Chapter Eight Organizing a Customer- Driven Business

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

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

1. Purpose Show the activities of the organization Show the activities of the organization Highlight subdivisions of the organization Highlight subdivisions of the organization Identify different types of work performed Identify different types of work performed Provide information about different management levels Provide information about different management levels Show the lines of authority in the organization and the flow of organizational communications Show the lines of authority in the organization and the flow of organizational communications

2. Design  Organization  Division  Department  Group  Individual

Fayol’s Principles One Boss One Boss Hierarchy of Authority Hierarchy of Authority Division of Labor Division of Labor Subordination of Individual Interest Subordination of Individual Interest Authority Authority Degree of Centralization Degree of Centralization Communication Channels Communication Channels Order Order Equity Equity Esprit de Corps Esprit de Corps

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

Organizational Issues: 1. Structures Tall Organizations - Many Layers of Mgmt. - Cost of Mgmt.=High Flat Organizations - Current Trend - Creation of Teams

2. Span of Control Capabilities of Subordinates & Manager Capabilities of Subordinates & Manager Complexity of Job Complexity of Job Geographically Closer + Geographically Closer + Functional Similarity + Functional Similarity + More Need for Coordination - More Need for Coordination - Greater Planning Demands - Greater Planning Demands - More Functional Complexity - More Functional Complexity - Optimum number of subordinates

Organization Types: 1. Bureaucracy  Chain of Command from top down  Rules & Regulations  Set Up by Function  Communication = Minimal Not responsive to customers

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

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

Different ways to Departmentalize Product type Product type Function in company Function in company Customer group Customer group Geographic Location Geographic Location Production Process Production Process

2. Centralization (No Delegation to Managers) Advantages Increased Uniformity Increased Uniformity Less Duplication Less Duplication Maximum Control Maximum ControlDisadvantages Lots of Policies & Procedures Lots of Policies & Procedures Many Layers/Slower Many Layers/Slower

3. Decentralization (Delegating Authority) Advantages Informed Decisions Informed Decisions Worker Responsibility Worker Responsibility Few Layers/Faster Few Layers/FasterDisadvantages Loss of Control Loss of Control Possible Duplication Possible Duplication

Line Personnel Perform Functions Perform Functions Contribute Directly to Organizational Goals Contribute Directly to Organizational Goals Staff Personnel Advise Advise Assist Line Personnel Assist Line Personnel Organizational Models: a. Line Organizations

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

b. Matrix Organizations Advantages Flexibility Flexibility Cooperation & Teamwork Cooperation & Teamwork Creativity Creativity More Efficient Use of Resources More Efficient Use of ResourcesDisadvantages Costly/Complex Costly/Complex Confusion in Loyalty Confusion in Loyalty Requires Good Interpersonal Skills & Cooperation Requires Good Interpersonal Skills & Cooperation Not Permanent Not Permanent Specialist from different parts of the organization for specific projects

c. Networking & ‘Nets Networking Networking Real Time Real Time Transparency Transparency ‘Nets ‘Nets Extranet Extranet Intranet Intranet Teleconference like Matrix

d. Virtual Corporation (Figure 8.7) CoreFirm Accounting Firm Production Firm Distribution Firm Advertising Agency Design Firm Legal Firm No permanent ties to core firm

 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

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 Assigning various functions to outside organizations – legal, accounting

Informal Groups  Relationships that form spontaneously within groups with similar goals  Learn who the important people are.  Work with the group.

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)