Adapting organizations to today27s markets

Structuringanorganization Structuringanorganizationconsistsof devisingadivisionoflabor sometimesresultinginspecialization Dividingtasksintosmallerjobsiscalledjobspecialization settingupteamsordepartmentstodospecifictasks e g productionandaccounting Theprocessofsettingupindividualdepartmentstodospecializedtasksiscalleddepartmentalization assigningresponsibilityandauthoritytopeople Structuringanorganization Generally anorganizationstructurechangesduetochangingbusinessenvironment including moreglobalcompetition fastertechnologicalchanges changeincustomerexpectationslikehigh qualityproducts fast friendlyserviceatreasonablecost Historicaldevelopmentoforganizationaldesign MassproductionmeansefficientlyproducinglargequantitiesofgoodsThebiggertheplant themoreefficientproductionbecameBusinessgrowthledtoeconomiesofscale Thistermreferstothefactthatcompaniescanreducetheirproductioncostsiftheycanpurchaserawmaterialsinbulk theaveragecostofgoodsgoesdownasproductionlevelsincreaseDuringtheeraofmassproduction organizationtheoriesemerged InFrance itwasHenriFayolandinGermany itwasMaxWeber Fayol sprinciplesoforganization Fayolintroducedthefollowingprinciples Unityofcommand Eachworkeristoreporttoone andonlyoneboss Hierarchyofauthority Allworkersshouldknowtowhomtheyshouldreport Divisionoflabor Functionsaretobedividedintoareasofspecializationsuchasproduction marketing andfinance Subordinationofindividualintereststothegeneralinterest Thegoaloftheteamaremoreimportantthanthegoaloftheindividuals Fayol sprinciplesoforganization Authority Authorityandresponsibilityarerelated Degreeofcentralization Theamountofdecision makingpowervestedintopmanagementshouldvarybycircumstances Inasmallorganization it spossibletocentralizealldecision makingpowerinthetopmanager Inalargerorganization somedecision makingpowershouldbedelegatedtolower levelmanagersandemployeesonbothmajorandminorissues Clearcommunicationchannels Allworkersshouldbeabletoreachothersinthefirmquicklyandeasily Order Materialsandpeopleshouldbeplacedandmaintainedintheproperlocation Fayol sprinciplesoforganization Equity Amanagershouldtreatemployeesandpeerswithrespectandjustice Espritdecorps AspiritofprideandloyaltyshouldbecreatedamongpeopleinthefirmThedrawbackofFayol sorganizationtheoryisthatrulemakingoftenledtoratherrigidorganizationsthatdidn talwaysrespondquicklytoconsumerrequests MaxWeber sorganizationaltheory ItwasWeberwhopromotedthepyramid shapedorganizationstructureWeberputgreattrustinmanagersandfeltthatthefirmwoulddowellifemployeessimplydidwhattheyweretoldWeber organizationaltheoryweresimilartothatofFayolbutemphasized jobdescriptions writtenrules decisionguidelines anddetailedrecords consistentprocedures regulations andpolicies staffingandpromotionbasedonqualificationsInotherwords WeberwasinfavorofbureaucracySometimesthepracticeofestablishingrulesandproceduresbecamesorigidthatitbecamecounterproductive Turningprinciplesintoorganizationaldesign FollowingtheconceptsofFayolandWeber organizationsarestillorganizedwitheverythingsetupinahierarchyAhierarchyisasysteminwhichonepersonisatthetopoftheorganizationandthereisrankedorsequentialorderingfromthetopdownofmanagersandotherswhoareresponsibletothatpersonSinceonepersoncan tkeeptrackofthousandsofworkers thetopmanagerneedsmanylower levelmanagerstohelpThechainofcommandisthelineofauthoritythatmovesfromthetopofthehierarchytothelowestlevelAbureaucracyisanorganizationwithmanylayersofmanagerswhosetrulesandregulationsandoverseealldecisions Turningprinciplesintoorganizationaldesign Slowserviceissimplynotacceptableinmanyoftoday