Chapter Eight Organizing a CustomerDriven Business 8-1 McGraw-Hill/ Irwin © 2002 by The McGraw-Hill Companies, Inc. All Rights Reserved. Management Pyramid CEO, Top Comptroller, Vice Pres. Sales Mgrs Plant Mgrs. Mid-Level Front Line/Supervisory Supervisors Foremen 8-2 McGraw-Hill/ Irwin © 2002 by The McGraw-Hill Companies, Inc. All Rights Reserved. Workers in Large* Companies During the Last 5 Years Have Undergone... Declining Sales or Profits *500+ Employees Downsizing or Layoffs Merger or Acquisition Reengineering or Reorganization 0% 10% 20% 30% 40% 50% 60% 70% Source: Gallup for Carlson Marketing Group 8-3 McGraw-Hill/ Irwin © 2002 by The McGraw-Hill Companies, Inc. All Rights Reserved. Purpose of an Organizational Chart Show the activities of the organization Highlight subdivisions of the organization Identify different types of work performed Provide information about different management levels Show the lines of authority in the organization and the flow of organizational communications 8-4 McGraw-Hill/ Irwin © 2002 by The McGraw-Hill Companies, Inc. All Rights Reserved. Organizational Design Organization CEO D ivisio n V .P . D e p a rtm e n t A G ro u p 1 S u b o rd in a te I D e p a rtm e n t B G ro u p 2 S u b o rd in a te II D ivisio n V .P . Division Department Group Individual 8-5 McGraw-Hill/ Irwin © 2002 by The McGraw-Hill Companies, Inc. All Rights Reserved. Fayol’s Principles of Organization Unity of Command Hierarchy of Authority Division of Labor Subordination of Individual Interest Authority Degree of Centralization Communication Channels Order Equity Esprit de Corps 8-6 McGraw-Hill/ Irwin © 2002 by The McGraw-Hill Companies, Inc. All Rights Reserved. Weber’s Organizational Principles Job Descriptions Written Rules Procedures, Regulations, Policies Staffing/Promotions based on Qualifications 8-7 McGraw-Hill/ Irwin © 2002 by The McGraw-Hill Companies, Inc. All Rights Reserved. Fundamentals of Bureaucracy Chain of Command Rules & Regulations Set Up by Function Communication = Minimal B oss V ice P resid en t S u p ervisor E m p loyee 8-8 McGraw-Hill/ Irwin © 2002 by The McGraw-Hill Companies, Inc. All Rights Reserved. Organizational Structures Tall Organizations Flat Organizations - Many Layers of - Current Trend Mgmt. - Creation of - Cost of Teams Mgmt.=High 8-9 McGraw-Hill/ Irwin © 2002 by The McGraw-Hill Companies, Inc. All Rights Reserved. Span of Control Capabilities of Subordinates & Manager Complexity of Job Bo ss S u b o rd in a te S u b o rd in a te S u b o rd in a te Geographically Close Functional Similarity Need for Coordination Planning Demands Functional Complexity 8-10 McGraw-Hill/ Irwin © 2002 by The McGraw-Hill Companies, Inc. All Rights Reserved. Departmentalization C o lle g e Advantages Skill Development Economies of Scale Good Coordination P re sid e n t Bu sin e ss E d u c a tio n C o m m ., H u m a n itie s, S o c ia l S c ie n c e s D e ve lo p m e n ta l S tu d ie s M a th , S c ie n c e s, H e a lth S c ie n c e s T e c h n ic a l, In d u stria l S e rvic e O c c u p a tio n s 8-11 McGraw-Hill/ Irwin © 2002 by The McGraw-Hill Companies, Inc. All Rights Reserved. Departmentalization Disadvantages Lack of Communication Employees Identify with Department Slow Response to External Demands Narrow Specialists 8-12 McGraw-Hill/ Irwin © 2002 by The McGraw-Hill Companies, Inc. All Rights Reserved. Departmentalization Product Function Customer Location Process 8-13 McGraw-Hill/ Irwin © 2002 by The McGraw-Hill Companies, Inc. All Rights Reserved. Centralization (No Delegation) Advantages Increased Uniformity Less Duplication Maximum Control Disadvantages Lots of Policies & Procedures Many Layers/Slower 8-14 