location  By process

Nickels 6e/Copyright © 2007 McGraw-Hill Ryerson Organization Models  Line organizations  Line-and-staff organizations  Matrix-style organizations  Cross-functional self-managed teams

Nickels 6e/Copyright © 2007 McGraw-Hill Ryerson A Virtual Corporation CoreFirm Accounting Firm Production Firm Distribution Firm Advertising Agency Design Firm Legal Firm

Nickels 6e/Copyright © 2007 McGraw-Hill Ryerson Outsourcing o Time to focus on company ’ s primary function o Increased level of expertise o Cost-effective o Decreased overhead o Risk reduction o Flexibility o Technology o Less personal approach o Less control by owner in planning, implementing and carrying out company ’ s future goals o Potential for competing for the outsourcing firm ’ s time Advantages Disadvantages