1. Structuring Organizations for Today’s Challenges
Chapter
Structuring Organizations for Today’s Challenges 8
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2. THE CHANGING ORGANIZATION
Often change in organizations is due to evolving business environments:
More global competition
Declining economy
Faster technological change
Pressure to protect the environment
Customer expectations have also changed – Consumers today want high-quality products with fast, friendly service and all at low cost.
See Learning Goal 2: Compare the organizational theories of Fayol and Weber.
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3. STRUCTURING an ORGANIZATION
Determine what work needs to be done
Create a division of labor
Set up teams or departments
Allocate resources
Assign tasks
Establish procedures
See Learning Goal 1: Outline the basic principles of organization management.
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4. Two Major Organizational Theorists
HENRI FAYOL
MAX WEBER

5. HENRI FAYOL

6. Fayol’s Principles of Organization
Degree of Centralization
Communication Channels
Order
Equity – respect & justice
Esprit de Corps
Unity of Command
Division of Labor
Authority
Hierarchy of Authority
Subordination of Individual Interest

7. ORGANIZATIONS BASED on FAYOL’S PRINCIPLES
Organizations in which employees have no more than one boss; lines of authority are clear.
Rigid organizations that often don’t respond to customers quickly.

8. MAX WEBER

9. WEBER’S PRINCIPLES
In addition to Fayol’s principles, Weber emphasized:
Job descriptions.
Written rules, decision guidelines and detailed records.
Consistent procedures, regulations and policies.
Staffing and promotion based on qualifications.

10. Front Line/Supervisory
Management Pyramid
CEO
CFO
COO
Top
Sales Mgrs Plant Mgrs.
Mid-Level
Supervisors
Foremen
Front Line/Supervisory

11. Organizational Design
Following Fayol’s and Weber’s concepts, organizations were designed for managers to control workers

12. Organizing
Designing structure of the organization and creating conditions and systems in which everyone and everything work together to achieve organization’s goals and objectives
Create Corporate Hierarchy
Generate the Organizational Chart

13. Organizational Design
Hierarchy – one person at the top and a ranked sequential order from top down
Chain of command – line of authority that moves from top of hierarchy to lowest level

14. BUREAUCRATIC ORGANIZATIONS
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 Goal 2: Compare the organizational theories of Fayol and Weber.
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15. Organizational Chart

16. Purpose of an Organizational Chart
Show the activities of the organization
Highlight subdivisions of the organization
Identify different types of work performed
Provide information about different management levels
Show the lines of authority and the flow of organizational communications

17. Typical Organization Chart

18. Considerations Involved in Structuring Organizations
Centralization/Decentralization
Span Of Control

19. Centralization vs. Decentralization of Authority
Degree of Centralization
The degree to which an organization allows managers at lower levels to make decisions

20. Centralized Authority
Decision-making authority is maintained at the top level of management at the company’s headquarters
Example: McDonald’s

21. Centralization (No Delegation)
Advantages
Greater Top-Management Control
More Efficiency
Simpler Distribution System
Disadvantages
Less Responsiveness to Customers
Less Empowerment
Lower Morale Away from Headquarters

22. Decentralized Authority
Decision-making authority is delegated to lower-level managers more familiar with local conditions than headquarters is.
Example: J.C. Penney

23. Decentralization (Delegation of Authority)
Advantages
Better Adaptation to Customer Wants
More Empowerment of Workers
Faster and More Informed Decision Making
Higher Morale
Disadvantages
Less Efficiency
Complex Distribution System
Less Top-Management Control

24. Span of Control

25. Span of Control
The optimal number of subordinates a manager supervises or should supervise effectively.
See Learning Goal 3: Evaluate the choices managers make in structuring organizations.
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26. Span of Control I. Capabilities of Subordinates & Manager
II. Complexity of Job
Geographical Closeness
Functional Similarity
Need for Coordination
Planning Demands
Functional Complexity

27. Span of Control - Narrow
Advantages
More Control by Management
More Chances for Advancement
Closer Supervision
Disadvantages
Less Empowerment
Higher Costs
See Learning Goal 2: Explain the various issues involved in structuring organizations.
See Text Pages: 214

28. Span of Control - Broad Disadvantages Advantages Reduced Costs
Fewer Chances for Advancement
Overworked Managers
Advantages
Reduced Costs
More Empowerment
See Learning Goal 2: Explain the various issues involved in structuring organizations.
See Text Pages: 214

29. Organizational Structures
Tall Organizations
Structures determine the way the company responds to employee and customer needs
Flat Organizations

30. Organizational Structures
Tall Organization Structure -- An organizational structure in which the organization chart would be tall because of the various levels of management.

31. Organizational Structures
Tall Organizations
Many Layers of Management
Communication distorted
High Cost of Management
Narrow Span of Control

32. Tall Organizational Structure

33. Organizational Structures
Flat Organization Structure -- An organizational structure that has few layers of management and a broad span of control.

