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Chapter 08 – Structuring Organizations for Today’s Challenges
8-46
PPT 8-57
Organizational Culture
ORGANIZATIONAL CULTURE
8-57
LO 8-6
• Organizational or Corporate
Culture -- The widely shared
values within an organization that
foster unity and cooperation to
achieve common goals.
• Some of the best organizational
cultures emphasize service.
• Culture is shown in stories,
traditions and myths.
lecture enhancer 8-10
EMPLOYER ICEBREAKING RITU-
ALS
Each organizational culture is different. Foot Levelers has its
own practices. (See the complete lecture enhancer on page
8.82 of this manual.)
Chapter 08 – Structuring Organizations for Today’s Challenges
8-47
4. The formal organization structure is just one el-
ement of the total organizational system.
B. MANAGING THE INFORMAL ORGANIZATION
1. All organizations have two systems.
a. The FORMAL ORGANIZATION is the struc-
ture that details lines of responsibility, au-
thority, and position; that is, the structure
that appears on the organization chart.
b. The INFORMAL ORGANIZATION is the
system that develops spontaneously as em-
ployees meet and form cliques, relation-
ships, and lines of authority outside the for-
mal organization; that is, the human side of
the organization that does not appear on any
organization chart.
2. No organization can operate effectively without
BOTH TYPES of organization.
a. The FORMAL ORGANIZATION can be slow
and bureaucratic, while the INFORMAL
ORGANIZATION can generate creative so-
lutions.
b. The informal organization is TOO UN-
STRUCTURED AND EMOTIONAL for deci-
sion making, while the formal organization
provides guidelines and lines of authority.
3. It is wise to learn quickly who the important peo-
ple are in the informal organization.
4. The nerve center of the informal organization is
Chapter 08 – Structuring Organizations for Today’s Challenges
8-48
PPT 8-58
Formal Organization
FORMAL ORGANIZATION
8-58
LO 8-6
• Formal Organization -- Details lines of
responsibility, authority and position.
• The formal system is often slow and
bureaucratic, but it helps guide the lines of
authority.
• No organization can be effective without formal
and informal organization.
PPT 8-59
Informal Organization
• Informal Organization -- The system of
relationships that develop spontaneously as
employees meet and form relationships.
INFORMAL ORGANIZATION
8-59
LO 8-6
• Informal organization
helps foster
camaraderie and
teamwork among
employees.
PPT 8-60
Limitations of Informal
Organizations
LIMITATIONS of INFORMAL
ORGANIZATIONS
8-60
LO 8-6
• The informal system is
too unstructured and
emotional on its own.
• Informal organization
may also be powerful in
resisting management
directives.
PPT 8-61
Group Norms
GROUP NORMS
Examples of Informal Group Norms
8-61
LO 8-6
• Do your job but don’t produce more than the rest
of your group.
• Don’t tell off-color jokes or use profanity.
• Everyone is to be clean and organized at the
workstation.
• Respect and help your fellow group members.
• Drinking is done off the job – NEVER at work.
Source:CIOMagazine,
www.cio.com,accessedNovember2014.
Chapter 08 – Structuring Organizations for Today’s Challenges
8-49
the GRAPEVINE.
5. Successful managers learn to WORK WITH
THE INFORMAL ORGANIZATION and use it to
the organization’s advantage.
6. The informal organization can also be very pow-
erful in resisting management directives.
VIII. SUMMARY
Chapter 08 – Structuring Organizations for Today’s Challenges
8-50
bonus case 8-3
OFFICE ALUMNI
Many businesses have set up social networking sites for their
“alumni” as the recession takes its toll on American jobs. (See
the complete lecture enhancer on page 8.92 of this manual.)
test
prep
PPT 8-62
Progress Assessment
TEST PREP
8-62
• What is an inverted organization?
• Why do organizations outsource functions?
• What is organizational culture?
Chapter 08 – Structuring Organizations for Today’s Challenges
8-51
PowerPoint slide notes
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.
Chapter 08 – Structuring Organizations for Today’s Challenges
8-52
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!
