Module 1
The “New” Organization: Taking Action in an
Era of Organizational Transformation
PowerPoint Presentation by Charlie Cook
Copyright © 2005 South-Western. All rights reserved.
“Old” Model of the Organization
• Bureaucracy—classic model of formal organization
identified by Weber; features include:
 Specialized individual positions and jobs
 A formal hierarchy with a clear line of authority (“chain of
command”)
 Formal rules and standard operating procedures
 Set boundaries for each department and subunit, and clear
boundaries between the organization itself and its
environment
 Standardized training and training requirements, career
paths, and reward systems, based on the development of
expertise
Class Notes: Changing Organizational Models
Copyright © 2005 South-Western. All rights reserved.
1–2
“Old” Model of the Organization (cont’d)
• Strengths of the classic model:
 Predictability and reliability
 Impartiality
 Expertise
 Clear lines of control
Class Notes: Changing Organizational Models
Copyright © 2005 South-Western. All rights reserved.
1–3
“New” Model of the Organization
• Key features of the “new” model:
 Networked
 Flat
 Flexible
 Diverse
 Global
Class Notes: Changing Organizational Models
Copyright © 2005 South-Western. All rights reserved.
1–4
Key Features of the “New” Model
• Importance of networks results from:
 Availability of new telecommunications and information
technologies to connect people and organization units
 Competitive need for rapid response to customer
needs, changing environments, demands for
innovation
 Need for increasingly complex and diverse resources
to develop and deliver value to customers
 New approach of dealing with volatility by linking
source of volatility with part of organization most
affected by it
Copyright © 2005 South-Western. All rights reserved.
1–5
Key Features of the “New” Model (cont’d)
• Flattening of the hierarchy necessary because:
 Organizations must respond more rapidly and flexibly
to changes in markets and technology
 Changes in information technology remove the need
for layers of middle managers whose main tasks were
organizing and transmitting information
 Organizations face intense pressure to cut costs
Copyright © 2005 South-Western. All rights reserved.
1–6
Key Features of the “New” Model (cont’d)
• Need for flexibility driven by:
 Intensifying competition
 Increasingly diverse labor force
 Increasingly complex and unpredictable external
environment
Copyright © 2005 South-Western. All rights reserved.
1–7
Key Features of the “New” Model (cont’d)
• Diversity is necessary because of:
 Growing diversity of the workforce in demographic
terms
 A greater need for innovation and creative approaches
to solving problems
 Growing volatility in the business environment
 “Requisite variety”—the diversity that matches the
diversity of key elements of the environment
Copyright © 2005 South-Western. All rights reserved.
1–8
Key Features of the “New” Model (cont’d)
• Key factors driving globalization:
 Greatly reduced costs of international transportation
and communications
 Growing equalization across markets of “advanced
factor endowments”
 Globalization of markets
Class Notes: Changing Organizational Models
Copyright © 2005 South-Western. All rights reserved.
1–9
Key Features of the “New” Model (cont’d)
• Key factors driving globalization (cont’d):
 Continuing differences in cost structures across
countries
 Cross-border learning that expands capabilities of
firms
 Pressures from international nongovernmental
organizations (NGOs)
Class Notes: Changing Organizational Models
Copyright © 2005 South-Western. All rights reserved.
1–10
Summary of Features of Old and New
Models of Organization
Old Model
New Model
Individual position/job as basic unit of
organization
Team as a basic unit
Relations with environment handled by
specialist boundary-spanners
Densely networked with environment
Vertical flows of information
Horizontal and vertical flows of information
Decisions come down, information flows up
Decisions made where information resides
Tall (many layers of management)
Flat (few layers of management)
Emphasis on structures
Emphasis on processes
Emphasis on rules and standard
procedures
Emphasis on results and outcomes
Fixed hours
Flexible workday, part-time workers
Class Notes: Changing Organizational Models
Copyright © 2005 South-Western. All rights reserved.
Figure 1.1a
1–11
Summary of Features of Old and New
Models of Organization (cont’d)
Old Model
New Model
Career paths upward, linear
Career paths lateral, flexible
Standardized evaluation and
reward systems
Customized evaluation and reward systems
Single strong culture with strong
expectations of homogeneous behavior
Diversity viewpoints and behaviors
Ethnocentric mindset
International/global mindset
Specialist international managers
Boundary-crossers at all levels
Local value chains
Value chains crossing borders
Environment defined in terms of
country of location
Environment seen as global
Class Notes: Changing Organizational Models
Copyright © 2005 South-Western. All rights reserved.
Figure 1.1b
1–12
Framework for Taking Action
in the New Organization
Class Notes: Changing Organizational Models
Copyright © 2005 South-Western. All rights reserved.
Figure 1.2
Transparency 1.4
1–13
Search for the Organization of Tomorrow
Sources/Authorities
Managers:
Lawrence Bossidy, CEO, Allied Signal
H. James Maxmin, CEO, Laura Ashley
Philip Jarrosiak, Manager/HRM, GE
Herman Simon, plant manager, Gaines
William Buehler, Senior VP, Xerox
Richard Palermo, VP, Xerox
Don Fletcher, VP, Hallmark
Paul Allaire, CEO, Xerox
Consultants:
David Nadler, Delta Consulting
Doug Smith, McKinsey
Frank Ostroff
Mike Hammer, CSC Index
James Champy, CSC Index
Class Notes: Reading the Business Press
Copyright © 2005 South-Western. All rights reserved.
Number of Quotes
5
1
2
1
1
1
1
1
2
5
3
2
2
Figure 1.3a
1–14
The Organization of Tomorrow (cont’d)
Sources/Authorities
Academics/Researchers:
Peter Drucker
Marvin Weisbord
Shoshanna Zuboff
Quinn Mills
Robert Reich
Workers:
Robert Brookhouse, Kodak “Zebra”
Class Notes: Reading the Business Press
Copyright © 2005 South-Western. All rights reserved.
Number of Quotes
1
1
1
1
1
1
Figure 1.3b
1–15
A New View of Organization
Class Notes: The Search for the Organization of Tomorrow
Copyright © 2005 South-Western. All rights reserved.
Figure 1.4a
1–16
A New View of Organization (cont’d)
A new view of organization by McKinsey consultants
Frank Ostroff and Doug Smith is meant to help clients
hung up by the old template. Says Ostroff: “They
needed a clear architecture” to show how a functional
pyramid (previous slide) could become a processoriented, horizontal organization.
Class Notes: The Search for the Organization of Tomorrow
Copyright © 2005 South-Western. All rights reserved.
Figure 1.4b
1–17
McKinsey’s Plan
• Organize primarily around
process, not task
• Flatten hierarchy by minimizing
subdivision of processes
• Give senior leaders charge of
processes and process
performance
• Link performance objectives
and evaluation of all activities to
customer satisfaction
• Make teams, not individuals, the
focus of organization
performance and design
• Combine managerial and nonmanagerial activities
• Each employee should develop
several competencies
• Inform and train on a just-intime, need-to-perform basis
• Maximize supplier and
customer contact with everyone
in the organization
• Reward individual skill
development and team
performance instead of
individual performance alone
Class Notes: The Search for the Organization of Tomorrow
Copyright © 2005 South-Western. All rights reserved.
1–18
Contrasting Views of the Corporation
Data: Business Week.
Class Notes: Management by Web
Copyright © 2005 South-Western. All rights reserved.
Table 1
1–19
Features of 21st Century Corporations
• Management by Web
• More about bits, less about atoms
• Mass customization
• Dependent on intellectual capital
• Global
• Increased speed of actions, deliberations,
information
Class Notes: Management by Web
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1–20