McGraw-Hill/ Irwin © 2002 by The McGraw-Hill Companies, Inc. All Rights Reserved. Decentralization (Delegate Authority) Advantages Informed Decisions Worker Responsibility Few Layers/Faster Disadvantages Loss of Control Possible Duplication 8-15 McGraw-Hill/ Irwin © 2002 by The McGraw-Hill Companies, Inc. All Rights Reserved. Line Organizations Advantages Clear Authority & Responsibility Easy to Understand One Supervisor per Employee Disadvantages Inflexible Few Specialists for Advice Long Line of Communication Difficult to Handle Complex Decisions 8-16 McGraw-Hill/ Irwin © 2002 by The McGraw-Hill Companies, Inc. All Rights Reserved. Layers of Authority Top ManagersDecision Makers Middle ManagersDeveloped Rules & Procedures Workers and Supervisors 8-17 McGraw-Hill/ Irwin © 2002 by The McGraw-Hill Companies, Inc. All Rights Reserved. Line/Staff Organizations Line Personnel Staff Personnel Perform Functions Contribute Directly to Organizational Goals McGraw-Hill/ Irwin Advise Assist Line Personnel © 2002 by The McGraw-Hill Companies, Inc. All Rights Reserved. 8-18 Matrix Organizations Advantages Flexibility Cooperation & Teamwork Creativity More Efficient Use of Resources Disadvantages Costly/Complex Confusion in Loyalty Requires Good Interpersonal Skills & Cooperation Not Permanent 8-19 McGraw-Hill/ Irwin © 2002 by The McGraw-Hill Companies, Inc. All Rights Reserved. Tips for Team Leaders Don’t be afraid to admit ignorance Know when to intervene Learn to truly share power Worry about what you take on, not what you give up Get used to learning on the job 8-20 McGraw-Hill/ Irwin © 2002 by The McGraw-Hill Companies, Inc. All Rights Reserved. Networking & ‘Nets Networking Real Time Transparency ‘Nets Extranet Intranet Teleconference 8-21 McGraw-Hill/ Irwin © 2002 by The McGraw-Hill Companies, Inc. All Rights Reserved. A Virtual Corporation (Figure 8.7) Accounting Firm Production Firm Distribution Firm Core Firm Legal Firm Design Firm Advertising Agency 8-22 McGraw-Hill/ Irwin © 2002 by The McGraw-Hill Companies, Inc. All Rights Reserved. The Four “Rs” of Organizational Transformation Reframe Restructure Revitalize Renew 8-23 McGraw-Hill/ Irwin © 2002 by The McGraw-Hill Companies, Inc. All Rights Reserved. How to Improve Organizational Structure Break business into smaller units Build teamwork Impose autonomy Create meaningful incentives Outsource non-operating activities Share business capabilities across units 8-24 McGraw-Hill/ Irwin © 2002 by The McGraw-Hill Companies, Inc. All Rights Reserved. Inverted Organization Structure Empowered frontline workers Support Personnel Top Mgmt. 8-25 McGraw-Hill/ Irwin © 2002 by The McGraw-Hill Companies, Inc. All Rights Reserved. Outsourcing Benefits Time to focus on company’s primary function + Increased level of expertise + Cost effectiveness + Decreased overhead + Risk reduction + Flexibility + Technology + Downside - - Less personal approach Less control by owner in planning, implementing & carrying out company’s future Potential for competing for the outsourcing firm’s time 8-26 McGraw-Hill/ Irwin © 2002 by The McGraw-Hill Companies, Inc. All Rights Reserved. Customer -Focused Design Bottom-up relationships Build teamwork Outsource cross-functional Global orientation integration Internal vs. Selfmanagement & external customers Information autonomy 8-27 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. 8-28 McGraw-Hill/ Irwin © 2002 by The McGraw-Hill Companies, Inc. All Rights Reserved. Examples of Informal Group Norms(cont’d) 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! 8-29 McGraw-Hill/ Irwin © 2002 by The McGraw-Hill Companies, Inc. 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