Company: UPS
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
Changing economic times require businesses to alter their
approach via reorganization. Using organizational princi-
ples is an important aspect to this reorganization.
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
Chapter 08 – Structuring Organizations for Today’s Challenges
8-53
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.
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:FastCompany,www.fastcompany.com,accessedMarch2014.
1. This slide shows just how much our country has
changed since 2000.
2. Clearly the digital revolution is shown here with the
amount of blogs, cell usage, emails sent, etc. Ask stu-
dents: Do you expect these numbers to continue to
grow? What may this table look like in 2020?
3. The number of daily newspapers and letters sent has
dropped. Ask students: Do you think we will lose
more daily newspapers? What about letters? How
many still receive letters/cards from grandparents op-
posed to emails or Facebook posts?
Chapter 08 – Structuring Organizations for Today’s Challenges
8-54
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.
PPT 8-11
Fayol’s Principles
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
This slide presents Fayol’s principles of organization.
Fayol published General and Industrial Management in
1919. Unity of command and hierarchy of authority sug-
gest that each employee reports to one and only one boss.
Management courses throughout the world teach these
principles, and organizations are designed accordingly.
When these principles become rules, policies, and regula-
tions, they create inflexibility which hampers organiza-
tions’ ability to respond quickly to situations. An example
of this inflexibility or a slower response time can be seen
in FEMA’s response to Hurricane Katrina.
PPT 8-12
Organizations Based on Fayol’s
Principles
ORGANIZATIONS BASED on
FAYOL’S PRINCIPLES
8-12
LO 8-2
• Organizations in which
employees have no more
than one boss; lines of
authority are clear.
• Rigid organizations that often
don’t respond to customers
quickly.
Chapter 08 – Structuring Organizations for Today’s Challenges
8-55
PPT 8-13
Weber’s Principles
WEBER’S PRINCIPLES
8-13
LO 8-2
• Employees just need to do what
they’re told.
• In addition to Fayol’s principles,
Weber emphasized:
- Job descriptions
- Written rules, decision guidelines
and detailed records
- Consistent procedures,
regulations and policies
- Staffing and promotion based on
qualifications
Weber, a German sociologist and economist, wrote The
Theory of Social and Economic Organizations. Weber’s
principles were similar to Fayol’s. He emphasized job de-
scriptions, written rules, consistent policies, regulations,
and procedures, and staffing and promotions based on
qualifications. Weber was in favor of bureaucracy and
believed that these principles were necessary for large
organizations’ effective functioning. However, in today’s
corporate world, these rules and bureaucracy do not nec-
essarily work. Organizations need to respond to customers
and other environmental factors quickly which calls for a
creative, flexible, and a quick decision-making process
contrary to a bureaucratic process.
PPT 8-14
Hierarchies and Command
HIERARCHIES and COMMAND
8-14
LO 8-2
• When following Fayol and Weber, managers
control workers.
• Hierarchy -- A system in which one person is at the
top of an organization and there is a ranked or
sequential ordering from the top down.
• Chain of Command -- The line of authority that
moves from the top of the hierarchy to the lowest
level.
PPT 8-15
Organizational Charts
ORGANIZATIONAL CHARTS
7-15
LO 8-2
• Organization Chart --
A visual device that
shows relationships
among people and
divides the organization
’
s
work; it shows who
reports to whom.
Chapter 08 – Structuring Organizations for Today’s Challenges
8-56
PPT 8-16
Typical Organization Chart
TYPICAL ORGANIZATION CHART
8-16
LO 8-2
PPT 8-17
Bureaucratic Organizations
BUREAUCRATIC ORGANIZATIONS
8-17
LO 8-2
• Bureaucracy -- An organization with many layers of
managers who set rules and regulations and oversee
all decisions.
• It can take weeks or months to have information
passed down to lower-level employees.
• Bureaucracies can annoy customers.
Chapter 08 – Structuring Organizations for Today’s Challenges
8-57
PPT 8-18
Test Prep
TEST PREP
8-18
• What do the terms division of labor and job
specialization mean?
