2. PowerPoint Presentation by Charlie Cook Copyright © 2005 Prentice Hall, Inc. All rights reserved. Chapter 6 Organizing the Business Enterprise Day two

3. Copyright © 2005 Prentice Hall, Inc. All rights reserved.6–2 “Anyone can do any amount of work provided it isn't the work he's supposed to be doing at the moment.” —Robert Benchley

4. Copyright © 2005 Prentice Hall, Inc. All rights reserved.6–3 Key Topics Organizational structure Specialization and departmentalization Responsibility, authority, delegation, and accountability Functional, divisional, matrix, and international organizational structures The informal organization and intrapreneuring

5. Copyright © 2005 Prentice Hall, Inc. All rights reserved.6–4 The Management Process Planning Organizing  What are we?  How are we put together?  Who does what? Directing Controlling

6. Copyright © 2005 Prentice Hall, Inc. All rights reserved.6–5 Organizational Structure Specification of the jobs to be done within an organization and how those jobs relate to one another Inputs Customers with wind power generators ?? There are a lot of questions to answer as to what happens in the black box that is our company

7. Copyright © 2005 Prentice Hall, Inc. All rights reserved.6–6 Is our structure intentional? “the living room effect”? The customer- centric organization External vs. Internal Focus Technology Size & Growth Strategies Mission Purpose What Elements Influence Organizational Structure?

8. Copyright © 2005 Prentice Hall, Inc. All rights reserved.6–7 The Organization Chart & Influences in its Development Figure 6–1

9. Copyright © 2005 Prentice Hall, Inc. All rights reserved.6–8 The Building Blocks of Organizational StructureSPECIALIZATION: What jobs need done, and who will do them? DEPARTMENTALIZATION OPTIONS Grouping jobs into logical units (groups) Customer Geographic Product Functional Other ? Process More customer- centric More Business- centric

10. Copyright © 2005 Prentice Hall, Inc. All rights reserved.6–9 Multiple Forms of Departmentalization in an organization chart Figure 6–2

11. Copyright © 2005 Prentice Hall, Inc. All rights reserved.6–10 Specialization & Departmentalization Effects on the Customer / Wholesaler Relationship Organized By Function Technical service Customer credit Marketing resources Sales The Customer Customer Representative The Customer Organized By Customer

12. Copyright © 2005 Prentice Hall, Inc. All rights reserved.6–11 The Decision-Making Hierarchy Assigning Tasks Responsibility & Authority Which is easier to delegate? Performing Tasks Delegation & Accountability Do you want accountable without authority? Distributing Authority Centralized vs. Decentralized How does this decision effect management’s ability to plan?

13. Copyright © 2005 Prentice Hall, Inc. All rights reserved.6–12 Centralized and Decentralized Organizations Centralized Decentralized Lower level managers hold significant decision-making authority Top managers hold most decision-making authority

14. Copyright © 2005 Prentice Hall, Inc. All rights reserved.6–13 Tall Organization: United States Army Figure 6–3b Centralized Top managers hold most decision-making authority. What types of goal setting does each layer focus on?

15. Copyright © 2005 Prentice Hall, Inc. All rights reserved.6–14 Flat Organization: Typical Law Firm Figure 6–3a Decentralized Lower level managers hold significant decision-making authority.

16. Copyright © 2005 Prentice Hall, Inc. All rights reserved.6–15 Relatively narrow span of control Relatively wide span of control Organizational Structure and Span of Control

17. Copyright © 2005 Prentice Hall, Inc. All rights reserved.6–16 Let’s see how this works: Team competition: Two airplane manufacturers One tall organization with centralized authority One flat with decentralized authority

18. Copyright © 2005 Prentice Hall, Inc. All rights reserved.6–17 Tall airplane manufacture Tall organization Functional departmentalization Centralized authority VP Purchasing Purchasing Manager VP Sales VP Production President The Customer Line Manager Materials Fabrication Sales Manager Line Manager Major Assembly Major Assembly Workers Line Manager Finish Assembly Finish Assembly Workers Materials Fabrication Workers The Supplier Purchasing Agent Sales Person

19. Copyright © 2005 Prentice Hall, Inc. All rights reserved.6–18 Purchasing Agents Flat airplane manufacture Flat organization Customer Departmentalization Decentralized decision making authority Director Type A Customers Materials Fabrication Workers President Type A Customer Purchasing Agent Sales Person Major Assembly Worker Finish Assembly Worker Director Type B Customers Type B Customer Major Assembly Workers Finish Assembly Workers Sales People Materials Fabrication Worker

20. Copyright © 2005 Prentice Hall, Inc. All rights reserved.6–19 The Competition: two teams Centralized Tall 1 President 3 VP’s 5 Managers 10 Workers 1 Customer 20 people Decentralized Short 1 President 2 Directors 10 Workers 1 Customer 14 People That’s 34 people employed, plus 1 customer, plus (SWOT) observers

21. Copyright © 2005 Prentice Hall, Inc. All rights reserved.6–20 The Goal: Make what the customer wants in the quantity they need Your customer provides product specifications to the sales person.  quantity expected to purchase  what the airplane should look like  Sample plane for each sales person

22. Copyright © 2005 Prentice Hall, Inc. All rights reserved.6–21 Tall Organization: Lay out your facility to look like your org. chart You may only communicate with people in your work group, AND one level up/down in your org chart.  Strictly obey your reporting relationships! There is no other communication possible outside of your work group President makes all decisions Middle managers: Pass information up and down Workers: Do what you are told, handle any feedback through your chain of command.

