CHAPTER 8 – ADAPTING ORGANIZATIONS TO TODAY’S MARKETS
LEARNING GOALS
After you have read and studied this chapter, you should be able to:
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 restructuring, organizational culture, and informal organizations can help businesses adapt to change.
LEARNING THE LANGUAGE
Listed below are important terms found in the chapter. Choose the correct term for each definition and write it in the space provided.
Benchmarking / Flat organization structure / Organizational (or corporate) cultureBureaucracy / Formal organization / Real time
Centralized authority / Hierarchy / Restructuring
Chain of command / Informal organization / Span of control
Core competencies / Inverted organization / Staff personnel
Cross-functional self managed teams / Line organization / Tall organization structure
Decentralized authority / Line personnel / Transparency
Departmentalization / Matrix organization / Virtual corporation
Digital natives / Networking
Economies of scale
1.Groups of employees from different departments who work together on a long- term basis are called ______.
2.A ______is a system in which one person is at the top of the organization and there is a ranked or sequential ordering from the top down of managers who are responsible to that person.
3.Using communications technology and other means to link organizations, or ______, allows them to work together on common objectives.
4.Redesigning an organization so that it can more effectively and efficiently serve its customers is known as ______.
5.Widely shared values within an organization, or the ______, provide unity and cooperation to achieve common goals.
6.The ______is the system of relationships and lines of authority that develop spontaneously as employees meet and form relationships, and lines of authority outside the formal organization.
7.Those functions that the organization can do as well as or better than any other organization in the world are called ______.
8.A ______is an organization with many layers of managers who set rules and regulations and oversee all decisions.
9.An organization in which decision-making authority is maintained at the top level of management at the company’s headquarters utilizes ______.
10.In a(n) ______contact people are at the top and the chief executive officer is at the bottom of the organization chart.
11.The ______refers to the optimum number of subordinates a manager supervises or should supervise.
12.The line of authority that moves from the top of the hierarchy to the lowest level is called the ______.
13.Employees known as ______are part of the chain of command that is responsible for achieving organizational goals.
14.When a company is using ______, it is comparing its practices, processes, and products against the world's best.
15.When decision-making authority is delegated to lower-level managers more familiar with local conditions than headquarters’ management could be, a company is said to have ______.
16.A______has few layers of management and a broad span of control.
17. Dividing organizational functions into separate units is commonly called ______.
18.The ______is the structure that details lines of responsibility, authority, and position and is shown on the organizational chart.
19.A ______is one in which specialists from different parts of the organization are brought together to work on specific projects but still remain part of a traditional line and staff structure.
20.Employees known as ______advise and assist line personnel in meeting their goals.
21.The concept of ______describes a situation in which companies can reduce their production costs if they can purchase raw materials in bulk, so the average cost of goods goes down as production levels increase.
22.An organizational structure in which the pyramidal organization chart would be quite tall because of the various levels of management would be called a ______.
23.A ______is one that has direct two-way lines of responsibility, authority, and communication running from the top to the bottom of the organization, with all people reporting to only one supervisor.
24.The present moment or the actual time in which something takes place is called ______.
25.The term ______is used to describe young people who grew up using the Internet.
26.A ______is a temporary, networked organization made up of replaceable firms that join the network and leave it as needed.
ASSESSMENT CHECK
Learning Goal 1
Everyone’s Organizing
1.According to the text the key to success for organizations is: ______
______.
2.Describe:
- Division of labor: ______
b.Job specialization: ______
3.Structuring an organization consists of:
- ______
- ______
- ______
- ______
- ______
- ______
4.What does an organization chart show?
5.What has created so much change in organizations?
Learning Goal 2
The Changing Organization
6.Identify and briefly describe 10 of Fayol's "principles" of organizing:
a.______
b.______
c.______
d.______
e.______
f.______
g.______
h.______
i______
j.______
7.The process of rule making often led to ______.
8.Identify four characteristics of Max Weber's bureaucracy.
a.______
b.______
c.______
d.______
9.How do workers today differ from those during the time that Weber was writing, and how did that affect management?
10.In a company with many layers of management, what is the process for an employee to introduce a work change? What did Weber mean by the term “bureaucrat”?
11.When employees have to ask their manager for permission to make a change ______
______.
12.How are companies reorganizing to make customers happy?
Learning Goal 3
Decisions to Make in Structuring Organizations
13.What are the advantages and disadvantages of centralized authority?
AdvantagesDisadvantages
a. ______a. ______
b. ______b. ______
c. ______c. ______
d. ______d. ______
14.What are the advantages and disadvantages of decentralized authority?
AdvantagesDisadvantages
a. ______a. ______
b. ______b. ______
c. ______c. ______
d. ______d. ______
15.Why does span of control narrow at higher levels of the organization?
16.What is the trend in today’s organizations regarding span of control?
17.Compare span of control in tall and flat organizational structures.
18.Why can flat structures respond more readily to customer demands?
19.What are the advantages and disadvantages of the traditional functional structure?