• What are the principles of management outlined
by Fayol?
• What did Weber add to the principles of Fayol?
1. Division of labor is dividing tasks among workers to
complete a job. Job specialization is dividing tasks
into smaller jobs.
2. Fayol’s principles of management are:
-Unity of command
-Hierarchy of authority
-Division of labor
-Subordination of individual interests to the general
interest
-Authority
-Degree of centralization
-Clear communication channels
-Order
-Equity
-Esprit de corps
3. Weber added:
-Job descriptions
-Written rules, decision guidelines, and detailed rec-
ords
-Consistent procedures, regulations, and policies
-Staffing and promotion based on qualifications
Chapter 08 – Structuring Organizations for Today’s Challenges
8-58
PPT 8-19
Centralization or Decentralization?
• Centralized Authority -- When decision-making is
concentrated at the top level of management.
CENTRALIZATION or
DECENTRALIZATION?
8-19
LO 8-3
• Decentralized
Authority -- When
decision-making is
delegated to lower-level
managers and employees
more familiar with local
conditions than
headquarters is.
Centralization can be defined as an organizational struc-
ture that focuses on retaining control of authority with
higher level managers. One of the disadvantages of this
type of management style is slower decisions because of
layers of management. Ask the students: What specific
problems do you see with this type of management?
(Slower decision-making means the company is less re-
sponsive to both internal an external customers needs.)
Share with the students a simple rule to follow when
dealing with centralized authority: Decisions regarding
overall company policy and establishment of goals and
strategies should be made at the top.
Decentralization is an organizational structure that fo-
cuses on delegating authority throughout the organiza-
tion to middle and lower-level managers. The most sig-
nificant advantage of this form of management style is
the empowerment of the employees. Statistics indicate
when delegation is practiced in a company, absenteeism,
injuries, loyalty and production improve. Share with the
students a simple rule to follow when dealing with de-
centralized authority: The closer an employee interacts
with the customer, the more decentralized the decision-
making should be. For example, a customer service
manager must have the authority to make a decision that
will satisfy a customer immediately, not wait until the
home office makes a decision.
PPT 8-20
Centralization and Decentralization
CENTRALIZATION and
DECENTRALIZATION
8-20
LO 8-3
Chapter 08 – Structuring Organizations for Today’s Challenges
8-59
PPT 8-21
Span of Control
SPAN of CONTROL
8-21
LO 8-3
• Span of Control -- The optimal number of
subordinates a manager supervises or should
supervise.
• When work is standardized, broad spans of
control are possible.
• Appropriate span narrows at higher levels of the
organization.
• The trend today is to reduce middle managers
and hire better low-level employees.
PPT 8-22
Organizational Structures
ORGANIZATIONAL STRUCTURES
8-22
LO 8-3
• Structures determine the way the company
responds to employee and customer needs.
• Tall Organization Structures -- An organizational
structure in which the organization chart would be tall
because of the various levels of management.
• Flat Organization Structures -- An organizational
structure that has few layers of management and a
broad span of control.
Many organizations have moved from tall organizations to
flat organizations in an effort to increase nimbleness in the
marketplace.
PPT 8-23
Flat Organizational Structure
Chapter 08 – Structuring Organizations for Today’s Challenges
8-60
PPT 8-24
Advantages and Disadvantages of the
Different Spans of Control
ADVANTAGES and DISADVANTAGES of
the DIFFERENT SPANS of CONTROL
8-24
LO 8-3
PPT 8-25
Departmentalization
DEPARTMENTALIZATION
8-25
LO 8-3
• Departmentalization -- Divides organizations into
separate units.
• Workers are grouped by skills and expertise to
specialize their skills.
PPT 8-26
Advantages of Departmentalization
ADVANTAGES of
DEPARTMENTALIZATION
8-26
LO 8-3
1) Employees develop skills and progress within a
department as they master skills.
2) The company can achieve economies of scale.
3) Employees can coordinate work within the
function and top management can easily direct
activities.
