McGraw-Hill© 2003 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill© 2003 The McGraw-Hill Companies, Inc. All rights reserved Chapter 9 The Responsive Organization

McGraw-Hill© 2003 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill© 2003 The McGraw-Hill Companies, Inc. All rights reserved Today’s Imperatives Responsiveness is more vital than ever to a firm’s success quickness, agility, and the ability to adapt to changing demands Burns and Stalker mechanistic structures - a form of organization that seeks to maximize internal efficiency organic structure - an organization form that emphasizes flexibility people work more as teammates than as subordinates breaks away from the traditional bureaucratic form responsive to changing competitive demands and market realities

McGraw-Hill© 2003 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill© 2003 The McGraw-Hill Companies, Inc. All rights reserved Elements Of Organic Structure Expertise is highly valued Greater reliance on judgement than rules Broad, changing job responsibilities Organic Structure Communication is advisory Employees relate more informally and personally Commitment to organizational goals Decentralized and informal decision making

McGraw-Hill© 2003 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill© 2003 The McGraw-Hill Companies, Inc. All rights reserved Leers (CEO) Stern (SVP Huttle Atkins Kibler O’Hara (SVP) Blair Stewart Ruiz Organization Chart Shows Who’s On Top Long (SVP) Muller Jules Baker Daven Thomas Zanado Calder (SVP) Harris Benson Fleming Church Martin Lee Wilson Swinney Carlson Hoberman Fiola

McGraw-Hill© 2003 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill© 2003 The McGraw-Hill Companies, Inc. All rights reserved Church Swinney Lee Fiola Wilson Carlson Hoberman Harris Calder (SVP) Fleming Martin Benson Blair Ruiz O’Hara (SVP) Stewart Leers (Ceo) Atkins Stern (SVP) Huttle Kibler Baker Jules Zanado Daven Thomas Long (SVP) Muller Advice Network Reveals Knowledge Flow

McGraw-Hill© 2003 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill© 2003 The McGraw-Hill Companies, Inc. All rights reserved Organizing For Optimal Size Large organizations typically less organic and more bureaucratic tend to have more specialized jobs and distinct groups of specialists add more levels to keep spans of control from becoming too large are more difficult to control adopt bureaucratic controls such as rules, procedures, and paperwork

McGraw-Hill© 2003 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill© 2003 The McGraw-Hill Companies, Inc. All rights reserved Organizing For Optimal Size (cont.) The case for big scale economies - lower costs per unit of production lowered operating costs, easier access to capital, greater purchasing power economies of scope - materials and processes used with one product can be used for other, related products Disadvantages of big diseconomies of scale - cost of being too big administrative difficulties may inhibit efficient performance

McGraw-Hill© 2003 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill© 2003 The McGraw-Hill Companies, Inc. All rights reserved Organizing For Optimal Size (cont.) The case for small smaller companies can: move fast provide quality goods and services to targeted market niches inspire greater involvement from their people today, premium exists for flexibility and responsiveness Being big and small small is beautiful for unleashing energy and speed large size offers market power challenge is to be both big and small to capitalize on the advantages of each

McGraw-Hill© 2003 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill© 2003 The McGraw-Hill Companies, Inc. All rights reserved Organizing For Optimal Size (cont.) Downsizing the planned elimination of positions or jobs common approaches include eliminating functions, hierarchical levels, or units rightsizing - a successful effort to achieve an appropriate size at which the company performs most effectively survivor’s syndrome - loss of productivity and morale in employees who remain after a downsizing struggle with heavier workloads wonder who will be the next to go try to figure out how to survive become narrow-minded, self-absorbed, and risk averse

McGraw-Hill© 2003 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill© 2003 The McGraw-Hill Companies, Inc. All rights reserved Easing The Pain Of Downsizing Positive practices Carefully choose positions to be eliminated Communicate constantly Attend to those who have lost their jobs Train people how to cope Emphasize a positive future Protect talented people

McGraw-Hill© 2003 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill© 2003 The McGraw-Hill Companies, Inc. All rights reserved Organizing For Environmental Response Organizing for customer responsiveness no other aspect of the environment has had a more profound impact on organizing recently than the focus on customers strategic triangle - managers must balance this triangle Customers CompetitorsCorporation Value

McGraw-Hill© 2003 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill© 2003 The McGraw-Hill Companies, Inc. All rights reserved Organizing for customer responsiveness (cont.) Customer Relationship Management (CRM) -multifaceted process that creates two-way exchanges with customers in order to learn their needs and buying patterns traditional thinking - customers wanted high quality or low costs world-class companies know that customers want it all kaizen - attain and retain competitive advantage by continuing to improve customer - refers to the next process or wherever work goes next highlights interdependence among related functions Organizing For Environmental Response (cont.)

