Chapter 08 – Structuring Organizations for Today’s Challenges
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A Virtual Corporation
1. This slide illustrates the concept of a virtual corpo-
ration as an organizational model that could propel
American businesses into the next century.
2. The theory behind the virtual corporation can be
understood by picturing a company stripped to its
core competencies. All other business functions
will be accomplished by:
• Forming joint ventures
• Forming temporary alliances with other vir-
tual companies with different areas of ex-
pertise
• Hiring consulting services
• Outsourcing or subcontracting services
3. Share with the students some other interesting con-
cepts of a virtual corporation:
• On-demand knowledge workers who oper-
ate independently
• Skill-selling professionals such as engi-
neers, accountants, and human resource ex-
perts who manage your projects from their
homes through worldwide telecommunica-
tions
Team-building will change as companies hire indi-
viduals with expertise in various areas to solve
business problems. As a solution is identified, the
team will cease to exist.
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When Your Workers Work for
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Benchmarking and Core
Competencies
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Benefits and Concerns of Healthcare
Outsourcing
1. This slide identifies the benefits and concerns of
healthcare outsourcing.
2. Have the students identify the possible countries to
which health care can be outsourced. (India is used
by many hospitals and health care organizations
due to availability of knowledge workers.)
3. Ask the students, Why do you think these countries
represent a threat to U.S. jobs? (Lower wages will
result in lower costs.)
4. Ask the students, What could be outsourced to
South Africa? Why? (South Africa is considered a
good choice for customer service centers for
French-, English-, and German-speaking custom-
ers. The workforce is trained to speak several dif-
ferent languages while wages are low. As a global
company dealing with consumer inquiries, the cen-
tral location of a call center may reduce costs sig-
nificantly.)
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Which Jobs Will Be Outsourced Next?
1. This slide supports the previous discussion of out-
sourcing by identifying the most common function-
al areas for which U.S. companies plan on hiring
outside organizations. The results are from the TEC
International’s survey of 1,091 CEOs.
2. As mentioned in previous discussions, the number
one reason companies outsource is to reduce costs.
This slide shows Manufacturing, Information
Technology, and Customer Support/Sales as the
largest planned outsourced business categories.
3. Ask the students, Why do you think these catego-
ries are outsourced more often? (Manufacturing
can be done a lot cheaper in a country with lower
wages. IT and customer support represent func-
tional areas that provide basic or routine types of
job performance, unlike sales and marketing, where
specific strategies are closely aligned to meet spe-
cific customer needs.)
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Adapting to Market Changes
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Keep in Touch
1. Information technology has allowed companies like
Amazon to better understand customer needs.
2. Use the three questions on this slide to start a dis-
cussion with students in class.
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When Twitter and Facebook Are Old
School
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Restructuring
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Traditional and Inverted Organizations
1. The inverted organization structure is an alternate
to the traditional management layers. The critical
idea behind the inverted organization structure is
that the managers’ job is to support and facilitate
the job of the frontline people, not boss them
around.
2. Ask the students, What type of organizational struc-
ture would they prefer to work under: traditional or
inverted? Why?
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Organizational Culture
When you search for a job, make sure the organizational
culture is one you can thrive in.
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Formal Organization
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Informal Organization
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Limitations of Informal Organizations
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Group Norms
1. Group norms are an interesting topic to discuss in
teaching organizational structure. This slide illus-
trates some informal group norms.
2. Ask the students, Have you ever felt pressure to
conform to such informal norms? If you gave in to
group pressure not to produce more than the rest of
the group, did you feel good about yourself? (Focus
on the self-gratification feeling of a job well done
and the corresponding compensation.)
3. Discuss the importance of informal groups in an
organization that become somewhat formal them-
selves (i.e., labor unions).
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lecture
links
“It is not the strongest of the species that survive, nor the most intelligent, but the
“The ability to learn faster than your competitors may be the only sustainable com-
petitive advantage.”
Arie De Geus, Head of Planning, Royal Dutch Shell
lecture link 8-1
SMITH’S FOLLY
Kenneth H. Olsen, founder and CEO of Digital Equipment Corporation, was known for his auto-
cratic style. However, at the same time he strongly believed in delegating responsibility, something other
computer entrepreneurs have found it difficult to do.
