Nickels Cover Nickels McHugh

Adapting Organizations to Today’s Markets Chapter 8 Adapting Organizations to Today’s Markets 8-2

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

Workers in Large* Companies in the Last 5 Years Have Undergone... *500+ Employees 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 and the flow of organizational communications

Organizational Design 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 is Minimal

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

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

Organizational Structures Flat Organizations Current Trend Creation of Teams Tall Organizations Many Layers of Management High Cost of Management

Departmentalization by Function Advantages Skill Development Economies of Scale Good Coordination

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

Departmentalization Customer Location Process Product Function

Line Organizations Advantages Disadvantages 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 Disadvantages Costly/Complex 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

How to Increase Team Productivity Teach other members by sharing skills/strengths Emphasize concern for teammates Ask/invite questions Motivate teammates through praise & recognition

Networking Networking Real Time Transparency Virtual Corporations

A Virtual Corporation Core Firm Production Firm Accounting Firm Distribution Firm Core Firm Legal Firm Advertising Agency Design Firm

Reasons to Outsource Source: CIO, “2003 Outsourcing Trends”

Outsourcing Benefits Downside 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

Top Five Outsourced Business Categories Source: BusinessWeek, July 8, 2002

Outsourcing Possibilities Country Possibilities China Hardware, Software, Call Centers Philippines Accounting, Graphic Artists, Architects, Telemarketers Mexico Car & Electronic Manufacturing Costa Rica Call Centers, IT Support, Bookkeeping South Africa French, English, German Speaking Call Centers Russia R & D Centers in Sciences, IT, Math India IT, Chip Design, Call Centers Source: BusinessWeek, February 3, 2003

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

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

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

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

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.

Examples of Informal Group Norms(cont’d) 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!