This document discusses the evolution of organizational design and structures from the 1900s to today. It covers how organizations adapted to changing business environments and customer expectations through different structural approaches proposed by theorists like Fayol and Weber. Their theories emphasized bureaucracy, specialization, and chain of command hierarchies. As businesses grew, they developed more complex departmentalization and matrix, team-based structures to improve coordination, decision making, and responsiveness to customers. Modern organizations continue adapting their structures to remain competitive through approaches like networking, virtual teams, and inverted hierarchies.

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Adapting
Organizations to
Today’s Markets
UNDERSTANDING BUSINESS

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EVOLVING BUSINESS ENVIRONMENTS
 Global Competition
 Declining Economy
 Technological Changes
 Preserving the Environment
 Changing Customer Expectations

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CUSTOMER EXPECTATIONS
 High quality
products
 Fast Service
 Friendly Service
 Reasonable Cost

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THE DEVELOPMENT OF ORGANIZATION DESIGN
 Business Growth
leads to economies
of scale
 The larger the
business the more
organization is
required

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ECONOMIES OF SCALE
Companies  Purchase raw
Reduce materials in bulk
Production  Average cost of
Costs if: goods goes down as
production increases

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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

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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

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HENRY FAYOL’S PRINCIPLES
 Unity of command  Degree of
 Hierarchy of centralization
authority  Clear
 Divisions of labor communication
 Subordination of channels
individual interests  Order
to the general  Equity
interest  Espirit’ de corps
 Authority

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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

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MAX WEBER’S ORGANIZATIONAL THEORY
 Principles similar to  Job descriptions
Fayol’s with additional  Written rules,
theories decision guidelines,
 Believed that and detailed records
organizational rules  Consistent
should be followed procedures,
precisely regulations, and
 His theories worked policies
well for uneducated  Staffing and
and untrained workers promotion based on
qualifications

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BUREAUCRACY
Layers Set rules
of
Set regulations
Managers
Oversee all
decisions

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 Based on Fayol’s and Weber’s theories
managers sought to control workers

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 One person is at
the top or in
charge
 Everyone else
is ranked
according to
whom they
report to

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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

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DECISIONS TO MAKE IN
STRUCTURING ORGANIZATIONS
 Centralized or decentralized authority
 Appropriate span of control
 Tall and flat organization structures
 Weigh advantages and disadvantages of
departmentalization

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CENTRALIZED DECENTRALIZED
 Top level  Top level
management managers
maintains designate
authority for authority to lower
decision making level managers
who are more
familiar with
operations &
employees
CENTRALIZED OR DECENTRALIZED?

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ADVANTAGES DISADVANTAGES
 Top level managers have  Less empowerment
more control  Less responsive to
 Distribution is basic customers
 Brand and corporate  Inter-organizational
image strengthens conflict
 Morale is lower away from
headquarters
CENTRALIZED

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ADVANTAGES DISADVANTAGES
 Adapt better to  Complex distribution
customer wants system
 More empowerment of  Less responsive to
workers customer wants
 Decisions made  Top level management
quicker has less control
DECENTRALIZED

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SPAN OF CONTROL
 Narrows at higher  More face-to-face
levels of management communication
 Empowers lower level  Manager can handle
management & more information
employees  Work becomes
 Reduces amount of standardized
middle managers

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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
CHOOSING TALL OR FLAT ORGANIZATION
STRUCTURE

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Organizations are divided  Functions
into separate units Design
Typically divided by
Production
functions Marketing
Accounting
The flatter the organization
 Groups of Workers
the greater the span of
Skills
control
Expertise
Resource

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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

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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

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ADVANTAGES DISADVANTAGES
 Narrow  Narrow
 Top Management has more  Empowerment reduced
control  Costs are higher
 Greater advancement  Decision making delayed
potential  Less responsiveness to
 Improved specialization customers
 Supervision is closer
 Broad
 Broad  Fewer chances for
 Cost reduction advancement
 Improved Customer  Overworked managers
responsiveness  Loss of control
 Decision making quicker  Management expertise
 More empowerment decreased
DEPARTMENTALIZATION

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 Line Organizations
 Line & Staff Organizations
 Matrix Organization
 Cross-Functional Self-Managed Teams

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LINE ORGANIZATIONS
Direct two-way lines running from the top
to the bottom of the organization
 Responsibility
 Authority
 Communications
Everyone reports to one supervisor

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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

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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

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

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CROSS FUNCTIONAL SELF MANAGED TEAMS
 Groups of employees from different
departments who work together on a long
term basis
 Temporary solution for Matrix teams

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CROSS FUNCTIONAL TEAMS EMPOWERED
Work closely with:
 Suppliers
 Customers
 Others
 Quick & Efficient
 High quality products
 Great service

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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

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CROSS FUNCTIONAL TEAMS WORK BEST
WHEN:
Sharing Leadership Includes
 Customers
 Suppliers
 Distributors
 Going beyond
organizational boundaries

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MANAGING INTERACTIONS AMONG
FIRMS
 Networking
 Transparency & Virtual
Organizations
 Benchmarking
 Core Competencies

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NETWORKING
 Communication links organizations allowing
them to work together on common
objectives

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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

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BENCHMARKING
Comparisons of Organizations Against
the world’s best Practices
 Products
 Adapting to change
 Process

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CORE COMPETENCIES
Functions:
 Organization can do “as
good” or better than
other organizations in the
world

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 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

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 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.

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 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

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CREATING A CHANGE
 Formal organization
 Structure detailing lines of responsibility,
authority and position

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CREATING A CHANGE
 Informal organization-System develops
spontaneously as employees meet and form
cliques, relationships and lines of authority
outside the formal organization

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REFERENCES
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