Organizational Agility Chapter 09 McGraw-Hill/Irwin Copyright © 2011 by the McGraw-Hill Companies, Inc. All rights reserved.

Learning Objectives LO 1 Discuss why it is critical for organizations to be responsive. LO 2 Describe the qualities of an organic organization structure LO 3 Identify strategies and dynamic organizational concepts that can improve and organization’s responsiveness LO 4 Explain how a firm can be both big and small LO 5 Summarize how firms organize to meet customer requirements LO 6 Identify ways that firms organize around different types of technology

The Responsive Organization Mechanistic organization A form of organization that seeks to maximize internal efficiency. Organic structure An organizational form that emphasizes flexibility

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.

Organic Structure (cont.) 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.

Organization Chart Shows Who’s on Top Figure 9.1(a)

Advice Network Reveals Knowledge Flow Figure 9.1(b)

Organizing around Core Competencies 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

Question What is a formal relationship created among independent organizations with the purpose of joint pursuit of mutual goals? Knowledge organization Learning organization Strategic alliance Wholly-owned subsidiary The correct answer is c – strategic alliance. See next slide 9-9

Strategic Alliances Strategic alliance A formal relationship created among independent organizations with the purpose of joint pursuit of mutual goals.

How I’s Can Become We’s Table 9.1

The Learning Organization An organization skilled at creating, acquiring, and transferring knowledge, and at modifying its behavior to reflect new knowledge and insights.

How do Firms Become Learning Organizations? Engage in disciplined thinking and attention to details, making decisions based on data and evidence rather than guesswork and assumptions Search for new knowledge and ways to apply it Review successes and failures looking for lessons and deeper understanding Benchmark--identify and implement best practices Share ideas throughout the organization

The High-Involvement Organization A type of organization in which top management ensures that there is consensus about the direction in which the business is heading

Organizational Size and Agility Large organizations are typically less organic and more bureaucratic Jobs tend to become more specialized in large organizations With size comes greater complexity and a need for increased control Organizations can still find ways to remain agile despite these challenges

The Case for Big Larger size helps create economies of scale Larger size helps develop economies of scope Economies in which materials and processes employed in one product can be used to make other related products

The Case for Small Large organizations can have difficulty managing relationships with customers and among its own units Large organizations are more difficult to coordinate and control Smaller organizations can: Move fast Provide quality goods and services to targeted market niches Inspire greater involvement from their people Being small can avoid diseconomies of scale

Being Big and Small Downsizing Rightsizing The planned elimination of positions or jobs Rightsizing A successful effort to achieve an appropriate size at which the company performs most effectively

Downsizing Survivor’s syndrome Loss of productivity and morale in employees who remain after a downsizing.

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 Managers must stay focused in three key ingredients - the strategic triangle The company itself Competition The customer

The Strategy Triangle Figure 9.2

Customer Relationship Management Customer relationship management (CRM) A multifaceted process focusing on creating two-way exchanges with customers to foster intimate knowledge of their needs, wants, and buying patterns.

Customer Relationship Management Value chain The sequence of activities that flow from raw materials to the delivery of a good or service, with additional value created at each step.

Generic Value Chain Figure 9.3

Total Quality Management Total quality management (TQM) 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.

ISO 9001 ISO 9001 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.

Reengineering Reengineering Revolutionizing key organizational systems and processes to answer the question: “If you were the customer, how would you like us to operate?” Processes are designed from scratch as if the organization was just starting out

Types of Technology Configurations Small batch Technologies that produce goods and services in low volume. Large batch Technologies that produce goods and services in high volume. Continuous process A process that is highly automated and has a continuous production flow.

Organizing for Flexible Manufacturing Mass customization The production of varied, individually customized products at the low cost of standardized, mass-produced products.

Key Features in Mass Customization Table 9.2

Computer-Integrated Manufacturing Computer-integrated manufacturing (CIM) The use of computer-aided design and computer-aided manufacturing to sequence and optimize a number of production processes.

Flexible Factories Flexible factories Manufacturing plants that have short production runs, are organized around products, and use decentralized scheduling.

Lean Manufacturing Lean manufacturing An operation that 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.

Organizing for Speed: Time-Based Competition Time-based competition (TBC) Strategies aimed at reducing the total time needed to deliver a good or service.

Question ___________ is the movement of the right goods in the right amount to the right place at the right time. Logistics Supply chain management Value chain analysis Customer Service The correct answer is a - logistics. See next slide. 9-35

Time-Based Competition Logistics The movement of the right goods in the right amount to the right place at the right time

Time-Based Competition Just-in-time (JIT) 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.

Just-in-time (JIT) Elimination of waste Perfect quality. Reduced cycle times. Employee involvement Value-added manufacturing Discovery of problems and prevention of recurrence

Time-Based Competition Simultaneous engineering 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.

Destination CEO: Royal Phillips Electronics Discuss Philips’ approach to remaining a competitive and responsive global organization. BusinessWeek TV’s Destination CEO Name: Royal Phillips Electronics CEO of Company: Gerard Kleisterlee   Themes: Organization Structure, Organizational Agility Suggested chapters: 8, 9 Short paragraph about the video. Gerard Kleisterlee has worked at Royal Philips Electronics since he graduated from college. In 2001, he was named CEO of the Dutch conglomerate that makes everything from light bulbs to medical defibrillators to coffee makers. Kleisterlee has guided Philips through a massive reorganization which included downsizing its number of divisions, reducing its number of employees, and returning 5 billion shares of stock through dividends and buybacks. Founded in 1891 as a light bulb company, Philips later became known for its flat screen television sets and lighting systems. Today the Medical Systems division has become the most profitable for Philips, accounting for approximately one fourth of its sales. As a result of its Sense and Simplicity program instituted by Kleisterlee, Philips is now becoming known for products which are easy to use and which are easy on the eyes. Royal Philips Electronics (Koninklijke Philips Electronics NV) trades under the symbol PHG on the NYSE. 3-4 multiple choice questions with answers regarding video topics Companies such as Philips which organize by business such as Medical Systems, Domestic Appliances, Consumer Electronics, and Lighting use what type of organizational structure? Functional Matrix Product Division Network Philips was founded in 1891 as a company selling which of the following products? light bulbs coffee pots radios home cleaning products The Medical Systems division has become Philips fastest growing area as a result of _____________. It’s the division from which Keisterlee was first hired This division employs the most engineers There is little to no competition in this product area The changing demographics around the world regarding life expectancy 2-3 essay or discussion questions with suggested answers regarding video topics Do you think Philips uses a centralized or decentralized organization? Why? Students’ responses will vary. Typically, companies which use a divisional structure utilize a decentralized approach, since each division has its own operations, marketing, and finance departments. In which type of organizational design would you prefer to work? Why? Students’ responses will vary. Each design has its advantages which may appeal to students. Discuss Philips’ approach to remaining a competitive and responsive global organization. Students’ responses will vary. Philips instituted a new motto entitled Sense and Sensibility, which focuses products which are easy to use and which are easy on the eyes. Philips has also experienced a reorganization which involved reduction in the number of its divisions as well as decreasing its number of employees.