PRINCIPLES OF MANAGEMENT LESSON 1 With material from Business Process Management Institute (BPMI), Rummler, Brache And Schermerhorn

PowerPoint Presentation to Accompany Chapter 11 of Management, 8/e John R. Schermerhorn, Jr. Prepared by: Michael K. McCuddy Valparaiso University Published by: John Wiley & Sons, Inc.

Systems and the Organizational Value Chain Organization as a transformation system Management of the value chain Resources & materials flow in Materials received & organized for use People & technology create products Finished products distributed Customers served Management 8/e - Chapter 11

Organizations as Networks of Subsystems Organizational network of subsystems Purchasing & inventory systems Marketing, sales and distribution systems Operations and service management systems Outputs Inputs Accounting & financial systems Information & technology systems Suppliers Customers Management 8/e - Chapter 11

Processes cut across Functional Departments Management 8/e - Chapter 11

Organization Chart for Philip’s Vintage Auto Parts Management 8/e - Chapter 11

Relationship Map for Philip’s Vintage Auto Parts Invoice Invoice Finance Payment Payment Parts Manufacturers Back-Orders Till Cash Auto Parts Customers Shortage Notifications Auto Parts Sales (Counter Reps) Auto Parts Inventory Purchasing Payment Back-Orders Auto Parts Phone Sale Notification Auto Parts Auto Parts Fed Ex Custom Workshops Auto Parts Sales (Phone Reps) Auto Parts Phone Orders Management 8/e - Chapter 11

Management 8/e - Chapter 11 BPMN with “Swim Lanes” Management 8/e - Chapter 11

Business Process Modeling Notation Example Management 8/e - Chapter 11

Study Question 4: How can work processes be reengineered? Process reengineering Systematic and complete analysis of work processes. Design of new and better work processes. Work process “A related group of tasks that create a result of value for the customer.” (Michael Hammer) Workflow Movement of work from one point to another in the manufacturing or service delivery process. Management 8/e - Chapter 11

Study Question 4: How can work processes be reengineered? Steps in reengineering core processes: Identify core processes. Map core processes in respect to workflows. Evaluate all tasks for core processes. Search for ways to eliminate unnecessary tasks or work. Search for ways to eliminate delays, errors, and misunderstandings. Search for efficiencies in how work is shared and transferred among people and departments. Management 8/e - Chapter 11

Study Question 1: What are the essentials of organizational design? Choosing and implementing structures that best arrange resources to serve the organization’s mission and objectives. A problem-solving activity that should be approached from a contingency perspective. Management 8/e - Chapter 11

Study Question 1: What are the essentials of organizational design? Short-run, medium-run and long-run criteria for evaluating organizational effectiveness: Short-run focus. Goal accomplishment. Performance efficiency in resource utilization. Stakeholder satisfaction. Medium-run focus. Adaptability in the face of changing environments. Development of people and systems to meet new challenges. Long-run focus. Survival under conditions of uncertainty. Management 8/e - Chapter 11

Study Question 1: What are the essentials of organizational design? Bureaucracy A form of organization based on logic, order, and the legitimate use of formal authority. Bureaucratic designs feature … Clear-cut division of labor. Strict hierarchy of authority. Formal rules and procedures. Promotion based on competency. Management 8/e - Chapter 11

Study Question 1: What are the essentials of organizational design? Contingency perspective on bureaucracy asks the questions: When is a bureaucratic form a good choice for an organization? What alternatives exist when it is not a good choice? Environment determines the answers to these questions. A mechanistic design works in a stable environment An organic design works in a rapidly changing and uncertain environment. Management 8/e - Chapter 11

Study Question 1: What are the essentials of organizational design? Structural characteristics associated with design alternatives: Goal  predictability versus adaptability. Authority  centralized versus decentralized. Rules and procedures  many versus few. Spans of control  narrow versus wide. Tasks  specialized versus shared. Teams and task forces  few versus many. Coordination  formal and impersonal versus informal and personal. Management 8/e - Chapter 11

Study Question 1: What are the essentials of organizational design? Mechanistic Designs Predictable goals Centralized authority Many rules and procedures Narrow spans of control Specialized tasks Few teams and task forces Formal and impersonal means of coordination Organic Designs Adaptable goals Decentralized authority Few rules and procedures Wide spans of control Shared tasks Many teams and task forces Informal and personal means of coordination Management 8/e - Chapter 11

Contingencies in Organization Design Environment Organization design aligns structures with situational contingencies People Strategy Size Technology Management 8/e - Chapter 11

Management 8/e - Chapter 11 Study Question 2: How do contingency factors influence organization design? Checklist for identifying contingency factors in organizational design: Does the design fit well with the major problems and opportunities of the external environment? Does the design support implementation of strategies and the accomplishment of key operating objectives? Does the design support core technologies and allow them to be used to best advantage? Can the design handle changes in organizational size and different stages in the organizational life cycle? Does the design support and empower workers and allow their talents to be used to best advantage? Management 8/e - Chapter 11

