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8-1
1-1
McGraw-Hill/Irwin
Understanding Business, 8e © 2008 The McGraw-Hill Companies, Inc., All Rights Reserved.
Nickels McHugh McHugh
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Adapting
Organizations
to Today’s
Markets 8
CHAPTER
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8-2
Structuring an Organization
Comprises:
• Accountability
• Allocating
Resources
• Establishing
Procedures
• Division of Labor
• Team Tasks
• Assigning
Responsibility/
Authority

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8-3
Fayol’s Principles
of Organization
• Unity of Command
• Hierarchy of
Authority
• Division of Labor
• Subordination of
Individual Interest
to the General
Interest
• Authority
• Degree of
Centralization
• Clear
Communication
Channels
• Order
• Equity
• Esprit de Corps

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8-4
Weber’s
Organizational Principles
• Job Descriptions
• Written Rules
• Procedures, Regulations,
Policies
• Staffing/Promotions Based
on Qualifications

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8-5
Centralization
(No Delegation)
Advantages
• Greater Top-
Management Control
• More Efficiency
• Simpler Distribution
System
• Stronger
Brand/Corporate
Image
Disadvantages
• Less
Responsiveness to
Customers
• Less
Empowerment
• Interorganizational
Conflict
• Lower Morale Away
from Headquarters

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8-6
Decentralization
(Delegate Authority)
Advantages
• Better Adaptation to
Customer Wants
• More Empowerment
of Workers
• Faster Decision
Making
• Higher Morale
Disadvantages
• Less Efficiency
• Complex Distribution
System
• Less Top-Management
Control
• Weakened Corporate
Image

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8-7
Organizational Structures
Tall Organizations
• Many Layers of
Management
• High Cost of
Management
• Narrow Span of
Control
Flat Organizations
• Current Trend
• Creation of Teams
• Broad Span of
Control

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8-8
How to Make Jobs
Fit Your Company (Part 1 of 2)
Each manager must ask:
• What resources do I control to
accomplish my tasks?
• What measures will be used to evaluate
my performance?
• Who do I need to interact with and
influence to achieve my goals?
• How much support can I expect when I
reach out to others for help?
Source: HBS Working Knowledge, October 31,2005

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8-9
How to Make Jobs
Fit Your Company (Part 2 of 2)
Four Basic Spans of a Job:
• The Span of Control
• The Span of Accountability
• The Span of Influence
• The Span of Support
Source: HBS Working Knowledge, October 31,2005

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8-10
Span of Control - Narrow
Advantages
• More Control by
Top Management
• More Chances for
Advancement
• Greater
Specialization
• Closer Supervision
Disadvantages
• Less Empowerment
• Higher Costs
• Delayed Decision
Making
• Less
Responsiveness to
Customers

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8-11
Span of Control - Broad
Advantages
• Reduced Costs
• More
Responsiveness
to Customers
• Faster Decision
Making
• More
Empowerment
Disadvantages
• Fewer Chances for
Advancement
• Overworked
Managers
• Loss of Control
• Less Management
Expertise

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8-12
Advantages
• Skill Development
• Economies of
Scale
• Good Coordination
Departmentalization
by Function
Disadvantages
• Lack of
Communication
• Employees Identify
with Department
• Slow Response to
External Demands
• Narrow Specialists
• Groupthink

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8-13
Departmentalization
• By Product
• By Function
• By Customer
Group
• By Geographic
Location
• By Process

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8-14
Line Organizations
Advantages
• Clear Authority
& Responsibility
• Easy to
Understand
• One Supervisor
Per Employee
Disadvantages
• Inflexible
• Few Specialists
for Advice
• Long Line of
Communication
• Difficult to Handle
Complex
Decisions

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8-15
Line/Staff Organizations
Line Personnel
• Formal Authority
• Make Policy
Decisions
Staff Personnel
• Advise Line
Personnel
• Assist Line
Personnel

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8-16
Matrix Organizations
Advantages
• Flexibility
• Cooperation &
Teamwork
• Creativity
• More Efficient Use
of Resources
Disadvantages
• Costly/Complex
• Confusion in
Loyalty
• Requires Good
Interpersonal
Skills &
Cooperation
• Not Permanent

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8-17
Important Conditions
for Small Teams
1. Clear Purpose
2. Clear Goals
3. Correct Skills
4. Mutual Accountability
5. Shift Roles When Appropriate
Source: CIO Dec 2003

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8-18
Networking
• Real Time
• Transparency
• Virtual
Corporations

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8-19
A Virtual Corporation
Core
Firm
Accounting
Firm
Production
Firm
Distribution
Firm
Advertising
Agency
Design
Firm
Legal
Firm

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8-20
Benefits and Concerns of
Healthcare Outsourcing
Benefits
• Provides Enough
Staff to Operate the
Facility
• Cost Savings
Concerns
• Lower Employee
Morale
• Liability
• Should Patients be
Informed
• Confidentiality &
Security
Source: Healthcare Financial Management, 2005

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8-21
Which Jobs Will
Be Outsourced Next?
0% 2% 4% 6% 8% 10% 12%
Customer
Support/Sales
Information
Technology
Manufacturing
Source: USA Today

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8-22
Adapting to Change
• Restructuring for Empowerment
• Focusing on the Customer
• Creating a Change-Oriented
Organizational Culture
• The Informal Organization

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8-23
Layers of Authority-
Traditional
• Top Managers- Decision
Makers
• Middle Managers- Develops
Rules & Procedures
• Workers and Supervisors

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8-24
Inverted
Organization Structure
Empowered front-
line workers
Support
Personnel
Top
Mgmt.

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8-25
Examples of
Informal Group Norms
• Do your job but don’t produce
more than the rest of the group.
• Don’t tell off-color jokes or use
profane language among group
members.
• Listen to the boss and use his/her
expertise but don’t trust him/her.
• Everyone is to be clean/organized at
the workstation.

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8-26
• Never side with managers in a
dispute involving group members.
• Respect/help your fellow group
members on the job.
• Criticize the organization only
among group members-- never
among strangers.
• Drinking is done off-the-job--
Never at work!
More Examples of
Informal Group Norms