9-1
Chapter
9
McGraw-Hill
The Responsive
Organization
© 2003 The McGraw-Hill Companies, Inc. All rights reserved.
9-2
Today’s Imperatives

Responsiveness is more vital than ever to a firm’s success

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quickness, agility, and the ability to adapt to changing
demands
Burns and Stalker

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mechanistic structures - a form of organization that seeks to
maximize internal efficiency
organic structure - an organization form that emphasizes
flexibility
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McGraw-Hill
people work more as teammates than as subordinates
breaks away from the traditional bureaucratic form
responsive to changing competitive demands and market realities
© 2003 The McGraw-Hill Companies, Inc. All rights reserved.
9-3
Elements Of Organic Structure
Employees relate
more informally
and personally
Broad,
changing job
responsibilities
Commitment to
organizational
goals
Greater reliance
on judgement
than rules
McGraw-Hill
Communication
is advisory
Organic
Structure
Decentralized
and informal
decision making
Expertise is
highly valued
© 2003 The McGraw-Hill Companies, Inc. All rights reserved.
Organization Chart Shows Who’s
On Top
9-4
Leers
(CEO)
O’Hara
(SVP)
Blair
Stewart
Ruiz
McGraw-Hill
Calder
(SVP)
Harris
Benson
Fleming
Church
Martin
Lee
Wilson
Swinney
Carlson
Hoberman
Fiola
Long
(SVP)
Muller
Jules
Baker
Daven
Thomas
Zanado
Stern
(SVP
Huttle
Atkins
Kibler
© 2003 The McGraw-Hill Companies, Inc. All rights reserved.
Advice Network Reveals Knowledge
Flow
9-5
Blair
Church
Baker
Muller
Zanado
Jules
Thomas
Swinney
Leers (Ceo)
Daven
Lee
Long (SVP)
Harris
O’Hara (SVP)
Martin
Fiola
Calder (SVP)
Stewart
Ruiz
Carlson
Stern (SVP)
Fleming
Wilson
Huttle
Kibler
Hoberman
McGraw-Hill
Benson
Atkins
© 2003 The McGraw-Hill Companies, Inc. All rights reserved.
Organizing For Optimal Size

9-6
Large organizations
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typically less organic and more bureaucratic
tend to have more specialized jobs and distinct groups of
specialists
add more levels to keep spans of control from becoming too
large
are more difficult to control

McGraw-Hill
adopt bureaucratic controls such as rules, procedures, and
paperwork
© 2003 The McGraw-Hill Companies, Inc. All rights reserved.
Organizing For Optimal Size (cont.)

The case for big
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9-7
scale economies - lower costs per unit of production
lowered operating costs, easier access to capital, greater
purchasing power
economies of scope - materials and processes used with one
product can be used for other, related products
Disadvantages of big

diseconomies of scale - cost of being too big

McGraw-Hill
administrative difficulties may inhibit efficient performance
© 2003 The McGraw-Hill Companies, Inc. All rights reserved.
Organizing For Optimal Size (cont.)

The case for small

smaller companies can:
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9-8
move fast
provide quality goods and services to targeted market niches
inspire greater involvement from their people
today, premium exists for flexibility and responsiveness
Being big and small

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small is beautiful for unleashing energy and speed
large size offers market power
challenge is to be both big and small to capitalize on the
advantages of each
McGraw-Hill
© 2003 The McGraw-Hill Companies, Inc. All rights reserved.
Organizing For Optimal Size (cont.)

