Chapter 09 – Organizational Agility
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9
chapter
Organizational Agility
s
Learning Objectives 2
Key Student Questions 3
Class Roadmap 4
Bottom Line 13
Social Enterprise 15
CHAPTER CONTENTS
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1 Discuss why it is critical for organizations to be responsive.
2 Describe the qualities of an organic organization structure.
LEARNING OBJECTIVES
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The concepts in this chapter can be difficult for students to master. You may find yourself being asked to
Other questions students might ask include:
1. “What are the advantages and disadvantages to working in an
organization with an organic structure?”
2. “Are companies more effective if they operate on a centralized
or decentralized structure, and how do they determine which one works best?”
3. “What are the differences between organizing for environmental,
technological, and strategic responses?
Answers to Student Questions
1. In an organic company, people tend to have more autonomy over how they do their work, and they
tend to do a variety of tasks on the job. For someone who is highly motivated, and willing to seek out
2. Large companies tend to cycle between centralized and decentralized structures, depending on their
leadership, profitability, and environment. While Burns and Stalker noted that the most effective or-
ganizations use a centralized structure in stable environments, and a decentralized structure in turbu-
3. When organizing for an environmental response, the company’s primary concern should be its cus-
tomers – who are they, what do they want, what other companies compete to service them, and what is
the best way to deliver to them. Strategic responses demand that organizations focus on core compe-
KEY STUDENT QUESTIONS
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Management in Action
How Jeffrey Immelt Tries to Keep General Electric Nimble
It’s tough to follow a legend, as Jeffrey Immelt has done at General Electric. GE’s legendary former CEO
Jack Welch said the company’s core capability was “Evaluating people,” and Welch was ruthless in
weeding out the lower-performing managers even as he rewarded the top performers with ever more chal-
lenging assignments. Immelt has said that GE’s core capability remains, but high performance across
Introduction
A. With today’s fast-changing business environment, responsiveness is vital to a firm’s sur-
vival.
1. Adaptable organizations are prepared to meet the complex and ever-changing chal-
lenges that managers and their organizations constantly confront.
LO 1: Discuss why it is critical for an organization to be responsive.
E.G.
Use Example 9.1 – Responsiveness here
I. THE RESPONSIVE ORGANIZATION
Chapter 09 – Organizational Agility
E.G.
Use Example 9.2 – Mechanistic and organic organizations here
C. The organic structure can be described as follows:
1. Jobholders have broader responsibilities that change as the need arises.
2. Communication occurs through advice and information rather than through orders and in-
structions.
Network diagrams capture informal structure of the organization – organic organizations show
more team networks, fewer boss/subordinate networks. (Exhibit 9.1)
LO 2: Describe the qualities of an organic organizational structure.
A. Organizing Around Core Capabilities
1. A well-understood, well-developed core capability can enhance a company’s respon-
siveness and competitiveness.
2. Managers who want to strengthen their firms’ competitiveness via core capabilities
LO 3: Identify strategies and dynamic organizational concepts that can be used to improve an
organization’s responsiveness.
B. Strategic Alliances
1. A strategic alliance is a formal relationship created with the purpose of joint pursuit
of mutual goals.
II. STRATEGY AND ORGANIZATIONAL AGILITY
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2. In a strategic alliance, individual organizations share administrative authority, form
social links, and accept joint ownership.
3. The best alliances are true partnerships that meet these criteria: (Exhibit 9.3)
a. Individual excellence – both partners add value.
Multiple Generations at Work
Changing Internal Structures to Accommodate Millennial Employees
Many managers are expressing concerns over their ability to find Millennial talent and then, once
hired, to motivate and retain them. Some estimates suggest that the average length of time these
E.G.
Use Example 9.3 – Strategic alliance here
C. The Learning Organization
1. A learning organization is an organization skilled at creating, acquiring, and trans-
ferring knowledge, and at modifying its behavior to reflect new knowledge and in-
D. High Involvement Organization
1. A high-involvement organization is one in which top management ensures that there
is consensus about the direction in which the business is heading.
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LO 4: Explain how a firm can be both big and small.
A. The Case for Big
1. Scale economies – lower costs per unit of production
E.G.
Use Example 9.4 – Scale vs. scope economies here
B. The Case for Small
1. As firms get larger customers begin to view their products as having lower quality.
2. Small companies can:
C. Being Big and Small
1. To avoid problems of growth and size, companies decentralize decision making and
organize around small, adaptive, team-based work units.
E.G.
Use Example 9.5 – Being big and small here
D. Downsizing
1. Companies downsize in an attempt to gain the responsiveness of a small company.
2. Downsizing is the planned elimination of positions or jobs.
3. Rightsizing is a successful effort to achieve an appropriate size at which the company
III. ORANIZATIONAL SIZE AND AGILITY
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c. Identify and protect talented people.
d. Choose positions to be eliminated by engaging in analysis and strategic thinking.
ing it.
5. Survivor’s syndrome is the loss of productivity and morale in employees who remain
after a downsizing.
Management in Action –
Progress Report
Being a corporate giant (revenues of more than $147 billion; 305,000 employees in 175 countries), GE
has access to capital and talent. This enables the company to jump in wherever it sees opportunity, be it
applications for “big data” or development of energy-efficient batteries. However, CEO Jeff Immelt is
well aware that people in a giant corporation can get bogged down by policies and procedures. Can the
world’s seventh largest company be agile?
