Chapter 08 – Structuring Organizations for Today’s Challenges
8-1
chapter
.
Structuring Organizations
for Today’s Challenges
what’s new in this edition 8.3
brief chapter outline and learning objectives 8.5
lecture outline and lecture notes 8.7
PowerPoint slide notes 8.51
lecture enhancers 8.76
lecture enhancer 8-1: SMITH’S FOLLY 8.76
lecture enhancer 8-2: STARBUCKS REINVENTS TO STAY RELEVANT 8.77
lecture enhancer 8-3: INCREASING COLLABORATION WITH BOSSLESS OFFICES 8.77
lecture enhancer 8-4: CHOOSING THE RIGHT SPAN OF CONTROL 8.78
lecture enhancer 8-5: THE MANHATTAN PROJECT 8.79
lecture enhancer 8-6: GREATER EFFICIENCY, FEWER JOBS 8.79
lecture enhancer 8-7: A NEW KIND OF OUTSOURCING 8.80
lecture enhancer 8-8: PIVOTING FROM ONE BUSINESS PLAN TO ANOTHER 8.81
lecture enhancer 8-9: SETTING UP SHOP ON FACEBOOK 8.81
lecture enhancer 8-10: EMPLOYER ICEBREAKING RITUALS 8.82
8
Chapter 08 – Structuring Organizations for Today’s Challenges
8-2
critical thinking exercises 8.83
critical thinking exercise 8-1: BUILDING AN ORGANIZATION CHART 8.83
critical thinking exercise 8-2: HOW DO ORGANIZATIONS GROUP 8.86
ACTIVITIES?
bonus cases 8.88
bonus case 8-1: STRUCTURAL COLLAPSE: RESPONSIBILITY AND 8.88
ACCOUNTABILITY
bonus case 8-2: CREATING CROSS-FUNCTIONAL TEAMS 8.90
bonus case 8-3: OFFICE ALUMNI 8.92
Chapter 08 – Structuring Organizations for Today’s Challenges
8-3
what’s new in
this edition
additions to the 11th edition:
• Getting to Know Jenna Lyons of J. Crew
• Name That Company: UPS
• Spotlight on Small Business: Cutting Back While Cutting Costs
• Adapting to Change: When Open Communication is Should Not Be So Open
• Video Case: Whole Foods
revisions to the 11th edition:
• Making Ethical Decisions: Would You Sacrifice Safety for Profits?
• Statistical data and examples throughout the chapter were updated to reflect current information.
deletions from the 10th edition:
• Getting to Know Ursula Burns
• Name That Company: K2 Skis
• Spotlight on Small Business
• Social Media in Business
Chapter 08 – Structuring Organizations for Today’s Challenges
8-4
Chapter 08 – Structuring Organizations for Today’s Challenges
8-5
brief chapter outline
and learning objectives
CHAPTER 8
STRUCTURING ORGANIZATIONS FOR TODAY’S CHAL-
LENGES
Getting to Know JENNA LYONS, of J. Crew
LEARNING OBJECTIVE 1
Outline the basic principles of organization management.
I. EVERYONE’S REORGANIZING
A. Building an Organization from the Bottom Up
LEARNING OBJECTIVE 2
Compare the organizational theories of Fayol and Weber.
II. THE CHANGING ORGANIZATION
A. The Development of Organization Design
B. Turning Principles into Organization Design
LEARNING OBJECTIVE 3
Evaluate the choices managers make in structuring organizations.
III. DECISIONS TO MAKE IN STRUCTURING ORGANIZATIONS
A. Choosing Centralized or Decentralized Authority
B. Choosing the Appropriate Span of Control
C. Choosing between Tall and Flat Organization Structures
D. Weighing the Advantages and Disadvantages of Departmentalization
Chapter 08 – Structuring Organizations for Today’s Challenges
8-6
LEARNING OBJECTIVE 4
Contrast the various organizational models.