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lecture link 8-2
STREAMLINING STARBUCKS
As with thousands of other companies, the recession has been not been kind to Starbucks. Rather
than exchange their excess cash for a $4 latte, more and more penny-pinching consumers have begun to
place a bigger chunk of their paychecks into their savings accounts. And when people begin to tighten
their belts, some of the first things to go are premium goods, such as a cup of expensive coffee. As a re-
sult of a 6.6% drop in annual revenue, Starbucks has been forced to close 900 stores as well as renegotiate
rents on many others.
lecture link 8-3
IMPLEMENTING THE TRADITIONAL MANAGERIAL RULES
Organizations today don’t always follow the traditional rules, but they are aware of the rules and
try to adjust accordingly. For example, look at unity of command, where each worker is to report to one,
and only one, boss. Firms today often have project teams or cross-functional teams where personnel from
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Many managers today are reluctant to give up what they consider to be their right to give orders
and the power to enforce obedience. Authority and responsibility are related: Whenever authority is exer-
cised, responsibility arises. Empowerment means that managers must give workers more authority and
lecture link 8-4
CHOOSING THE RIGHT SPAN OF CONTROL
No formula exists for determining the ideal span of control. Several factors affect the number of
people a manager can effectively supervise. Variables in span of control include the following:
• Capabilities of the manager. The more experienced and capable a manager is, the
broader the span of control can be. (A large number of workers can report to that manager.)
• Planning demands. The more involved the plan, the narrower the span of control might
be.
• Functional complexity. The more complex the functions are, the narrower the span of
control might be.
Other factors to consider include the professionalism of superiors and subordinates and the num-
ber of new problems that occur in a day. In business, the span of control varies widely. The number of
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lecture link 8-5
OTIS ELEVATORS COME TO THE RESCUE IN JAPAN
Unfortunately the tragedy in Japan continues even after the initial 9.0 earthquake in March 2011.
A series of aftershocks and an ongoing nuclear crisis can make any reports of progress toward recovery
seem rather hollow. Nevertheless, there’s some solace to be found in the fact that this disaster could have
been much worse were it not for the ingenuity of the response effort of the government, foreign aid organ-
izations and, perhaps surprisingly, businesses.
For instance, when the president of Otis Elevator Didier Michaud-Daniel heard about the quake,
not only did he have 2,400 Japanese employees to worry about, he had 80,000 elevators on his mind as
well. Michaud-Daniel wasn’t the only one: In the 48 hours following the quake Otis received 13,000 calls
lecture link 8-6
THE MANHATTAN PROJECT
As early as 1939 Albert Einstein warned President Franklin Roosevelt that the new field of phys-
ics had opened up the possibility of extraordinarily powerful bombs. In the summer of 1942, the govern-
ment created the Manhattan Engineer District to meet the goal of producing an atomic weapon under the
pressure of ongoing global war. The project became known as the Manhattan Project. The story of the
bomb’s creation involved the extraordinary efforts of scientists, engineers, and military officials. But it is
also the story of a massive organizational endeavor.
The project was put under the direction of Brigadier General Leslie Groves of the Army Corps of
Engineers. Groves had impressed his superiors with this administrative ability, organizational skill, and
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Groves’s aggressive management style and determination were key factors to the success of the
Manhattan Project. His detractors called him egotistical, brusque, manipulative, and overly authoritative.
However, he was decisive and able to cut through the red tape to accomplish his goals.
By the time the bombs were perfected, Germany had surrendered, and some scientists on the pro-
lecture link 8-7
GREATER EFFICIENCY, FEWER JOBS
Unfortunately, such efficiency improvements have all but closed the door on future hiring. A tep-
id economic recovery has forced many companies to operate in recession-mode for the long term, stress-
ing slimming costs instead of investment and expansion. Campbell, for instance, must find $80 million in
savings in order to stay profitable and offset inflation. So every day at its factories, floor employees meet
with managers to devise ways Campbell can implement its sweeping new efficiency measures. Though
these practices will keep jobs safe and the company afloat, they detract focus from innovative measures
that could allow Campbell to expand into the new decade. No less than former Fed chair Alan Greenspan
fears that this culture of cost cutting will run its course eventually and margins will shrink in its wake.
Chapter 08 – Structuring Organizations for Today’s Challenges
lecture link 8-8
A NEW KIND OF OUTSOURCING
With unemployment soaring in the double digits, local governments across the country are
scrambling for new ways to create jobs. Ironically, some communities are finding relief from the very
companies that were responsible for outsourcing their region’s jobs in the first place. For example, like
many American cities, Cincinnati lost scores of manufacturing jobs to cheap labor overseas. But Ohio
lecture link 8-9
SETTING UP SHOP ON FACEBOOK
Nearly two decades ago the desktop computer reigned supreme as the must-have technological
tool. In time, though, the laptop overtook its stationary sister and thus the mobile age was born. Now con-
sumers have access to an array of smartphones and digital tablets that can send them into cyberspace no