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* * Chapter Eight Adapting Organizations to Today’s Markets Copyright © 2010 by the McGraw-Hill Companies, Inc. All rights...
REORGANIZATION is for  EVERYONE * * Everyone’s Organizing <ul><li>Many companies are reorganizing, especially those in dec...
STRUCTURING an ORGANIZATION * * Building an Organization from the Bottom Up <ul><ul><li>Create a division of labor </li></...
THE CHANGING ORGANIZATION * * The Changing Organization <ul><li>Often change in organizations is due to evolving business ...
PRODUCTION CHANGED  ORGANZIATION DESIGN * * The Development of Organization Design <ul><li>Mass production of goods led to...
FAYOL’S PRINCIPLES * * Fayol’s Principles of Organization <ul><ul><li>Unity of command </li></ul></ul><ul><ul><li>Hierarch...
ORGANIZATIONS BASED on  FAYOL’S PRINCIPLES * * Fayol’s Principles of Organization <ul><li>Organizations in which employees...
WEBER’S PRINCIPLES * * Max Weber and Organizational Theory <ul><li>Employees just need to do what they’re told. </li></ul>...
HIERARCHIES and COMMAND * * Turning  Principles into Organization Design <ul><li>When following Fayol and Weber, managers ...
TYPICAL ORGANIZATION CHART * * Turning  Principles into Organization Design LG2 8-
BUREAUCRATIC ORGANIZATIONS * * Turning  Principles into Organization Design <ul><li>Bureaucracy --  An organization with m...
Decisions required in structuring an organization <ul><li>I.  Centralization verses decentralization </li></ul><ul><li>II....
CENTRALIZATION or DECENTRALIZATION? * * Choosing Centralized or Decentralized Authority <ul><li>Centralized Authority --  ...
SPAN of CONTROL * * Choosing the Appropriate Span of Control <ul><li>Span of Control --  The optimal number of subordinate...
ORGANIZATIONAL STRUCTURES * * Choosing Tall versus Flat Organization Structures <ul><li>Structures determine the way the c...
FLAT ORGANIZATIONAL  STRUCTURE * * Choosing Tall versus Flat Organization Structures LG3 8-
DEPARTMENTALIZATION * * Weighing the Advantages and Disadvantages of Departmentalization <ul><ul><li>Departmentalization -...
ADVANTAGES of DEPARTMENTALIZATION * * Weighing the Advantages and Disadvantages of Departmentalization <ul><ul><ul><li>Emp...
DISADVANTAGES of DEPARTMENTALIZATION * * Weighing the Advantages and Disadvantages of Departmentalization <ul><ul><ul><li>...
FOUR WAYS to STRUCTURE an ORGANIZATION * * Organization Models <ul><ul><li>Line Organizations </li></ul></ul><ul><ul><li>L...
LINE ORGANIZATIONS * * Line Organizations  <ul><ul><ul><li>Line Organization --  Has direct two-way lines of responsibilit...
LINE PERSONNEL * * Line-and-Staff Organizations  <ul><ul><ul><li>Line Personnel --  Workers responsible for directly achie...
Line and staff organizations <ul><li>Goal is to minimize disadv of simple line organizations </li></ul><ul><li>They have b...
STAFF PERSONNEL * * Line-and-Staff Organizations  <ul><ul><ul><li>Staff Personnel --  Employees who advise and assist line...
SAMPLE LINE-and-STAFF ORGANIZATION * * Line-and-Staff Organizations  LG4 8-
MATRIX ORGANIZATIONS * * Matrix-Style Organizations  <ul><ul><ul><li>Matrix Organization --  Specialists from different pa...
SAMPLE MATRIX  ORGANIZATION * * Matrix-Style Organizations  LG4 8-
ADVANTAGES of the  MATRIX STYLE * * Matrix-Style Organizations  <ul><ul><ul><li>Managers have flexibility in assigning peo...
DISADVANTAGES of the  MATRIX STYLE * * Matrix-Style Organizations  <ul><ul><ul><li>It’s costly and complex. </li></ul></ul...
CROSS-FUNCTIONAL  SELF-MANAGED TEAMS * * Cross-Functional Self-Managed Teams <ul><li>A way to fix the problem of matrix-st...
GOING BEYOND  ORGANIZATIONAL BOUNDARIES * * Going Beyond Organizational Boundaries <ul><li>Cross-functional teams work bes...
