Chapter 08 – Structuring Organizations for Today’s Challenges
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PPT 8-27
Disadvantages of Departmentalization
DISADVANTAGES of
DEPARTMENTALIZATION
8-27
LO 8-3
1) Departments may not communicate well.
2) Employees may identify with their department’s
goals rather than the organization’s.
3) The company’s response to external changes may
be slow.
4) People may not be trained to take different
managerial responsibilities, instead they become
specialists.
5) Department members may engage in groupthink and
may need outside input.
PPT 8-28
Ways to Departmentalize
WAYS to DEPARTMENTALIZE
8-28
LO 8-3
PPT 8-29
Ways to Departmentalize
WAYS to DEPARTMENTALIZE
8-29
LO 8-3
Chapter 08 – Structuring Organizations for Today’s Challenges
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PPT 8-30
Test Prep
TEST PREP
8-30
• Why are organizations becoming flatter?
• What are some reasons for having a narrow span
of control in an organization?
• What are the advantages and disadvantages of
departmentalization?
• What are the various ways a firm can
departmentalize?
1. Over the last 25 years businesses have adopted flatter or-
ganizations with fewer layers of management and a broad-
er span of control in order to quickly respond to customer
demands. A flatter organization gives lower-level employ-
ees the authority and responsibility to make decisions di-
rectly affecting customers.
2. Span of control refers to the number of subordinates a
manager supervises. Generally, the span of control nar-
rows at higher levels of the organization, because work be-
comes less standardized and managers need more face–to
face communication.
3. The advantages of departmentalization include: Depart-
mentalization may reduce costs, since employees should be
more efficient; employees can develop skills in depth and
progress within a department as they master more skills;
the company can achieve economies of scale by centraliz-
ing all the resources it needs and locating various experts
in that particular area; employees can coordinate work
within the function; and top management can easily direct
and control various departments’ activities. The disad-
vantages of departmentalization include: Communication
is inhibited; employee’s may identify with their depart-
ment’s goals rather than the organization’s; the company’s
response may be slowed by departmentalization; employ-
ees tend to be narrow specialists; department members may
engage in groupthink and may need input from the outside
to become more competitive.
An organization can elect to departmentalize in the fol-
lowing ways: customer group, product, functional, geo-
graphic, process, and hybrid.
Chapter 08 – Structuring Organizations for Today’s Challenges
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Four Ways to Structure an
Organization
FOUR WAYS to STRUCTURE an
ORGANIZATION
8-31
LO 8-4
1. Line Organizations
2. Line-and-Staff
Organizations
3. Matrix-Style
Organizations
4. Cross-Functional Self-
Managed Teams
Traditional business models, such as line organizations
and line-and-staff organizations, are giving way to new
structures.
PPT 8-32
Line Organizations
LINE ORGANIZATIONS
8-32
LO 8-4
• Line Organization — Has direct two-way lines of
responsibility, authority and communication running
from the top to the bottom. Everyone reports to one
supervisor.
• There are no specialists, legal, accounting,
human resources or information technology
departments.
• Line managers issue orders, enforce discipline
and adjust the organization to changes.
PPT 8-33
Line Personnel
LINE PERSONNEL
8-33
LO 8-4
• Line Personnel — Workers responsible for directly
achieving organizational goals, and include
production, distribution and marketing employees.
• Line personnel have authority to make policy
decisions.
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PPT 8-34
Staff Personnel
STAFF PERSONNEL
8-34
LO 8-4
• Staff Personnel — Employees who advise and assist
line personnel in meeting their goals, and include
marketing research, legal advising, IT and human
resource employees.
PPT 8-35
Sample Line–and-Staff Organization
SAMPLE LINE-and-STAFF
ORGANIZATION
8-35
LO 8-4
PPT 8-36
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.
The creation of matrix organizations was in response to
the inflexibility of other more traditional organizational
structures. This structure brings specialists from different
parts of the organization to work together temporarily on
specific projects.
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PPT 8-37
Sample Matrix Organization
SAMPLE MATRIX
ORGANIZATION
8-37
LO 8-4
PPT 8-38
Advantages of the 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.
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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.
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.
1. This slide presents five important conditions for gar-
nering the maximum benefits of small teams, accord-
ing to Jon Katzenbach, co-author of The Wisdom of
Teams.
