McGraw-Hill/ Irwin © 2002 by The McGraw-Hill Companies, Inc. All Rights Reserved. 8-1 Chapter Eight Organizing a Customer- Driven Business

McGraw-Hill/ Irwin © 2002 by The McGraw-Hill Companies, Inc. All Rights Reserved. 8-2 Management Pyramid Top Mid-Level Front Line/Supervisory CEO,Comptroller, Vice Pres. Sales Mgrs Plant Mgrs. SupervisorsForemen

McGraw-Hill/ Irwin © 2002 by The McGraw-Hill Companies, Inc. All Rights Reserved. 8-3 Workers in Large* Companies During the Last 5 Years Have Undergone... *500+ Employees Source: Source: Gallup for Carlson Marketing Group

McGraw-Hill/ Irwin © 2002 by The McGraw-Hill Companies, Inc. All Rights Reserved. 8-4 Purpose of an Organizational Chart 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

McGraw-Hill/ Irwin © 2002 by The McGraw-Hill Companies, Inc. All Rights Reserved. 8-5 Organizational Design  Organization  Division  Department  Group  Individual

McGraw-Hill/ Irwin © 2002 by The McGraw-Hill Companies, Inc. All Rights Reserved. 8-6 Fayol’s Principles of Organization Unity of Command Unity of Command 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

McGraw-Hill/ Irwin © 2002 by The McGraw-Hill Companies, Inc. All Rights Reserved. 8-7 Weber’s Organizational Principles Job Descriptions Job Descriptions Written Rules Written Rules Procedures, Regulations, Policies Procedures, Regulations, Policies Staffing/Promotions based on Qualifications Staffing/Promotions based on Qualifications

McGraw-Hill/ Irwin © 2002 by The McGraw-Hill Companies, Inc. All Rights Reserved. 8-8 Fundamentals of Bureaucracy  Chain of Command  Rules & Regulations  Set Up by Function  Communication = Minimal

McGraw-Hill/ Irwin © 2002 by The McGraw-Hill Companies, Inc. All Rights Reserved. 8-9 Organizational Structures Tall Organizations - Many Layers of Mgmt. - Cost of Mgmt.=High Flat Organizations - Current Trend - Creation of Teams

McGraw-Hill/ Irwin © 2002 by The McGraw-Hill Companies, Inc. All Rights Reserved Span of Control Capabilities of Subordinates & Manager Capabilities of Subordinates & Manager Complexity of Job Complexity of Job Geographically Close Geographically Close Functional Similarity Functional Similarity Need for Coordination Need for Coordination Planning Demands Planning Demands Functional Complexity Functional Complexity

McGraw-Hill/ Irwin © 2002 by The McGraw-Hill Companies, Inc. All Rights Reserved Departmentalization Advantages Skill Development Skill Development Economies of Scale Economies of Scale Good Coordination Good Coordination

McGraw-Hill/ Irwin © 2002 by The McGraw-Hill Companies, Inc. All Rights Reserved Departmentalization Disadvantages Lack of Communication Lack of Communication Employees Identify with Department Employees Identify with Department Slow Response to External Demands Slow Response to External Demands Narrow Specialists Narrow Specialists

McGraw-Hill/ Irwin © 2002 by The McGraw-Hill Companies, Inc. All Rights Reserved Departmentalization Product Product Function Function Customer Customer Location Location Process Process

McGraw-Hill/ Irwin © 2002 by The McGraw-Hill Companies, Inc. All Rights Reserved Centralization (No Delegation) 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

McGraw-Hill/ Irwin © 2002 by The McGraw-Hill Companies, Inc. All Rights Reserved Decentralization (Delegate 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

McGraw-Hill/ Irwin © 2002 by The McGraw-Hill Companies, Inc. All Rights Reserved 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

McGraw-Hill/ Irwin © 2002 by The McGraw-Hill Companies, Inc. All Rights Reserved Layers of Authority Top Managers- Decision Makers Top Managers- Decision Makers Middle Managers- Developed Rules & Procedures Middle Managers- Developed Rules & Procedures Workers and Supervisors Workers and Supervisors

McGraw-Hill/ Irwin © 2002 by The McGraw-Hill Companies, Inc. All Rights Reserved Line/Staff Organizations 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

McGraw-Hill/ Irwin © 2002 by The McGraw-Hill Companies, Inc. All Rights Reserved 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

McGraw-Hill/ Irwin © 2002 by The McGraw-Hill Companies, Inc. All Rights Reserved Tips for Team Leaders Don’t be afraid to admit ignorance Don’t be afraid to admit ignorance Know when to intervene Know when to intervene Learn to truly share power Learn to truly share power Worry about what you take on, not what you give up Worry about what you take on, not what you give up Get used to learning on the job Get used to learning on the job

McGraw-Hill/ Irwin © 2002 by The McGraw-Hill Companies, Inc. All Rights Reserved Networking & ‘Nets Networking Networking Real Time Real Time Transparency Transparency ‘Nets ‘Nets Extranet Extranet Intranet Intranet Teleconference

McGraw-Hill/ Irwin © 2002 by The McGraw-Hill Companies, Inc. All Rights Reserved A Virtual Corporation (Figure 8.7) CoreFirm Accounting Firm Production Firm Distribution Firm Advertising Agency Design Firm Legal Firm

McGraw-Hill/ Irwin © 2002 by The McGraw-Hill Companies, Inc. All Rights Reserved The Four “Rs” of Organizational Transformation  Reframe  Restructure  Revitalize  Renew

McGraw-Hill/ Irwin © 2002 by The McGraw-Hill Companies, Inc. All Rights Reserved  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

McGraw-Hill/ Irwin © 2002 by The McGraw-Hill Companies, Inc. All Rights Reserved Inverted Organization Structure Empowered front- line workers Support Personnel Top Mgmt.

McGraw-Hill/ Irwin © 2002 by The McGraw-Hill Companies, Inc. All Rights Reserved 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

McGraw-Hill/ Irwin © 2002 by The McGraw-Hill Companies, Inc. All Rights Reserved Customer -Focused Design Information Information Build teamwork Build teamwork cross-functional cross-functional integration integration Self- management & autonomy Self- management & autonomy Bottom-up relationships Bottom-up relationships Outsource Outsource Global orientation Global orientation Internal vs. external customers Internal vs. external customers

McGraw-Hill/ Irwin © 2002 by The McGraw-Hill Companies, Inc. All Rights Reserved 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.

McGraw-Hill/ Irwin © 2002 by The McGraw-Hill Companies, Inc. All Rights Reserved  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)