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Chapter 08 – Structuring Organizations for Today’s Challenges
8-31
make policy decisions; staff have the AUTHOR-
ITY TO ONLY ADVISE line personnel.
5. ADVANTAGES OF LINE-AND-STAFF OR-
GANIZATION:
a. Have access to expert advice
b. Staff positions strengthen the line personnel
D. MATRIX-STYLE ORGANIZATIONS
1. Both line and line-and-staff organizations can
become INFLEXIBLE.
a. Both structures work well in organizations
with relatively unchanging environments and
slow product development.
b. However, high-growth industries now domi-
nate the economy.
c. In such industries, emphasis is on new
product development, creativity, rapid com-
munication, and interdepartmental team-
work.
2. A MATRIX ORGANIZATION is an organization
in which specialists from different parts of the
organization are brought together to work on
specific projects, but still remain part of a line-
and-staff structure.
a. Matrix organization structures were devel-
oped in the aerospace industry.
b. The structure is now used in banking, man-
agement consulting firms, ad agencies, and
school systems.
Chapter 08 – Structuring Organizations for Today’s Challenges
8-32
PPT 8-34
Matrix Organizations
• Matrix Organization -- Specialists from different
parts of the organization work together temporarily on
specific projects, but still remain part of a line-and-staff
structure.
MATRIX ORGANIZATIONS
8-36
LO 8-4
• Emphasis is on
product development,
creativity, special
projects,
communication and
teamwork.
PPT 8-35
Sample Matrix Organization
TEXT FIGURE 8.7
A Matrix Organization
SAMPLE MATRIX
ORGANIZATION
8-37
LO 8-4
Chapter 08 – Structuring Organizations for Today’s Challenges
8-33
3. ADVANTAGES OF MATRIX ORGANIZATIONS
a. Flexibility in assigning people to projects
b. Encourage interorganizational cooperation
and teamwork
c. Can give more creative solutions to prob-
lems
d. More efficient use of organizational re-
sources
4. DISADVANTAGES OF MATRIX ORGANIZA-
TIONS
a. Are costly and complex
b. Create confusion in employee loyalties
c. Require good interpersonal skills and coop-
erative employees and managers
d. May be only a temporary solution to a long-
term problem
5. Although matrix organizations seem to violate
some traditional managerial principles, the sys-
tem functions relatively effectively.
a. The matrix organization has been adopted in
high-tech firms because of its effectiveness.
b. A potential problem is that the project teams
ARE NOT PERMANENT and there is little
chance for cross-functional learning.
E. CROSS-FUNCTIONAL SELF-MANAGED TEAMS
1. One solution to the disadvantage of temporary
teams is to establish long-lived teams.
2. CROSS-FUNCTIONAL SELF-MANAGED
TEAMS are groups of employees from different
Chapter 08 – Structuring Organizations for Today’s Challenges
8-34
PPT 8-38
Advantages of Matrix Style
ADVANTAGES of the
MATRIX STYLE
8-38
LO 8-4
• Managers have flexibility in assigning people to
projects.
• Interorganizational cooperation and teamwork is
encouraged.
• Creative solutions to product development
problems are produced.
• Efficient use of organizational resources.
PPT 8-39
Disadvantages of the Matrix Style
• It’s costly and complex.
• Employees may be confused about where their
loyalty belongs.
• Good interpersonal skills and cooperative
employees are a must.
DISADVANTAGES of the
MATRIX STYLE
8-39
LO 8-4
• It’s a temporary
solution to a possible
long-term problem.
• Teams are not
permanent.
PPT 8-40
Cross-Functional Self-Managed
Teams
CROSS-FUNCTIONAL
SELF-MANAGED TEAMS
8-40
LO 8-4
• Cross-Functional Self-Managed Teams --
Groups of employees from different departments who
work together on a long-term basis.
• A way to fix the problem of matrix-style teams is
to establish long-term teams.
• Empower teams to work closely with suppliers,
customers and others to figure out how to create
better products.
bonus case 8-2
CREATING CROSS-FUNCTIONAL
TEAMS
The Direct Response Group instigated organizational change
to make its people more responsive to the customer. (See the
complete case, discussion questions, and suggested answers
beginning on page 8.90 of this manual.)
