Chapter
Eight
Organizing a CustomerDriven Business
8-1
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© 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
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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
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© 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
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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
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© 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
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Weber’s
Organizational Principles
 Job
Descriptions
 Written Rules
 Procedures, Regulations,
Policies
 Staffing/Promotions based on
Qualifications
8-7
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© 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
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© 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
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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
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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
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Departmentalization
Disadvantages
Lack of
Communication
 Employees Identify
with Department
 Slow Response to
External Demands
 Narrow Specialists

8-12
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Departmentalization
Product
 Function

Customer
 Location
 Process

8-13
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Centralization
(No Delegation)
Advantages
 Increased
Uniformity
 Less
Duplication
 Maximum
Control
Disadvantages
Lots of Policies
& Procedures
 Many
Layers/Slower

8-14
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Decentralization
(Delegate Authority)
Advantages
Informed
Decisions
 Worker
Responsibility
 Few
Layers/Faster

Disadvantages
Loss of
Control
 Possible
Duplication

8-15
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© 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
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Layers of Authority
 Top
ManagersDecision Makers
 Middle ManagersDeveloped Rules &
Procedures
 Workers and
Supervisors
8-17
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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
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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
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© 2002 by The McGraw-Hill Companies, Inc. All Rights Reserved.
Networking & ‘Nets

Networking
Real Time
 Transparency


‘Nets
Extranet
 Intranet

Teleconference
8-21
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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
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© 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
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© 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
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© 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. All Rights Reserved.