MGMT 1 Chapter 8 - Structuring Organizations for Today's Challenges

In an inverted org, frontline ppl have to be

-better educated -better trained -better paid than the in the past -> leads to better customer satisfaction

Matrix structure disadv.

-costly + complex -can confuse employees about where their loyalty belongs -requires good interpersonal skills, cooperative employees + managers -may only be a temp solution to a long-term problem

Disadv of departmentalization

-deps may not communicate well -employees may id w/ their dep's goals rather than the org's -comp's response to external changes may be slow -ppl may not be trained to take diff managerial responsibilities -> tend to be narrow specialists -dep members may engage in groupthink (think alike) + may need input from outside to be *more creative*

Trend today is to

-expand span of control as orgs adopt empowerment -reduce number of middle managers -hire more talented + better educated lower-level employees

Matrix structure adv.

-gives managers flexibility in assigning ppl to projects -encourages interorg cooperation + teamwork -produce creative solutions to prod dev probs -makes efficient use of org resources

Disadv of line org

-inflexible -few specialists / experts to advise ppl along the line -lengthy lines of communication -unable to handle complex decisions

Line managers can

-issue orders -enforce disipline -adjust org as conditions change

Decentralized authority disadv.

-less efficiency -complex dist. system -less top mgmt control -weakened corp image

Centralized authority disadv.

-less responsiveness to customers -less empowerment -interorg conflict -lower moral away from headquarters

In the pasts, businesses were

-small -processes were rel. simple -org workers was easy

Fayol's Principles of Organization (French economic theoretician)

1. *Unity of command* - each worker reports to one, and only one boss 2. *Hierarchy of authority* - managers have right to give orders + expect others to follow 3. *Division of labor* - functions are to be divided into areas of specialization (ex. production, marketing, finance) 4. *Subordination of individual interests to the general interests* - workers are to think of themselves as a coordinated team 5. *Authority* - changing slowly due to enabling enpowerment 6. *Degree of centralization* - amount of decision-making power vested in top management should vary by circumstances 7. *Clear communication channels* - all workers should be able to reach others in the firm quickly + easily 8. *Order* - materials + people should be placed + maintained in proper location 9. *Equity* - a manager should treat employees + peers w/ respect + justice 10. *Esprit de corps* - spirit of pride + loyalty should be created among people in the firm

Different ways to departmentalize

1. By Function 2. By Product 3. By Customer Group 4. By geographic location

Several organizational issues

1. Centralization vs. decentralization 2. Span of control 3. Tall vs. flar organization structures 4. Departmentalization

How to structure an organization

1. Devising a division of labor (-> specialization) 2. Set up teams/departments to do specific tasks (prod/accting) 3. Assign responsibility + authority to people 4. Allocate resources 5. Assign specific tasks 6. Est. procedures for accomplishing the org. objectives 7. Make ethical decisions on how to treat workers and how to benefit community 8. Organization chart 9. Monitor environment to see what competitors are doing + what customers are demanding

4 ways to structure an org

1. Line orgs 2. Line + staff orgs 3. Matrix-style orgs 4. Cross functional self-managed teams

Bureaucracy

Def: organization with many layers of managers who set rules + regulations + oversee all decisions -reliance on rules

Virtual corporation

a temporary networked org made up of replaceable firms that join and leave as needed

@ lower levels where there's standardized work can implement what span of control?

broad span of control

What is just as important to many businesses

change in customer expectations

Weber believed that large organizations demanded...

clearly established rules + guidelines to be followed precisely *aka Weber favors bureaucracy*

Benchmarking

comapres an org's practices, processes, and products against the world's best

Hybrid forms of departmentalization

combination of dep techs ex. dep by function, geo, + customer groups

Economies of scale

companies can reduce their production costs by purchasing raw materials in bulk -> *average cost of goods decreases as production levels rise*

Function by geographical location

customers vary greatly by region

By function

design, production, marketing, + accounting

Organizing begins with

determining what work needs to be done + divide the work up

Matrix structure is used in...

developed in aerospace industry + now familar in areas of banking, mgmt consulting firms, accting firms, ad agencies, + sch system

Line organization

direct 2-way lines of responsibility, authority, + communication running from the top to the bot of the org everyone reports to only one supervisor -no specialists to provide managerial support -follows all of Fayol's traditional mgmt rules

Job specialization

dividing tasks into smaller jobs

What did business growth lead to?

economies of scale

Weber's principles of organization (similar to Fayol but also..)

emphasis on 1. job descriptions 2. written rules, decision deadlines, and detailed records 3. consistent procedures, regulations, and policies 4. staffing and promotion based on qualifications

Self-managed

employees are empowered to make decisions without mgmt approval

Much change in business is due to

evolving business environment -more global competition -declining economy -faster tech change -pressure to preserve natural environment

Function by product

ex. have trade book dep, textbook dep, technical book dep

Function by customer group

ex. pharm comp have dep for consumer market, dep for hospitals, dep for doctors

In the past, the mgmt structure was meant to

facilitate management over pleasing the customer ex. many rules for managers to control employees

Networked org structures tend to be

flexible

Secret to successful org change is to

focus on customers and give them what they want

It is impt for an org to have both

formal and informal org structures

Core competencies

functions that the org can do as well as or better than any other org in the world ex. Nike is great @ design + marketing athletic shoes but outsources manufacturing

Empowerment

giving employees authority and power to make their own decisions -> only works when employees are given the proper training and resources to respond

