MGMT 3140 CH 8

Board of Directors

- Stockholders elect a board of directors to oversee the organization. - The board, led by the chair, makes major decisions affecting the organization, subject to corporate charter and bylaw provisions.

What duties do the board of directors perform?

(1) selecting, evaluating, rewarding, and perhaps replacing the CEO (2) determining the firm's strategic direction and reviewing financial performance (3) ensuring ethical, socially responsible, and legal conduct.

Increasing Information-Processing Capability

** Cross coordination can lead to effective problem solving. - They can invest in information systems, by employing computer systems or they can engage in better knowledge management. One way is by creating horizontal relationships between units to foster coordination and integration

Hierarchy

- The authority of the organizational pyramid. The authority structure is the glue that holds vertical levels together.

Things that must happen for networks to be flexible, innovative and successful:

- Firm must choose the right specialty. It must be something (good or service) that the market needs and that the firm is better at providing than other firms. - Firm must choose collaborators who are excellent at what they do and that provide complementary strengths - Must make certain that all parties fully understand the strategic goals of the partnership - Each party must be able to trust all the others with strategic information and trust that each collaborator will deliver quality products even if the business grows quickly and makes heavy demands

What structure saves time and money

- A flat structure with fewer horizontal layers - Most executives believe that fewer layers create a more efficient, fast-acting, and cost-effective organization. Also holds true for the subunits of major corporations.

Delegation

- A manager delegates when she assigns a task to someone at a lower level. It often requires the subordinate to report back to his or her boss about how effectively the assignment was carried out. - Most fundamental process of management because it entails getting work done through others. Important at all hierarchical levels.

Product Divisions

- All functions that contribute to a product are organized under one product manager. - Because the product structure is more flexible than the functional structure, it is better for unstable environments in which firms must be able to adapt and change rapidly.

Organizational Integration

- As organizations differentiate their structures, they also need to integrate and coordinate the work of different parts of the organization. The more differentiated the organization, the more difficult and important integration is. - Due to specialization and the division of labor, different groups of managers and employees develop different perspectives. - People working in separate functions, divisions, and business units tend to forget and misunderstand one another's perspectives.

Benefits of having a board of directors

- Board members bring credibility and networks that expand business opportunities, hold executives accountable for their actions, and leadership make difficult or unpopular strategic decisions. - Inclusive boards help companies succeed. Companies benefit even more when the board is diverse. Diverse boards help achieve higher financial returns.

Top Management Team

- C suite. - Top management teams are typically composed of the CEO, president, COO, CFO, CIO, CHRO, and other key executives.

Reducing the Need for Information

- Can reduce the need for information in two ways: (1) creating slack resources and (2) creating self-contained tasks.

Customer and Geographic Divisions

- Customer and geographic divisions often serve customers faster. - Primary advantage is the ability to focus on customer needs and provide faster, better service. Duplication of activities across many customer groups and geographic areas is expensive.

Divisional organization

- Departmentalization that groups units around products, customers, or geographic regions. - In this structure, separate divisions act almost as separate businesses or profit centers, working autonomously to accomplish the goals of the entire enterprise.

Boundary roles of broker/managers that aid network integration and coordination:

- Designer role: A network architect who envisions a set of groups of firms whose collective expertise can focus on a particular good or service - Process engineering role: A network co-operator who lays out the flow of resources and relationships and makes certain that everyone shares common goals, standards, payments and the like. - Nurturing role: A network developer who nurtures and enhances the network (maintains and strengthens the team) to make certain the relationships are healthy and mutually beneficial.

Major Downfall of the Matrix

- Some people function poorly under these ambiguous, conflictual circumstances; sometimes this signals the end of their careers with the company.

Unity of command principle

- States that a person should have only one boss. - Reporting to two superiors can create confusion and a difficult interpersonal situation unless steps are taken to prevent these problems

Disadvantages of product divisions

- It is difficult to coordinate across product lines. - Managers may not acquire the depth of functional expertise that comes from working in the functional structure. - Duplicating functions is expensive. - Decision making is decentralized in this structure, so top management can lose some control over decisions made in the divisions. Delegating and decentralizing properly are essential.