Management 8/e - Chapter 11 Study Question 2: How do contingency factors influence organization design? Environment and organizational design — Certain environment … Relatively stable and predictable elements. Bureaucratic organizations and mechanistic designs are appropriate. Uncertain environment … More dynamic and less predictable elements. Adaptive organizations and organic designs are appropriate. Management 8/e - Chapter 11

Management 8/e - Chapter 11 Study Question 2: How do contingency factors influence organization design? Strategy and organizational design — Structure follows strategy. Stability strategy is supported by: Bureaucratic organizations using mechanistic designs. Growth strategies are is supported by: Adaptive organizations using organic designs. Management 8/e - Chapter 11

Management 8/e - Chapter 11 Study Question 2: How do contingency factors influence organization design? Technology The combination of knowledge, skills, equipment, computers, and work methods used to transform resource inputs into organization outputs. Management 8/e - Chapter 11

Management 8/e - Chapter 11 Study Question 2: How do contingency factors influence organization design? Core manufacturing technologies: Small-batch production. A variety of custom products are tailor-made to order. Mass production. A large number of uniform products are made in an assembly-line system. Continuous-process production. A few products are made by continuously feeding raw materials through a highly automated production system with largely computerized controls. Management 8/e - Chapter 11

Management 8/e - Chapter 11 Study Question 2: How do contingency factors influence organization design? Technology and organization design — The technological imperative Technology is a major influence on organizational structure. The best small-batch and continuous process plants have more flexible organic structures. The best mass-production plants have more rigid mechanistic structures. Management 8/e - Chapter 11

Management 8/e - Chapter 11 Study Question 2: How do contingency factors influence organization design? Core service technologies: Intensive technology Focuses the efforts of many people with special expertise on the needs of patients or clients. Mediating technology Links together parties seeking a mutually beneficial exchange of values. Long-linked technology Functions like mass production, where a client is passed from point to point for various aspects of service delivery. Management 8/e - Chapter 11

Management 8/e - Chapter 11 Study Question 2: How do contingency factors influence organization design? Organization size, life cycle, and design — Larger organizations tend to have more mechanistic designs, but it is not always best. Organizational life cycle: Birth stage — small size, simple structure. Youth stage — rapid growth in size, simple structure experiences stress. Midlife stage — growing to large size, more complex and formal structure. Maturity stage — stabilizes at large size, mechanistic structure. Management 8/e - Chapter 11

Management 8/e - Chapter 11 Study Question 2: How do contingency factors influence organization design? Coping with the disadvantages of large size: Downsizing. Reducing the scope of operations and number of employees. Intrapreneurship. The pursuit of entrepreneurial behavior by individuals and subunits within large organizations. Simultaneous structures. Organizations that combine mechanistic and organic designs. Management 8/e - Chapter 11

Management 8/e - Chapter 11 Study Question 2: How do contingency factors influence organization design? Human resources and good organization design — Provides people with supporting structures needed for both high performance and work satisfaction. Produces a good “fit” between organization structures and human resources. Allows the expertise and talents of organization members to be unlocked and utilized. Management 8/e - Chapter 11

Managing the “Tight / Loose Dilemma” Organizations must be – Tight and focused around objectives and values. Organizations must also be – Loose but disciplined in actions and contributions . Management 8/e - Chapter 11

High Performance Organizational Designs Objectives & Values TIGHT and Focused Actions & Contributions LOOSE but Disciplined Management 8/e - Chapter 11

High Performance Organizational Designs Objectives & Values TIGHT and Focused What it takes: shared purpose clear goals talent accountability Management 8/e - Chapter 11

High Performance Organizational Designs Support needed: teamwork participation decentralization freedom accountability Actions & Contributions LOOSE but Disciplined Management 8/e - Chapter 11

Study Question 3: What are the major issues in subsystems design? Basics of subsystem design … Subsystem — A department or work unit headed by a manager. Operates as a smaller part of the larger organization. Ideally, each subsystem supports other subsystems, working toward interests of entire organization. Management 8/e - Chapter 11

Study Question 3: What are the major issues in subsystems design? Lawrence and Lorsch’s findings on subsystems design … The total system structures of successful firms match the challenges of their environments. The subsystems structures of successful firms match the challenges of their respective subenvironments. Subsystems in successful firms worked well with each other. Management 8/e - Chapter 11

Study Question 3: What are the major issues in subsystems design? Managing subsystem differentiation: Differentiation is the degree of difference that exists among the internal components of an organization. Common sources of subsystems differentiation: Time orientation Objectives Interpersonal orientation Formal structure Management 8/e - Chapter 11

Study Question 3: What are the major issues in subsystems design? Managing subsystem integration: Integration is the level of coordination achieved among an organization’s internal components. Organization design paradox — Increased differentiation creates the need for greater integration. Integration is more difficult to achieve as differentiation increases. Management 8/e - Chapter 11

Study Question 3: What are the major issues in subsystems design? Mechanisms for achieving subsystem integration: Rules and procedures Hierarchical referral Planning Direct contact Liaison role Task forces Teams Matrix organizations Management 8/e - Chapter 11

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