REAL TIME BUSINESS * * Transparency and Virtual Organizations <ul><li>Most companies are no longer self-sufficient; they’r...
TRANSPARENCY and VIRTUAL CORPORATIONS * * Transparency and Virtual Organizations <ul><li>Transparency --  When a company i...
A VIRTUAL CORPORATION * * Transparency and Virtual Organizations LG5 8-
BENCHMARKING and  CORE COMPETENCIES * * Benchmarking and Core Competencies <ul><li>Benchmarking --  Compares an organizati...
Prime ex of core competency <ul><li>Nike – designs and markets some of best athletic shoes….but they do not make them in h...
ADAPTING to  MARKET CHANGES * * Adapting to Change <ul><li>Change isn’t easy. Employees like to do things the way they alw...
RESTRUCTURING * * Restructuring  for Empowerment <ul><li>Restructuring --  Redesigning an organization so it can more effe...
TRADITIONAL and INVERTED ORGANIZATIONS * * Restructuring  for Empowerment LG5 8-
ORGANIZATIONAL CULTURE * * Creating a Change-Oriented Organizational Culture <ul><li>Organizational  or  Corporate Culture...
FORMAL ORGANIZATION * * Managing the Informal Organization  <ul><li>Formal Organization --  Details lines of responsibilit...
INFORMAL ORGANIZATION * * Managing the Informal Organization  <ul><li>Informal Organization --  The system of relationship...
LIMITATIONS of INFORMAL ORGANIZATIONS * * Managing the Informal Organization  <ul><li>The informal system is too unstructu...
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Chap008

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Chap008

  1. 1. * * Chapter Eight Adapting Organizations to Today’s Markets Copyright © 2010 by the McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin
  2. 2. REORGANIZATION is for EVERYONE * * Everyone’s Organizing <ul><li>Many companies are reorganizing, especially those in decline. Including: </li></ul><ul><ul><li>Auto makers </li></ul></ul><ul><ul><li>Homebuilders </li></ul></ul><ul><ul><li>Banks </li></ul></ul><ul><ul><li>Adjusting to changing markets is normal in capitalist economies. </li></ul></ul><ul><ul><li>Companies must go back to basic organizational principles and firm up the foundation. </li></ul></ul>LG1 8-
  3. 3. STRUCTURING an ORGANIZATION * * Building an Organization from the Bottom Up <ul><ul><li>Create a division of labor </li></ul></ul><ul><ul><li>Set up teams or departments </li></ul></ul><ul><ul><li>Allocate resources </li></ul></ul><ul><ul><li>Assign tasks </li></ul></ul><ul><ul><li>Establish procedures </li></ul></ul><ul><ul><li>Adjust to new realities </li></ul></ul>LG1 8-
  4. 4. THE CHANGING ORGANIZATION * * The Changing Organization <ul><li>Often change in organizations is due to evolving business environments: </li></ul><ul><ul><li>More global competition </li></ul></ul><ul><ul><li>Declining economy </li></ul></ul><ul><ul><li>Faster technological change </li></ul></ul><ul><ul><li>Pressure to protect the environment </li></ul></ul><ul><ul><li>Customer expectations have also changed --Consumers today want high-quality products with fast, friendly service and all at low cost. </li></ul></ul>LG2 8-
  5. 5. PRODUCTION CHANGED ORGANZIATION DESIGN * * The Development of Organization Design <ul><li>Mass production of goods led to complexities in organizing businesses. </li></ul>LG2 <ul><li>Economies of Scale -- Companies can reduce their production costs by purchasing raw materials in bulk. </li></ul><ul><ul><li>The average cost of goods decrease as production levels rise. </li></ul></ul>8-
  6. 6. FAYOL’S PRINCIPLES * * Fayol’s Principles of Organization <ul><ul><li>Unity of command </li></ul></ul><ul><ul><li>Hierarchy of authority </li></ul></ul><ul><ul><li>Division of labor </li></ul></ul><ul><ul><li>Subordination of individual interests to the general interest </li></ul></ul><ul><ul><li>Authority </li></ul></ul>LG2 <ul><ul><li>Degree of centralization </li></ul></ul><ul><ul><li>Clear communication channels </li></ul></ul><ul><ul><li>Order </li></ul></ul><ul><ul><li>Equity </li></ul></ul><ul><ul><li>Esprit de corps </li></ul></ul>8-
