understanding business

Understanding Business Created by Penelope Dean April 26, 2011:

Understanding Business Created by Penelope Dean April 26, 2011 Adapting Organizations to Today’s Markets 4/27/2011

Evolving Business Environments:

Evolving Business Environments Global Competition Declining Economy Technological Changes Preserving the Environment Changing Customer Expectations 4/27/2011

Customer expectations:

Customer expectations High quality products Fast Service Friendly Service Reasonable Cost 4/27/2011

The Development of Organization Design:

The Development of Organization Design Business Growth leads to economies of scale The larger the business the more organization is required 4/27/2011

Economies of Scale:

Economies of Scale Companies Reduce Production Costs if: Purchase raw materials in bulk Average cost of goods goes down as production increases 4/27/2011

1900’s Era of Mass Production:

1900’s Era of Mass Production The 1900’s spawned the Era of Mass Production Manufacturer’s main goal was to produce large quantities of goods efficiently Two organization theorists influenced mass production techniques 4/27/2011

Henry Fayol :

Henry Fayol Published- Administration industriele et generale , 1919 in France His Book became popular in the U.S. in 1949 as General and Industrial Management 4/27/2011

Henry Fayol’s Principles:

Henry Fayol’s Principles Unity of command Hierarchy of authority Divisions of labor Subordination of individual interests to the general interest Authority Degree of centralization Clear communication channels Order Equity Espirit ’ de corps 4/27/2011

Max Weber:

4/27/2011 Max Weber Author of The theory of social and economic organizations German socialogist and economist Introduced the term bureaucracy by referring to a middle manager as a bureaucrat

Max Weber’s Organizational Theory:

Max Weber’s Organizational Theory Principles similar to Fayol’s with additional theories Believed that organizational rules should be followed precisely His theories worked well for uneducated and untrained workers Job descriptions Written rules, decision guidelines, and detailed records Consistent procedures, regulations, and policies Staffing and promotion based on qualifications 4/27/2011

Bureaucracy :

Bureaucracy Layers of Managers Set rules Set regulations Oversee all decisions 4/27/2011

Turning Principles into Organization Design:

Turning Principles into Organization Design Based on Fayol’s and Weber’s theories managers sought to control workers 4/27/2011

Heirarchy:

Heirarchy One person is at the top or in charge E veryone else is ranked according to whom they report to 4/27/2011

Chain of Command:

Chain of Command Chain of authority that moves from the top of the hierarchy to the bottom going through each level or chain of command 4/27/2011

Decisions to Make In Structuring Organizations:

Decisions to Make In Structuring Organizations 4/27/2011 Centralized or decentralized authority Appropriate span of control Tall and flat organization structures Weigh advantages and disadvantages of departmentalization

Centralized or Decentralized?:

Centralized or Decentralized? Centralized Decentralized Top level management maintains authority for decision making Top level managers designate authority to lower level managers who are more familiar with operations & employee s 4/27/2011

Centralized:

Centralized Advantages Disadvantages Top level managers have more control Distribution is basic Brand and corporate image strengthens Less empowerment Less responsive to customers Inter-organizational conflict Morale is lower away from headquarters 4/27/2011

Decentralized:

Decentralized Advantages Disadvantages Adapt better to customer wants More empowerment of workers Decisions made quicker Complex distribution system Less responsive to customer wants Top level management has less control 4/27/2011

Appropriate Span of Control:

Appropriate Span of Control 4/27/2011 Deciding on Appropriate Span of Control Span of control is the most amount of subordinates that one manager can oversee and control

Span of Control:

Span of Control Narrows at higher levels of management Empowers lower level management & employees Reduces amount of middle managers More face-to-face communication Manager can handle more information Work becomes standardized 4/27/2011

Choosing Tall or Flat Organization Structure:

Choosing Tall or Flat Organization Structure Tall Organization Structure Flat Organization Structure Pyramid organization chart shows as tall because of the many levels of management Smaller span of control Less people report to each manager Higher costs More paper work Poor communication and decision making Few layers of management/wider span of control More people report to each manager Empowering lower level employees to make decisions Large organizations use flat structures to imitate small firms customer relations 4/27/2011

Departmentalization divides organizations into separate units:

Departmentalization divides organizations into separate units Organizations are divided into separate units Typically divided by functions The flatter the organization the greater the span of control Functions Design Production Marketing Accounting Groups of Workers Skills Expertise Resource 4/27/2011

Benefits of Departmentalization:

Benefits of Departmentalization Specialize tasks Work together more effectively Save on costs Improves efficiency Coordinate work within functions Top management has more control Improves Responsiveness to customers Higher chances for advancement 4/27/2011

