9-1. chapter organizational agility 9 9mcgraw-hill/irwin management, 7/e copyright © 2007 the...
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Chapter
Chapter
Organizational AgilityOrganizational Agility
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McGraw-Hill/IrwinMcGraw-Hill/IrwinManagement, 7/eManagement, 7/e Copyright © 2007 The McGraw-Hill Companies, Inc. All rights reserved.Copyright © 2007 The McGraw-Hill Companies, Inc. All rights reserved.
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Learning Objectives
After Studying Chapter 9, You will know Why it is critical for organizations to be
responsive. The advantages of an organic organization
structure. The strategies and dynamic organizational
concepts that can be used to improve an organization’s responsiveness.
How a firm can be both big and small. How firms organize to meet customer
requirements. How firms organize around different types of
technology.
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Organizational Agility
It is change, continuing change, inevitable change, that is the dominant fact in
society today. No sensible decision can be made any longer without taking into
account not only the world as it is, but the world as it will be.
- Isaac Asimo
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The Responsive Organization
In today’s fast-changing business environment, responsiveness – quickness, agility, the ability to adapt to changing demands – is vital to a firm’s survival
Two broad forms of organizational structure include Mechanistic organization – seeks to maximize
internal efficiency Organic structure – an organizational form
that emphasizes flexibility
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Strategy and Organizational Agility
Certain strategies, and the structures, processes, and relationships that accompany them, seem particularly well suited to improving an organization’s ability to respond quickly and effectively to the challenges it faces
These strategies and structures are based on: Core competencies Strategic Alliances The organization’s ability to learn The organization’s ability to engage all its people in
achieving organizational objectives
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Organizing around Core Competencies
Core competence is the capability—knowledge, expertise, skill—that underlies a company’s ability to be a leader in providing a range of specific goods or services
Successfully developing a world-class core competence opens the door to a variety of future opportunities; failure means being foreclosed from many markets
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Organizing around Core Competencies
Using the core competency model effects the organization Strategically it means the organization
should commit to excellence and leadership in competencies before they commit to winning market share
Organizationally this means that the corporation should be viewed as a portfolio of competencies, not just a portfolio of specific businesses
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Organizing around Core Competencies
Managers who want to strengthen their firms’ competitiveness via core competencies need to focus on several related issues: Identify existing core competencies Acquire or build core competencies that will be
important for the future Keep investing in competencies so that the firm
remains world-class and better than competitors Extend competencies to find new applications
and opportunities for the markets of tomorrow.
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Strategic Alliances
A strategic alliance is a formal relationship created with the purpose of joint pursuit of mutual goals
In a strategic alliance, individual organizations share administrative authority, form social links, and accept joint ownership
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Strategic Alliances
Companies form strategic alliances to develop new technologies, enter new markets, and reduce manufacturing costs
Alliances are often the fastest, most efficient way to achieve objectives
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The Learning Organization
Being responsive requires continually changing and learning new ways to act
Learning faster than the competition is the only sustainable advantage according to some experts
A learning organization is an organization skilled at creating, acquiring, and transferring knowledge, and at modifying its behavior to reflect new knowledge and insights
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The Learning Organization
There are 5 key ingredients to a learning organization Their people engage in disciplined thinking
and attention to details, making decisions based on data and evidence rather than guesswork and assumptions
They search constantly for new knowledge, looking for expanding horizons and opportunities rather than quick fixes to current problems
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The Learning Organization
5 key ingredients to a learning organization They carefully review both successes and
failures, looking for lessons and deeper understanding
Learning organizations benchmark—they identify and implement the best business practices of other organizations, stealing ideas shamelessly
They share ideas throughout the organization via reports, information systems, informal discussions, site visits, education, and training
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The High-Involvement Organization
Participative management is becoming increasingly popular as a way to create a competitive advantage
High-Involvement Organizations are a type of organization in which top management ensures that there is consensus about the direction in which the business is heading
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The High-Involvement Organization
Task forces, study groups, and other techniques are used to foster participation in decisions that affect the entire organization
Continual feedback to participants regarding how they are doing compared to the competition and how effectively they are meeting the strategic agenda is also fundamental to this type of organization
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Organizational Size and Agility
One of the most important characteristics of an organization—and one of the most important factors influencing its ability to respond effectively to its environment—is its size
Large organizations Are typically more bureaucratic Jobs become more specialized Are more complex, which increases the need
for control
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The Case for Big
Alfred Chandler noted that big companies were the engine of economic growth throughout the 20th century
Size creates Scale economies – lower costs per unit of
production Economies of scope – materials and
processes employed in one product can be used to make other related products
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The Case for Small
Smaller companies can Move fast Provide quality goods
and services to targeted market niches
Inspire greater involvement from their people
Nimble, small firms frequently outmaneuver big bureaucracies; they introduce new and better products, and they steal market share
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Being Big and Small
The challenge is to e both big and small and capitalize on the advantages of each Small is beautiful for unleashing energy and
speed Size offers market power when buying and
selling To regain the responsiveness of a small
company some larger firms have had to downsize/rightsize
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Customers and the Responsive Organization
The point of structuring a responsive, agile organization lies in enabling it to meet and exceed the expectations of its customers
Perhaps no other aspect of the environment has had a more profound impact on organizing than a focus on customers
All business units must take into account three key players The company The competition The customer
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Customer Relationship Management
Customer relationship management (CRM) is a multifaceted process, typically mediated by a set of information technologies, that focuses on creating two-way exchanges with customers so that firms have an intimate knowledge of their needs, wants, and buying patterns
CRM helps companies understand and anticipate the needs of current and potential customers
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Customer Relationship Management
Customers want quality goods and service, low cost, innovative products, and speed; they are learning that somewhere an organization exists that will provide it all
World class companies have learned that to provide customers with what they want they will need to continuously improve their process because the competition will catch up
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Value Chain
The word customer now refers to the next process, or wherever the work goes next
The value chain is a deeper way to understand how organizations can add customer value to their products and services A value chain is the sequence of activities that
flow from raw materials to the delivery of a product or service, with additional value created at each step
When the total value created—that is, what customers are willing to pay—exceeds the cost of providing the product or service, the result is the organization’s profit margin
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Total Quality Management
Total Quality Management (TQM) is an integrative approach to management that supports the attainment of customer satisfaction through a wide variety of tools and techniques that result in high-quality goods and services
TQM has been impacted greatly by The work of W. Edwards Deming Six Sigma
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ISO 9000
ISO 9000 is a series of quality standards developed by a committee working under the International Organization for Standardization to improve total quality in all businesses for the benefit of producers and consumers
9-31
Reengineering Extending from TQM
and a focus on organizing around customer needs, organizations also have embraced the notion of reengineering
Key organizational systems and processes are examined in light of the answer to the following question: If you were the
customer, how would you like us to operate?