Corporate Governance

- Key responsibility at the top management level - A term describing the oversight of the firm by its executive staff and board of directors.

How does a matrix organization work?

- Managers and staff personnel report to two bosses - a functional manager and a divisional manager. - Each project manager draws employees from each functional area to form a group for the project. - The employees working on those projects report to the individual project manager as well as to the manager of their functional area.

Peer advisory groups

- Members of peer advisory groups, like the alternative board, can share problems and exchange solutions with fellow members in confidential, facilitated monthly meetings.

Advantages of Delegation

- Not delegating or delegating ineffectively sharply reduces what a manager can receive, and hurts morale. - Effective delegation leverages the manager's energy and talent and those of his or her subordinates. Saves time, by giving some of your responsibility to other people. Able to devote energy to important, higher-level activities. - Helps managers develop effective subordinates. Gives the subordinate a more important job. The subordinate now has an opportunity to develop new skills and demonstrate responsibilities for promotion. - Promotes a sense of being an important, contributing member of the organization.

Disadvantage of functional organization

- People may care more about their own function than about the company as a whole, and their attention to functional tasks may make them lose focus on overall product quality and customer satisfaction. - Managers develop functional expertise but do not acquire knowledge of the other areas of the business; they become specialists but not generalists. - Although functional differentiation might exist, functional integration might not. - The functional structure is most appropriate in simple, stable environments. - Other forms of departmentalization are more flexible and responsive than the functional structure. - Managers facing tough demands for total quality, customer service, innovation, and speed have learned the shortcomings of the functional form: it is highly differentiated and creates barriers to coordination across functions.

CEO

- Personally accountable to the board and to the owners for the organization's performance. - In some corporations, one person holds all three positions of CEO, chair of the board of directors, and president. - Usually the CEO is either chair of the board OR president.

Advantages of Product Departmentalization

- Product managers focus on a particular product line - Product managers have significant autonomy and control - Product managers are strategic - Product managers receive broader training

Benefits of Hierarchy

- Provides management career paths that help organizations retain and develop ambitious, talented people, giving them gradually more challenging experiences as they prepare for executive positions. - Where there is little hierarchy, employees who see little chance of promotion may leave to find better opportunities. - Well-designed hierarchy can ensure that managers have a reasonable number of people to monitor.

Coordination by mutual agreement

- Simplest and most flexible approach to coordination may be just to have interdependent parties talk to one another.

What causes organizations to change their degree of centralization?

- The challenges they face. - Tougher times often cause senior management to take charge of decisions, whereas times of rapid growth, decisions are pushed further down the chain of command. - Decentralized approach allows people to take faster action. (speeds decision making.)

Authority

- The legitimate right to make decisions and to tell other people what to do. - Resides in positions more than people. - The owners of a firm have ultimate authority - Formal position authority is generally the primary means of running an organization. - Power in an organization is not always position-dependent. People with particular expertise, experience, or personal qualities may have considerable informal authority.

Matrix Survival Skills

- The need to collaborate effectively is particularly high in the matrix, and this can be difficult because people often rotate teams, teammates, and bosses. - Problems can be avoided if the key managers in the matrix learn the behavioral skills needed in this structure. These skills vary depending on the job in the four-person diamond structure.

Four person diamond structure

- The top executive, who heads the matrix, must learn to balance power and emphasis between the product and functional requirements. - Product or division managers and functional managers must learn to collaborate and manage their conflicts constructively. - The two-boss managers or employees at the bottom of the diamond must learn how to be responsible to two superiors. Prioritizing multiple demands and sometimes even reconciling conflicting orders.

Coordination and Communication

- To cope with high uncertainty and heavy information demands, managers use two general strategies. - First, management can act to reduce the need for information. - Second, it can increase its capacity to handle more information.

Dynamic Network

- Very flexible version of the network organization - also called the modular or virtual corporation - is composed of temporary arrangements that can be assembled and reassembled to meet a changing competitive environment. - The members of the network are held together by contracts that stipulate results expected rather than by hierarchy and authority. - Dynamic networks are suitable when much of the work can be done independently by experts.