AdvantagesDisadvantages
a. ______a. ______
b. ______b. ______
c. ______c. ______
d. ______
e. ______
20.What are five methods of grouping, or departmentalizing, workers?
a.______d.______
b.______e.______
c.______
21.The decision about which way to departmentalize depends on ______
______.
22.A hybrid form of departmentalization is being used when ______
______,
Learning Goal 4
Organization Models
23.Name four types of organizational structures.
a.______c.______
b.______d.______
24.What are the disadvantages of a line organization, for a larger organization?
a. ______
b. ______
c. ______
d. ______
25.What is the difference between line and staff personnel?
26. In a matrix system, a product manager can: ______
______.
This is important in industries in which the emphasis is on ______
______.
27.What are the advantages and disadvantages of a matrix structure?
Advantages:
- ______
- ______
- ______
- ______
Disadvantages:
- ______
- ______
- ______
- ______
28.A potential problem with the teams created by matrix management is ______
______.
An answer to the disadvantage of the teams created by matrix management is: ______
______.
29.Describe the characteristics of cross-functional teams.
30.Why should cross functional teams include customers, suppliers and distributors?
Learning Goal 5
Managing the Interactions Among Firms
31.What is meant by the concept of transparency?
32.How have the networking, real time and the concept of transparency, changed the way information is shared between organizations?
33.What is the result of those changes on organizational design and structure?
34.How does benchmarking lead to outsourcing, and ultimately to a firm’s core competencies?
Learning Goal 6
Adapting to Change
35.Why is introducing change in an organization difficult?
36.How are companies using the Internet to help adapt to changes?
37.Illustrate and describe an inverted organization.
38.What is a manager’s job in an inverted organization?
39.How does the inverted organization support front line personnel? How does this change the requirements for front-line personnel?
40.How is the culture of an organization reflected?
41.Describe the kind of organizational cultures that the best organizations have, including the key to a productive culture.
42.What are two organizational systems that all companies have?
a. ______b. ______
43.What is a drawback of the formal organization? What is a benefit of the formal organization?
44.What is the drawback of the informal organization? What is the benefit?
45.Describe the importance of the “grapevine” in the organization.
46.How have managers’ views toward the informal organization changed in the new more open organizations?
CRITICAL THINKING EXERCISES
Learning Goal 1
1.Consider an organization with which you are familiar. This could be the school you attend, or the company you work for, or a charitable organization with which you have worked. Can you identify the manner in which this organization is “organized”?
How is the work divided? Are there teams? Is the organization departmentalized? Are the positions of authority clear? What are the various types of tasks that need to be accomplished? Are there clear procedures for doing work? Is there an organization chart?
Learning Goal 2
2.Many organizations today have been organized around principles developed by Henri Fayol and Max Weber. Read the following and determine whose ideas are being described.
a. ______Introduced several "principles" of organizing.
b. ______Believed workers should think of themselves as coordinated teams, and that the goal of the team is more important than individual goals.
c. ______Promoted a bureaucratic organization.
d.______Believed that large organizations demanded clearly established rules and guidelines, which were to be precisely followed.
e. ______Wrote that each worker should report to only one boss.
f.______Said that managers should treat employees and peers with respect
g. ______Wrote that functions are to be divided into areas of specialization such as production, marketing and so on.
h. ______Believed in written rules, decision guidelines and detailed records.
i. ______Said that staffing and promotions should be based solely on qualifications.
j. ______Proposed that an organization should consist of three layers of authority: top managers, middle managers, and supervisors.
k. ______Believed the less decision-making employees had to do, the better.
l. ______Believed that managers have the right to give orders and expect obedience.
Learning Goal 3
3.You are a manager for Sun-2-Shade, a company that makes a self-darkening windshield for automobiles using the same technology that is used for prescription eyeglasses. Sun-2-Shade is a small company right now, with just a few workers. Eric is the CEO and founder of the company. You are the plant manager. The customers for Sun-2-Shade for right now are automobile manufacturers. Do you think a centralized or decentralized authority structure would be most effective? Why?
4.As companies are moving away from traditional methods of organizing, and taking different perspectives regarding span of control, how are companies changing in the area of centralization versus decentralization, and tall versus flat organizational structures?
5.There are a number of ways companies have tried to departmentalize to better serve customers:
Product Customer group Process
FunctionGeographic location
The hybrid structure is an organization that has used several forms of departmentalization
Match each of the following to the correct form:
a. ______General Motors has the Chevrolet and Buick, divisions, each employing separate staffs for design, engineering, product development and so on.
b. ______At the highest corporate levels, G.E. has a corporate strategic planning staff, production staff, human resources staff, technical resources staff and finance staff.
c. ______Apple Computer, in manufacturing the Mac Computer System, begins with an assembly line that makes the logic board; another line makes the analog board. Once assembled, the boards go through diagnostic tests before being assembled into a computer unit.
d. ______When Wendy's made the decision to expand into the European market, the company created a separate European division.
e. ______Most banks have commercial loan officers who deal only with business customers and consumer loan specialists for personal loans.