McGraw-Hill© 2003 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill© 2003 The McGraw-Hill Companies, Inc. All rights reserved Organizing For Environmental Response (cont.) Organizing for customer responsiveness (cont.) Total Quality Management (TQM) - comprehensive approach to improving quality and customer satisfaction characterized by a strong orientation toward internal and external customers involves people across departments in improving all aspects of the business requires integrative mechanisms that facilitate group problem solving, information sharing, and cooperation across business functions Baldrige award - given to U.S. companies that achieve quality excellence

McGraw-Hill© 2003 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill© 2003 The McGraw-Hill Companies, Inc. All rights reserved W. Edwards Deming’s “14 Points” Of Quality Create constancy of purpose Don’t tolerate delays or mistakes Cease dependencies on mass inspection Don’t award business on price tag alone Constantly and forever improve the system of production or service Institute training and retraining Institute leadership Drive out fear Breakdown barriers among departments Eliminate slogans, exhortations, and arbitrary targets Eliminate numerical quotas Remove barriers to pride in workmanship Educate your people who should be viewed as assets, not commodities Provide a structure that enables quality

McGraw-Hill© 2003 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill© 2003 The McGraw-Hill Companies, Inc. All rights reserved The Baldrige Criteria Human resource development and management Management of process quality Leadership Quality excellence Information and analysis Customer focus and satisfaction Quality and operational results Strategic quality planning

McGraw-Hill© 2003 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill© 2003 The McGraw-Hill Companies, Inc. All rights reserved Organizing For Environmental Response (cont.) Organizing for customer responsiveness (cont.) ISO a series of quality standards developed by a committee working under the International Organization for Standardization intended to improve total quality in all businesses companies that comply with standards entitled to certification reengineering - revolutionizes key organizational systems and processes based on a vision for how the organization should run completely overhauls the operation in revolutionary ways

McGraw-Hill© 2003 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill© 2003 The McGraw-Hill Companies, Inc. All rights reserved Organizing For Technological Response Technology systematic application of scientific knowledge to a new product, process, or service refers to the methods, processes, systems, and skills used to transform resources (inputs) into products (outputs) Types of technology configurations small batch technologies - produce goods and services in low volume job shops structure tends to be organic few rules and formal procedures decentralized decision making

McGraw-Hill© 2003 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill© 2003 The McGraw-Hill Companies, Inc. All rights reserved Organizing For Technological Response (cont.) Types of technology configurations (cont.) large batch technologies - produce goods and services in high volume (mass production) structure tends to be more mechanistic many more rules and formal procedures centralized decision making with higher spans of control more formal communication continuous process technologies - highly automated continuous production flow structure can be more organic less monitoring and supervision required more informal communication

McGraw-Hill© 2003 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill© 2003 The McGraw-Hill Companies, Inc. All rights reserved Organizing For Technological Response (cont.) Organizing for flexible manufacturing produce both high-volume and high-variety products at the same time mass customization - the production of varied, individually customized products at the low cost of standardized, mass- produced products a dynamic network of relatively independent operating units module - a specific process or task performed by a unit some modules performed by outside suppliers or vendors different modules joined to make a good or service combination of modules dictated by unique customer requests

McGraw-Hill© 2003 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill© 2003 The McGraw-Hill Companies, Inc. All rights reserved Organizing For Technological Response (cont.) Organizing for flexible manufacturing (cont.) Computer-integrated manufacturing (CIM) - use of computer-aided design and computer-aided manufacturing to sequence and optimize a number of production processes host of computerized production efforts linked together team members work on the network from remote sites potentially affords greater control and predictability of production processes, reduced waste, faster throughput times, and higher quality requires good strategy and qualified people

McGraw-Hill© 2003 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill© 2003 The McGraw-Hill Companies, Inc. All rights reserved Organizing For Technological Response (cont.) Organizing for flexible manufacturing (cont.) flexible factories - differ from traditional factories have much shorter production runs with different products organized around products in work cells or teams use local or decentralized scheduling lean manufacturing - operation that strives to achieve the highest possible productivity and total quality, cost effectively, by eliminating unnecessary steps in the production process and continually strives for improvement

McGraw-Hill© 2003 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill© 2003 The McGraw-Hill Companies, Inc. All rights reserved Conditions For Effectiveness Of Lean Manufacturing Effective operation of lean manufacturing Broad training of people Long-term supplier relationships Work is organized in teams (cells) Informal and horizontal communication Concurrent product development General-purpose equipment

McGraw-Hill© 2003 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill© 2003 The McGraw-Hill Companies, Inc. All rights reserved Organizing For Technological Response (cont.) Organizing for speed: Time-based competition (TBC) time is emerging as a key competitive advantage that can separate market leaders from also-rans TBC - strategies aimed at reducing the total time it takes to deliver a product or service logistics - the movement of resources into the organization (inbound) and products from the organization (outbound) movement of the right goods in the right amount to the right place at the right time an extension of the organization’s technology configuration a great mass of parts, materials, and products moving via trucks, trains, planes, and ships

McGraw-Hill© 2003 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill© 2003 The McGraw-Hill Companies, Inc. All rights reserved Organizing for speed: Time-based competition (cont.) Just-In-Time (JIT) - system that calls for subassemblies and components to be manufactured in very small lots and delivered to the next stage of the production process just as they are needed a company-wide philosophy oriented toward eliminating waste throughout all operations and improving materials throughout excess inventory is eliminated costs are reduced Organizing For Technological Response (cont.)