IV. ORGANIZATIONAL MODELS
A. Line Organizations
B. Line-and-Staff Organizations
C. Matrix-Style Organizations
D. Cross-Functional Self-Managed Teams
E. Going Beyond Organizational Boundaries
LEARNING OBJECTIVE 5
Identify the benefits of interfirm cooperation and coordination.
V. MANAGING THE INTERACTIONS AMONG FIRMS
A. Transparency and Virtual Organizations
B. Benchmarking and Core Competencies
VI. ADAPTING TO CHANGE
A. Restructuring for Empowerment
LEARNING OBJECTIVE 6
Explain how organizational culture can help businesses adapt to
change.
VII. CREATING A CHANGE-ORIENTED ORGANIZATIONAL CULTURE
A. Managing the Informal Organization
VIII. SUMMARY
Chapter 08 – Structuring Organizations for Today’s Challenges
8-7
Getting to Know JENNA LYONS of J. CREW
Jenna Lyons combined her fierce fashion sense and compassionate management
style to transform J. Crew into a chic clothing company.
learning objective 1
Outline the basic principles of organization management.
I. EVERYONE’S REORGANIZING
A. MANY COMPANIES ARE REORGANIZING.
1. The text discusses how Procter & Gamble has
reorganized to become an innovation leader.
2. Other firms are declining—banks, automobile
companies, and home-building companies.
3. ADJUSTING TO CHANGING MARKETS is a
normal function in a capitalist economy.
4. The key to success is to REMAIN FLEXIBLE and
to adapt to the changing times.
5. The text uses the example of Starbucks expand-
ing its menu, then reducing it when customers
were unhappy with the smell.
B. BUILDING AN ORGANIZATION FROM THE BOT-
TOM UP
1. ORGANIZING THE BUSINESS
a. The text uses the example of starting a lawn–
This company maintains strict written rules and decision guidelines. Those rules enable the
firm to deliver packages quickly because employees don’t have to pause to make decisions –
procedures are clearly spelled out for them. Name that company.
(Students should read the chapter before guessing the company’s name: UPS.)
Chapter 08 – Structuring Organizations for Today’s Challenges
8-8
PPT 8-1
Chapter Title
Copyright © 2015 by the McGraw-Hill Companies, Inc. All rights reserved.
McGraw-Hill/Irwin
Structuring
Organizations for
Today’s
Challenges
CHAPTER 8
PPT 8-2
Learning Objectives
LEARNING OBJECTIVES
8-2
1. Outline the basic principles of organization management.
2. Compare the organizational theories of Fayol and Weber.
3. Evaluate the choices managers make in structuring
organizations.
4. Contrast the various organizational models.
5. Identify the benefits of inter-firm cooperation and
coordination.
6. Explain how organizational culture can help businesses
adapt to change.
PPT 8-3
Jenna Lyons
JENNA LYONS
J. Crew
8-3
• Joined J. Crew in 1990 as a junior
designer.
• Worked her way up the ladder by
emphasizing her commitment to
quality.
• Her management style is
compassionate and understanding.
PPT 8-4
Name That Company
NAME that COMPANY
8-4
This company maintains strict written rules and
decision guidelines. Those rules enable the firm
to deliver packages quickly because employees
don’t have to pause to make decisions –
procedures are clearly spelled out for them.
Name that company!
(See complete PowerPoint slide notes on page 8.51.)
PPT 8-5
Reorganization Is for Everyone
REORGANIZATION is for
EVERYONE
8-5
• Adjusting to changing markets is normal in capitalist
economies.
• Companies must go back to basic organizational
principles and firm up the foundation.