  7. 7. ORGANIZATIONS BASED on FAYOL’S PRINCIPLES * * Fayol’s Principles of Organization <ul><li>Organizations in which employees have no more than one boss; lines of authority are clear. </li></ul>LG2 <ul><li>Rigid organizations that often don’t respond to customers quickly. </li></ul>8-
  8. 8. WEBER’S PRINCIPLES * * Max Weber and Organizational Theory <ul><li>Employees just need to do what they’re told. </li></ul><ul><li>In addition to Fayol’s principles, Weber emphasized: </li></ul><ul><ul><li>Job descriptions. </li></ul></ul><ul><ul><li>Written rules, decision guidelines and detailed records. </li></ul></ul><ul><ul><li>Consistent procedures, regulations and policies. </li></ul></ul><ul><ul><li>Staffing and promotion based on qualifications. </li></ul></ul>LG2 8-
  9. 9. HIERARCHIES and COMMAND * * Turning Principles into Organization Design <ul><li>When following Fayol and Weber, managers control workers. </li></ul><ul><li>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. </li></ul><ul><li>Chain of Command -- The line of authority that moves from the top of the hierarchy to the lowest level. </li></ul>LG2 8-
  10. 10. TYPICAL ORGANIZATION CHART * * Turning Principles into Organization Design LG2 8-
  11. 11. BUREAUCRATIC ORGANIZATIONS * * Turning Principles into Organization Design <ul><li>Bureaucracy -- An organization with many layers of managers who set rules and regulations and oversee all decisions. </li></ul><ul><li>It can take weeks or months to have information passed down to lower-level employees. </li></ul><ul><li>Bureaucracies can annoy customers. </li></ul>LG2 8-
  12. 12. Decisions required in structuring an organization <ul><li>I. Centralization verses decentralization </li></ul><ul><li>II. Span of control </li></ul><ul><li>III. Tall verses flat </li></ul><ul><li>IV. departmentalization </li></ul>
  13. 13. CENTRALIZATION or DECENTRALIZATION? * * Choosing Centralized or Decentralized Authority <ul><li>Centralized Authority -- When decision-making is concentrated at the top level of management. </li></ul>LG3 <ul><li>Decentralized Authority -- When decision-making is delegated to lower-level managers and employees more familiar with local conditions than headquarters. </li></ul>8-
  14. 14. SPAN of CONTROL * * Choosing the Appropriate Span of Control <ul><li>Span of Control -- The optimal number of subordinates a manager supervises or should supervise. </li></ul><ul><ul><li>When work is standardized, broad spans of control are possible. </li></ul></ul><ul><ul><li>Appropriate span narrows at higher levels of the organization. </li></ul></ul><ul><ul><li>The trend today is to reduce middle managers and hire better low-level employees. </li></ul></ul>LG3 8-
  15. 15. ORGANIZATIONAL STRUCTURES * * Choosing Tall versus Flat Organization Structures <ul><li>Structures determine the way the company responds to employee and customer needs. </li></ul><ul><li>Tall Organization Structures -- An organizational structure in which the organization chart would be tall because of the various levels of management. </li></ul><ul><li>Flat Organization Structures -- An organizational structure that has few layers of management and a broad span of control. </li></ul>LG3 8-
  16. 16. FLAT ORGANIZATIONAL STRUCTURE * * Choosing Tall versus Flat Organization Structures LG3 8-
  17. 17. DEPARTMENTALIZATION * * Weighing the Advantages and Disadvantages of Departmentalization <ul><ul><li>Departmentalization -- Divides organizations into separate units. </li></ul></ul><ul><ul><ul><li>Workers are grouped by skills and expertise to specialize their skills. </li></ul></ul></ul>LG3 8-
  18. 18. ADVANTAGES of DEPARTMENTALIZATION * * Weighing the Advantages and Disadvantages of Departmentalization <ul><ul><ul><li>Employees develop skills and progress within a department as they master skills. </li></ul></ul></ul><ul><ul><ul><li>The company can achieve economies of scale. </li></ul></ul></ul><ul><ul><ul><li>Employees can coordinate work within the function and top management can easily direct activities. </li></ul></ul></ul>LG3 8-