9-9
Downsizing

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the planned elimination of positions or jobs
common approaches include eliminating functions,
hierarchical levels, or units
rightsizing - a successful effort to achieve an appropriate
size at which the company performs most effectively
survivor’s syndrome - loss of productivity and morale in
employees who remain after a downsizing
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McGraw-Hill
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struggle with heavier workloads
wonder who will be the next to go
try to figure out how to survive
become narrow-minded, self-absorbed, and risk averse
© 2003 The McGraw-Hill Companies, Inc. All rights reserved.
Easing The Pain Of Downsizing
Carefully choose
positions to be
eliminated
Emphasize a
positive future
Communicate
constantly
McGraw-Hill
9 - 10
Train people
how to cope
Positive
practices
Protect talented
people
Attend to those
who have lost
their jobs
© 2003 The McGraw-Hill Companies, Inc. All rights reserved.
Organizing For Environmental
Response

9 - 11
Organizing for customer responsiveness

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no other aspect of the environment has had a more profound
impact on organizing recently than the focus on customers
strategic triangle - managers must balance this triangle
Customers
Corporation
McGraw-Hill
Competitors
© 2003 The McGraw-Hill Companies, Inc. All rights reserved.
Organizing For Environmental
Response (cont.)

9 - 12
Organizing for customer responsiveness (cont.)


Customer Relationship Management (CRM) -multifaceted
process that creates two-way exchanges with customers in
order to learn their needs and buying patterns
traditional thinking - customers wanted high quality or low
costs

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world-class companies know that customers want it all
kaizen - attain and retain competitive advantage by
continuing to improve
customer - refers to the next process or wherever work goes
next

McGraw-Hill
highlights interdependence among related functions
© 2003 The McGraw-Hill Companies, Inc. All rights reserved.
Organizing For Environmental
Response (cont.)

9 - 13
Organizing for customer responsiveness (cont.)

Total Quality Management (TQM) - comprehensive approach
to improving quality and customer satisfaction

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characterized by a strong orientation toward internal and external
customers
involves people across departments in improving all aspects of
the business
requires integrative mechanisms that facilitate group problem
solving, information sharing, and cooperation across business
functions
Baldrige award - given to U.S. companies that achieve quality
excellence
McGraw-Hill
© 2003 The McGraw-Hill Companies, Inc. All rights reserved.
W. Edwards Deming’s “14 Points”
Of Quality
9 - 14
• Create constancy of purpose
• Don’t tolerate delays or mistakes
• Cease dependencies on mass inspection
• Don’t award business on price tag alone
• Constantly and forever improve the system of production or service
• Institute training and retraining
• Institute leadership
• Drive out fear
• Breakdown barriers among departments
• Eliminate slogans, exhortations, and arbitrary targets
• Eliminate numerical quotas
• Remove barriers to pride in workmanship
• Educate your people who should be viewed as assets, not commodities
• Provide a structure that enables quality
McGraw-Hill
© 2003 The McGraw-Hill Companies, Inc. All rights reserved.
9 - 15
The Baldrige Criteria
Leadership
Customer focus
and satisfaction
Quality and
operational
results
Information
and analysis
Quality
excellence
Management of
process quality
McGraw-Hill
Strategic
quality planning
Human resource
development and
management
© 2003 The McGraw-Hill Companies, Inc. All rights reserved.
Organizing For Environmental
Response (cont.)

9 - 16
Organizing for customer responsiveness (cont.)

ISO 9000 - a series of quality standards developed by a
committee working under the International Organization for
Standardization
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intended to improve total quality in all businesses
companies that comply with standards entitled to certification
reengineering - revolutionizes key organizational systems and
processes
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McGraw-Hill
based on a vision for how the organization should run
completely overhauls the operation in revolutionary ways
© 2003 The McGraw-Hill Companies, Inc. All rights reserved.
Organizing For Technological
Response

Technology
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9 - 17
systematic application of scientific knowledge to a new
product, process, or service
refers to the methods, processes, systems, and skills used to
transform resources (inputs) into products (outputs)
Types of technology configurations

small batch technologies - produce goods and services in
low volume


job shops
structure tends to be organic

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McGraw-Hill
few rules and formal procedures
decentralized decision making
© 2003 The McGraw-Hill Companies, Inc. All rights reserved.
Organizing For Technological
Response (cont.)

