Chapter 6 Organizing the Business Enterprise Day two PowerPoint Presentation by Charlie Cook Copyright © 2005 Prentice Hall, Inc. All rights reserved. Key Topics • Organizational structure • Specialization and departmentalization • Responsibility, authority, delegation, and accountability • Functional, divisional, matrix, and international organizational structures • The informal organization and intrapreneuring Copyright © 2005 Prentice Hall, Inc. All rights reserved. 6–3 The Management Process • Planning • Organizing What are we? How are we put together? Who does what? • Directing • Controlling Copyright © 2005 Prentice Hall, Inc. All rights reserved. 6–4 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 Copyright © 2005 Prentice Hall, Inc. All rights reserved. ? 6–5 What Elements Influence Organizational Structure? Purpose Mission Strategies Size & Growth Technology External vs. Internal Focus Copyright © 2005 Prentice Hall, Inc. All rights reserved. Is our structure intentional? “the living room effect”? The customercentric organization 6–6 The Organization Chart & Influences in its Development Copyright © 2005 Prentice Hall, Inc. All rights reserved. Figure 6–1 6–7 The Building Blocks of Organizational Structure SPECIALIZATION: What jobs need done, and who will do them? DEPARTMENTALIZATION OPTIONS Grouping jobs into logical units (groups) More customercentric Customer Functional Product Process Geographic Other ? Copyright © 2005 Prentice Hall, Inc. All rights reserved. More Businesscentric 6–8 Multiple Forms of Departmentalization in an organization chart Copyright © 2005 Prentice Hall, Inc. All rights reserved. Figure 6–2 6–9 Specialization & Departmentalization Effects on the Customer / Wholesaler Relationship • Organized By Function Technical service Customer credit Marketing resources The Customer Copyright © 2005 Prentice Hall, Inc. All rights reserved. • Organized By Customer Sales Customer Representative The Customer 6–10 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? Copyright © 2005 Prentice Hall, Inc. All rights reserved. 6–11 Tall Organization: United States Army Centralized Top managers hold most decision-making authority. What types of goal setting does each layer focus on? Copyright © 2005 Prentice Hall, Inc. All rights reserved. Figure 6–3b 6–13 Flat Organization: Typical Law Firm Decentralized Lower level managers hold significant decision-making authority. Copyright © 2005 Prentice Hall, Inc. All rights reserved. Figure 6–3a 6–14 Let’s see how this works: • Team competition: • Two airplane manufacturers • One tall organization with centralized authority • One flat with decentralized authority Copyright © 2005 Prentice Hall, Inc. All rights reserved. 6–16 Tall airplane manufacture • Tall organization • Functional departmentalization • Centralized authority President VP Production VP Purchasing VP Sales Purchasing Manager Line Manager Materials Fabrication Line Manager Major Assembly Line Manager Finish Assembly Sales Manager Purchasing Agent Materials Fabrication Workers Major Assembly Workers Finish Assembly Workers Sales Person The Supplier Copyright © 2005 Prentice Hall, Inc. All rights reserved. The 6–17 Customer Flat airplane manufacture • Flat organization • Customer Departmentalization • Decentralized decision making Director authority President Director Type B Customers Type A Customers Purchasing Agent Materials Fabrication Worker Major Assembly Worker Copyright © 2005 Prentice Hall, Inc. All rights reserved. Finish Assembly Worker Sales Person Type A Customer Finish Purchasing Materials Major Sales Assembly Agents Fabrication Assembly People Workers Workers Workers Type 6–18B Customer 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 Copyright © 2005 Prentice Hall, Inc. All rights reserved. 6–20 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. Copyright © 2005 Prentice Hall, Inc. All rights reserved. 6–21 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. Copyright © 2005 Prentice Hall, Inc. All rights reserved. 6–22 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 Copyright © 2005 Prentice Hall, Inc. All rights reserved. 6–23 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 Copyright © 2005 Prentice Hall, Inc. All rights reserved. 6–24 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. Copyright © 2005 Prentice Hall, Inc. All rights reserved. 6–25 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. Copyright © 2005 Prentice Hall, Inc. All rights reserved. 6–26 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. Copyright © 2005 Prentice Hall, Inc. All rights reserved. 6–27 The Globally Integrated Enterprise Samuel Palmisano – CEO IBM - U.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 Copyright © 2005 Prentice Hall, Inc. All rights reserved. 6–30 Matrix Organization at Martha Stewart Copyright © 2005 Prentice Hall, Inc. All rights reserved. Figure 6–5 6–31 Basic Forms of Organizational Structure Functional Organization Divisional Organization International Organization Matrix Organization Copyright © 2005 Prentice Hall, Inc. All rights reserved. 6–35 International Division Structure Why is that international book cheaper? Copyright © 2005 Prentice Hall, Inc. All rights reserved. Figure 6–6 6–36 The Virtual Organization Copyright © 2005 Prentice Hall, Inc. All rights reserved. Figure 6–7 6–37 The Informal Organization: A Powerful Dynamic • Informal Groups • The Grapevine • Intrapreneuring Copyright © 2005 Prentice Hall, Inc. All rights reserved. 6–39 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. Copyright © 2005 Prentice Hall, Inc. All rights reserved. 6–40