34. Organizational Structures
Flat Organizations
More responsive
Current Trend
Creation of Teams
Broad Span of Control

35. Flat Organizational Structure

36. Departmentalization
Departmentalization -- Divides organizations into separate units.

37. Advantages of Departmentalization
Employees develop skills and progress within a department as they master skills.
The company can achieve economies of scale.
Employees can coordinate work within the function and top management can easily direct activities.

38. Disadvantages of Departmentalization
Departments may not communicate well.
Employees may identify with their department’s goals rather than the organization’s.
People may not be trained to take different managerial responsibilities, instead they become specialists.
Department members may engage in groupthink and may need outside input.

39. Ways to Departmentalize
By Function
Workers are grouped by skills and expertise to
specialize their skills.

40. Other Ways to Departmentalize

41. Other Ways to Departmentalize

42. Organization Models

43. FOUR WAYS to STRUCTURE an ORGANIZATION
Line Organizations
Line-and-Staff Organizations
Matrix-Style Organizations
Cross-Functional Self- Managed Teams
See Learning Goal 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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44. Line Organizations

45. Line Organizations
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.

46. Line Organization

47. Line Organizations Advantages Disadvantages
Clear Authority & Responsibility
Easy to Understand
Each Employee Has One Supervisor
Disadvantages
Inflexible
Few Specialists for Advice
Long Line of Communication
Difficult to Handle Complex Decisions

48. Line/Staff Organizations

49. Line/Staff Organizations
Line Personnel -- Workers responsible for directly achieving organizational goals, and include production, distribution and marketing employees.
Line personnel have authority to make policy decisions.
Staff Personnel -- Employees who advise and assist line personnel in meeting their goals, and include marketing research, legal advising, IT and human resource employees.

50. Line Personnel
Line Personnel -- Workers responsible for directly achieving organizational goals, and include production, distribution and marketing employees.
Line personnel have authority to make policy decisions.

51. Staff Personnel
Staff Personnel -- Employees who advise and assist line personnel in meeting their goals, and include marketing research, legal advising, IT and human resource employees.

52. Line-and-Staff Organization

53. Line/Staff Organizations
Advantages
Same as Line Org
plus
Access to expert advice
Disadvantages
Same as Line Org

54. Matrix Organizations

55. MATRIX ORGANIZATIONS
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 Goal 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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56. Typical Matrix Organization

57. Typical Matrix Organization

58. Advantages of Matrix Style
Inter-organizational cooperation and teamwork is encouraged.
Creative solutions to product development problems are produced.
Efficient use of organizational resources.

59. DISADVANTAGES of the MATRIX STYLE
It’s costly and complex.
Good interpersonal skills and cooperative employees are a must.
Teams are not permanent
Employees may be confused about where their loyalty belongs.
See Learning Goal 4: Contrast the various organizational models.
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60. Typical Matrix Organization

61. Fixing The Matrix Organization

62. Fixing The Matrix Organization
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.

63. Fixing The Matrix Organization
Cross-Functional Self-Managed Teams Groups of employees from different departments who work together on a long- term or permanent basis.

64. Fixing The Matrix Organization

65. Cross-Functional Self-Managed Teams
Empowered
Autonomous

66. Benchmarking and Outsourcing

67. Benchmarking and Outsourcing
Comparing an organization’s practices, processes, and products against the world’s best

68. Benchmarking and Outsourcing
If a company can’t match the benchmark, they may try to outsource.

69. Benchmarking and Outsourcing
Assigning various functions, such as accounting, production, security, billing, maintenance, and legal work to outside organizations

70. Outsourcing Firm Production Accounting Maintenance Advertising Legal
Training

71. Outsourcing Benefits Downside
Time to focus on company’s primary function
Increased level of expertise
Cost effectiveness
Decreased overhead
Less personal approach
Potential for competing for the outsourcing firm’s time

72. Benchmarking and Outsourcing
Core Competencies -- The functions an organization can do as well as or better than any other organization in the world.

73. Adapting to Market Changes
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.

74. Restructuring

75. Restructuring
Restructuring -- Redesigning an organization so it can more effectively and efficiently serve its customers.
Inverted Organization -- An organization that has contact people at the top and the CEO at the bottom of the organizational chart.
The manager’s job is to assist and support frontline workers, not boss them.

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

77. Traditional and Inverted Organization Structure

78. Organizational Culture
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.

79. The Formal and Informal Organization
Each organization is composed of two organizations – the Formal organization and the Informal organization

80. Formal Organization
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.

81. Formal Organization
Organization
Division
Department
Group
Individual

82. Informal Organization
The system of relationships that develop spontaneously as employees meet and form relationships.
Informal organization helps foster camaraderie and teamwork among employees.
No organization can be effective without formal and informal organization.

83. 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.

84. Examples of Informal Group Norms
Do your job but don’t produce more than the rest of the group.
Don’t tell off-color jokes or use profane language among group members.
Listen to the boss and use his/her expertise but don’t trust him/her.
Everyone is to be clean/organized at the workstation.

85. Examples of Informal Group Norms(cont’d)
Never side with managers in a dispute involving group members.
Respect/help your fellow group members on the job.
Criticize the organization only among group members- never among strangers.
Drinking is done off-the-job Never at work!