Chapter Chapter EightEight

Organizing a Organizing a Customer-Driven Customer-Driven

BusinessBusiness

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

Workers in Large* Companies During the Last 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

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

Organizational Design

OrganizationDivisionDepartmentGroupIndividualSubordinate I Subordinate II

G roup 1 G roup 2

Departm ent A Departm ent B

Division V .P. Division V .P.

CEO

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

Weber’s Organizational Principles

• Job Descriptions

• Written Rules

• Procedures, Regulations, Policies

• Staffing/Promotions based on Qualifications

Fundamentals of Bureaucracy

Chain of Command

Rules & Regulations

Set Up by Function

Communication = MinimalE m p loyee

S u p erviso r

V ice P res id en t

B oss

Organizational Structures

Tall Organizations

- Many Layers of Mgmt.

- Cost of Mgmt.=High

Flat Organizations

- Current Trend

- Creation of Teams

Span of Control• Capabilities of Subordinates &

Manager

• Complexity of Job– Geographically Close– Functional Similarity– Need for Coordination– Planning Demands– Functional Complexity

Subordinate Subordinate Subordinate

Boss

Departmentalization

Advantages– Skill

Development

– Economies of Scale

– Good Coordination

Business Education

Com m ., Hum anities,Social Sciences

Developm entalStudies

M ath, Sciences,Health Sciences

Technical, Industria lService Occupations

CollegePresident

Departmentalization

Disadvantages– Lack of Communication– Employees Identify

with Department– Slow Response to

External Demands– Narrow Specialists

Departmentalization

• Product

• Function

• Customer

• Location

• Process

Centralization (No Delegation)

Advantages– Increased

Uniformity

– Less Duplication

– Maximum Control

Disadvantages– Lots of Policies &

Procedures– Many

Layers/Slower

Decentralization (Delegate Authority)

Advantages– Informed

Decisions– Worker

Responsibility– Few

Layers/Faster

Disadvantages– Loss of Control– Possible

Duplication

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

Layers of Authority

• Top Managers- Decision Makers

• Middle Managers- Developed Rules & Procedures

• Workers and Supervisors

Line/Staff Organizations

Line Personnel–Perform Functions

–Contribute Directly to Organizational Goals

Staff Personnel–Advise

–Assist Line Personnel

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

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

Networking & ‘Nets• Networking

– Real Time– Transparency

• ‘Nets– Extranet– Intranet

TeleconferencTeleconferencee

A Virtual A Virtual CorporationCorporation

(Figure 8.7)(Figure 8.7)

CoreCore

FirmFirm

Accounting Accounting FirmFirm

ProductioProduction Firmn Firm DistributioDistributio

n Firmn Firm

AdvertisinAdvertising Agencyg Agency

Design Design FirmFirm

Legal Legal FirmFirm

The Four “Rs” ofOrganizational Transformation

Reframe

Restructure

Revitalize

Renew

Break business into smaller unitsBuild teamworkImpose autonomyCreate meaningful incentivesOutsource non-operating activitiesShare business capabilities across units

How to ImproveOrganizational Structure

Inverted Organization Structure

Empowered Empowered front-line front-line workersworkersSupport Support

PersonnelPersonnel

Top Top Mgmt.Mgmt.

Outsourcing+ Time to focus on

company’s primary function

+ Increased level of expertise

+ Cost effectiveness+ Decreased overhead+ Risk reduction+ Flexibility+ Technology

- Less personal approach- Less control by owner in

planning, implementing & carrying out company’s future

- Potential for competing for the outsourcing firm’s time

BenefitsBenefits DownsideDownside

Customer -Focused Design

• Information

• Build teamwork– cross-functional

– integration

• Self-management & autonomy

• Bottom-up relationships

• Outsource

• Global orientation

• Internal vs. external customers

Examples ofInformal 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.

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!

Examples ofExamples ofInformal Group Informal Group

NormsNorms(cont’d)(cont’d)

Key Terms

• Bureaucracy 236

• Centralized authority 244

• Continuous improvement 251

• Cross functional teams 248

• Decentralized authority 244

• Departmentalization 241

• Formal organization 255

• Informal organization 255

• Inverted organization 252

• Line personnel 245

• Matrix organization 246

• Networking 249

• Organizational culture 254

• Organizational design 236

• Outsourcing 254

• Reengineering 252

• Restructuring 238

• Span of control 239

• Staff personnel 249

• Total quality management 251