*

*Chapter Eight

Adapting Organizations

to Today’s Markets

McGraw-Hill/Irwin Copyright © 2012 by The McGraw-Hill Companies, Inc. All rights reserved.

*

*Building an Organization from the Bottom Up

• Create a division of labor

• Set up teams or departments

• Allocate resources

• Assign tasks

• Establish procedures

• Adjust to new realities

STRUCTURING an ORGANIZATIONLG1

8-2

*

*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.

THE CHANGING ORGANIZATION

LG2

8-3

*

*The Development of Organization Design

• Mass production of goods led to complexities in organizing businesses.

PRODUCTION CHANGED ORGANZIATION DESIGN

LG2

• Economies of Scale -- Companies can reduce their production costs by purchasing raw materials in bulk.

• The average cost of goods decrease as production levels rise.

8-4

*

*Fayol’s Principles of Organization

• Unity of command

• Hierarchy of authority

• Division of labor

• Subordination of individual interests to the general interest

• Authority

FAYOL’S PRINCIPLES

LG2

• Degree of centralization

• Clear communication channels

• Order

• Equity

• Esprit de corps

8-5

*

*Max Weber and Organizational Theory

• Employees just need to do what they’re told.

• 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.

WEBER’S PRINCIPLES

LG2

8-6

*

* Turning Principles into Organization Design

• When following Fayol and Weber, managers control workers.

• Hierarchy -- A system in which one person is at the top of an organization and there is a ranked or sequential ordering from the top down.

• Chain of Command -- The line of authority that moves from the top of the hierarchy to the lowest level.

HIERARCHIES and COMMAND

LG2

8-7

*

* Turning Principles into Organization Design

LG2

TYPICAL ORGANIZATION CHART

8-8

*

* Turning Principles into Organization Design

• 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.

BUREAUCRATIC ORGANIZATIONSLG2

8-9

*

*Choosing Centralized or Decentralized Authority

• Centralized Authority -- When decision-making is concentrated at the top level of management.

CENTRALIZATION or DECENTRALIZATION? LG3

• Decentralized Authority -- When decision-making is delegated to lower-level managers and employees more familiar with local conditions than headquarters.

8-10

*

*Choosing the Appropriate Span of Control

• Span of Control -- The optimal number of subordinates a manager supervises or should supervise.

• When work is standardized, broad spans of control are possible.

• Appropriate span narrows at higher levels of the organization.

• The trend today is to reduce middle managers and hire better low-level employees.

SPAN of CONTROLLG3

8-11

*

* Choosing Tall versus Flat Organization Structures

• Structures determine the way the company responds to employee and customer needs.

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

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

ORGANIZATIONAL STRUCTURESLG3

8-12

*

* Choosing Tall versus Flat Organization Structures

FLAT ORGANIZATIONAL STRUCTURE

LG3

8-13

*

*Weighing the Advantages and Disadvantages of Departmentalization

• Departmentalization -- Divides organizations into separate units.

• Workers are grouped by skills and expertise to specialize their skills.

DEPARTMENTALIZATION

LG3

8-14

*

*Weighing the Advantages and Disadvantages 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.

ADVANTAGES of DEPARTMENTALIZATION

LG3

8-15

*

*Weighing the Advantages and Disadvantages of Departmentalization

• Departments may not communicate well.

• Employees may identify with their department’s goals rather than the organization’s.

• The company’s response to external changes may be slow.

• 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.

DISADVANTAGES of DEPARTMENTALIZATION

LG3

8-16

*

*Organization ModelsFOUR WAYS to STRUCTURE an

ORGANIZATIONLG4

8-17

*

*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.

LINE ORGANIZATIONS

LG4

8-18

*

*Line-and-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.

LINE PERSONNEL

LG4

8-19

*

*Line-and-Staff Organizations

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

STAFF PERSONNEL

LG4

8-20

*

*Line-and-Staff Organizations

LG4

SAMPLE LINE-and-STAFF ORGANIZATION

8-21

*

*Creating a Change-Oriented Organizational Culture

• Organizational or Corporate Culture -- The widely shared values within an organization that foster unity and cooperation to achieve common goals

ORGANIZATIONAL CULTURE

LG6

8-22

*

*Managing the Informal 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.

• No organization can be effective without formal and informal organization.

FORMAL ORGANIZATION

LG6

8-23

*

*Managing the Informal Organization

• Informal Organization -- The system of relationships that develop spontaneously as employees meet and form relationships.

INFORMAL ORGANIZATION

LG6

• Informal organization helps foster camaraderie and teamwork among employees.

8-24