23. Copyright © 2005 Prentice Hall, Inc. All rights reserved.6–22 Flat Organization: Set up your facility to look like your org chart. Production & purchasing workers position as one work group. Communication is possible within this work group. Work groups are delegated decision making authority. Communicate outside your work group only through your director.

24. Copyright © 2005 Prentice Hall, Inc. All rights reserved.6–23 Production Round One: Customer: Place forecasts (talk w/instructor) Organizations: Take forecasts and communicate through your proper channels to set up production Start: Once teams are ready we will begin production all together. End: When the instructor says so Tally:  Units produced,  Units sold,  ending inventory

25. Copyright © 2005 Prentice Hall, Inc. All rights reserved.6–24 Production Round Two: Customer: Place requests (talk w/instructor first) Organizations: Take requests and communicate through your proper channels to set up production Start: Begin production when your team is ready  Do not wait for a go ahead from the instructor! End: When the instructor says so Tally:  Units produced,  Units sold,  ending inventory  Customer satisfaction

26. Copyright © 2005 Prentice Hall, Inc. All rights reserved.6–25 Customer Instructions Provide one sample product to each company. Pad your forecast to make sure you have access to enough product when you need it.  You will be shorted on your actual product received in the first round Purchase the product based on first production finished. Take delivery upon completion. Change spec as directed for round two Do not accept any non-spec product, ever.

27. Copyright © 2005 Prentice Hall, Inc. All rights reserved.6–26 Instructor Instructions Tell customer to order 10 airplanes from each team for round 1. During round 1, instruct presidents on future market trends (upcoming change to product specifications). Note: Tall org. President may be too busy to meet. (note: delegating daily operations allows the CEO more time for strategic planning – like talking to the customer) Stop round 1 leaving plenty of unfinished inventory, expect more in the Tall org. Round 2: Allow production & sales right when order is placed to emphasize any speed-to-change differences in Tall vs. Short organizations.

28. Copyright © 2005 Prentice Hall, Inc. All rights reserved.6–27 Lessons from Production Contest: SWOT for Tall organizations  Strengths  Weaknesses  Opportunities  Threats SWOT for Flat organizations  Strengths  Weaknesses  Opportunities  Threats Describe the types of organizations for which each option is appropriate. Give detailed examples.

29. Copyright © 2005 Prentice Hall, Inc. All rights reserved.6–28 Small airplane manufacture Tall organization Functional organization Centralized authority VP Purchasing Manager Purchasing VP Sales VP Production President The Customer Purchasing Agents Line Manager Materials Fabrication Sales Manager Sales People Line Manager Major Assembly Major Assembly Workers Line Manager Finish Assembly Finish Assembly Workers Materials Fabrication Workers

30. Copyright © 2005 Prentice Hall, Inc. All rights reserved.6–29 Purchasing Agents Small airplane manufacture Flat organization Customer Departmentalization Decentralized decision making authority Director Type A Customers Materials Fabrication Workers President Type A Customer Purchasing Agents Sales People Major Assembly Workers Finish Assembly Workers Director Type B Customers Type B Customer Major Assembly Workers Finish Assembly Workers Sales People Materials Fabrication Workers

31. Copyright © 2005 Prentice Hall, Inc. All rights reserved.6–30 The Globally Integrated Enterprise Samuel Palmisano – CEO IBM - U.S. News & World ReportU.S. News & World Report Corporate evolution Hub & spoke system is obsolete 1980’s: little replicas around the world New: distributed centers of excellence Stimulates collaboration and knowledge growth Command & Control & replication doesn’t measure up Issues? Quality, job-shifting, growing the pie

32. Copyright © 2005 Prentice Hall, Inc. All rights reserved.6–31 Matrix Organization at Martha Stewart Figure 6–5

33. Copyright © 2005 Prentice Hall, Inc. All rights reserved.6–32 Off to Chapter 7!

34. Copyright © 2005 Prentice Hall, Inc. All rights reserved.6–33 Forms of Authority Line Authority  Line Departments Staff Authority  Staff Members Committee and Team Authority

35. Copyright © 2005 Prentice Hall, Inc. All rights reserved.6–34 Line and Staff Organization Figure 6–4

36. Copyright © 2005 Prentice Hall, Inc. All rights reserved.6–35 Basic Forms of Organizational Structure Divisional Organization International Organization Functional Organization Matrix Organization

37. Copyright © 2005 Prentice Hall, Inc. All rights reserved.6–36 International Division Structure Why is that international book cheaper? Figure 6–6

38. Copyright © 2005 Prentice Hall, Inc. All rights reserved.6–37 The Virtual Organization Figure 6–7

39. Copyright © 2005 Prentice Hall, Inc. All rights reserved.6–38 Organizational Design in the 21 st Century Boundaryless Organizations Team Organizations Virtual Organizations Learning Organizations Customer Centric Organizations  Is what’s best for the customer more important that what’s easier for the company

40. Copyright © 2005 Prentice Hall, Inc. All rights reserved.6–39 The Informal Organization: A Powerful Dynamic Informal Groups The Grapevine Intrapreneuring

41. Copyright © 2005 Prentice Hall, Inc. All rights reserved.6–40 Chapter Review Discuss the elements of organizational structure. Explain specialization and departmentalization. Describe when tall vs. flat organizations are appropriate, and what characteristics they are likely to bring to an organization. How does the matrix fit in? Explain decision-making in centralized vs. decentralized organizations. Understand the importance of the informal organization.

42. Copyright © 2005 Prentice Hall, Inc. All rights reserved.6–41 Chapter Review (cont’d) Distinguish among functional, divisional, matrix, and international organizational structures. Describe the informal organization and intrapreneuring.