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Nickels Nickels

McHughMcHugh

McHughMcHugh

Nickels Cover

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Chapter

8888 Adapting Adapting Organizations to Organizations to Today’s MarketsToday’s Markets

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Management Management PyramidPyramid

TopTop

Mid-Mid-LevelLevel

Front Front Line/SupervisoryLine/Supervisory

CEO,CEO,

ComptrolleComptroller,r,

Vice Pres.Vice Pres.Sales Sales Mgrs Plant Mgrs Plant

Mgrs.Mgrs.SupervisoSuperviso

rsrs

ForemenForemen

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Workers in Large* Companies in the Workers in Large* Companies in the Last 5 Years Have UndergoneLast 5 Years Have Undergone......

0% 10% 20% 30% 40% 50% 60% 70%

Reengineering orReorganization

Merger orAcquisition

Downsizing orLayoffs

Declining Sales orProfits

*500+ Employees*500+ Employees

Source: Source: Gallup for Carlson Marketing Group

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Purpose of an Purpose of an Organizational ChartOrganizational Chart

• Show the Show the activities of the activities of the organizationorganization

• Highlight Highlight subdivisions of subdivisions of the organizationthe organization

• Identify different Identify different types of work types of work performedperformed

• Provide Provide information about information about different different management management levelslevels

• Show the lines of Show the lines of authority and the authority and the flow of flow of organizational organizational communicationscommunications

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Organizational DesignOrganizational Design

OrganizationOrganizationDivisionDivisionDepartmentDepartmentGroupGroupIndividualIndividualSubordinate I Subordinate II

Group 1 Group 2

Departm ent A Departm ent B

Division V .P. Division V .P.

CEO

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Fayol’s Principles Fayol’s Principles of Organizationof Organization

• Unity of Unity of CommandCommand

• Hierarchy of Hierarchy of AuthorityAuthority

• Division of LaborDivision of Labor

• Subordination of Subordination of Individual InterestIndividual Interest

• AuthorityAuthority

• Degree of Degree of CentralizationCentralization

• Communication Communication ChannelsChannels

• OrderOrder

• EquityEquity

• Esprit de CorpsEsprit de Corps

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Weber’s Weber’s Organizational PrinciplesOrganizational Principles

• Job DescriptionsJob Descriptions

• Written RulesWritten Rules

• Procedures, Regulations, Procedures, Regulations, PoliciesPolicies

• Staffing/Promotions based Staffing/Promotions based on Qualificationson Qualifications

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Fundamentals Fundamentals of Bureaucracyof Bureaucracy

Chain of CommandChain of CommandRules & Rules &

RegulationsRegulationsSet Up by FunctionSet Up by FunctionCommunication is Communication is

MinimalMinimal E m p loyee

S u p erviso r

V ice P res id en t

B oss

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CentralizationCentralization (No Delegation)(No Delegation)

AdvantagesAdvantages

• Increased Increased UniformityUniformity

– Less Less DuplicationDuplication

– Maximum Maximum ControlControl

DisadvantagesDisadvantages

– Lots of Lots of Policies & Policies & ProceduresProcedures

– Many Many Layers/SlowerLayers/Slower

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Decentralization Decentralization ((Delegate Authority)Delegate Authority)

AdvantagesAdvantages– Informed Informed

DecisionsDecisions

– Worker Worker ResponsibilityResponsibility

– Few Few Layers/FasterLayers/Faster

DisadvantagesDisadvantages

– Loss of ControlLoss of Control

– Possible Possible DuplicationDuplication

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Span of ControlSpan of Control• Capabilities of Subordinates & Capabilities of Subordinates &

ManagerManager

• Complexity of JobComplexity of Job– Geographically CloseGeographically Close– Functional SimilarityFunctional Similarity– Need for CoordinationNeed for Coordination– Planning DemandsPlanning Demands– Functional ComplexityFunctional Complexity

Subordinate Subordinate Subordinate

Boss

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Organizational StructuresOrganizational Structures