9 - 18
Types of technology configurations (cont.)

large batch technologies - produce goods and services in
high volume (mass production)

structure tends to be more mechanistic
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many more rules and formal procedures
centralized decision making with higher spans of control
more formal communication
continuous process technologies - highly automated
continuous production flow

structure can be more organic
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McGraw-Hill
less monitoring and supervision required
more informal communication
© 2003 The McGraw-Hill Companies, Inc. All rights reserved.
Organizing For Technological
Response (cont.)

9 - 19
Organizing for flexible manufacturing

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produce both high-volume and high-variety products at the
same time
mass customization - the production of varied, individually
customized products at the low cost of standardized, massproduced products

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a dynamic network of relatively independent operating units
module - a specific process or task performed by a unit
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McGraw-Hill
some modules performed by outside suppliers or vendors
different modules joined to make a good or service
combination of modules dictated by unique customer requests
© 2003 The McGraw-Hill Companies, Inc. All rights reserved.
Organizing For Technological
Response (cont.)

9 - 20
Organizing for flexible manufacturing (cont.)

Computer-integrated manufacturing (CIM) - use of
computer-aided design and computer-aided manufacturing to
sequence and optimize a number of production processes
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McGraw-Hill
host of computerized production efforts linked together
team members work on the network from remote sites
potentially affords greater control and predictability of production
processes, reduced waste, faster throughput times, and higher
quality
requires good strategy and qualified people
© 2003 The McGraw-Hill Companies, Inc. All rights reserved.
Organizing For Technological
Response (cont.)

9 - 21
Organizing for flexible manufacturing (cont.)

flexible factories - differ from traditional factories
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have much shorter production runs with different products
organized around products in work cells or teams
use local or decentralized scheduling
lean manufacturing - operation that strives to achieve the
highest possible productivity and total quality, cost effectively,
by eliminating unnecessary steps in the production process and
continually strives for improvement
McGraw-Hill
© 2003 The McGraw-Hill Companies, Inc. All rights reserved.
Conditions For Effectiveness Of Lean
Manufacturing
Informal and
horizontal
communication
Broad training
of people
Concurrent
product
development
Long-term
supplier
relationships
McGraw-Hill
9 - 22
Effective
operation of
lean
manufacturing
General-purpose
equipment
Work is
organized in
teams (cells)
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Organizing For Technological
Response (cont.)

9 - 23
Organizing for speed: Time-based competition (TBC)

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time is emerging as a key competitive advantage that can
separate market leaders from also-rans
TBC - strategies aimed at reducing the total time it takes to
deliver a product or service
logistics - the movement of resources into the organization
(inbound) and products from the organization (outbound)
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McGraw-Hill
movement of the right goods in the right amount to the right place
at the right time
an extension of the organization’s technology configuration
a great mass of parts, materials, and products moving via trucks,
trains, planes, and ships
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Organizing For Technological
Response (cont.)

9 - 24
Organizing for speed: Time-based competition (cont.)

Just-In-Time (JIT) - system that calls for subassemblies and
components to be manufactured in very small lots and
delivered to the next stage of the production process just as
they are needed

a company-wide philosophy oriented toward eliminating waste
throughout all operations and improving materials throughout
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McGraw-Hill
excess inventory is eliminated
costs are reduced
© 2003 The McGraw-Hill Companies, Inc. All rights reserved.
Production Concepts Included In JIT
Elimination
of waste
Problem
discovery and
prevention
Value-added
manufacturing
McGraw-Hill
9 - 25
Perfect
quality
JIT
Reduced
cycle times
Employee
involvement
© 2003 The McGraw-Hill Companies, Inc. All rights reserved.
Organizing For Technological
Response (cont.)