  19. 19. DISADVANTAGES of DEPARTMENTALIZATION * * Weighing the Advantages and Disadvantages of Departmentalization <ul><ul><ul><li>Departments may not communicate well. </li></ul></ul></ul><ul><ul><ul><li>Employees may identify with their department’s goals rather than the organization’s. </li></ul></ul></ul><ul><ul><ul><li>The company’s response to external changes may be slow. </li></ul></ul></ul><ul><ul><ul><li>People may not be trained to take different managerial responsibilities, instead they become specialists. </li></ul></ul></ul><ul><ul><ul><li>Department members may engage in groupthink and may need outside input. </li></ul></ul></ul>LG3 8-
  20. 20. FOUR WAYS to STRUCTURE an ORGANIZATION * * Organization Models <ul><ul><li>Line Organizations </li></ul></ul><ul><ul><li>Line-and-Staff Organizations </li></ul></ul><ul><ul><li>Matrix-Style Organizations </li></ul></ul><ul><ul><li>Cross-Functional Self-Managed Teams </li></ul></ul>LG4 8-
  21. 21. LINE ORGANIZATIONS * * Line Organizations <ul><ul><ul><li>Line Organization -- Has direct two-way lines of responsibility, authority and communication running from the top to the bottom. Everyone reports to one supervisor. </li></ul></ul></ul><ul><ul><ul><li>There are no specialists, legal, accounting, human resources or information technology departments. </li></ul></ul></ul><ul><ul><ul><li>Line managers issue orders, enforce discipline and adjust the organization to changes. </li></ul></ul></ul>LG4 8-
  22. 22. LINE PERSONNEL * * Line-and-Staff Organizations <ul><ul><ul><li>Line Personnel -- Workers responsible for directly achieving organizational goals, and include production, distribution and marketing employees. </li></ul></ul></ul><ul><ul><ul><li>Line personnel have authority to make policy decisions. </li></ul></ul></ul>LG4 8-
  23. 23. Line and staff organizations <ul><li>Goal is to minimize disadv of simple line organizations </li></ul><ul><li>They have both line and staff personnel </li></ul><ul><li>**the line personnel in this model respon for achieving organ goals (incl production labor, distribution people, and marketing people) </li></ul>
  24. 24. STAFF PERSONNEL * * Line-and-Staff Organizations <ul><ul><ul><li>Staff Personnel -- Employees who advise and assist line personnel in meeting their goals, and include marketing research, legal advising, IT and human resource employees. </li></ul></ul></ul>LG4 8-
  25. 25. SAMPLE LINE-and-STAFF ORGANIZATION * * Line-and-Staff Organizations LG4 8-
  26. 26. MATRIX ORGANIZATIONS * * Matrix-Style Organizations <ul><ul><ul><li>Matrix Organization -- Specialists from different parts of the organization work together temporarily on specific projects, but still remain part of a line-and-staff structure. </li></ul></ul></ul>LG4 <ul><ul><ul><li>Emphasis is on product development, creativity, special projects, communication and teamwork. </li></ul></ul></ul>8-
  27. 27. SAMPLE MATRIX ORGANIZATION * * Matrix-Style Organizations LG4 8-
  28. 28. ADVANTAGES of the MATRIX STYLE * * Matrix-Style Organizations <ul><ul><ul><li>Managers have flexibility in assigning people to projects. </li></ul></ul></ul><ul><ul><ul><li>Interorganizational cooperation and teamwork is encouraged. </li></ul></ul></ul><ul><ul><ul><li>Creative solutions to product development problems are produced. </li></ul></ul></ul><ul><ul><ul><li>Efficient use of organizational resources. </li></ul></ul></ul>LG4 8-
  29. 29. DISADVANTAGES of the MATRIX STYLE * * Matrix-Style Organizations <ul><ul><ul><li>It’s costly and complex. </li></ul></ul></ul><ul><ul><ul><li>Employees may be confused about where their loyalty belongs. </li></ul></ul></ul><ul><ul><ul><li>Good interpersonal skills and cooperative employees are a must. </li></ul></ul></ul><ul><ul><ul><li>It’s a temporary solution to a possible long-term problem. </li></ul></ul></ul><ul><ul><ul><li>Teams are not permanent. </li></ul></ul></ul>LG4 8-
  30. 30. CROSS-FUNCTIONAL SELF-MANAGED TEAMS * * Cross-Functional Self-Managed Teams <ul><li>A way to fix the problem of matrix-style teams is to establish long-term teams. </li></ul><ul><li>Empower teams to work closely with suppliers, customers and others to figure out how to create better products. </li></ul><ul><li>Cross-Functional Self-Managed Teams -- Groups of employees from different departments who work together on a long-term basis. </li></ul>LG4 8-
