The PROFILE at the beginning of this chapter is "Getting to Know CARLY FIORINA of HEWLETT-PACKARD." Fiorina made a break in the "glass ceiling," when she became CEO of Hewlett-Packard.

1. THE CHANGING ORGANIZATION.
1. Never before has business changed so quickly.
1. Much of that change is due to the changing business environment, including more global competition, faster technological change, and changes in consumer expectations.
2. Managing change has become a critical managerial function.
3. Organizations in the past were designed so that managers could control workers rather than to please the customer.
4. The newest forms of organization are designed to better serve the customer.

THE HISTORICAL DEVELOPMENT OF ORGANIZATIONAL DESIGN.

Explain the organizational theories of Fayol and Weber.

5. Not until the 20th century and introduction of mass production did business organizations grow complex and difficult to manage.
6. The bigger the plant, the more efficient production became, a concept called ECONOMY OF SCALE.
7. The text discusses two major organization theorists:
1. The text discusses two major organization theorists:
2. MAX WEBER (The Theory of Social and Economic Organizations in Germany about the same time. )
2. FAYOL’S PRINCIPLES OF ORGANIZATION.
1. Fayol introduced principles such as:
1. UNITY OF COMMAND. Each worker is to report to only one boss.
2. HIERARCHY OF AUTHORITY. One should know to whom to report.
3. DIVISION OF LABOR. Functions were divided into areas of specialization.
4. SUBORDINATION OF INDIVIDUAL INTERESTS TO THE GENERAL INTERESTS. Goals of the organization were to be considered more important then personal goals.
5. AUTHORITY. Managers should give orders and expect them to be carried out.
6. DEGREE OF CENTRALIZATION. The decisions needed to be made by top management depends upon the size of the organization.
7. CLEAR DEFINITION OF COMMUNICATION CHANNELS.
8. ORDER. "A place for everything and everything in its place."
9. EQUITY. Employees should be treated fairly and justly.
10. ESPRIT DE CORPS. Employees should be proud of and loyal to the organization.
2. These principles have been taught for years, becoming synonymous with the concept of management CONCEPT CHECK .
3. These principles led to rigid organizations.
3. MAX WEBER AND ORGANIZATION THEORY.
1. Weber promoted the pyramid-shaped organization structure.
1. Weber put great trust in managers and felt the less decision making employees had to do, the better.
2. Today, however, many firms believe that workers are the best source of ideas, and managers are there to support workers.
2. WEBER’S PRINCIPLES were similar to Fayol’s with the addition of:
1. JOB DESCRIPTIONS.
2. WRITTEN RULES.
3. CONSISTENT PROCEDURES, REGULATIONS, AND POLICIES.
4. STAFFING AND PROMOTIONS BASED ON QUALIFICATIONS.
3. Today, many organizations are attempting to rid themselves of the pyramid structure because it slows the process of change.
4. Some firms are eliminating managers and non-managers and giving more power to lower-level employees, called DOWNSIZING, or RIGHTSIZING.
4. TURNING MANAGERIAL CONCEPTS INTO ORGANIZATIONAL DESIGN.
1. ORGANIZATIONAL DESIGN is the structuring of workers so that they can best accomplish all the goals of the firm. CONCEPT CHECK
1. A HIERARCHY 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.
2. Some organizations have as many as 10 to 14 layers of management between the chief executive officer and the lowest-level employee.
2. BUREAUCRACY is the term used in organizations to describe having many layers of management who set rules and regulations and participate in all decisions.
3. Decision making may take too long to satisfy customers.
4. To make customers happy, organizations are giving employees more power to make decisions on their own, known as EMPOWERMENT.
5. BUREAUCRATIC ORGANIZATIONS EMPHASIZE FUNCTIONAL SEPARATION.
1. In a bureaucracy:
1. CHAIN OF COMMAND goes from the top down
2. Organizations are SET UP BY FUNCTION.
2. Organizations are SET UP BY FUNCTION.
3. COMMUNICATION among departments is minimal.
4. Today such organizations aren’t very responsive to customer wants and needs.
2. Today such organizations aren’t very responsive to customer wants and needs.