2. Ask the students: Which of these five conditions do
you believe would be most important in your team
experience? Why? (The most critical factor of these
five conditions, according to Katzenbach, is a clear
performance purpose for the team.)
Chapter 08 – Structuring Organizations for Today’s Challenges
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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?
1. Line personnel are responsible for directly achieving
organizational goals. Line personnel include produc-
tion workers, distribution people, and marketing per-
sonnel. Staff personnel advise and assist line person-
nel in meeting their goals.
2. The flexibility inherent in the matrix-style organiza-
tion directly challenge the rigid line and line-and-staff
organization structures.
3. The main difference between matrix–style organiza-
tion and cross-functional teams is that cross-
functional teams tend to be long-lived as compared to
the temporary and fluid nature of teams in a matrix-
style organization.
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 Corporations
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.
Chapter 08 – Structuring Organizations for Today’s Challenges
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PPT 8-46
A Virtual Corporation
A VIRTUAL CORPORATION
8-46
LO 8-5
1. This slide illustrates the concept of a virtual corpora-
tion as an organizational model that could propel
American businesses into the next century.
2. The theory behind the virtual corporation can be un-
derstood 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 exper-
tise
• 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 operate
independently
• Skill-selling professionals such as engineers,
accountants, and human resource experts
who manage your projects from their homes
through worldwide telecommunications
Team-building will change as companies hire individuals
with expertise in various areas to solve business prob-
lems. As a solution is identified, the team will cease to
exist.
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
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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
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 re-
sult 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-, Eng-
lish-, and German-speaking customers. The work-
force is trained to speak several different languages
while wages are low. As a global company dealing
with consumer inquiries, the central location of a call
center may reduce costs significantly.)
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PPT 8-50
Which Jobs Will Be Outsourced Next?
Source:USAToday.
WHICH JOBS are most often
OUTSOURCED?
8-50
LO 8-5
1. This slide supports the previous discussion of out-
sourcing by identifying the most common functional
areas for which U.S. companies plan on hiring out-
side organizations. The results are from the TEC In-
ternational’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 Tech-
nology, and Customer Support/Sales as the largest
planned outsourced business categories.
3. Ask the students, Why do you think these categories
are outsourced more often? (Manufacturing can be
done a lot cheaper in a country with lower wages. IT
and customer support represent functional areas that
provide basic or routine types of job performance,
unlike sales and marketing, where specific strategies
are closely aligned to meet specific customer needs.)
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.
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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 companies and
consumers or are they an invasion of privacy?
1. Information technology has allowed companies like
Amazon to better understand customer needs.
2. Use the three questions on this slide to start a discus-
sion with students in class.
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
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.
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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
TRADITIONAL and INVERTED
ORGANIZATIONS
8-56
LO 8-5
1. The inverted organization structure is an alternative to
the traditional management layers. The critical idea
behind the inverted organization structure is that the
managers’ job is to support and facilitate the jobs of
the frontline people, not boss them around.
2. Ask the students: What type of organization structure
would they prefer to work under: traditional or invert-
ed? Why?
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.
When you search for a job, make sure the organizational
culture is one you can thrive in.
Chapter 08 – Structuring Organizations for Today’s Challenges
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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.
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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.
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 con-
form 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.)
Discuss the importance of informal groups in an
organization that become somewhat formal themselves
(i.e., labor unions).
PPT 8-62
Test Prep
TEST PREP
8-62
• What is an inverted organization?
• Why do organizations outsource functions?
• What is organizational culture?
1. Some service-oriented organizations have elected to
turn the traditional organizational structure upside
down. An inverted organization has employees who
come into contact with customers at the top of the or-
ganization and the chief executive officer at the bot-
tom. A manager’s job is to assist and support front-
line people, not tell them what to do.
2. In the past organizations have often tried to do all
functions themselves, maintaining departments for
each function including: accounting, finance, market-
ing, and production. If an organization is not able to
efficiently perform the function themselves they will
outsource the function. Outsourcing is the process of
assigning various functions, such as accounting, pro-
duction, security, maintenance, and legal work, to an
outside firm. The goal is to retain the functions that
the organization considers its core competencies.
3. Organizational or corporate culture is the widely
shared values within an organization that create unity
and cooperation. Usually the culture of an organiza-
tion is passed to employees via stories, traditions, and
myths.
Chapter 08 – Structuring Organizations for Today’s Challenges
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