Disadvantages of Matrix Design

- Violation of the unity of command principles - Unclear responsibilities - accountability difficult to define - Lower employee engagement - Possible conflict and stress for employees who must manage a dual reporting role - Additional time required for meetings and other communications to coordinate work - Extensive collaboration needed but not always easy to reward.

Matrix Form Today

- Waned during the late 1980s but it came back strong - Reasons for this resurgence include pressures to consolidate costs and be faster to market, creating needs for better coordination across functions or across countries for firms with global business strategies.

When to use a wide span of control?

- Work is clearly defined and unambiguous - Subordinates are highly trained and have access to information - Managers are capable and supportive of subordinates - subordinates have similar jobs and are rated on comparable performance measures - subordinates prefer autonomy and independence - The organization is small. - Functional organization

In traditionally structured organizations,

- conflicts often arise between line and staff departments. - Career paths and success in staff functions depend on having a particular functional expertise, whereas success in line functions is based more on knowing the organization's industry.

Delegation Process step 1

- defining the goal. - Requires the manager to have a clear understanding of the outcome he or she wants. Then, the manager should select a person who is capable of performing the task.

Organization Chart

- depicts the positions in the firm and the way they are arranged. - The chart provides a picture of the reporting structure (who reports to whom) and the various activities that people perform.

Coordination by plan

- does not require the same high degree of stability that standardization does. - Units can have some freedom in how they work as long as they meet the deadlines and targets needed by other units as specified in agreed-upon plans.

Advantages of Matrix Design

- higher degree of flexibility and adaptability - Linkage of employees at all level and in all functions to the company's goals and strategies - More information shared across functions - Communication fostered - Greater responsiveness to customers from bringing together information about customer needs and organizational capabilities - Creative ideas from cross-functional work - Loyalty to the organization as a whole rather than a function or division

Matrix Organization

- hybrid form of organization in which functional and divisional forms overlap. - Matrix organizations have a dual rather than a single line of command.

Coordination by mutual adjustment

- involves discussions to figure out jointly how to approach problems and devise solutions that are agreeable to everyone. - Hashing out every issue takes time and may or may not result in clear mutual understanding.

Functional Organization

- jobs are specialized and grouped according to business functions and the skills they require: production, marketing, human resources, research and development, finance, accounting, etc. - Common in small and large organizations - When similar functions are grouped, savings often result.

Optimal span of control

- maximizes effectiveness because it is (1) narrow enough to permit managers to maintain control over direct reports but (2) not so narrow that it leads to overcontrol and an excessive number of managers who oversee a small number of people. - 5. - Depends on a number of factors

Who does the board membership include

- some of the company's top executives- called inside directors. - Most boards have more outside than inside directors.

Differentiation

- the organization is composes of many units that work on different kinds of tasks, using different skills and work methods. - Differentiation is created through division of labor and job specialization. - high when an organization has many subunits and many kinds of specialists.

Accountability

- the subordinate's manager has the right to expect the subordinate to perform the job and the right to take corrective action if the subordinate fails to do so.

Integration

- the work of these differentiated units is coordinated into an overall product. - achieved through structural mechanisms that enhance collaboration and coordination. Any job activity that links different work units performs an integrative function. - The more highly differentiated your firm, the greater the need for integration among the different units. - Organizations are more likely to fail if they exist in complex environments and are highly differentiated but fail to integrate adequately.

Line Departments

- those that have responsibility for the principal activities of the firm. Line units deal directly with the organization's primary goods or services; they make things, sell things, or provide customer service.

Staff Departments

- those that provide specialized or professional expertise that supports line departments. - They include research, legal, accounting, public relations, and HR departments.

What makes the best board of directors?

- those who are active, critical participants in determining company strategies. - A board staffed mainly with legal and regulatory experts cannot always give management the necessary direction on strategy.

Line Managers

- typically have much authority and power in the organization. - They are responsible for making major operating decisions. - They are accountable for the bottom-line results of their units.