Alternate ways to departmentalize:

Alternate ways to departmentalize Nature, Product & Customer’s determine the type of departmentalization that is needed A combination of different types is called “Hybrid forms” Customer group Geographical location Activity Processes 4/27/2011

Departmentalization:

Departmentalization Advantages Disadvantages Narrow Top Management has more control Greater advancement potential Improved specialization Supervision is closer Broad Cost reduction Improved Customer responsiveness Decision making quicker More empowerment Narrow Empowerment reduced Costs are higher Decision making delayed Less responsiveness to customers Broad Fewer chances for advancement Overworked managers Loss of control Management expertise decreased 4/27/2011

Organizational Models:

Organizational Models Line Organizations Line & Staff Organizations Matrix Organization Cross-Functional Self-Managed Teams 4/27/2011

Line Organizations:

Line Organizations Direct two-way lines running from the top to the bottom of the organization Responsibility Authority Communications Everyone reports to one supervisor 4/27/2011

Line & Staff Organizations:

Line & Staff Organizations 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 goal 4/27/2011

Matrix Organizations:

Matrix Organizations Specialists from different parts of the organization are brought together to work on specific projects and remain part of the line and staff structure 4/27/2011

Matrix Organization:

Matrix Organization Advantages Disadvantages Managers have flexibility assigning people to projects Inter-organizational teamwork Efficient use of organization resources Costly and complex Confusing to employees (loyalty to project manager or functional unit) Good interpersonal skills required Managers and employees must cooperate (avoid communication problems) Temporary solution to a long term problem 4/27/2011

Cross Functional Self Managed Teams:

Cross Functional Self Managed Teams Groups of employees from different departments who work together on a long term basis Temporary solution for Matrix teams 4/27/2011

Cross Functional Teams Empowered :

Cross Functional Teams Empowered Work closely with: Suppliers Customers Others Quick & Efficient High quality products Great service 4/27/2011

Cross Functional Teams Long-Term:

Cross Functional Teams Long-Term Teams who work together long term as self managed teams empowered to make managerial decisions without prior management approval break down barriers in: Design Engineering Marketing Distribution Other functions 4/27/2011

Cross Functional Teams Work Best When::

Cross Functional Teams Work Best When: Sharing Leadership Includes Customers Suppliers Distributors Going beyond organizational boundaries 4/27/2011

Managing Interactions among firms:

Managing Interactions among firms Networking Transparency & Virtual Organizations Benchmarking Core Competencies 4/27/2011

Networking:

Networking Communication links organizations allowing them to work together on common objectives 4/27/2011

Transparency & Virtual Organizations :

Transparency & Virtual Organizations Real time-Present moment when something takes place Virtual corporation-organization temporarily networked comprised of replaceable firms join and leave as needed 4/27/2011

BenchMarking:

BenchMarking Comparisons of Organizations Against the world’s best Practices Products Adapting to change Process 4/27/2011

Core competencies:

Core competencies Functions: Organization can do “as good” or better than other organizations in the world 4/27/2011

Adapting to change :

Adapting to change Prepare to adapt to structure changes Digital Natives-People who have grown up using Internet and social networking Restructuring-Redesigning an organization so it is more effective & efficient 4/27/2011

Restructuring for Empowerment:

Restructuring for Empowerment Traditional Organization-Top Management, Middle, Supervisory, Frontline Inverted Organization-Has contact people at the top and chief executive officer at the bottom of the organization chart-turning the traditional organization structure upside down. 4/27/2011

Creating a Change:

Creating a Change Organizational (Corporate) culture-Shared values within an organization that provide unity and cooperation to achieve common goals Informal organization-System develops spontaneously as employees meet and form cliques, relationships and lines of authority outside the formal organization 4/27/2011

Creating a Change:

Creating a Change Formal organization Structure detailing lines of responsibility, authority and position 4/27/2011

Creating a change:

Creating a change Informal organization-System develops spontaneously as employees meet and form cliques, relationships and lines of authority outside the formal organization 4/27/2011

References:

References 4/27/2011 Nickels, William G. McHugh, M. James, McHugh M. Susan. Understanding business. preview edition , 9th edition. McGraw Hill/Irwin. 2010./ Photo. Fayol Henry. http://www.123people.com/ext/frm?ti=person%20finder&search_term=henry%20fayol&search_country=US&st=perso%20finder&target_url=http://s657.photobucket.com/album Photo. Weber Max. http://www.mta.ca/faculty/socsci/sociology/fleming/weber_album/weberin1918.html