Tall OrganizationsTall Organizations

- Many Layers of Many Layers of ManagementManagement

- High Cost of High Cost of ManagementManagement

Flat OrganizationsFlat Organizations

- Current TrendCurrent Trend

- Creation of Creation of TeamsTeams

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AdvantagesAdvantages– Skill DevelopmentSkill Development

– Economies of Economies of ScaleScale

– Good Good CoordinationCoordination

Departmentalization by Departmentalization by FunctionFunction

Business Education

Com m ., Hum anities,Social Sciences

Developm entalStudies

M ath, Sciences,Health Sciences

Technical, IndustrialService Occupations

CollegePresident

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Departmentalization by Departmentalization by FunctionFunction

DisadvantagesDisadvantages– Lack of Lack of

CommunicationCommunication

– Employees Identify Employees Identify with Departmentwith Department

– Slow Response to Slow Response to External DemandsExternal Demands

– Narrow SpecialistsNarrow Specialists

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DepartmentalizationDepartmentalization

• ProductProduct

• FunctionFunction

• CustomerCustomer• LocationLocation• ProcessProcess

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Line OrganizationsLine Organizations

AdvantagesAdvantages– Clear Authority Clear Authority

& Responsibility& Responsibility

– Easy to Easy to UnderstandUnderstand

– One Supervisor One Supervisor per Employeeper Employee

DisadvantagesDisadvantages– InflexibleInflexible

– Few Specialists for Few Specialists for AdviceAdvice

– Long Line of Long Line of CommunicationCommunication

– Difficult to Handle Difficult to Handle Complex Complex DecisionsDecisions

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Layers of AuthorityLayers of Authority• Top Managers- Decision Top Managers- Decision

MakersMakers

• Middle Managers- Middle Managers- Developed Rules & Developed Rules & ProceduresProcedures

• Workers and Workers and SupervisorsSupervisors

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Line/Staff OrganizationsLine/Staff Organizations

Line PersonnelLine Personnel

– Perform FunctionsPerform Functions

– Contribute Directly Contribute Directly to Organizational to Organizational

GoalsGoals

Staff PersonnelStaff Personnel

– AdviseAdvise

– Assist Line Assist Line PersonnelPersonnel

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Matrix OrganizationsMatrix OrganizationsAdvantagesAdvantages

– FlexibilityFlexibility

– Cooperation & Cooperation & TeamworkTeamwork

– CreativityCreativity

– More Efficient Use More Efficient Use of Resourcesof Resources

DisadvantagesDisadvantages– Costly/ComplexCostly/Complex

– Confusion in Confusion in LoyaltyLoyalty

– Requires Good Requires Good Interpersonal Skills Interpersonal Skills & Cooperation& Cooperation

– Not PermanentNot Permanent

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Tips for Team LeadersTips for Team Leaders Don’t be afraid to admit Don’t be afraid to admit

ignoranceignorance Know when to interveneKnow when to intervene Learn to truly share powerLearn to truly share power Worry about what you take Worry about what you take

on, not what you give upon, not what you give up Get used to learning on Get used to learning on

the jobthe job

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How to IncreaseHow to Increase Team ProductivityTeam Productivity

TTeacheach other members by other members by sharing skills/strengthssharing skills/strengths

EEmphasize concern for mphasize concern for teammatesteammates

AAsk/invitesk/invite questionsquestionsMMotivateotivate teammates through teammates through

praise & recognitionpraise & recognition

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NetworkingNetworking

• NetworkingNetworking– Real TimeReal Time

– TransparencyTransparency

– Virtual Virtual CorporationsCorporations

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A Virtual A Virtual CorporationCorporation

CoreCore

FirmFirm

Accounting Accounting FirmFirm

ProductioProduction Firmn Firm DistributioDistributio

n Firmn Firm

AdvertisinAdvertising Agencyg Agency

Design Design FirmFirm

Legal Legal FirmFirm

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Reasons to OutsourceReasons to Outsource