• How does GE benefit from being large?
• How can GE also reap some of the benefits of smallness?
Ways for large companies to acquire some of the agility of a small organization include organizing
LO 5: Summarize how firms organize to meet customer requirements.
A. Customer Relationship Management
1. Customer relationship management is a multifaceted process, meditated by a set of
information technologies that focuses on creating two-way exchanges with customers
IV. CUSTOMERS AND THE RESPONSIVE
ORGANIZATION
Chapter 09 – Organizational Agility
E.G.
Use Example 9.6 – Organizing for customer responsiveness here
2. Total quality management (TQM) is an integrative approach to management that
supports the attainment of customer satisfaction through a wide variety of tools and
techniques that result in high-quality goods and services.
a. Demming’s “14 points” of quality (Exhibit 9.7):
a. Create constancy of purpose
b. Adopt the new philosophy
3. Commitment to total quality requires a thorough, extensive, integrated approach to
organizing.
4. Six Sigma quality is a method of systematically analyzing work processes to identify
5. The Malcolm Baldrige National Quality Award encourages companies to achieve
quality excellence, and is granted on the basis of seven criteria:
a. Leadership
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6. ISO 9001 is a series of quality standards developed by a committee working under
7. Reengineering revolutionizes key organizational systems and processes to answer the
question, “If you were the customer, how would you like us to operate?”
LO 6: Identify ways that firms organize around different types of technology.
A. Technology is the systematic application of scientific knowledge to a new product, pro-
cess, or service.
B. Types of technology configurations:
1. Small batch technologies – when goods or services are provided in very low volume
C. Organizing for flexible manufacturing.
1. Mass customization is the production of varied, individually customized products at
the low cost of standardized, mass-produced products. (See Exhibit 9.8)
4. Lean manufacturing is an operation that strives to achieve the highest possible
productivity and total quality, cost effectively, by eliminating unnecessary steps in the
production process and continually strives for improvement.
V. TECHNOLOGY AND ORGANIZATIONAL
AGILITY
Chapter 09 – Organizational Agility
E.G.
Use Example 9.7 – Lean manufacturing here
D. Organizing for speed: Time-based competition (TBC) refers to strategies aimed at re-
ducing the total time it takes to deliver the product or service. Key organizational ele-
ments to TBC:
1. Logistics, which is the movement of resources into the organization (inbound) and
products from the organizations to its customers (outbound).
A. Any approach to organizing has its strengths and limitations. Today’s advantages are tomorrow’s
“table stakes” requirements that need to be met if a firm expects to be a major player in an indus-
try.
and they are able to respond to those changes quickly, efficiently, and effectively.
Management in Action –
Onward
GE tries to be responsive in a variety of ways. Among these are the use of Six Sigma to continually im-
prove quality and Lean methods to improve efficiency by eliminating waste. These methods make change
a constant part of doing business at GE.
• How else might GE become more responsive to its customers?
Other ways to be responsive to customers include using a customer relationships management (CRM)
• Based on the information in the three parts of this case, how would you rate GE’s organizational agili-
ty? Summarize your reasons for this rating.
VI. FINAL THOUGHTS ON ORGANIZATIONAL
AGILITY
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p. 296: How can lack of speed kill an organization?
Many customers care about when they can obtain a product, once they have decided to make a purchase.
If the organization cannot meet customers’ demand for timely delivery, the customers will go elsewhere.
p. 298: Does your school have a core competence? If so, what is it?
Answers will vary. Students might think about why they decided to attend this particular school. This is a
p. 300: How might an alliance increase innovation?
p. 302: How has General Electric’s large size affected its ability to compete?
Basic points about large companies apply: High volume of production leads to economies of scale, as
p. 303: A salesperson learns about a customer’s new challenge. Why might a small company be able to
react to this information faster?
In a small company, there are fewer bureaucratic layers and divisional silos for an idea to travel through
p. 306: How does a rigid bureaucracy make it difficult to meet all these challenges at once?
Meeting so many challenges at once requires the ability to make changes rapidly when customer tastes
p. 309: What happens when the commitment to quality is weak at the top of an organization?
In that situation, the organizational culture probably won’t support high quality, the rewards for perfor-
BOTTOM LINE
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p. 312: What other drivers of success can reengineering improve?
Reengineering can improve quality, customer service, and sustainability (by reducing waste). It also can
p. 314: Give an example of a product you’d like to have customized for your personal preferences. Have
you found a customized version yet? If not, you may someday.
p. 316: Which of the quality improvement approaches is often combined with lean manufacturing?
p. 319: Give an example of a situation in which speed would be important for a book publisher.
Answers will vary. Speed would logically be important when it is important to release a book ahead of
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Making More Impact: Scaling Social Enterprises
1. As Social Enterprises try to get larger, what unique challenges do they face?
Social enterprises may face a lack of resources as they get larger. This is why it is important
2. What are some of the drawbacks associated with partnering with governments or big
businesses? If you ran an SE, which of these options would you pursue?
Answers will vary on which option students would choose, but it is important to understand
SOCIAL ENTERPRISE