CHAPTER Structuring Organizations for Today’s Challenges McGraw-Hill/Irwin Copyright © 2015 by the McGraw-Hill Companies, Inc All rights reserved LEARNING OBJECTIVES Outline the basic principles of organization management Compare the organizational theories of Fayol and Weber Evaluate the choices managers make in structuring organizations Contrast the various organizational models Identify the benefits of inter-firm cooperation and coordination Explain how organizational culture can help businesses adapt to change 8-2 JENNA LYONS J Crew • Joined J Crew in 1990 as a junior designer • Worked her way up the ladder by emphasizing her commitment to quality • Her management style is compassionate and understanding 8-3 NAME that COMPANY This company maintains strict written rules and decision guidelines Those rules enable the firm to deliver packages quickly because employees don’t have to pause to make decisions – procedures are clearly spelled out for them Name that company! 8-4 REORGANIZATION is for EVERYONE LO 8-1 • Many companies are reorganizing, especially those in decline Including: - Auto makers - Homebuilders - Banks • Adjusting to changing markets is normal in capitalist economies • Companies must go back to basic organizational principles and firm up the foundation 8-5 STRUCTURING an ORGANIZATION LO 8-1 • Create a division of labor • Set up teams or departments • Allocate resources • Assign tasks • Establish procedures • Adjust to new realities 8-6 WOULD YOU SACRIFICE SAFETY for PROFITS? You own a lawn-mowing business and are aware of the hazards in the job But you’ve seen other companies save money by eliminating safety equipment You’d also like to make more money • What you do? • Save money with less safety precautions? • What are the consequences? 8-7 THE CHANGING ORGANIZATION LO 8-2 • Often change in organizations is due to evolving business environments: - More global competition - Declining economy - Faster technological change - Pressure to protect the environment • Customer expectations have also changed Consumers today want high-quality products with fast, friendly service and all at low cost 8-8 HOW MUCH CHANGES in a DECADE? Source: Fast Company, www.fastcompany.com, accessed March 2014 LO 8-2 8-9 PRODUCTION CHANGED ORGANZIATION DESIGN LO 8-2 • Mass production of goods led to complexities in organizing businesses • Economies of Scale -Companies can reduce their production costs by purchasing raw materials in bulk • The average cost of goods decreases as production levels rise 8-10 BENCHMARKING and CORE COMPETENCIES LO 8-5 • Benchmarking Compares an organization’s practices, processes and products against the world’s best • Core Competencies The functions an organization can as well as or better than any other organization in the world • K2 Skis researched other companies’ practices in order to create the best possible skis and snowboards 8-48 BENEFITS and CONCERNS of HEALTHCARE OUTSOURCING Source: Healthcare Financial Management LO 8-5 8-49 WHICH JOBS are most often OUTSOURCED? Source: USA Today LO 8-5 8-50 ADAPTING to MARKET CHANGES LO 8-5 • Change isn’t easy Employees like to things the way they always have • Get rid of old, inefficient facilities and equipment • Use the Internet to get to know your customers and sell directly to them 8-51 KEEP in TOUCH LO 8-5 Amazon and its Customer Database Amazon uses information stored in databases to reach out to customers The company emails customers letting them know about music, DVDs or books they might like based on past purchases • Have you ever received an email like this from Amazon or another company? • What benefits would a database of personal information, like past purchases, provide Amazon? • Do you think these databases are helpful for both companies and consumers or are they an invasion of privacy? 8-52 LO 8-5 MAKING the CHANGE • Digital Natives -Young people who have grown up using the Internet and social networking Photo Credit: Marc Wathieu 8-53 WHEN OPEN COMMUNICATION SHOULD NOT BE SO OPEN • The blending of mobile technology and work has been helpful to business • However, it also has encroached on the traditional work-life boundaries • Over 1/3 of surveyed employees responded that receive workrelated emails after hours, many complain it affects quality of life 8-54 RESTRUCTURING LO 8-5 • Restructuring Redesigning an organization so it can more effectively and efficiently serve its customers • Inverted Organization An organization that has contact people at the top and the CEO at the bottom of the organizational chart • The manager’s job is to assist and support frontline workers, not boss them 8-55 TRADITIONAL and INVERTED ORGANIZATIONS LO 8-5 8-56 ORGANIZATIONAL CULTURE LO 8-6 • Organizational or Corporate Culture The widely shared values within an organization that foster unity and cooperation to achieve common goals • Some of the best organizational cultures emphasize service • Culture is shown in stories, traditions and myths 8-57 FORMAL ORGANIZATION LO 8-6 • Formal Organization Details lines of responsibility, authority and position • The formal system is often slow and bureaucratic, but it helps guide the lines of authority • No organization can be effective without formal and informal organization 8-58 INFORMAL ORGANIZATION LO 8-6 • Informal Organization The system of relationships that develop spontaneously as employees meet and form relationships • Informal organization helps foster camaraderie and teamwork among employees 8-59 LIMITATIONS of INFORMAL ORGANIZATIONS LO 8-6 • The informal system is too unstructured and emotional on its own • Informal organization may also be powerful in resisting management directives 8-60 GROUP NORMS LO 8-6 Examples of Informal Group Norms • Do your job but don’t produce more than the rest of your group • Don’t tell off-color jokes or use profanity • Everyone is to be clean and organized at the workstation • Respect and help your fellow group members • Drinking is done off the job – NEVER at work Source: CIO Magazine, www.cio.com, accessed November 2014 8-61 TEST PREP • What is an inverted organization? • Why organizations outsource functions? • What is organizational culture? 8-62 ... organizational culture can help businesses adapt to change 8-2 JENNA LYONS J Crew • Joined J Crew in 1990 as a junior designer • Worked her way up the ladder by emphasizing her commitment to... SACRIFICE SAFETY for PROFITS? You own a lawn-mowing business and are aware of the hazards in the job But you’ve seen other companies save money by eliminating safety equipment You’d also like to... Mass production of goods led to complexities in organizing businesses • Economies of Scale -Companies can reduce their production costs by purchasing raw materials in bulk • The average cost of