  31. 31. GOING BEYOND ORGANIZATIONAL BOUNDARIES * * Going Beyond Organizational Boundaries <ul><li>Cross-functional teams work best when the voice of the customer is heard. </li></ul><ul><li>Teams that include customers, suppliers and distributors goes beyond organizational boundaries. </li></ul><ul><li>Government coordinators may assist in sharing market information beyond national boundaries. </li></ul>LG4 8-
  32. 32. REAL TIME BUSINESS * * Transparency and Virtual Organizations <ul><li>Most companies are no longer self-sufficient; they’re part of a global business network. </li></ul><ul><li>Real Time -- The present moment or actual time in which something takes place. </li></ul>LG5 8-
  33. 33. TRANSPARENCY and VIRTUAL CORPORATIONS * * Transparency and Virtual Organizations <ul><li>Transparency -- When a company is so open to other companies that electronic information is shared as if the companies were one. </li></ul><ul><li>Virtual Corporation -- A temporary networked organization made up of replaceable firms that join and leave as needed. </li></ul>LG5 8-
  34. 34. A VIRTUAL CORPORATION * * Transparency and Virtual Organizations LG5 8-
  35. 35. BENCHMARKING and CORE COMPETENCIES * * Benchmarking and Core Competencies <ul><li>Benchmarking -- Compares an organization’s practices, processes and products against the world’s best. </li></ul><ul><li>Core Competencies -- The functions an organization can do as well as or better than any other organization in the world. </li></ul><ul><li>If a company can’t match a competitor, they may try to outsource . </li></ul>LG5 8-
  36. 36. Prime ex of core competency <ul><li>Nike – designs and markets some of best athletic shoes….but they do not make them in house. They outsource to someone who can do it faster and cheaper </li></ul>
  37. 37. ADAPTING to MARKET CHANGES * * Adapting to Change <ul><li>Change isn’t easy. Employees like to do things the way they always have. </li></ul><ul><li>Get rid of old, inefficient facilities and equipment. </li></ul><ul><li>Use the Internet to get to know your customers and sell directly to them. </li></ul>LG5 8-
  38. 38. RESTRUCTURING * * Restructuring for Empowerment <ul><li>Restructuring -- Redesigning an organization so it can more effectively and efficiently serve its customers. </li></ul><ul><li>Inverted Organization -- An organization that has contact people at the top and the CEO at the bottom of the organizational chart. </li></ul>LG5 <ul><li>The manager’s job is to assist and support frontline workers, not boss them. </li></ul>8-
  39. 39. TRADITIONAL and INVERTED ORGANIZATIONS * * Restructuring for Empowerment LG5 8-
  40. 40. ORGANIZATIONAL CULTURE * * Creating a Change-Oriented Organizational Culture <ul><li>Organizational or Corporate Culture -- The widely shared values within an organization that foster unity and cooperation to achieve common goals </li></ul><ul><li>Some of the best organizational cultures emphasize service. </li></ul><ul><li>Culture is shown in stories, traditions and myths. </li></ul>LG6 8-
  41. 41. FORMAL ORGANIZATION * * Managing the Informal Organization <ul><li>Formal Organization -- Details lines of responsibility, authority and position. </li></ul><ul><li>The formal system is often slow and bureaucratic but it helps guide the lines of authority. </li></ul><ul><li>No organization can be effective without formal and informal organization. </li></ul>LG6 8-
  42. 42. INFORMAL ORGANIZATION * * Managing the Informal Organization <ul><li>Informal Organization -- The system of relationships that develop spontaneously as employees meet and form relationships. </li></ul>LG6 <ul><li>Informal organization helps foster camaraderie and teamwork among employees. </li></ul>8-
  43. 43. LIMITATIONS of INFORMAL ORGANIZATIONS * * Managing the Informal Organization <ul><li>The informal system is too unstructured and emotional on its own. </li></ul><ul><li>Informal organization may also be powerful in resisting management directives. </li></ul>LG6 8-

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