9 - 26
Organizing for speed: Time-based competition (cont.)

simultaneous engineering - a design approach in which all
relevant functions cooperate jointly and continually in
maximum effort aimed at producing high-quality products that
meet customers’ requests

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McGraw-Hill
departure from old development process in which tasks were
assigned to various functions in sequence
incorporates the issues and perspectives of all functions - and
customers and suppliers - from the beginning of the process
© 2003 The McGraw-Hill Companies, Inc. All rights reserved.
Organizing For Strategic Response

9 - 27
Organizing around core competencies

companies compete on the basis of their core strengths and
expertise

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core competence - the capability - knowledge, expertise, skill that underlies a company’s ability to be a leader
company viewed as a portfolio of competencies
company should strive for core competence leadership by:

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McGraw-Hill
identifying existing core competencies
acquiring or building core competencies that will be important in
the future
investing in competencies in order to remain world-class
extending competencies
© 2003 The McGraw-Hill Companies, Inc. All rights reserved.
Organizing For Strategic Response
(cont.)

9 - 28
The network organization

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
a collection of independent, mostly single-function firms
not one firm but a web of interrelationships among many firms
dynamic network (modular/virtual corporation) - temporary
arrangement among partners that can be assembled and
reassembled to adapt to the environment

contracts stipulate expected results

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offers flexibility, innovation, quick responses, and reduced costs
and risks
managers become brokers

McGraw-Hill
poorly performing firms can be removed and replaced
play several important boundary roles
© 2003 The McGraw-Hill Companies, Inc. All rights reserved.
9 - 29
A Dynamic Network
Producers
Designers
Brokers
Suppliers
McGraw-Hill
Distributors
© 2003 The McGraw-Hill Companies, Inc. All rights reserved.
Organizing For Strategic Response
(cont.)

9 - 30
Strategic alliances
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a formal relationship created among independent organizations
with the purpose of joint pursuit of mutual goals
individual organizations:
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share administrative authority
form social links
accept joint ownership
may lead to the creation of additional, unforeseen
opportunities
managers must foster and develop the human relationships in
the partnership
McGraw-Hill
© 2003 The McGraw-Hill Companies, Inc. All rights reserved.
9 - 31
How I’s Can Become We’s
Integrity
Individual
excellence
Importance
Institutionalization
Characteristics
of the best
alliances
Integration
Information
McGraw-Hill
Interdependence
Investment
© 2003 The McGraw-Hill Companies, Inc. All rights reserved.
9 - 32
Organizing For Strategic Response
(cont.)

Strategic Alliances

Advantages

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
Quick market entry
Access to materials and technology
Disadvantages


McGraw-Hill
Shared ownership limits control and profits
May lose control of proprietary technology
© 2003 The McGraw-Hill Companies, Inc. All rights reserved.
9 - 33
Organizing For Strategic Response
(cont.)

Strategic Alliances

Mutually strengthens partners

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Exploit economies of scale
Fills gaps in technology and expertise
Share distribution facilities
Must overcome issues of
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McGraw-Hill
Language, cultural barriers and trust
Differences on how to proceed
Effective and efficient decision making
Sharing competitively sensitive information
© 2003 The McGraw-Hill Companies, Inc. All rights reserved.
9 - 34
Organizing For Strategic Response
(cont.)

Strategic Alliances

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Pick good partners
Be sensitive to cultural differences
Alliance must benefit both sides
Ensure parties honor their commitments
Initiate structure for fast and effective decision making
Keep the alliance flexible
McGraw-Hill
© 2003 The McGraw-Hill Companies, Inc. All rights reserved.
Organizing For Strategic Response
(cont.)

9 - 35
The learning organization
an organization skilled at creating, acquiring, and
transferring knowledge
 modifies its behavior to reflect new knowledge and insights
 characteristics of learning organizations

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people engage in disciplined thinking and attention to detail
constant search for new knowledge in order to expand horizons
careful review of successes and failures
benchmark and implement the best business practices
share ideas throughout the organization
© 2003 The McGraw-Hill Companies, Inc. All rights reserved.
Organizing For Strategic Response
(cont.)

9 - 36
High-involvement organization

top management ensures that there is consensus about the
direction of the business

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McGraw-Hill
seeks input from lower-levels of the company
techniques used to foster participation in decision making
continual feedback to participants
flat, decentralized structure built around customer, product, or
service
© 2003 The McGraw-Hill Companies, Inc. All rights reserved.