Structuring Organizations for Todays Challenges Chapter 8 Building

Structuring Organizations for Today’s Challenges Chapter 8

Building or Reorganizing from the Bottom Up

Structuring an Organization • Division of Labor: dividing tasks among workers • Job Specialization: dividing tasks into smaller jobs • Departmentalization: creating individual departments for specialized tasks • Assigning authority and responsibility • Resource allocation • Designing procedures to accomplish goals • Aided by an organizational chart

Managing Change • More rapid than ever before • Customers, Technology, Global Business environment • Past: companies structured to manage employees • Modern: companies structured to please the customer

Development of Organizational Design

Fayol’s Principles of Organization • Before the 20 th century, most businesses were small, and relatively easy to manage and organize • Mass production and economies of scale • 1919 published General and Industrial Management • Popularized after WWII in the US

Organizational Principles • Unity of Command: worker reports to one boss • Hierarchy of Authority: workers should know to whom they report to • Division of Labor: functions divided into areas of specialization • The general interest is greater than the individual interest • Authority (and responsibility) • Degree of Centralization • Clear communication channels • Order: materials and people maintained in right place • Equity: employees deserve to be treated with respect and justice • Esprit de corps

Weber and Organizational Theory • Theory of Social and Economic Organizations • Company works most efficiently when workers are just told what to do • Less decision-making the better • Uneducated and untrained workers • Similar ideas to Fayol’s, plus: • • Job descriptions Written rules, decision guidelines, and detailed records. Consistent procedures, regulations, and policies. Staffing and promotion based on qualifications.

Structuring an Organization: Organizational Chart • Hierarchy • Chain of Command assigning authority and responsibility • Division of Labor: dividing tasks among workers • Job Specialization: dividing tasks into smaller jobs • Departmentalization: creating individual departments for specialized tasks • Bureaucracy

Reducing Bureaucracy • Empowerment of employees

Structuring Decisions

Centralized vs Decentralized authority • Decision-making from the top or delegating to lower managers

Purchasing and promotion decisions from the top

Store manager has authority to buy, price, and promote merchandise Why?

Span of Control • How many people should a manager supervise? • Depends on levels of Standardization of jobs • Less standardization means less span of control • However, empowering workers allows for broader span of control • Also, more educated workers • Information technology

Tall (Mechanic)vs Flat (Organic) Hierarchy • Level of hierarchy • Layers and number of managers • Level of empowerment

Departmentalization options • Function • Product • Customer Group • Geographic location • Process • Hybrid

Function (Traditional) President Production Mktg Finance HR Acct.

Product Johnson & Johnson: https: //www. jnj. com/healthcareproducts CEO Consumer Products Mk Prd Medical Devices Fin Mk Prd Pharmaceuticals Fin

Consumer group / Market CEO Commercial Mk Prd Fin Residential Mk Prd Fin Governm ent Agric.

Geography CEO EMEA Latin Am. Asia Pac. N. Amer.

Process CEO R&D Customer Acquisition Order Fulfillment

Organizational Models

Line • Direct two-way lines of responsibility, authority, and communication running from the top to the bottom of the organization • Reporting to one supervisor • No specialists to provide support to managers • No legal, accounting, HR, or IT

Line-and-Staff • Line: responsible for directly achieving organizational goals • Staff: advice and assist

Matrix