scompetitivefirmsTomakecustomershappier somecompaniesarere organizingtogiveemployeespowertomakemoredecisionsontheirownGivingemployeessuchauthorityandresponsibilitytomakedecisionsandpleasecustomersiscalledempowermentEmpowermentworksonlywhenemployeesaregiventhepropertrainingandresourcestorespond Issuesinvolvedinstructuringorganizations Whendesigningresponsiveorganizations firmshavehadtodealwithseveralorganizationalissues centralization decentralization spanofcontrol tallversusflatorganizationstructures departmentalization Issuesinvolvedinstructuringorganizations ThedegreetowhichanorganizationallowsmanagersatthelowerlevelsofthemanagerialhierarchytomakedecisionsdeterminesthedegreeofdecentralizationthatanorganizationpracticesCentralizedauthorityoccurswhendecision makingauthorityismaintainedatthetoplevelofmanagementatthecompany sheadquartersDecentralizedauthorityoccurswhendecision makingauthorityisdelegatedtolower levelmanagersandemployeeswhoaremorefamiliarwithlocalconditionsthanheadquarter smanagementcouldbeForexample controlworkswellforafast foodchainlikeMcDonald sbutnotaclothingretailerlikeJCPenny Issuesinvolvedinstructuringorganizations TheadvantagesofcentralizationGreatertop managementcontrolMoreefficiencySimplerdistributionsystemStrongerbrand corporateimageThedisadvantagesofcentralizationLessresponsivetocustomersLessempowermentInter organizationalconflictLowermoraleawayfromheadquarters Issuesinvolvedinstructuringorganizations TheadvantagesofdecentralizationBetteradaptationtocustomerwantsMoreempowermentofworkersFasterdecisionmakingHighermoraleThedisadvantagesofdecentralizationLessefficiencyComplexdistributionsystemLesstop managementcontrolWeakenedcorporateimage Issuesinvolvedinstructuringorganizations SpanofcontrolreferstotheoptimumnumberofsubordinatesamanagersupervisesorshouldsuperviseAtlowerlevels whereworkisstandardized it spossibletoimplementawidespanofcontrolThenumbergraduallynarrowsathigherlevelsoftheorganizationbecauseworkislessstandardizedandthere smoreneedforface to facecommunication Issuesinvolvedinstructuringorganizations Variablesinspanofcontrolincludethefollowing capabilitiesofthemanager capabilitiesofthesubordinates geographicalcloseness functionalsimilarity needforco ordination planningdemands functionalcomplexity Issuesinvolvedinstructuringorganizations Atallorganizationstructureisoneinwhichthepyramidalorganizationchartwouldbequitetallbecauseofthevariouslevelsofmanagementandasmallspanofcontrol thatis fewpeoplereportingtoeachmanager Aflatorganizationstructureisonethathasfewlayersofmanagementandabroadspanofcontrol thatis manypeoplereportingtoeachmanager Issuesinvolvedinstructuringorganizations TheadvantagesofanarrowspanofcontrolMorecontrolbytopmanagementMorechancesofadvancementGreaterspecializationClosersupervisionThedisadvantagesofanarrowspanofcontrolLessempowermentHighercostsDelayeddecisionmakingLessresponsivenesstocustomers Issuesinvolvedinstructuringorganizations TheadvantagesofabroadspanofcontrolReducedcostsMoreresponsivenesstocustomersFasterdecisionmakingMoreempowermentThedisadvantagesofabroadspanofcontrolfewerchancesofadvancementOverworkedmanagersLossofcontrolLessmanagementexpertise Issuesinvolvedinstructuringorganizations Departmentalizationisthedividingoforganizationalfunctions design marketing etc intoseparateunitsThetraditionalwaytodepartmentalizeorganizationsisbyfunctionFunctionalstructureisthegroupingofworkersintodepartmentsbasedonsimilarskills expertiseorresourceuse Issuesinvolvedinstructuringorganizations