Understanding business 10th chapter 8 structuring organizations for todays challenges

Chapter 08

Structuring
Organizations
for Today’s
Challenges

McGraw-Hill/Irwin

Copyright © 2014 by The McGraw-Hill Companies, Inc. All rights reserved.


Chapter Eight

LEARNING GOALS

1. Outline the basic principles of organizational
management.
2. Compare the organizational/management theories of
Fayol and Weber.
3. Evaluate the choices managers make in structuring
organizations.
4. Contrast the various organizational/management
models.
5. Identify the benefits of inter-firm cooperation and
coordination.
6. Explain how organizational culture can help
businesses adapt to change.
8-2

Profile

URSULA BURNS
Xerox

• Started as a summer intern and
moved up through Xerox.
• The only female AfricanAmerican CEO among
Fortune’s Top 150 Companies.
• Serves on many boards and
has been placed on councils by
President Obama and VicePresident Biden.
8-3


Chapter Eight

NAME that COMPANY

This sport’s equipment company studied the CD
industry and learned to use ultraviolet inks to
print graphics on skis. It went to the cable
television industry to learn how to braid layers
of fiberglass and carbon, and adapted that
knowledge to make its products.
Name that company!

8-4

Everyone’s
Reorganizing
LG1

REORGANIZATION is for
EVERYONE

• Many companies are reorganizing, especially
those in decline. Including:
- Auto makers

- Homebuilders - Banks

• Adjusting to changing markets is normal in
capitalist economies.
- More global competition
- Faster technological change
- Pressure to protect the environment

• Companies must go back to basic organizational
principles and firm up the foundation, and
attending to service needs of customers.
8-5


Building an
Organization from
the Bottom Up

STRUCTURING an ORGANIZATION

LG1

• Create a division of labor
• Set up teams or departments
• Allocate resources
• Assign tasks
• Establish procedures
• Adjust to new realities

8-6


SAFETY vs. PROFIT
(Making Ethical Decisions)

You own a lawn-mowing business and are aware of
the hazards in the job. But you’ve seen other
companies save money by eliminating safety
equipment. You’d also like to make more money.
• What do you do?
• Save money with less
safety precautions?
• What are the
consequences?
8-7


The Development
of Organization

Design
LG2

PRODUCTION CHANGED
ORGANZIATIONAL DESIGN

• Mass production of goods led to complexities in
organizing businesses.
• Economies of Scale -Companies can reduce
their production costs by
purchasing raw materials
in bulk.

• The average cost of
goods decreases as
production levels rise.
8-8


Fayol’s Principles
of Management
LG2

HENRI FAYOL’S - 14 PRINCIPLES
of MANAGEMENT

• Unity of command

• Degree of centralization

• Hierarchy of authority

• Clear communication
channels

• Division of labor

• Order

• Subordination of individual
• Equity
interests to the general
interest
• Esprit de corps
• Authority

8-9


Fayol’s Principles
of Management
LG2

ORGANIZATIONS BASED on
FAYOL’S PRINCIPLES

Organizations in which
employees have no more
than one boss; lines of
authority are clear.

Rigid organizations that
often do not respond to
customers quickly.
Video: />8-10


Max Weber and
Management
Theory

MAX WEBER’S PRINCIPLES

LG2

• Employees just need to do what they are told, a
Bureaucracy!
• In addition to Fayol’s principles, Weber
emphasized:
- Formal written rules, decision guidelines and
detailed records
- Consistent procedures, regulations and
policies
- Competence, not personality in job
appointment, and well defined job descriptions
- Division of labor and work specialization
- Staffing and promotion based on qualification

Video: />8-11

Turning
Principles into
Organization
Design

BUREAUCRATIC ORGANIZATIONS

LG2

• Bureaucracy -- An organization with many layers of
managers who set rules and regulations and oversee
all decisions.

• It can take weeks or months to have information
passed down to lower-level employees.
• Bureaucracies can annoy customers.

8-12


Turning
Principles into
Organization
Design

HIERARCHIES and COMMAND

LG2

• When following Fayol and Weber, managers

control workers.

• Chain of Command -- The line of
authority that moves from the top of the
hierarchy to the lowest level.
• Hierarchy -- A system in which one person is
at the top of an organization and there is a
ranked or sequential ordering from the top
down.
8-13


Progress
Assessment

PROGRESS ASSESSMENT

• What do the terms division of labor and job
specialization mean?
• What are the principles of management outlined
by Fayol?
• What did Weber add to the principles of Fayol?

8-14


Choosing
Centralized
or
Decentralized

Authority
LG3

CENTRALIZATION or
DECENTRALIZATION?

• Centralized Authority -- When decision-making is
concentrated at the top level of management.

• Decentralized
Authority -- When
decision-making is
delegated to lower-level
managers and employees
more familiar with local
conditions than
headquarters is.
8-15


Choosing the
Appropriate
Span of Control

SPAN of CONTROL

LG3

• Span of Control -- The optimal number of
subordinates a manager supervises or should

supervise.

• When work is standardized, broad spans of
control are possible.
• Appropriate span narrows at higher levels of the
organization.
• The trend today is to reduce middle managers
and hire better low-level employees.
8-16


Choosing Tall
versus Flat
Organization
Structures
LG3

ORGANIZATIONAL STRUCTURES
CHARTS

Structures determine the
way the company
responds to employee and
customer needs.

Tall Organization
Structures -- An
organizational structure in
which the organization
chart would be tall

because of the various
levels of management.
8-17


Organizational
Structure
LG2

ORGANIZATIONAL STRUCTURE
CHARTS

Flat Organization Structures -- An organizational
structure that has few layers of management and a
broad span of control.

8-18


Weighing the
Advantages and
Disadvantages of
Departmentalization

DEPARTMENTALIZATION

LG3

• Departmentalization -- Divides organizations into
separate units.

• Workers are grouped by skills and expertise to
specialize their skills.

8-19


Weighing the
Advantages and
Disadvantages of
Departmentalization

LG3

DEPARTMENTALIZATION
Advantages

1) Employees develop skills and progress within a
department as they master skills.
2) The company can achieve economies of scale.
3) Employees can coordinate work within the
function and top management can easily direct
activities.

8-20


Weighing the
Advantages and
Disadvantages of

Departmentalization

LG3

DEPARTMENTALIZATION
Disadvantages

1) Departments may not communicate well.
2) Employees may identify with their department’s
goals rather than the organization’s.
3) The company’s response to external changes may
be slow.
4) People may not be trained to take different
managerial responsibilities, instead they become
specialists.
5) Department members may engage in groupthink and
may need outside input.
8-21


Looking at
Alternate Ways to
Departmentalize

WAYS to DEPARTMENTALIZE

LG3

8-22

Looking at
Alternate Ways to
Departmentalize

WAYS to DEPARTMENTALIZE

LG3

8-23


Progress
Assessment

PROGRESS ASSESSMENT

• Why are organizations becoming flatter?
• What are some reasons for having a narrow span
of control in an organization?
• What are the advantages and disadvantages of
departmentalization?
• What are the various ways a firm can
departmentalize?
8-24


Organization
Models
LG4

FOUR WAYS to
STRUCTURE an ORGANIZATION

1. Line Organizations
2. Line-and-Staff
Organizations
3. Matrix-Style
Organizations
4. Cross-Functional SelfManaged Teams

8-25