LO 8-1
• Many companies are reorganizing, especially those
in decline. Including:
– Auto makers
– Homebuilders
– Banks
lecture enhancer 8-1
SMITH’S FOLLY
A lesson in accountability from Kenneth Olsen, founder of Digi-
tal Equipment Corporation (now part of Hewlett-Packard). (See
the complete lecture enhancer on page 8.76 of this manual.)
lecture enhancer 8-2
STARBUCKS REINVENTS TO STAY
RELEVANT
Some of Starbucks’ recent actions caused some to wonder if it’s
a dying company. (See the complete lecture enhancer on page
8.77 of this manual.)
Chapter 08 – Structuring Organizations for Today’s Challenges
8-9
mowing business.
b. A first step is ORGANIZING (or STRUC-
TURING), deciding what work needs to be
done and then dividing up tasks (called DI-
VISION OF LABOR).
c. Dividing tasks into smaller jobs is called JOB
SPECIALIZATION.
2. As the business grows, the entrepreneur will hire
more workers and will need to organize them in-
to teams or departments.
a. The process of setting up departments to do
specialized tasks is called DEPARTMEN-
TALIZATION.
b. Finally, you need to ASSIGN AUTHORITY
AND RESPONSIBILITY to people so you
can control the process.
3. STRUCTURING AN ORGANIZATION consists
of:
a. Devising a division of labor
b. Setting up teams or departments to do spe-
cific tasks
c. Assigning responsibility and authority to
people
4. An ORGANIZATION CHART shows relation-
ships—who is accountable for tasks and who
reports to whom.
5. The entrepreneur must monitor the environment
to see what competitors are doing and what cus-
Chapter 08 – Structuring Organizations for Today’s Challenges
8-10
lecture enhancer 8-3
INCREASING COLLABORATION
WITH BOSSLESS OFFICES
In this company, tasks are determined and divided by the em-
ployees. (See the complete lecture enhancer on page 8.77 of
this manual.)
bonus case 8-1
STRUCTURAL COLLAPSE:
RESPONSIBILITY AND
ACCOUNTABILITY
Because of engineering errors and poor planning, the skywalks
of a newly constructed hotel collapsed, killing over 100 peo-
ple. (See the complete case, discussion questions, and suggest-
ed answers beginning on page 8.88 of this manual.)
PPT 8-6
Structuring an Organization
STRUCTURING an ORGANIZATION
8-6
LO 8-1
• Create a division of labor
• Set up teams or departments
• Allocate resources
• Assign tasks
• Establish procedures
• Adjust to new realities
critical thinking
exercise 8-1
BUILDING AN ORGANIZATION
CHART
This exercise gives a list of employees and asks students to
create an organization chart showing a possible chain of com-
mand. (See the complete exercise on page 8.83 of this manu-
al.)
MAKING
ethical
decisions
PPT 8-7
Would You
Sacrifice Safety
for Profits?
WOULD YOU SACRIFICE
SAFETY for PROFITS?
• What do you do?
• Save money with less
safety precautions?
• What are the
consequences?
8-7
You own a lawn-mowing business and are aware of
the hazards in the job. But you’ve seen other
companies save money by eliminating safety
equipment. You’d also like to make more money.
Chapter 08 – Structuring Organizations for Today’s Challenges
8-11
tomers are demanding.
learning objective 2
Compare the organizational theories of Fayol and Weber.
II. THE CHANGING ORGANIZATION
A. Never before has business changed so quickly, in-
cluding major changes in the business environment.
1. Managing change has become a critical mana-
gerial function.
2. In the past, organizations were designed to
make management easier rather than to please
the customer.
3. This reliance on rules is called BUREAUCRA-
CY.
B. THE DEVELOPMENT OF ORGANIZATION DE-
SIGN
1. Until the 20th century, organizations were small
and organized simply.
a. After the introduction of MASS PRODUC-
TION, business organizations grew complex
and difficult to manage.
b. The bigger the plant, the more efficient pro-
duction became.
c. ECONOMIES OF SCALE describes the sit-
uation in which companies can reduce their
production costs if they can purchase raw
materials in bulk; the average cost of goods
Chapter 08 – Structuring Organizations for Today’s Challenges
8-12
PPT 8-8
The Changing Organization
THE CHANGING ORGANIZATION
8-8
LO 8-2
• Often change in organizations is due to evolving
business environments:
– More global competition
– Declining economy
– Faster technological change
– Pressure to protect the environment
• Customer expectations have also changed —
Consumers today want high-quality products with
fast, friendly service and all at low cost.