TheadvantagesofdepartmentalizationbyfunctionEmployeescandevelopskillsindepthandcanprogresswithinadepartmentastheymasterthoseskillsThecompanycanachieveeconomiesofscaleinthatitcancentralizealltheresourcesitneedsandlocatevariousexpertsinthatareaThere sgoodco ordinationwithinthefunction andtopmanagementcaneasilydirectandcontrolvariousdepartments activities Issuesinvolvedinstructuringorganizations ThedisadvantagesofdepartmentalizationbyfunctionTheremaybelackofcommunicationamongthedifferentdepartmentsIndividualemployeesmaybegintoidentifywiththeirdepartmentanditsgoalsratherthanwiththegoalsoftheorganizationasawholeThecompany sresponsetoexternalchangesmaybeslowPeopletendtobecomenarrowspecialistsPeopleinthesamedepartmenttendtothinkalikeandmayneedinputfromoutsiderstobecreative Issuesinvolvedinstructuringorganizations Thealternativewaystodepartmentalizeinclude byproduct byfunction bycustomergroup bygeographiclocation byprocess Organizationalmodels Tostructureanorganization youcanlookatfourcommonmodels lineorganization lineandstafforganizations matrixstyleorganizations cross functionalself managedteams Organizationalmodels Alineorganizationhasdirecttwo waylinesofresponsibility authority andcommunicationrunningfromthetoptothebottomoftheorganizationAlineorganizationdoesnothaveanyspecialistswhoprovidemanagerialsupportSuchorganizationsfollowallofFayol straditionalmanagementrulesThemilitaryandsmallbusinessesareorganizedthisway Organizationalmodels Tominimizethedisadvantagesofsimplelineorganizations manyorganizationstodayhavebothlineandstaffpersonnelLinepersonnelarepartofthechainofcommandthatisresponsibleforachievingorganizationalgoals e g productionworkers distributionpeople andmarketingpersonnel Staffpersonneladviseandassistlinepersonnelinmeetingtheirgoals e g marketingresearch legaladvising informationtechnology andhumanresourcemanagement Organizationalmodels TheimportantdifferencebetweenlineandstaffpersonnelisauthorityLinepersonnelhaveformalauthoritytomakepolicydecisionsandmaychoosetoseekorignoretheadvicefromstaffpersonnelStaffpersonnelhaveformalauthoritytoadvisethelinepersonnelandmakesuggestionsthatmightinfluencethosedecisions buttheycan tmakepolicychangesthemselvesStaffpositionsstrengthenthelinepositionsandarenotinferiororlower paid Organizationalmodels Bothlineandline and stafforganizationstructuressufferfromacertaininflexibilityToday seconomicsceneisdominatedbyhigh growthindustries e g telecommunications robotics biotechnology Insuchindustries competitionisstiffandthelifecycleofnewideasisshortEmphasisisonproductdevelopment creativity specialprojects rapidcommunication andinter departmentalteamwork Theeconomic technological andcompetitiveenvironmentsarerapidlychangingFromthosechanges grewthepopularityofthematrixorganization Organizationalmodels Inamatrixorganization specialistsfromdifferentpartsoftheorganizationarebroughttogethertoworkonspecificprojectsbutstillremainpartofaline and staffstructureAprojectmanagercanborrowpeoplefromdifferentdepartmentstohelpdesignandmarketnewproductideasTheadvantagesofamatrixorganizationstructureItgivesflexibilitytomanagersinassigningpeopletoprojectsItencouragesinter organizationalco operationandteamworkItcanresultincreativesolutionstoproblemssuchasthoseassociatedwithproductdevelopmentItprovidesforefficientuseoforganizationalresources Organizationalmodels ThedisadvantagesofamatrixorganizationstructureIt scostlyandcomplexItcancauseconfusionamongemployeesastowhethertheirloyaltybelongs totheprojectmanagerortotheirfunctionalunitItrequiresgoodinter personalskillsandco operativeemployeesandmanagers communicationproblemscanemergeItmaybeonlyatemporarysolutiontoalong termproblemApotentialproblemwithmatrixmanagementisthattheprojectteamsarenotpermanentTheyareformedtosolveaproblemordevelopanewproduct