BMGT Chapter 8 September 25 2012 Everyone s Organizing Challenge to reorganize companies is strong Adjusting to changing markets is a normal function is a capitalist economy Key to success remaining flexible enough to adapt to the changing times Building an Organization from the Bottom Up No matter the size of the business the principles of organization are the same One of the first steps is organizing o Determining what work needs to be done o Dividing up the tasks Division of labor Success of a business depends on management s ability to identify each worker s strengths and assign them to the right person o Job specialization dividing tasks into smaller jobs Your business might evolve into a company with several departments o Departmentalization Production marketing accounting maintenance Finally you assign authority and responsibility Organizational chart shows relationships among people You will have to adjust to new realities Changing the Organization Change is due to the evolving business environment o More global competition o Declining economy o Faster tech change o Pressure to preserve natural environment o Change in customer expectations Consumers expect high quality products and fast friendly service at a reasonable cost Development of Organizational Design 1900 s introduction of mass production efficiently producing large quantities of goods Economies of scale companies can reduce their production costs if they can purchase raw materials in bulk the average cost of goods goes down as production levels increase o Ex Production of cars computers housing Fayol s Principle of Organization French Henri Fayol Book General and Industrial Management 1919 Synonymous with concept of management o Unity of command each worker is to report to ONLY ONE boss o Hierarchy of authority o Division of labor functions divided into areas of specialization o Subordination of individual interests to the general interest work as o Authority managers have power to give orders and enforce o Degree of centralization amount of decision making power vest in top o Clear communication channels all workers should be able to reach a team obedience management each other o Order organized work space o Equity manager should treat employees w respect and justice o Esprit de corps spirit of pride and loyalty among people in firm Max Weber and Organizational Theory Book The Theory of Social and Economic Organizations 1940 s German sociologist and economist Promoted pyramid shaped organization structure became popular in large firms Believed firm would do well if employees listened to their managers Weber s principles of organization resembled Fayol s but also emphasized o Job descriptions o Written rules decision guidelines and detailed records o Consistent procedures regulations and policies o Staffing and promotion based on qualifications Example of a company that follows Weber s theory UPS Turning Principles into Organization Design Many companies still follow a hierarchy a system in which one person is at the top of the organization and there is a ranked or sequential ordering from the top down of managers who are responsible to that person Chain of command the line of authority that moves from the top of a hierarchy to the lowest level o Necessary b c one person cannot keep track of thousands of workers Bureaucracy an organization with many layers of managers who set rules and regulations and oversee all decisions o When employees in a bureaucracy have to ask managers for permission to make a change the process may take so long that customers may get annoyed Some companies are instilling empowerment giving employees the right training to make decisions without having to go through the manager Decisions to Make in Structuring Organizations Choosing Centralized or Decentralized Authority Centralized Authority decision making is concentrated at the top level of management o Ex Target McDonald s Decentralized Authority decision making is delegated to lower level managers and employees more familiar with local conditions than headquarters management could be o Ex Macy s JCPenney Home Depot Lowe s Choosing the Appropriate Span of Control Span of control optimal number of subordinates a manger supervises or should supervise Choosing between Tall and Flat Organizations Structures Tall organization structure an organizational structure in which the pyramidal organization chart would be quite tall b c of the various levels of management o Hard to convey messages from bottom to top Flat organization structure An organization structure that has few layers of management and a broad span of control o Respond quickly to lower level employees Weighing the Advantages and Disadvantages of Departmentalization Departmentalization divides organizations into separate units by function design production marketing and accounting o Advantages o Disadvantages Employees can develop skills in depth and progress within a department as they master more skills Company can achieve economies of scale by centralizing all the resources it needs locate various experts in that area Employees can coordinate work within a function Departments may not communicate well Employees may identify with their department goals and not organizational goals Company s response to external change may be slow People may not be trained to take on different managerial responsibilities Department members may not branch out and be creative Alternative ways to departmentalization 1 By product 2 By function 3 By customer group 4 By geographic location 5 By process Organizational Models Line Organizations Line organizations 2 way lines of responsibility authority and communication running from the top to the bottom of the organization w everyone reporting to one supervisor o Ex Military or locally owned pizza restaurant o Follows Fayol s management rules o Does not have any specialists Line and Staff Organizations Inflexible Line personnel are responsible for directly achieving organizational goals and include production workers distribution people and marketing personnel Staff personnel Employees who advise and assist line personnel in meeting their goals include those in marketing research info technology human resource management Matrix Style Organization 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 o Developed in aerospace industry
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