PPT 8-9
How Much Changes in a Decade?
HOW MUCH CHANGES
in a DECADE?
8-9
What? 2000 2010
Amount of cell phone use 34% 89%
Number of active blogs 12,000 141,000,000
Amount of reality shows 4 320
Daily emails sent 12 billion 247 billion
Number of hours spent online per week 2.7 18
Number of daily newspapers 1,480 1,302
Number of daily letters mailed 207 billion 175 billion
Amount of books published 282,242 1,052,803
iTunes downloads 0 10 billion
Percentage of obese Americans 26% 34%
LO 8-2
Source:FastCompany,www.fastcompany.com,accessedMarch2014.
PPT 8-10
Production Changed Organization
Design
• Mass production of goods led to complexities in
organizing businesses.
PRODUCTION CHANGED
ORGANZIATION DESIGN
8-10
LO 8-2
• Economies of Scale —
Companies can reduce
their production costs by
purchasing raw materials
in bulk.
• The average cost of
goods decreases as
production levels rise.
Chapter 08 – Structuring Organizations for Today’s Challenges
8-13
goes down as production levels increase.
2. The text discusses two major ORGANIZATION
THEORISTS and their publications.
a. HENRI FAYOL (Administration Industrielle
et Generale in France in 1919)
b. MAX WEBER (The Theory of Social and
Economic Organizations in Germany about
the same time)
3. FAYOL’S PRINCIPLES OF ORGANIZATION
a. Fayol introduced principles such as:
i. UNITY OF COMMAND: Each worker is
to report to only one boss.
ii. HIERARCHY OF AUTHORITY: One
should know to whom to report.
iii. DIVISION OF LABOR: Functions should
be divided into areas of specialization.
iv. SUBORDINATION OF INDIVIDUAL IN-
TERESTS TO THE GENERAL INTER-
ESTS: Goals of the organization should
be considered more important than per-
sonal goals.
v. AUTHORITY: Managers should give or-
ders and expect them to be carried out.
vi. DEGREE OF CENTRALIZATION: The
amount of decision-making power vested
in top management should vary by cir-
cumstances.
Chapter 08 – Structuring Organizations for Today’s Challenges
8-14
FAYOL’S PRINCIPLES
• Degree of
centralization
• Clear communication
channels
• Order
• Equity
• Esprit de corps
8-11
LO 8-2
• Unity of command
• Hierarchy of authority
• Division of labor
• Subordination of
individual interests to
the general interest
• Authority
Chapter 08 – Structuring Organizations for Today’s Challenges
8-15
vii. CLEAR COMMUNICATION CHAN-
NELS
viii. ORDER: Materials and people should be
placed in the proper location.
ix. EQUITY: A manager should treat em-
ployees and peers with respect and jus-
tice.
x. ESPRIT DE CORPS: A spirit of pride
and loyalty should be created.
b. For years, these principles have been linked
to management.
c. This led to RIGID ORGANIZATIONS.
d. The text uses the example of consumer dis-
satisfaction with government-run DMVs.
4. MAX WEBER AND ORGANIZATIONAL THE-
ORY
a. Max Weber’s book The Theory of Social and
Economic Organizations appeared in the
U.S. in the 1940s.
b. Weber promoted the PYRAMID-SHAPED
ORGANIZATION STRUCTURE.
i. Weber put great trust in managers and
felt the less decision making employees
had to do, the better.
ii. This approach makes sense when deal-
ing with uneducated and untrained
workers.