Chapter 08 – Structuring Organizations for Today’s Challenges
8-35
departments who work together on a long-term
basis (as opposed to the temporary teams es-
tablished in matrix-style organizations).
a. Usually the teams are EMPOWERED to
make decisions on their own without seeking
the approval of management.
b. Self-managed teams reduce the barriers be-
tween design, engineering, marketing, and
other functions.
c. Cross-functional teams work best when
leadership is shared.
F. GOING BEYOND ORGANIZATIONAL BOUNDA-
RIES
1. Cross-functional teams work best when custom-
ers’ input is included.
2. Some go beyond organizational boundaries to
include customers, suppliers, and distributors.
3. Some cross-functional teams share information
across national boundaries and may be encour-
aged by the government.
learning objective 5
Identify the benefits of interfirm cooperation and coordination.
V. MANAGING THE INTERACTIONS AMONG
FIRMS
A. NETWORKING is using communications technology
and other means to link organizations and allow
them to work together on common objectives.
Chapter 08 – Structuring Organizations for Today’s Challenges
8-36
PPT 8-41
Going Beyond Organizational
Boundaries
GOING BEYOND
ORGANIZATIONAL BOUNDARIES
8-41
LO 8-4
• Cross-functional teams work best when the voice
of the customer is heard.
• Teams that include customers, suppliers and
distributors go beyond organizational boundaries.
• Government coordinators may assist in sharing
market information beyond national boundaries.
PPT 8-42
Building Successful Teams
BUILDING SUCCESSFUL TEAMS
Important Conditions for Small Teams
8-42
LO 8-4
• Clear purpose
• Clear goals
• Correct skills
• Mutual accountability
• Shift roles when
appropriate
Source:CIOMagazine,
www.cio.com,accessedNovember2014.
test
prep
PPT 8-43
Test Prep
TEST PREP
8-43
• What’s the difference between line and staff
personnel?
• What management principle does a matrix-style
organization challenge?
• What’s the main difference between a matrix-
style organization’s structure and the use of
cross-functional teams?
Chapter 08 – Structuring Organizations for Today’s Challenges
8-37
B. TRANSPARENCY AND VIRTUAL ORGANIZA-
TIONS
1. The Internet links organizations so closely that
each can see what the others are doing in real
time.
a. REAL TIME is the present moment or the
actual time in which something takes place.
b. TRANSPARENCY is a concept that de-
scribes a company being so open to other
companies working with it that the once-solid
barriers between them become see-through,
and electronic information is shared as if the
companies were one.
c. Using this integration, two companies can
work together as closely as two departments
once did.
2. Most organizations are no longer self-sufficient,
but are part of a vast network of global business-
es.
3. A modern organization chart should show peo-
ple in different organizations and how they are
networked together.
4. Organization structures tend to be flexible and
changing.
5. A VIRTUAL CORPORATION is a temporary
networked organization made up of replaceable
firms that join and leave as needed.
a. This concept is very different from traditional
Chapter 08 – Structuring Organizations for Today’s Challenges
8-38
PPT 8-44
Real-Time Business
REAL-TIME BUSINESS
8-44
LO 8-5
• Networking -- Using communications technology to
link organizations and allow them to work together.
• Most companies are no longer self-sufficient;
they’re part of a global business network.
• Real Time -- The present moment or actual time in
which something takes place.
PPT 8-45
Transparency and Virtual Corpora-
tions
TRANSPARENCY and VIRTUAL
CORPORATIONS
8-45
LO 8-5
• Transparency -- When a company is so open to
other companies that electronic information is shared
as if the companies were one.
• Virtual Corporation -- A temporary networked
organization made up of replaceable firms that join
and leave as needed.
PPT 8-46
A Virtual Corporation
TEXT FIGURE 8.8
A Virtual Corporation
A VIRTUAL CORPORATION
8-46
LO 8-5
SPOTLIGHT ON
small
business
PPT 8-47
Cutting Back
While Cutting
Costs
CUTTING BACK WHILE
CUTTING COSTS
8-47
• Hiring workers is a major
expense for small business
owners.