McGraw-Hill© 2003 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill© 2003 The McGraw-Hill Companies, Inc. All rights reserved Production Concepts Included In JIT JIT Elimination of waste Value-added manufacturing Employee involvement Perfect quality Problem discovery and prevention Reduced cycle times

McGraw-Hill© 2003 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill© 2003 The McGraw-Hill Companies, Inc. All rights reserved Organizing For Technological Response (cont.) Organizing for speed: Time-based competition (cont.) simultaneous engineering - a design approach in which all relevant functions cooperate jointly and continually in maximum effort aimed at producing high-quality products that meet customers’ requests departure from old development process in which tasks were assigned to various functions in sequence incorporates the issues and perspectives of all functions - and customers and suppliers - from the beginning of the process

McGraw-Hill© 2003 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill© 2003 The McGraw-Hill Companies, Inc. All rights reserved Organizing For Strategic Response Organizing around core competencies companies compete on the basis of their core strengths and expertise core competence - the capability - knowledge, expertise, skill - that underlies a company’s ability to be a leader company viewed as a portfolio of competencies company should strive for core competence leadership by: identifying existing core competencies acquiring or building core competencies that will be important in the future investing in competencies in order to remain world-class extending competencies

McGraw-Hill© 2003 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill© 2003 The McGraw-Hill Companies, Inc. All rights reserved Organizing For Strategic Response (cont.) The network organization a collection of independent, mostly single-function firms not one firm but a web of interrelationships among many firms dynamic network (modular/virtual corporation) - temporary arrangement among partners that can be assembled and reassembled to adapt to the environment contracts stipulate expected results poorly performing firms can be removed and replaced offers flexibility, innovation, quick responses, and reduced costs and risks managers become brokers play several important boundary roles

McGraw-Hill© 2003 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill© 2003 The McGraw-Hill Companies, Inc. All rights reserved A Dynamic Network Distributors Suppliers Brokers Producers Designers

McGraw-Hill© 2003 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill© 2003 The McGraw-Hill Companies, Inc. All rights reserved Organizing For Strategic Response (cont.) Strategic alliances a formal relationship created among independent organizations with the purpose of joint pursuit of mutual goals individual organizations: share administrative authority form social links accept joint ownership may lead to the creation of additional, unforeseen opportunities managers must foster and develop the human relationships in the partnership

McGraw-Hill© 2003 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill© 2003 The McGraw-Hill Companies, Inc. All rights reserved How I’s Can Become We’s Characteristics of the best alliances Integration Interdependence Information Investment Institutionalization ImportanceIntegrity Individual excellence

McGraw-Hill© 2003 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill© 2003 The McGraw-Hill Companies, Inc. All rights reserved Organizing For Strategic Response (cont.) Strategic Alliances Advantages Quick market entry Access to materials and technology Disadvantages Shared ownership limits control and profits May lose control of proprietary technology

McGraw-Hill© 2003 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill© 2003 The McGraw-Hill Companies, Inc. All rights reserved Organizing For Strategic Response (cont.) Strategic Alliances Mutually strengthens partners Exploit economies of scale Fills gaps in technology and expertise Share distribution facilities Must overcome issues of Language, cultural barriers and trust Differences on how to proceed Effective and efficient decision making Sharing competitively sensitive information

McGraw-Hill© 2003 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill© 2003 The McGraw-Hill Companies, Inc. All rights reserved Organizing For Strategic Response (cont.) Strategic Alliances Pick good partners Be sensitive to cultural differences Alliance must benefit both sides Ensure parties honor their commitments Initiate structure for fast and effective decision making Keep the alliance flexible

McGraw-Hill© 2003 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill© 2003 The McGraw-Hill Companies, Inc. All rights reserved Organizing For Strategic Response (cont.) The learning organization an organization skilled at creating, acquiring, and transferring knowledge modifies its behavior to reflect new knowledge and insights characteristics of learning organizations people engage in disciplined thinking and attention to detail constant search for new knowledge in order to expand horizons careful review of successes and failures benchmark and implement the best business practices share ideas throughout the organization

McGraw-Hill© 2003 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill© 2003 The McGraw-Hill Companies, Inc. All rights reserved High-involvement organization top management ensures that there is consensus about the direction of the business seeks input from lower-levels of the company techniques used to foster participation in decision making continual feedback to participants flat, decentralized structure built around customer, product, or service Organizing For Strategic Response (cont.)