Cross-function self-managed teams

groups of employees from different deps who work together on a long-term basis

Customers now expect

high-quality products + fast, friendly service @ reasonable cost

Appropriate span of control narrows @

higher levels of org ->work becomes less standardized + managers need more face-to-face communication

The success of a firm often depends on mgmt's ability to

identify each worker's strengths + assign right tasks to right person

Over time, innovations became less...

less meaningful as other companies copied the processes

Difference b/w line + staff personnel

line has formal authority to make policy decisions staff have authority to advise line personnel + influence their decisions, but can't make the actual policy changes

Chain of command

line of authority that moves from the top of the hierarchy to the lowest level

Mass production

methods for efficiently producing large quantities of goods

Bureaucrat

middle manager whose function -> implement top mgmt's orders

Span of control

optimal number of subordinates a manager supervises or should supervise

Matrix organization

org in which specialists from different parts of the org work tgt temporarily on specific projects, but still remain part of a line-and-staff structure ex. project manager can borrow people from diff deps to help design + market new product ideas

Centralized authority

org structure in which decision making is concentrated @ top lvl of mgmt Ex, McDonald's, Target

Decentralized authority

org structure in which decision making is delegated to lower-level managers and employees more familiar with local conditions than headquarters mgmt could be Ex. Macy's

Tall organization structures (early 20th cent)

org structure in which the pyramidal org chart would be quite *tall* b/c of the *various lvls of mgmt* -msg can become distorted as it goes thru every manager -cost is too high -paperwork generated is enormous -inefficient communication + decision making

Flat organization structures (more recent)

org structure that has few layers of mgmt + broad span of control -many ppl report to 1 manager -respond readily to customer demands due to empowerment

Inverted organization

org that has contact people @ the top + the chief office at the bottom of the org chart

Cross functional teams are the only one way businesses can interact with

other companies

Departmentalization

process of setting up individual departments to do specialized tasks Def: dividing org functions into separate units

Restructuring

redesigning an organization so that it can more effectively and efficiently serve its customers

Line personnel

responsible for directly achieving org goals -> production workers, dist. ppl, marketing personnel

All companies have to

restructure to keep its customer base

Organization chart

shows relationships between people, who is accountable for completion of specific work, + who reports to whom Def: visual device that shows relationships among people + divides the organization's work; also shows who reports to whom

Formal organization

structure that details lines of responsibility, authority, and position -structure shown on org charts

Organizing

structuring

Informal organization

system that develops spontaneously as employees meet and form cliques, relationships, and lines of authority outside the formal organization

Grapevine (informal org)

system through which unofficial info flows between and among managers and employees

Hierarchy

system where one person is @ top of the org + there is a ranked / sequential ordering from top down of managers + others who are responsible to that person ex. top manager needs many lower-level managers to help manage thousands of workers

Weber's ideal org structure made sense at the time, but the rules and procedures became so rigid that...

the companies grew counterproductive

What made business org so complex?

the introduction of mass production

The bigger the plant,

the more efficient production became

Real time

the present moment or the actual time in which an event takes place

Purpose of benchmarking

to see what the other org does better -> try to improve it to be better than compared org

Networking

using communications tech + other means to link orgs + allow them to work tgt on common objectives

Cross-function teams work best

when the voice of the customer is brought in, esp. in product developement tasks

Organizational (or corp) culture

widely shared values w/in an org that foster unity + cooperation to achieve common goals

Digital natives

young people who have grown up using the Internet and social networking

In an inverted org, the mgmt layers are few, and the manager's job is to

*assist and support* frontline people, not boss them around

1900s - managers began designing orgs so that they can

*control* workers

One solution to the temp nature of matrix teams is to est.

*long lived teams* + empower them to work closely with suppliers, customers, and others to quickly + efficiently bring out new, high-quality prods while giving great service

Decentralized authority adv.

+better adaption to customer wants +more empowerment of workers +faster decision making +higher morale

Adv of departmentalization

+employees can dev skills in depth + progress w/in dep as they master more skills +comp can achieve ecnomies of scale by centralizing all the resources it needs + locate various experts in that area +employees can coordinate work w/in the function, + top mgmt can easily direct + control various dep's acts

*Equity*

- a manager should treat employees + peers w/ respect + justice

*Clear communication channels*

- all workers should be able to reach others in the firm quickly + easily

*Degree of centralization*

- amount of decision-making power vested in top management should vary by circumstances

*Authority*

- changing slowly due to enabling empowerment

*Unity of command*

- each worker reports to one, and only one boss

*Division of labor*

- functions are to be divided into areas of specialization (ex. production, marketing, finance)

*Hierarchy of authority*

- managers have right to give orders + expect others to follow

*Order*

- materials + people should be placed + maintained in proper location

*Esprit de corps*

- spirit of pride + loyalty should be created among people in the firm

*Subordination of individual interests to the general interests*

- workers are to think of themselves as a coordinated team

Max Weber

-German sociologist + economist -promoted pyramid-shaped org structure that became popular in large firms -believed that firm would do well if employees did what they were told -> less decision making the better

Centralized authority adv.

-Greater top mgmt control -More efficiency -Simpler dist. system -Stronger brand/corp image

What has become a critical managerial function?

Managing change ->change whole org structure

What is a normal function in a capitalist economy?

adjusting to changing markets

Staff personnel

advise + assist line personnel in meeting their goals, + include those in marketing research, legal advising, info tech, + human resource mgmt