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Chapter Chapter EightEight
Organizing a Organizing a Customer-Driven Customer-Driven
BusinessBusiness
Management Management PyramidPyramid
TopTop
Mid-Mid-LevelLevel
Front Front Line/SupervisoryLine/Supervisory
CEO,CEO,
ComptrolleComptroller,r,
Vice Pres.Vice Pres.Sales Sales Mgrs Plant Mgrs Plant
Mgrs.Mgrs.SupervisoSuperviso
rsrs
ForemenForemen
Workers in Large* Companies During the Last 5 Years
Have Undergone...
0% 10% 20% 30% 40% 50% 60% 70%
Reengineering orReorganization
Merger orAcquisition
Downsizing orLayoffs
Declining Sales orProfits
*500+ Employees*500+ Employees
Source: Source: Gallup for Carlson Marketing Group
Purpose of an Organizational Chart
• Show the activities of the organization
• Highlight subdivisions of the organization
• Identify different types of work performed
• Provide information about different management levels
• Show the lines of authority in the organization and the flow of organizational communications
Organizational Design
OrganizationDivisionDepartmentGroupIndividualSubordinate I Subordinate II
G roup 1 G roup 2
Departm ent A Departm ent B
Division V .P. Division V .P.
CEO
Fayol’s Principles of Organization
• Unity of Command
• Hierarchy of Authority
• Division of Labor
• Subordination of Individual Interest
• Authority
• Degree of Centralization
• Communication Channels
• Order
• Equity
• Esprit de Corps
Weber’s Organizational Principles
• Job Descriptions
• Written Rules
• Procedures, Regulations, Policies
• Staffing/Promotions based on Qualifications
Fundamentals of Bureaucracy
Chain of Command
Rules & Regulations
Set Up by Function
Communication = MinimalE m p loyee
S u p erviso r
V ice P res id en t
B oss
Organizational Structures
Tall Organizations
- Many Layers of Mgmt.
- Cost of Mgmt.=High
Flat Organizations
- Current Trend
- Creation of Teams
Span of Control• Capabilities of Subordinates &
Manager
• Complexity of Job– Geographically Close– Functional Similarity– Need for Coordination– Planning Demands– Functional Complexity
Subordinate Subordinate Subordinate
Boss
Departmentalization
Advantages– Skill
Development
– Economies of Scale
– Good Coordination
Business Education
Com m ., Hum anities,Social Sciences
Developm entalStudies
M ath, Sciences,Health Sciences
Technical, Industria lService Occupations
CollegePresident
Departmentalization
Disadvantages– Lack of Communication– Employees Identify
with Department– Slow Response to
External Demands– Narrow Specialists
Centralization (No Delegation)
Advantages– Increased
Uniformity
– Less Duplication
– Maximum Control
Disadvantages– Lots of Policies &
Procedures– Many
Layers/Slower
Decentralization (Delegate Authority)
Advantages– Informed
Decisions– Worker
Responsibility– Few
Layers/Faster
Disadvantages– Loss of Control– Possible
Duplication
Line Organizations
Advantages– Clear Authority &
Responsibility– Easy to Understand– One Supervisor per
Employee
Disadvantages– Inflexible– Few Specialists for
Advice– Long Line of
Communication– Difficult to Handle
Complex Decisions
Layers of Authority
• Top Managers- Decision Makers
• Middle Managers- Developed Rules & Procedures
• Workers and Supervisors
Line/Staff Organizations
Line Personnel–Perform Functions
–Contribute Directly to Organizational Goals
Staff Personnel–Advise
–Assist Line Personnel
Matrix Organizations
Advantages– Flexibility– Cooperation &
Teamwork– Creativity– More Efficient Use of
Resources
Disadvantages– Costly/Complex– Confusion in Loyalty– Requires Good
Interpersonal Skills & Cooperation
– Not Permanent
Tips for Team Leaders
• Don’t be afraid to admit ignorance
• Know when to intervene• Learn to truly share power• Worry about what you take
on, not what you give up• Get used to learning on the
job
Networking & ‘Nets• Networking
– Real Time– Transparency
• ‘Nets– Extranet– Intranet
TeleconferencTeleconferencee
A Virtual A Virtual CorporationCorporation
(Figure 8.7)(Figure 8.7)
CoreCore
FirmFirm
Accounting Accounting FirmFirm
ProductioProduction Firmn Firm DistributioDistributio
n Firmn Firm
AdvertisinAdvertising Agencyg Agency
Design Design FirmFirm
Legal Legal FirmFirm
Break business into smaller unitsBuild teamworkImpose autonomyCreate meaningful incentivesOutsource non-operating activitiesShare business capabilities across units
How to ImproveOrganizational Structure
Inverted Organization Structure
Empowered Empowered front-line front-line workersworkersSupport Support
PersonnelPersonnel
Top Top Mgmt.Mgmt.
Outsourcing+ Time to focus on
company’s primary function
+ Increased level of expertise
+ Cost effectiveness+ Decreased overhead+ Risk reduction+ Flexibility+ Technology
- Less personal approach- Less control by owner in
planning, implementing & carrying out company’s future
- Potential for competing for the outsourcing firm’s time
BenefitsBenefits DownsideDownside
Customer -Focused Design
• Information
• Build teamwork– cross-functional
– integration
• Self-management & autonomy
• Bottom-up relationships
• Outsource
• Global orientation
• Internal vs. external customers
Examples ofInformal Group Norms
Do your job but don’t produce more than the rest of the group.
Don’t tell off-color jokes or use profane language among group members.
Listen to the boss and use his/her expertise but don’t trust him/her.
Everyone is to be clean/organized at the workstation.
Never side with managers in a dispute involving group members.
Respect/help your fellow group members on the job.
Criticize the organization only among group members- never among strangers.
Drinking is done off-the-job. Never at work!
Examples ofExamples ofInformal Group Informal Group
NormsNorms(cont’d)(cont’d)
Key Terms
• Bureaucracy 236
• Centralized authority 244
• Continuous improvement 251
• Cross functional teams 248
• Decentralized authority 244
• Departmentalization 241
• Formal organization 255
• Informal organization 255
• Inverted organization 252
• Line personnel 245
• Matrix organization 246
• Networking 249
• Organizational culture 254
• Organizational design 236
• Outsourcing 254
• Reengineering 252
• Restructuring 238
• Span of control 239
• Staff personnel 249
• Total quality management 251
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