Chapter Eight Organizing a Customer- Driven Business

Management Pyramid Top Mid-Level Front Line/Supervisory CEO,Comptroller, Vice Pres. Sales Mgrs Plant Mgrs. SupervisorsForemen

Workers in Large* Companies During the Last 5 Years Have Undergone... *500+ Employees Source: Source: Gallup for Carlson Marketing Group

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 in the organization and the flow of organizational communications

Organizational Design  Organization  Division  Department  Group  Individual

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

Weber’s Organizational Principles Job Descriptions Written Rules Procedures, Regulations, Policies Staffing/Promotions based on Qualifications

Fundamentals of Bureaucracy  Chain of Command  Rules & Regulations  Set Up by Function  Communication = Minimal

Organizational Structures Tall Organizations -Many Layers of Mgmt. -Cost of Mgmt.=High Flat Organizations -Current Trend -Creation of Teams

Span of Control Capabilities of Subordinates & Manager Complexity of Job –Geographically Close –Functional Similarity –Need for Coordination –Planning Demands –Functional Complexity

Departmentalization Advantages –Skill Development –Economies of Scale –Good Coordination

Departmentalization Disadvantages –Lack of Communication –Employees Identify with Department –Slow Response to External Demands –Narrow Specialists

Departmentalization Product Function Customer Location Process

Centralization (No Delegation) Advantages –Increased Uniformity –Less Duplication –Maximum Control Disadvantages –Lots of Policies & Procedures –Many Layers/Slower

Decentralization (Delegate Authority) Advantages –Informed Decisions –Worker Responsibility –Few Layers/Faster Disadvantages –Loss of Control –Possible Duplication

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

Layers of Authority Top Managers- Decision Makers Middle Managers- Developed Rules & Procedures Workers and Supervisors

Line/Staff Organizations Line Personnel –Perform Functions –Contribute Directly to Organizational Goals Staff Personnel –Advise –Assist Line Personnel

Matrix Organizations Advantages –Flexibility –Cooperation & Teamwork –Creativity –More Efficient Use of Resources Disadvantages –Costly/Complex –Confusion in Loyalty –Requires Good Interpersonal Skills & Cooperation –Not Permanent

Tips for Team Leaders Don’t be afraid to admit ignorance Know when to intervene Learn to truly share power Worry about what you take on, not what you give up Get used to learning on the job

Networking & ‘Nets Networking –Real Time –Transparency ‘Nets –Extranet –Intranet Teleconference

A Virtual Corporation (Figure 8.7) CoreFirm Accounting Firm Production Firm Distribution Firm Advertising Agency Design Firm Legal Firm

The Four “Rs” of Organizational Transformation  Reframe  Restructure  Revitalize  Renew

 Break business into smaller units  Build teamwork  Impose autonomy  Create meaningful incentives  Outsource non-operating activities  Share business capabilities across units How to Improve Organizational Structure

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

Outsourcing +Time to focus on company’s primary function +Increased level of expertise +Cost effectiveness +Decreased overhead +Risk reduction +Flexibility +Technology -Less personal approach -Less control by owner in planning, implementing & carrying out company’s future -Potential for competing for the outsourcing firm’s time BenefitsDownside

Customer -Focused Design Information Build teamwork –cross-functional –integration Self-management & autonomy Bottom-up relationships Outsource Global orientation Internal vs. external customers

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.

 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! Examples of Informal Group Norms (cont’d)

Key Terms Bureaucracy 236 Centralized authority 244 Continuous improvement 251 Cross functional teams 248 Decentralized authority 244 Departmentalization 241 Formal organization 255 Informal organization 255 Inverted organization 252 Line personnel 245 Matrix organization 246 Networking 249 Organizational culture 254 Organizational design 236 Outsourcing 254 Reengineering 252 Restructuring 238 Span of control 239 Staff personnel 249 Total quality management 251