• This has led to more offshore
outsourcing.
• The increase can be partly
attributed to the presence of
online job marketplaces like
ODesk.
Chapter 08 – Structuring Organizations for Today’s Challenges
8-39
organizations.
b. Traditional managers often have trouble
adapting to rapidly changing structures.
C. BENCHMARKING AND CORE COMPETENCIES
1. In the past, each organization had a separate
department for each function.
a. Organizations are now benchmarking each
function against the best in the world.
b. BENCHMARKING is comparing an organi-
zation’s practices, processes, and products
against the world’s best (example: K2
benchmarked Piezo’s technology).
c. Companies can also study the best practices
of unrelated industries (example: Wyeth
Pharmaceuticals benchmarked the aero-
space industry’s project management).
d. Benchmarking can be used in a direct com-
petitive way, as when Target compared itself
with Walmart.
2. If the organization can’t do as well as the best, it
can OUTSOURCE the function to an organiza-
tion that is the best.
a. OUTSOURCING is assigning functions—
such as accounting, production, security,
and legal work—to outside organizations.
b. Overseas outsourcing is controversial.
c. Some functions, such as information man-
agement and marketing, may be too im-
Chapter 08 – Structuring Organizations for Today’s Challenges
8-40
PPT 8-48
Benchmarking and Core
Competencies
BENCHMARKING and
CORE COMPETENCIES
8-48
LO 8-5
• Benchmarking -- Compares an organization
’
s
practices, processes and products against the
world
’
s best.
• Core Competencies -- The functions an
organization can do as well as or better than any
other organization in the world.
• K2 Skis researched other companies’ practices
in order to create the best possible skis and
snowboards.
PPT 8-49
Benefits and Concerns of
Healthcare Outsourcing
Source:HealthcareFinancialManagement.
BENEFITS and CONCERNS of
HEALTHCARE OUTSOURCING
8-49
Benefits Concerns
• Provides enough
staff to operate the
facility
• Lower employee
morale
• Cost savings • Liability
• Should patients be
informed
• Confidentiality and
security
LO 8-5
lecture enhancer 8-7
A NEW KIND OF OUTSOURCING
Some communities are finding relief from the very companies
that outsourced their old jobs. (See the complete lecture en-
hancer on page 8.80 of this manual.)
PPT 8-50
Which Jobs Will Be Outsourced
Next?
Source:USAToday.
WHICH JOBS are most often
OUTSOURCED?
8-50
LO 8-5
Chapter 08 – Structuring Organizations for Today’s Challenges
8-41
portant to outsource.
3. CORE COMPETENCIES are those functions
that the organization can do as well or better
than any other organization in the world.
a. Nike’s core competencies are designing and
marketing athletic shoes, but it outsources
manufacturing.
b. Dell has reversed its outsourcing practices to
include call centers in North America.
VI. ADAPTING TO CHANGE
A. The organization structure must be ADAPTED TO
CHANGES in the market.
1. Introducing change into an organization is one of
the toughest challenges for managers.
2. It is difficult for some companies to reinvent
themselves in response to changes in the com-
petitive environment.
3. Painful changes may be necessary—such as
U.S. automakers closing plants and reducing
staff.
4. Companies must coordinate the efforts of tradi-
tional departments and their Internet staff.
5. To reach DIGITAL NATIVES (individuals who
grew up with the Internet), companies must re-
train older workers in the new technologies (ex-
amples: YouTube, Facebook, Twitter, RSS).
6. Target uses a “creative cabinet” to help react ef-
Chapter 08 – Structuring Organizations for Today’s Challenges
8-42
PPT 8-51
Adapting to Market Changes
ADAPTING to
MARKET CHANGES
8-51
LO 8-5
• Change isn’t easy.
Employees like to do
things the way they
always have.
• Get rid of old, inefficient
facilities and equipment.
• Use the Internet to get to
know your customers and
sell directly to them.
lecture enhancer 8-8
PIVOTING FROM ONE BUSINESS
PLAN TO ANOTHER
Some ideas don't work as well as we’d like to believe at the
start. Michael Garritty rolled with those punches. (See the
complete lecture enhancer on page 8.81 of this manual.)