How should managers delegate

1. Define the goal succinctly 2. Select the person for the task 3. Ask for subordinate's views about suggested approaches 4. Give the subordinate the authority, time, and resources to perform the assignment. 5. Review progress at appropriate intervals

Horizontal processes ranged from simplest to most complex

1. Direct contact (mutual adjustment) 2. Liasion roles or specialized jobs to handle communications between two departments. 3. Task forces or groups of representatives from different departments brought together temporarily to solve a common problem 4. Permanent interdepartmental decision making groups 5. Product, program, or project managers who direct interdisciplinary groups with a common task to perform 6. Matrix Organizations

Structure of an organization chart

1. The boxes represent different clusters of jobs. 2. The titles in the boxes show the work that each unit performs. 3. The solid lines show reporting and authority relationships: superior-subordinate connections. 4. Each horizontal layer indicates one level of management. A level indicates all persons of the same rank or units of the same rank reporting to someone in the level above.

Specialization

refers to the fact that different people or groups perform those smaller parts of the organization's overall work. Work is divided, and people specialize in certain work tasks.

formalization

rules and regulations governing how people interact. Ex: policies regarding attendance, dress, and decorum.

What tasks should not be delegated?

Disciplining subordinates and conducting performance reviews

In today's organizations,

staff units tend to be focused less on monitoring and controlling performance and more on moving toward new roles providing strategic support and expert advice.

Why is cross functional coordination essential?

For delivering every performance dimension. The functional organization will not disappear, but functional managers will make fewer decisions.

Effective delegation helps develop direct reports while raising the quality of service they provide to customers or co-workers.

true

How to improve coordination?

Organizations can rely on formalization

Span of Control

The number of subordinates who report directly to an executive or supervisor

When will standardization not work well?

When the situation requires flexibility

The Sarbanes-Oxley Act

along with requirements of the SEC imposed new, tighter corporate governance rules.

Where does decision making occur ideally?

at the level of the people who are most directly affected and have the most relevant knowledge about the work.

Role of managers changes in a network from supervising direct reports to more like that of a

broker

Narrow span of control

build a tall organization that has many reporting levels.

Network Organization

collection of independent, mostly single-function firms that collaborate to produce a good or service. - flexible arrangements among designers, suppliers, producers, distributors, and customers where each firm is able to pursue its own distinctive competence plus work effectively with other members of the network. ** Networks can improve cost, quality, service, speed, sustainability, and innovation.

Standardization

constrains actions and integrates various units by regulating what people do. People often know how to act, and how to interact, because standard operating procedures determine what they should do.

Wide spans

create a flat organization with fewer reporting levels

Delegating responsibility and authority _______ decision making.

decentralize

Slack Resources

extra resources on which organizations can rely in a pinch so that if they get caught off guard, they can still adjust. (Ex: inventory)

Three basic approaches to departmentalization

functional, divisional, matrix

If you are not delegating, you are merely doing things; but the more you delegate, the more you are truly managing and building an organization.

true

Managers remain responsible and accountable not only for their own actions but also for the actions of their subordinates.

true

When is work standardized?

when organizations coordinate activities by establishing routines and standard operating procedures that remain in place over time.

Centralized organization

important decisions usually are made at the top.

As organizations differentiate their structures,

managers must simultaneously consider issues of integration.

Responsibility

means that a person is supposed to carry out an assigned task. The manager also can delegate to the subordinate enough authority to get the job done.

Division of Labor

means that the work of the organization is subdivided into smaller tasks.

Decentralized organization

more decisions are made at lower levels.

Board of advisors

owners of noncompeting companies, retired executives, strategists, technology experts, and perhaps their banker or accountant.

Ideal situation in the matrix

people learn to communicate effectively with one another, rise above the difficulties, and manage these work relationships constructively. ** The key to managing in the matrix is to realize that the matrix is a process. ** The matrix structure, managed well, can speed decisions and cut costs.

Coordination

refer to the procedures that link the parts of the organization's overall mission.

Creating self contained tasks

refers to changing from a functional organization to a product or project organization and giving each unit the resources It needs to perform its task.