Understanding business 8th by mcchugh nickels chapter 08

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Adapting
Organizations
to Today’s
Markets

Nickels

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McHugh

McGraw-Hill/Irwin
Understanding Business, 8e

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CHAPTER

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8

McHugh
1-1

8-1

© 2008 The McGraw-Hill Companies, Inc., All Rights


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Structuring an Organization
Comprises:

• Division of Labor

• Accountability

• Team Tasks

• Allocating

• Assigning

Responsibility/
Authority

Resources

• Establishing
Procedures

8-2

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Fayol’s Principles
of Organization

• Unity of Command • Degree of
Centralization
• Hierarchy of
Authority
• Clear
Communication
• Division of Labor
Channels
• Subordination of • Order
Individual Interest
to the General
• Equity
Interest
• Esprit de Corps
• Authority
8-3


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Weber’s
Organizational Principles

• Job Descriptions
• Written Rules
• Procedures, Regulations,

Policies
• Staffing/Promotions Based
on Qualifications
8-4


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Centralization

(No Delegation)

Advantages

•
•
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Greater TopManagement Control

More Efficiency
Simpler Distribution
System
Stronger
Brand/Corporate
Image

Disadvantages

• Less

Responsiveness to
Customers
Less Empowerment

•
• Interorganizational
•

Conflict
Lower Morale Away
from Headquarters
8-5


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Decentralization

(Delegate Authority)
Advantages

• Better Adaptation to •
Customer Wants
•
• More Empowerment
of Workers
•
• Faster Decision
Making
•
• Higher Morale

Disadvantages
Less Efficiency
Complex Distribution
System
Less Top-Management
Control
Weakened Corporate
Image

8-6


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Organizational Structures
Tall Organizations
• Many Layers of
Management
• High Cost of
Management
• Narrow Span of
Control

Flat Organizations
• Current Trend

• Creation of Teams
• Broad Span of
Control

8-7


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How to Make Jobs
Fit Your Company (Part 1 of 2)
Each manager must ask:

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•

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What resources do I control to accomplish my tasks?
What measures will be used to evaluate my performance?
Who do I need to interact with and influence to achieve my goals?
How much support can I expect when I reach out to others for
help?

Source: HBS Working Knowledge, October 31,2005

8-8


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How to Make Jobs
Fit Your Company (Part 2 of 2)
Four Basic Spans of a Job:

• The Span of Control
• The Span of Accountability
• The Span of Influence
• The Span of Support
Source: HBS Working Knowledge, October 31,2005

8-9

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Span of Control - Narrow
Advantages
•
•
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More Control by
Top Management
More Chances for
Advancement
Greater
Specialization
Closer Supervision

Disadvantages
•
•
•
•

Less Empowerment
Higher Costs
Delayed Decision
Making

Less
Responsiveness to
Customers
8-10


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Span of Control - Broad
Advantages
•
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•

Reduced Costs
More
Responsiveness to
Customers
Faster Decision
Making
More
Empowerment

Disadvantages
•
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•

•

Fewer Chances for
Advancement
Overworked
Managers
Loss of Control
Less Management
Expertise
8-11


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Departmentalization
by Function
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Advantages
Skill Development
Economies of Scale
Good Coordination

Disadvantages

• Lack of

•
•

Communication
Employees Identify
with Department
Slow Response to
External Demands
Narrow Specialists

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• Groupthink

8-12


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Departmentalization

• By Product
• By Function
• By Customer

Group
• By Geographic
Location
• By Process

8-13


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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

8-14


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Line/Staff Organizations
Line Personnel

Staff Personnel

• Formal Authority

• Advise Line

• Make Policy
Decisions

Personnel

• Assist Line
Personnel

8-15


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Matrix Organizations
Advantages

Disadvantages

• Flexibility

• Costly/Complex

• Cooperation &

• Confusion in

• Creativity

• Requires Good

Teamwork

• More Efficient Use
of Resources

Loyalty

Interpersonal
Skills &
Cooperation

• Not Permanent

8-16


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Important Conditions
for Small Teams

1. Clear Purpose
2. Clear Goals
3. Correct Skills
4. Mutual Accountability
5. Shift Roles When Appropriate
Source: CIO Dec 2003

8-17


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Networking

• Real Time
• Transparency
• Virtual
Corporations

8-18


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A Virtual Corporation
Accounting
Firm

Productio
n Firm

Distributio
n Firm

Core
Firm
Legal
Firm
Design
Firm

Advertisin
g Agency

8-19

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Benefits and Concerns of
Healthcare Outsourcing
Benefits

•
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Provides Enough
Staff to Operate the
Facility
Cost Savings

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•

Source: Healthcare Financial Management, 2005

Concerns
Lower Employee
Morale
Liability
Should Patients be
Informed

Confidentiality &
Security

8-20


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Which Jobs Will
Be Outsourced Next?

Source: USA Today

8-21


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Adapting to Change
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Restructuring for Empowerment

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Focusing on the Customer

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Creating a Change-Oriented Organizational Culture

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The Informal Organization

8-22


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Layers of AuthorityTraditional

• Top Managers- Decision
Makers

• Middle Managers- Develops
Rules &
Procedures
• Workers and Supervisors
8-23


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Inverted
Organization Structure
Empowered
front-line
workers
Support
Personnel
Top
Mgmt.

8-24


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Examples of
Informal Group Norms
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Do your job but don’t produce
the group.

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Don’t tell off-color jokes or use profane language among
group members.

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Listen to the boss and use his/her expertise but don’t trust
him/her.

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Everyone is to be clean/organized at the workstation.

more than the rest of

8-25