0% 10% 20% 30% 40% 50%

Reduce Cost

Focus on Core Competencies

Access to Expertise

Increase Profit

Faster Delivery

Resource Constraints

Technology Access

Source: CIO, “2003 Outsourcing Trends”

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OutsourcingOutsourcing+ Time to focus on Time to focus on

company’s primary company’s primary functionfunction

+ Increased level of Increased level of expertiseexpertise

+ Cost effectivenessCost effectiveness

+ Decreased overheadDecreased overhead

+ Risk reductionRisk reduction

+ FlexibilityFlexibility

+ TechnologyTechnology

- Less personal Less personal approachapproach

- Less control by Less control by owner in planning, owner in planning, implementing & implementing & carrying out carrying out company’s futurecompany’s future

- Potential for Potential for competing for the competing for the outsourcing firm’s outsourcing firm’s timetime

BenefitsBenefits DownsideDownside

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Top Five Outsourced Top Five Outsourced Business CategoriesBusiness Categories

0% 10% 20% 30% 40% 50% 60%

Information Tech.

HR/Benefits

Facilities Mgmt

Finance & Acctg

Marketing/Sales

Source: BusinessWeek, July 8, 2002

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Outsourcing PossibilitiesOutsourcing Possibilities

CountryCountry PossibilitiesPossibilities

ChinaChina Hardware, Software, Call CentersHardware, Software, Call Centers

PhilippinesPhilippinesAccounting, Graphic Artists, Architects, Accounting, Graphic Artists, Architects,

TelemarketersTelemarketers

MexicoMexico Car & Electronic ManufacturingCar & Electronic Manufacturing

Costa RicaCosta Rica Call Centers, IT Support, BookkeepingCall Centers, IT Support, Bookkeeping

South AfricaSouth Africa French, English, German Speaking Call CentersFrench, English, German Speaking Call Centers

RussiaRussia R & D Centers in Sciences, IT, MathR & D Centers in Sciences, IT, Math

IndiaIndia IT, Chip Design, Call CentersIT, Chip Design, Call CentersSource: BusinessWeek, February 3, 2003

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Break business into smaller unitsBreak business into smaller unitsBuild teamworkBuild teamworkImpose autonomyImpose autonomyCreate meaningful incentivesCreate meaningful incentivesOutsource non-operating activitiesOutsource non-operating activitiesShare business capabilities across Share business capabilities across

unitsunits

How to ImproveHow to ImproveOrganizational StructureOrganizational Structure

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The Four “Rs” ofThe Four “Rs” ofOrganizational TransformationOrganizational TransformationRReframeeframe

RRestructureestructure

RRevitalizeevitalize

RRenewenew

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Customer -Focused DesignCustomer -Focused Design

• InformationInformation

• Build teamworkBuild teamwork– cross-functionalcross-functional

– integrationintegration

• Self-Self-management & management & autonomyautonomy

• Bottom-up Bottom-up relationshipsrelationships

• Outsource Outsource

• Global orientationGlobal orientation

• Internal vs. Internal vs. external external customerscustomers

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Inverted Inverted Organization StructureOrganization Structure

Empowered Empowered front-line front-line workersworkersSupport Support

PersonnelPersonnel

Top Top Mgmt.Mgmt.

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Examples ofExamples ofInformal Group NormsInformal Group Norms

Do your job but don’t produce Do your job but don’t produce more than the rest of the group.more than the rest of the group.

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

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

Everyone is to be clean/organized at Everyone is to be clean/organized at the workstation.the workstation.

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Never side with managers in a Never side with managers in a dispute involving group members.dispute involving group members.

Respect/help your fellow group Respect/help your fellow group members on the job.members on the job.

Criticize the organization only Criticize the organization only among group members- never among group members- never among strangers.among strangers.

Drinking is done off-the-job- Drinking is done off-the-job- Never at work!Never at work!

Examples ofExamples ofInformal Group Informal Group

NormsNorms(cont’d)(cont’d)