Chapter 8 Adapting Organizations to Today s Markets Everyone s Organizing Size of business has no effect on the principles of organization Organizing structuring determine what work needs to be done dividing tasks among workers division of labor dividing tasks into smaller jobs job specialization o Departmentalization process of setting up individual departments to do specialized tasks o Organization chart shows relationships among ppl The Changing Organization Change is mostly due to the evolving business environment that is more global competition a declining economy faster technological change and pressure to preserve the environment This reliance on rules is called bureaucracy Mass production methods for efficiently producing large quantites of goods Economies of scale the situation in which 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 Fayol s principals of organization o Unity of command each person reports to only one boss o Hierarchy of authority o Division of labor o Subordination of individual interests to the general interest o Authority o Degree of centralization o Clear communication channels o Order o Equity o Esprit de corps spirit of pride loyalty Max Weber s Organizational theory o Weber s principles resemble Fayol s but Weber emphasized o Job descriptions o Written rules decision guidelines detailed records o Consistent procedures regulations and policies o Staffing and promotion based on qualifications 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 Bureaucracy an organization with many layers of managers who set rules and regulations and oversee all decisions o Processes for change can be very slow o Empowerment allowing employees to make some decisions in order to combat the time it takes for an idea issue to make its way to the manager and back Decisions to Make in Structuring Organization Centralized vs decentralized authority o Centralized an organization structure in which decision making authority is maintained at the top level of management Advantages greater top management control more efficiency simpler distribution system stronger brand corporate image Disadvantages less responsiveness to customers less empowerment interorganizational conflict lower morale away from headquarters o Decentralized an organization structure in which decision making authority is delegated to lower level managers more familiar with local conditions than headquarters management could be Advantages better adaptation to customer wants more empowerment of workers faster decision making higher morale Disadvantages less efficiency complex distribution system less top management control weakened corporate image Span of control the optimal number of subordinates a manager supervisees should supervise o Trend today is to expand the span of control as organizations adopt empowerment reduce the middle of middle managers and hire more talented better educated employees o Narrow control Advantages more control by top management more chances for advancement greater specialization closer supervision Disadvantages less empowerment higher costs delayed decision making less responsiveness to customers o Broad control Advantages reduced costs more responsiveness to customers faster decision making more empowerment Disadvantages fewer chances for advancement overworked managers loss of control less management expertise Tall vs flat o Tall organization structures an organizational structure in which the pyramidal organization chart would be quite tall b c of the various levels of management o Flat organization structures an organizational structure that has few layers of management and a broad span of control Departmentalization the dividing of organizational functions into separate units usually by function such as design production marketing accounting o Advantages work more efficiently save costs employees can develop skills in depth within a department company can achieve economies of scale by centralizing all the resources it needs locate various experts in that area employees can coordinate work within the function top management can easily direct and control activities o Disadvantages departments may not communicate well may identify with department goals instead of organization s company s response to external changes may be slow ppl may not be trained to take different managerial responsibilities b c they tend to become narrow specialists department members may engage in group think and may need input from outside to be more creative o Can also departmentalize by product textbook department general public books technical books o Can also departmentalize by customer group pharmaceutical company might have a department for consumer market hospitals doctors o Can by geographic location process hybrid forms Organizational Models Line organization an organization that has direct 2 way lines of responsibility authority and communication running from the top to the bottom of the organization with all ppl reporting to only one supervisor o Follow of all Fayol s rules Line and staff organizations o Line personnel employees who are part of the chain of command that is responsible for achieving organizational goals production workers distribution ppl marking personnel o Staff personnel employees who advise and assist line personnel in meeting their goals Matrix style organizations an organization in which specialists from different parts of the organization are brought together to work on specific projects but still remain part of a line and staff structure o Advantages gives managers flexibility in assigning ppl to projects encourages interorganizational cooperation and teamwork produce creative solutions to product development problems makes efficient use of organizational resources o Disadvantages costly complex can confuse employees about where their loyalty belongs requires good interpersonal skills as well as cooperative employees to avoid communication problems o May only be a temporary solution to a long term problem Cross functional self managed teams groups of employees from different departments who work together on a long term basis o Empowered to
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