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Technology and Organizational Agility
Broadly speaking technology can be viewed as the methods, processes, systems, and skills used to transform resources (inputs) into products (outputs)
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Types of Technology Configurations
There are three basic technologies characterize how work is done Small batch technologies will produce goods
and services in low volumes Large batch technologies produce goods and
services in high volume Continuous process technologies are
processes that are highly automated and have continuous production flow
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Organizing for Flexible Manufacturing
Mass customization is production of varied, individually customized products at the low cost of standardized, mass-produced products
To accomplish mass customization companies organize around a dynamic network of relatively independent operating units Each process or task is called a module
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Organizing for Flexible Manufacturing
Computer-integrated manufacturing (CIM) encompasses a host of computerized production efforts linked together to optimize the production process
Flexible factories are manufacturing plants that have short production runs, are organized around products, and use decentralized scheduling
Lean Manufacturing means an operation that is both efficient and effective; it strives to achieve the highest possible productivity and total quality, cost-effectively, by eliminating unnecessary steps in the production process and continually striving for improvement
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Organizing for speed: Time-Based Competition
Time is emerging as the key competitive advantage that can separate market leaders from followers
Time-based competition refers to strategies aimed at reducing the total time needed to deliver the product or service Logistics is the movement of the right goods in the
right amount to the right place at the right time Just in Time is a system that calls for subassemblies
and components to be manufactured in very small lots and delivered to the next stage of the production process just as they are needed
Simultaneous engineering is a design approach in which all relevant functions cooperate jointly and continually in a maximum effort aimed at producing high-quality products that meet customers’ needs
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Final thoughts
Successful organizations—and that includes the successful managers within them—do not sit
still. They do not follow rigid models but maintain structures, systems, organizational
designs, and relationships that are adaptive—always sensitive to changes in their
environment and able to respond quickly, efficiently, and effectively to them. Their managers focus constantly on exceeding customer expectations and on continuous
quality improvement, designing their systems and structures to help them do just that.
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Looking Ahead
Chapter 10: Human Resource Management How companies use human resources management to gain
competitive advantage. Why companies recruit both internally and externally for
new hires. The various methods available for selecting new employees. Why companies spend so much on training and
development. How to determine who should appraise an employee’s
performance. How to analyze the fundamental aspects of a reward
system. How unions influence human resources management. How the legal system influences human resources
management.
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Organic Structure
Jobholders have broader responsibilities that change as the need arises
Communication occurs through advice and information rather than through orders and instructions
Decision making and influence are more decentralized and informal
Expertise is highly valued Jobholders rely more heavily on judgment than on rules Obedience to authority is less important than
commitment to the organization’s goals Employees depend more on one another and relate
more informally and personally
Return
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Downsizing and Rightsizing
Downsizing is the planned elimination of positions Rightsizing is a successful effort to achieve an
appropriate size at which the company performs most effectively
How to ease the pain of downsizing Avoid excessive hiring Choose positions to be eliminated by engaging in careful
analysis and strategic thinking Train people to cope with the new situation Identify and protect talented people Give special attention and help to those who have lost their
jobs Communicate constantly with people about the process Emphasize a positive future and people’s new roles in
attaining itReturn
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Deming’s 14 Points
Create constancy of purpose—strive for long-term improvement rather than short-term profit
Adopt the new philosophy—don’t tolerate delays and mistakes
Cease dependence on mass inspection—build quality into the process on the front end
End the practice of awarding business on price tag alone—build long-term relationships
Improve constantly and forever the system of production and service—at each stage
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Deming’s 14 Points
Institute training and retraining—continual updating of methods and thinking
Institute leadership—provide the resources needed for effectiveness
Drive out fear—people must believe it is safe to report problems or ask for help
Break down barriers among departments—promote teamwork
Eliminate slogans, exhortations, and arbitrary targets—supply methods, not buzzwords
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Deming’s 14 Points
Eliminate numerical quotas—they are contrary to the idea of continuous improvement
Remove barriers to pride in workmanship—allow autonomy and spontaneity
Institute a vigorous program of education and retraining—people are assets, not commodities
Take action to accomplish the transformation—provide a structure that enables quality
Return
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