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Chapter

8888 Adapting Adapting Organizations to Organizations to Today’s MarketsToday’s Markets

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Workers in Large* Companies in the Workers in Large* Companies in the Last 5 Years Have UndergoneLast 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

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8-3

Fayol’s Principles Fayol’s Principles of Organizationof Organization

• Unity of Unity of CommandCommand

• Hierarchy of Hierarchy of AuthorityAuthority

• Division of LaborDivision of Labor

• Subordination of Subordination of Individual InterestIndividual Interest

• AuthorityAuthority

• Degree of Degree of CentralizationCentralization

• Communication Communication ChannelsChannels

• OrderOrder

• EquityEquity

• Esprit de CorpsEsprit de Corps

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Weber’s Weber’s Organizational PrinciplesOrganizational Principles

• Job DescriptionsJob Descriptions

• Written RulesWritten Rules

• Procedures, Regulations, Procedures, Regulations, PoliciesPolicies

• Staffing/Promotions based Staffing/Promotions based on Qualificationson Qualifications

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Fundamentals Fundamentals of Bureaucracyof Bureaucracy

Chain of CommandChain of CommandRules & Rules &

RegulationsRegulationsSet Up by FunctionSet Up by FunctionCommunication is Communication is

MinimalMinimal E m p loyee

S u p erviso r

V ice P res id en t

B oss

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CentralizationCentralization (No Delegation)(No Delegation)

AdvantagesAdvantages

• Increased Increased UniformityUniformity

– Less Less DuplicationDuplication

– Maximum Maximum ControlControl

DisadvantagesDisadvantages

– Lots of Lots of Policies & Policies & ProceduresProcedures

– Many Many Layers/SlowerLayers/Slower

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Decentralization Decentralization ((Delegate Authority)Delegate Authority)

AdvantagesAdvantages– Informed Informed

DecisionsDecisions

– Worker Worker ResponsibilityResponsibility

– Few Few Layers/FasterLayers/Faster

DisadvantagesDisadvantages

– Loss of ControlLoss of Control

– Possible Possible DuplicationDuplication

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Span of ControlSpan of Control• Capabilities of Subordinates & Capabilities of Subordinates &

ManagerManager

• Complexity of JobComplexity of Job– Geographically CloseGeographically Close– Functional SimilarityFunctional Similarity– Need for CoordinationNeed for Coordination– Planning DemandsPlanning Demands– Functional ComplexityFunctional Complexity

Subordinate Subordinate Subordinate

Boss

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Organizational StructuresOrganizational Structures

Tall OrganizationsTall Organizations

- Many Layers of Many Layers of ManagementManagement

- High Cost of High Cost of ManagementManagement

Flat OrganizationsFlat Organizations

- Current TrendCurrent Trend

- Creation of Creation of TeamsTeams

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DepartmentalizationDepartmentalization

• ProductProduct

• FunctionFunction

• CustomerCustomer• LocationLocation• ProcessProcess

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Departmentalization by Departmentalization by FunctionFunction

DisadvantagesDisadvantages– Lack of Lack of

CommunicationCommunication

– Employees Identify Employees Identify with Departmentwith Department

– Slow Response to Slow Response to External DemandsExternal Demands

– Narrow SpecialistsNarrow Specialists

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Line OrganizationsLine Organizations

AdvantagesAdvantages– Clear Authority Clear Authority

& Responsibility& Responsibility

– Easy to Easy to UnderstandUnderstand

– One Supervisor One Supervisor per Employeeper Employee

DisadvantagesDisadvantages– InflexibleInflexible

– Few Specialists for Few Specialists for AdviceAdvice

– Long Line of Long Line of CommunicationCommunication

– Difficult to Handle Difficult to Handle Complex Complex DecisionsDecisions

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Line/Staff OrganizationsLine/Staff Organizations

Line PersonnelLine Personnel

– Perform FunctionsPerform Functions

– Contribute Directly Contribute Directly to Organizational to Organizational

GoalsGoals

Staff PersonnelStaff Personnel

– AdviseAdvise

– Assist Line Assist Line PersonnelPersonnel

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Matrix OrganizationsMatrix OrganizationsAdvantagesAdvantages

– FlexibilityFlexibility

– Cooperation & Cooperation & TeamworkTeamwork

– CreativityCreativity

– More Efficient Use More Efficient Use of Resourcesof Resources

DisadvantagesDisadvantages– Costly/ComplexCostly/Complex

– Confusion in Confusion in LoyaltyLoyalty

– Requires Good Requires Good Interpersonal Skills Interpersonal Skills & Cooperation& Cooperation

– Not PermanentNot Permanent

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Reasons to OutsourceReasons to Outsource

0% 10% 20% 30% 40% 50%

Reduce Cost

Focus on Core Competencies

Access to Expertise

Increase Profit

Faster Delivery

Resource Constraints

Technology Access

Source: CIO, “2003 Outsourcing Trends”

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Top Five Outsourced Top Five Outsourced Business CategoriesBusiness Categories

0% 10% 20% 30% 40% 50% 60%

Information Tech.

HR/Benefits

Facilities Mgmt

Finance & Acctg

Marketing/Sales

Source: BusinessWeek, July 8, 2002

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Outsourcing PossibilitiesOutsourcing Possibilities

CountryCountry PossibilitiesPossibilities

ChinaChina Hardware, Software, Call CentersHardware, Software, Call Centers

PhilippinesPhilippinesAccounting, Graphic Artists, Architects, Accounting, Graphic Artists, Architects,

TelemarketersTelemarketers

MexicoMexico Car & Electronic ManufacturingCar & Electronic Manufacturing

Costa RicaCosta Rica Call Centers, IT Support, BookkeepingCall Centers, IT Support, Bookkeeping

South AfricaSouth Africa French, English, German Speaking Call CentersFrench, English, German Speaking Call Centers

RussiaRussia R & D Centers in Sciences, IT, MathR & D Centers in Sciences, IT, Math

IndiaIndia IT, Chip Design, Call CentersIT, Chip Design, Call CentersSource: BusinessWeek, February 3, 2003

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Inverted Inverted Organization StructureOrganization Structure

Empowered Empowered front-line front-line workersworkersSupport Support

PersonnelPersonnel

Top Top Mgmt.Mgmt.

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Examples ofExamples ofInformal Group NormsInformal Group Norms

Do your job but don’t produce Do your job but don’t produce more than the rest of the group.more than the rest of the group.

Don’t tell off-color jokes or use Don’t tell off-color jokes or use profane language among group profane language among group members.members.

Listen to the boss and use his/her Listen to the boss and use his/her expertise but don’t trust him/her.expertise but don’t trust him/her.

Everyone is to be clean/organized at Everyone is to be clean/organized at the workstation.the workstation.

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Never side with managers in a Never side with managers in a dispute involving group members.dispute involving group members.

Respect/help your fellow group Respect/help your fellow group members on the job.members on the job.

Criticize the organization only Criticize the organization only among group members- never among group members- never among strangers.among strangers.

Drinking is done off-the-job- Drinking is done off-the-job- Never at work!Never at work!

Examples ofExamples ofInformal Group Informal Group

NormsNorms(cont’d)(cont’d)

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