Essentials of Management Chapter 8

1. Essentials of ManagementChapter 8 Organization Structure, Culture, and Change

2. Introductory Concepts • Chapter 8 describes a variety of approaches to subdividing work at the organizational and unit levels. • Structure is the hard side of organizations. • Culture and change are the soft side of organizations. • Topics of structure, culture, and change are vital to understanding organizations.

3. Principles of Organization in a Bureaucracy • Hierarchy of authority (organizational units controlled by a higher one) • Unity of command (subordinates receive assigned duties from one superior, and only accountable to that superior) • Task specialization (each organizational unit and each employee concentrates on one function)

4. Principles of Organization in a Bureaucracy, continued • Responsibilities and job descriptions (each employee has precise job description; policy and procedure manuals kept current and accessible) • Line and staff functions (line deal with primary outputs of firm, staff deals with support activities, and advise line units)

5. Advantages of a Bureaucracy • Allows for high level of accomplishment. • Workers know who is responsible for what, and whether they have the authority to make a given decision. • Facilitates vertical integration, allowing for control of product development, manufacturing, and distribution. • Prevents problem of workers not having enough direction.

6. Disadvantages of a Bureaucracy • Can be rigid in handling people and problems. • Rules and regulations can lead to inefficiency, such as getting approvals. • High frustration often caused by red tape (tight procedures that must be followed). • Slow decision making because layers of approval are necessary.

7. Functional Departmentalization • Departments are defined by functions each one performs (e.g., accounting). • Well suited for large-batch processing and for specialization. • Can have problems due to its size and complexity. • People within unit may not communicate well with workers in other units (functional silo problem).

8. Geographic Departmentalization • Departments are arranged according to geographic area or territory served. • A natural unit in global business, such as Honda of America. • Allows for decision making at local level. • Can lead to high costs because of duplication of effort, and management may not be able to control local units well.

9. Product-Service Departmentalization • Departments arranged according to products or services they provide. • Makes most sense when product or service has own unique demands. • In well-run firm, units cooperate for mutual benefit. • Some problems with duplication of effort, and control of separate units.

10. Modifications of the Bureaucratic Organization • Project and Matrix Organization • Flat Structures, Downsizing, Outsourcing • Horizontal Structure (Organization by Team and Process) • Informal Structures and Communication Networks • Power Sharing (Chairman and CEO) • Selection of an Organization Structure

11. Project and Matrix Organization • Projects good for performing special tasks involving multiple specialties. • Matrix organization is project structure superimposed on functional structure. • Capitalizes on advantages of both. • Big projects function as mini-companies. • Project managers borrow resources from functional departments.

12. Flat Structures • Organization with many layers is sometimes converted to flat structure. • Less bureaucratic because fewer managers review work of others. • Wider span of control because managers now have fewer direct reports. • IT a force for flatter structures. • Flat structures can eliminate too many managers needed for decision making.

13. Downsizing • Can lead to simplified, less bureaucratic structure, better profits and stock prices. • Can backfire with lowered morale and return on assets. • Effective downsizing: (a) make it part of business strategy, (b) eliminate low-value work, (c) link to future work needs, (d) lay off sensibly, (e) help laid off workers, and (f) involve employees in resizing process.

14. Outsourcing • Part of globalization, but also having work performed by other organizations. • Company can operate with fewer employees and physical assets, focus on activities it performs best. • Both basic and more advanced business functions can be outsourced. • Homeshoring moves customer service activities into homes of telecommuters.

15. Horizontal Structure (Organization by Team and Process) • Group of people is concerned with a process such as order fulfillment. • Instead of task focus, all workers focus on purpose of the activity. • Horizontal structure uses teams responsible for accomplishing a process. • Reengineering switches emphasis from task to process. • Caution—expertise is still important.

16. Informal Structures and Communication Networks • Informal structure supplements formal structure by adding flexibility and speed. • Also referred to as informal networks because of focus on using personal contacts to obtain information. • Social network analysis maps and measures links throughout organization. • Nodes are people, links are relationships.

17. Power Sharing at Highest Level of Management • Concerns about complexity of top job has led to (a) splitting roles of chairman and CEO, and (b) use of co-CEOs. • One person as chairman and CEO could lead to unchecked power. • When CEO focuses on operations, chairperson can focus on strategy. • Co-CEO arrangement better for family business than large, public company.

18. Key Factors that Influence Selection of Organization Structure • Strategy and goals—structure follows strategy. • Technology—high technology firms rely more on flexible structures. • Size—bigness leads to centralized controls and some formalization. • Financial condition—flat costs less. • Environmental stability—flexible structure for unstable environment.

19. Delegation of Responsibility and Empowerment • To delegate and empower effectively, manager should: • Assign duties to right people. • Delegate whole task, avoid details. • Give as much instruction as needed. • Retain some important tasks. • Obtain feedback on the delegated task.

20. Decentralization • Refers to passing authority to lower levels, as opposed to centralization. • Favored when key decisions are made low in management hierarchy. • Centralized firm exercises more control than does decentralized firm. • Advanced technique is for decentralized units to be autonomous yet cooperate for common good.

21. Determinants of Organizational Culture • Origins could lie in values, administrative practices, and personality of founder. • Culture mirrors choices, behavior, and prejudices of top-level managers. • Society influences organizational culture. • Industry in which firm operates can be influential, such as steel mill versus investment bank.

22. Dimensions of Organizational Culture • Values (almost synonymous with culture) • Relative diversity of members • Resource allocation and rewards (which behavior or units gets the most) • Degree of change (stable versus rapidly changing) • Sense of ownership (of workers) • Strength of culture (extent of impact)

23. How Workers Learn the Culture • Socialization is major approach. • Contacts with others lead to understanding values, norms, and customs essential for adapting to the organization. • Teachings of leaders can also help impart culture to organizational members.

24. Consequences and Implications of Organizational Culture • Competitive advantage and financial success • Productivity, quality, and morale • Innovation (culture of innovation) • Compatibility of mergers and acquisitions • Person-organization fit (fitting the firm) • Direction of leadership activity (points leader toward what needs to be done)

25. Managing and Sustaining the Culture • Managers bring about culture change by • Being a role model for change. • Using rewards to reinforce the culture • Selecting people with values that match the culture • Sponsoring training in support of culture • Disseminating type of change required

26. Creating Change at Individual versus Organizational Level • Many useful changes take place at individual and small group level, rather than organizational level. • “Movers and shakers” seek results rather than to avoid offending people. • Organizational level change is change in fundamental way company operates. • All employees must be eager for change.

27. Unfreezing-Changing-Refreezing Model of Change • Unfreezing is reducing or eliminating resistance to change. • Changing or moving to a new level involves considerable two-way communication including group discussion. • Refreezing includes rewarding people for implementing the change.

28. Resistance to Change • Fear of an unfavorable outcome. • Not wanting to break old habits. • Concern about upsetting balance of an activity, such as in-person contact. • Desire to cling to the old, however flawed. • Awareness of the weakness of a proposed change. • Resistance can be feedback from workers about potential problems.

29. Gaining Support for Change • Allow for discussion and negotiation. • Allow for participation. • Point to reasons for, including finances. • Establish sense of urgency. • Use a visual people can relate to. • Avoid change overload. • Allow for first-hand observation of change. • Get best people behind program.

30. Six Sigma and Planned Change • Shift to quality-conscious firm is total systems approach to change. • Six Sigma can means (a) 3.4 errors in 1 million opportunities, (b) philosophy of driving out waste and improving quality, and (c) data-driven method for achieving near-perfect quality with emphasis on preventing problems. • To work well, Six Sigma must fit culture.