CHAPTER 9 - Adapting organizations to today’s market

CHAPTER 9 Adapting organizations to today’s market 1 The principles of management are much the same, no matter the size of the business. Management begins with planning. Organizing, or structuring, begins with determining what work needs to be done and then dividing up tasks Dividing tasks into smaller jobs is called job specialization The process of setting up individual departments to do specialized tasks is called departmentalization management 2 Business growth Business growth led to what was called economies of scale. This term refers to the fact that companies can reduce their production costs if they can purchase raw materials in bulk and develop specialized labour, resulting in the unit cost of goods going down. Economies of scale focus on the supply side of a business; Economies of scope focus on the demand side, this term refers to efficiencies that can be realized through product bundling and family branding. 3 Fayol’s principles of organization These principles became synonymous with the concept of management. Organizations were designed so that no person had more than one boss, lines of authority were clear, and everyone knew to whom they were to report. 4 Fayol’s principles of organization 5 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 Weber was writing about organization theory in Germany around the same time Fayol was writing his books in France. His principles: Job Descriptions Written Rules Procedures, Regulations, Policies Staffing/Promotions based on Qualifications 6 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. Organizational design 7 Chain of Command Rules and Regulations Set Up by Function Communication is Minimal Fundamentals of bureaucracy 8 Centralized authority occurs when decision-making authority is maintained at the top level of management at the company’s headquarters. Decentralized authority occurs when decision-making authority is delegated to lower-level managers and employees who are more familiar with local conditions than headquarters’ management could be. Centralization Versus decentralization of authority 9 Centralization versus decentralization of authority 10 Span of control Span of control refers to the optimum number of subordinates a manager supervises or should supervise. Variables to consider in span of control Capabilities of Subordinates and Manager Complexity of Job Geographically Close Functional Similarity Need for Coordination Planning Demands Functional Complexity 11 Span of control 12 departmentalization Departmentalization is dividing an organization into separate units. The traditional way to departmentalize organizations is by function. Functional structure is the grouping of workers into departments based on similar skills, expertise, or resource use. 13 Advantages of departmentalization Employees can develop skills in depth and can progress within a department as they master those skills. The company can achieve economies of scale in that it can centralize similar resources in one area. There’s good coordination within the function, and top management can easily direct and control various departments’ activities. 14 disadvantages of departmentalization There may be a lack of communication among the different departments. Individual employees may begin to identify with their department and its goals rather than with the goals of the organization as a whole. The company’s response to external changes may be too narrow. People may not be trained to take broad-based senior managerial responsibilities. People in the same department tend to think alike. 15 By product By function By customer group By geographic location By process Alternative ways to departmentalize 16 Organizational models Four models: (1) line organizations, (2) line-and-staff organizations, (3) matrix-style organizations, and (4) self-managed teams 17 Disadvantages Inflexible Few Specialists for Advice Long Line of Communication Difficult to Handle Complex Decisions Advantages Clear Authority and Responsibility Easy to Understand One Supervisor per Employee Line organizations 18 Line-and-staff organizations: To minimize the disadvantages of simple line organizations, many organizations today have both line and staff personnel. Line personnel Employees who are part of the chain of command that is responsible for achieving organizational goals. Staff personnel Employees who advise and assist line personnel in meeting their goals. 19 Matrix-Style Organizations 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. A group that has skills from different functional areas 20 Self-Managed Teams Groups of employees from different departments who work together on a long-term basis (as opposed to the temporary teams established in matrix-style organizations). 21 Benchmarking and core competencies Benchmarking Comparing an organization’s practices, processes, and products against the world’s best. Core competencies Those functions that an organization can do as well as or better than any other organization in the world. 22 Restructuring for empowerment Restructuring Redesigning an organization so that it can more effectively and efficiently serve its customers. 23 Restructuring for empowerment 24 Most organizations have strong informal organizations as well. Examples of informal group norms Do your job, but don’t produce more than the rest of the group. Don’t tell off-colour 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! 25