PPT 8-52
Keep in Touch
KEEP in TOUCH
Amazon and its Customer Database
8-52
LO 8-5
Amazon uses information stored in databases to
reach out to customers. The company emails
customers letting them know about music, DVDs
or books they might like based on past purchases.
• Have you ever received an email like this from Amazon or another
company?
• What benefits would a database of personal information, like past
purchases, provide Amazon?
• Do you think these databases are helpful for both co mpanies and
consumers or are they an invasion of privacy?
PPT 8-53
Making the Change
MAKING the CHANGE
8-53
LO 8-5
• Digital Natives --
Young people who
have grown up using
the Internet and
social networking.
PhotoCredit:MarcWathieu
Chapter 08 – Structuring Organizations for Today’s Challenges
8-43
fectively to changes in consumer preferences.
B. RESTRUCTURING FOR EMPOWERMENT
1. To implement empowerment, firms often must
reorganize dramatically.
2. RESTRUCTURING is redesigning an organiza-
tion so that it can more effectively and efficiently
serve its customers.
3. A few organizations have turned the traditional
organizational structure upside down.
a. An INVERTED ORGANIZATION is an or-
ganization that has contact people at the top
and the chief executive officer at the bottom
of the organization chart.
b. There are few layers of management, and
their job is to assist and support frontline
people.
c. Companies using the inverted structure sup-
port frontline personnel with internal and ex-
ternal databanks, advances communication
systems, and professional assistance.
d. Frontline people now have to be better edu-
cated, better trained, and better paid than in
the past.
e. In more progressive organizations, everyone
SHARES INFORMATION, giving everyone
power.
Chapter 08 – Structuring Organizations for Today’s Challenges
8-44
lecture enhancer 8-9
SETTING UP SHOP ON FACEBOOK
Companies are catering to digital natives by opening up shop
on Facebook. (See the complete lecture enhancer on page 8.81
of this manual.)
ADAPTING TO
change
PPT 8-54
When Open
Communication
Should Not Be
So Open
WHEN OPEN COMMUNICATION
SHOULD NOT BE SO OPEN
8-54
• The blending of mobile
technology and work has been
helpful to business.
• However, it also has encroached
on the traditional work-life
boundaries.
• Over 1/3 of surveyed employees
responded that receive work-
related emails after hours, many
complain it affects quality of life.
PPT 8-55
Restructuring
RESTRUCTURING
8-55
LO 8-5
• Restructuring -- Redesigning an organization so it
can more effectively and efficiently serve its
customers.
• Inverted Organization -- An organization that has
contact people at the top and the CEO at the bottom
of the organizational chart.
• The manager’s job is to assist and support
frontline workers, not boss them.
PPT 8-56
Traditional and Inverted
Organizations
TEXT FIGURE 8.9
Comparison of an Inverted Organi-
zational Structure and a Traditional
Organizational Structure
TRADITIONAL and INVERTED
ORGANIZATIONS
8-56
LO 8-5
Chapter 08 – Structuring Organizations for Today’s Challenges
8-45
learning objective 6
Explain how organizational culture can help businesses adapt to change.
VII. CREATING A CHANGE-ORIENTED ORGANI-
ZATIONAL CULTURE
A. Organizational change always causes some RE-
SISTANCE.
1. Firms that adjust best have a change-oriented
organizational culture.
2. ORGANIZATIONAL (OR CORPORATE) CUL-
TURE is the widely shared values within an or-
ganization that provide unity and cooperation to
achieve common goals.
a. An organization’s culture is reflected in sto-
ries, traditions, and myths.
b. For example, McDonald’s culture emphasiz-
es quality, service, cleanliness, and value.
c. An organization’s culture can be negative, as
with an organization in which no one cares
about quality.
3. The very best organizations have cultures that
emphasize SERVICE TO CUSTOMERS.
a. The atmosphere is one of friendly, caring
people who enjoy working together.
b. Those companies have LESS NEED FOR
CLOSE SUPERVISION of employees.
c. The key to productive culture is MUTUAL
TRUST.