Learning Goal 4
6.There are 4 types of organizational structures:
LineMatrix
Line and StaffCross-functional self-managed teams
Read below brief descriptions of several companies and decide which form of organizational structure would be most suitable for each.
a. ______A small company, Dynalink, is in the biotechnology industry. Competition is fierce, and new product development is of highest importance. The field is changing and growing so rapidly that new product ideas must come fast and furious. The firm employs highly skilled, very creative people.
b. ______Another small firm is Cleanem Up, a dry cleaning establishment, with one owner and one store. They are located in a suburban area and have a loyal clientele. The store is known for its quality and courteous service.
c. ______Wells Industries is a medium sized firm employing about 1500 people. Wells makes a variety of business- related products such as stationary, forms, and so forth. They have a good sales force, which knows the product very well. While this is a fairly competitive industry, new product development happens as the need arises, such as when firms went from sophisticated word processing machines to even more sophisticated computerized office management.
d. ______Mitsubishi wants to develop a new luxury car to compete with Lexus, Infiniti, and others. Time is important, as they want to enter the market within 18 months.
Learning Goals 4, 5
7. How will cross functional self managed teams impact organizational designs of the future?
8.How does the inverted organizational structure relate to the other kinds of changes we have read about in this chapter, such as wider spans of control, decentralization, cross functional teams, outsourcing, benchmarking, and so on?
Learning Goals 5, 6
9. What is the relationship between leadership style, the organizational structure (such as tall vs flat organizations, span of control, delegation, teams) and the creation of an organizational culture?
Learning Goals 1-5
10. Think about the organizational design of the school you are attending, or an organization with which you are familiar, such as where you work. Can you identify the "hierarchy"? Identify how many layers of management come between the front-line workers and the highest level of management. Are there separate departments for various functions (instruction, bookstore, and so on)? Are there rules and regulations that seem to keep workers organized and are meant to make the organization run efficiently? (Hint - perhaps your instructor will have a copy of the organizational chart for your school, or your manager may have one for the company for which you work.)
11.Sun-2-Shade is in a growth state and Eric, the CEO and founder, wants to be sure to build on a good foundation. The product is a windshield that darkens automatically when your car goes into a sunny area, much like the eyeglasses. This is a small company, with a educated and well trained workers, and Eric is very concerned about customer service. What suggestions can you give Eric about organizational design, knowing what you already know about the company and its employees?
PRACTICE TEST
MULTIPLE CHOICE – Circle the best answer
Learning Goal 1
1.The first step in the process of organizing a business is to:
a.determine the work that needs to be done.
b.divide people into teams.
c.grouping workers into departments based on skills or expertise.
d.develop an organization chart.
2.The process of setting up individual departments to do specialized tasks is called:
a..division of labor.
b.job specialization.
c.departmentalization.
d. planning
Learning Goal 2
3.The evolving business environment has made ______a critical managerial function.
a.controlling employees
b.managing change
c.finding new employees
d.division of labor
4.The principle of ______means that each person should know to whom they report, and that managers should have the right to give orders and expect others to follow.
a.unity of command
b.division of labor
c.order
d.hierarchy of authority
Learning Goal 3
5.Robin Banks is in a supervisor for a large, bureaucratic organization on the West Coast. According to the views of a bureaucratic organization, this means that Robin should:
a.be included on decision making when decisions affect her workers.
b.do her work and let middle and upper level managers do the decision making.
c.try to get her workers organized into cross-functional teams.
d.have a wide span of control.
6.A manager’s span of control:
a.can narrow as subordinates need less supervision.
b.will narrow as the manager gets to higher levels in the organization and work becomes less standardized.
c.will decrease as employees become more professional.
d.is generally the same in most organizations.
7.Who Dunnit is a new firm that makes murder mystery games for sale in retail stores and through catalogs. The company has very few management positions, and most everybody pitches in when they need to, to get the job done. It is really a “team” effort, with very few layers of management. Who Dunnit is an example of a:
a.tall organization.
b.bureaucratic organization.
c.centralized organization.
d.flat organization.
8.Dewey, Cheatum, and Howe is a car company that makes four models, a hybrid sport utility, a sports car, a four door sedan, and a compact car. Workers at Dewey basically work on only one type of vehicle, and separate marketing and product development processes are designed for each type of vehicle, to better serve the customers for each type of vehicle. Dewey, Cheatum, and Howe is departmentalized by:
a.product.
b.function.
c.process.
d.customer.
9.In order to more quickly respond to customer needs, Hewlett Packard is changing it’s organizational structure to give more authority and responsibility to field managers located across the country. These managers spend time with customers and know what the customers need right away. It appears that H-P is moving toward a ______structure.
a.more decentralized
b.more centralized
c.more bureaucratic
d.more traditional
Learning Goal 4
10.The form of organizational structure that is most flexible, and allows the organization to
take on new projects without adding to the organizational structure is the:
a.Line.
b.Line and staff.
c.Matrix.
d.Cross-functional self managed team.
11.Maria Escobar works as an attorney for a large East Coast consulting firm. Maria’s job is to act as an advisor to the consultants, to be sure that they do not confront any legal issues when they are working at the various clients’ job sites. Maria’s position would be classified as a ______position.
a.line
b.middle management
c.first line
d.staff
12.Banana Computers is restructuring, and intends to implement cross-functional teams.