andthentheybreakupThereislittlechanceforcross functionallearningbecauseexpertsfromeachfunctionaretogetherforsolittletime Organizationalmodels Ananswertothedisadvantageofthetemporaryteamscreatedbymatrixmanagementistoestablishlong livedteamsandtoempowerthemtoworkcloselywithsuppliers customers andothersquicklyandefficientlybringingoutnew highqualityproductswhilegivinggreatserviceCross functionalself managedteamsaregroupsofemployeesfromdifferentdepartmentswhoworktogetheronalong termbasis asopposedtothetemporaryteamsestablishedinmatrix styleorganizations Sometimestheteamsareinter firmandalsogobeyondnationalboundaries Managingtheinteractionsamongfirms Whetheritinvolvescustomers suppliersanddistributors orthegovernment networkingisusingcommunicationstechnologyandothermeanstolinkorganizationsandallowthemtoworktogetheroncommonobjectivesOrganizationsaresocloselylinkedbytheInternetthateachcanfindoutwhattheothersaredoinginrealtime RealtimesimplymeansthepresentmomentoftheactualtimeinwhichsomethingtakesplaceTransparencyoccurswhenacompanyissoopentoothercompaniesworkingwithitthattheonce solidbarriersbetweenthembecomeseethroughandelectronicinformationissharedasifthecompanieswereone Managingtheinteractionsamongfirms Theorganizationstructurestendtobeflexibleandchanging Thatis onecompanymayworkwithadesignexpertfromadifferentcompanyinItalyforayearandthennotneedthatpersonanymore Anotherexpertfromanothercompanyinanothercountrymaybehirednexttimeforanotherproject Suchatemporarynetworkedorganization madeofreplaceablefirmsthatjoinandleaveasneeded iscalledavirtualcorporationTraditionally organizationshavetriedtodoallfunctionsthemselves Today sorganizationsarelookingtootherorganizationstohelptheminareaswheretheyarenotabletogenerateworld classquality Benchmarkinginvolvescomparinganorganization spractices processes andproductsagainsttheworld sbestForexample K2isacompanythatmakesskis snowboards skates andrelatedproducts Itstudiedthecompact discindustryandlearnedtouseultravioletinkstoprintgraphicsonskis ItwenttotheaerospaceindustrytogetPiezotechnologytoreducevibrationinitssnowboards theaerospaceindustryusesthetechnologyforwingsonplanes Andfinally itlearnedfromthecable TVindustryhowtobraidlayersoffiberglassandcarbon andadaptedthatknowledgetomakeskis Managingtheinteractionsamongfirms Ifanorganizationcan tdoaswellasthebestinanyparticulararea suchasshipping itoftenwilltrytooutsourcethefunctiontoanorganizationthatisthebest e g UPSorFedEx Outsourcingisassigningvariousfunctions suchasaccounting production security maintenance andlegalwork tooutsideorganizationsWhenafirmhascompleteditsoutsourcingprocess theremainingfunctionsarethefirm scorecompetencies CorecompetenciesarethosefunctionsthattheorganizationcandoaswellasorbetterthananyotherorganizationintheworldandisusuallydifficulttoimitateForexample Nikeisgreatatdesigningandmarketingathleticshoes Thoseareitscorecompetencies Itout sourcesthemanufacturingofthoseshoestoothercompaniesthatcanmakeshoesbetterandlessexpensivethanNikeitselfcan Adaptingtochange Onceyouhavestructuredanorganization youmustbepreparedtoadaptthatstructuretochangesinthemarketMergersandacquisitionsposespecialchallengesinadaptingtochange That swhysomanymergersofbigcorporationsfailandwhysomanypeoplewereskepticalaboutmergersandacquisitionsToimplementtheempowermentofemployees firmsoftenmustreorganizedramatically Sometimesthatmaymeanrestructuringthefirmtomakefront lineworkersthemostimportantpeopleintheorganization RestructuringisredesigninganorganizationsothatitcanmoreeffectivelyandefficientlyserveitscustomersAfews