Discuss the various issues involved in structuring and restructuring organizations

1. RESTRUCTURING is redesigning an organization so that it can more effectively and efficiently serve its customers.
2. TALL VERSUS FLAT ORGANIZATION STRUCTURES.
1. TALL ORGANIZATIONS have many layers of management.
1. The organization chart becomes very tall because of the levels of management.
2. Communication is distorted as it flows through these layers.
3. The cost of all these managers and support people was high.
2. FLAT ORGANIZATIONS cut out management layers and expand sideways instead.
1. The trend is toward more flat organization structures.
2. These structures are usually much more responsive to customer demands because decision-making power may be given to lower-level employees.
3. CHOOSING THE APPROPRIATE SPAN OF CONTROL.
1. CHOOSING THE APPROPRIATE SPAN OF CONTROL.
1. At lower levels, it is possible to implement a wide span of control.
2. The number narrows at higher levels of the organization.
2. Variables in span of control include:
1. CAPABILITIES OF THE MANAGER. The more experienced, the broader the span of control.
2. CAPABILITIES OF THE SUBORDINATES. The more need for supervision, the narrower the span of control.
3. COMPLEXITY OF THE JOB.
1. GEOGRAPHICAL CLOSENESS. The more concentrated the work area, the broader the span of control.
2. FUNCTIONAL SIMILARITY. The more similar the employees’ functions are, the broader the span of control.
3. NEED FOR COORDINATION. The greater the need for coordination, the narrower the span of control.
4. PLANNING DEMANDS. The more involved the plan, the narrower the span of control might be.
5. FUNCTIONAL COMPLEXITY. The more complex, the narrower the span of control.
4. Other factors to consider include professionalism of superiors and subordinates and the number of new problems that occur in a day.
3. The span of control varies widely.
4. The trend is to expand the span of control as organizations get rid of middle managers.
4. ADVANTAGES AND DISADVANTAGES OF DEPARTMENTALIZATION.
1. DEPARTMENTALIZATION is dividing organizational functions into separate units.
1. The traditional way to departmentalize is by function.
2. FUNCTIONAL STRUCTURE is the grouping of workers into departments based on similar skills, expertise, or resource use.
2. The ADVANTAGES of functional departmentalization are:
1. It enables employees to specialize.
2. SKILLS CAN BE DEVELOPED IN DEPTH.
3. It allows for ECONOMIES OF SCALE as resources can be centralized.
4. There is GOOD COORDINATION within the function.
3. The DISADVANTAGES of departmentalization are:
1. LACK OF COMMUNICATION between departments.
2. EMPLOYEES IDENTIFY WITH THE DEPARTMENT rather than the total organization.
3. .RESPONSE TO EXTERNAL CHANGE IS SLOW.
4. Employees become NARROW SPECIALISTS.
5. People in the same department tend to think alike (engage in GROUP THINK.)
4. Businesses are now trying to REDESIGN THEIR STRUCTURES to increase communication among employees.
5. DIFFERENT WAYS TO DEPARTMENTALIZE.
1. By PRODUCT (a book publisher might have departments for trade books, textbooks, and technical books.)
2. By FUNCTION (production, marketing, finance, human resource management, and accounting are common.)
3. By CUSTOMER GROUP (a pharmaceutical company might have separate departments that focus on the consumer market, on hospitals, and on doctors.)
4. By GEOGRAPHIC LOCATIONS (U.S. operations and Canadian operations.)
5. By PROCESS (a firm that makes leather coats may have one department to cut the leather, another to dye it, and a third to sew the coat.)
6. Some firms use a combination of departmental techniques.
7. Companies must learn to coordinate traditional departmental efforts with those of their Internet operations.
6. CENTRALIZATION VERSUS DECENTRALIZATION OF AUTHORITY.
1. The degree to which an organization allows managers at lower levels to make decisions determines the degree of decentralization.
2. CENTRALIZED AUTHORITY occurs when decision-making authority is maintained at the top level of management (example: McDonalds.) CONCEPT CHECK
3. DECENTRALIZED AUTHORITY occurs when decision-making is delegated to lower-level managers (example: J.C. Penney).
4. Today’s rapidly changing markets tend to favor more decentralization and more delegation of authority.
3. ORGANIZATION MODELS

Describe traditional organizations and their limitations.

1. There are several ways to structure an organization to accomplish their goals.
2. LINE ORGANIZATIONS CONCEPT CHECK .
1. A LINE ORGANIZATION has direct two-way lines of responsibility, authority, and communication running from top to bottom, with all employees reporting to only one boss (i.e. Army.)
2. ADVANTAGES:
1. CLEARLY DEFINED RESPONSIBILITY AND AUTHORITY
2. EASY TO UNDERSTAND.
3. ONLY ONE SUPERVISOR FOR EACH PERSON.
3. DISADVANTAGES:
1. TOO INFLEXIBLE.
2. FEW SPECIALIST to advise employees along the line.
3. Too long LINES OF COMMUNICATION.
4. UNABLE TO HANDLE COMPLEX DECISIONS.
3. LINE-AND-STAFF SYSTEMS ORGANIZATIONS.
1. LINE PERSONNEL perform functions that contribute directly to the goals of the organization.
2. STAFF PERSONNEL perform functions that advise and assist line personnel.
3. ADVANTAGES:
1. Expert consultants are continuously available.
2. Staff positions strengthen the line personnel.
4. MATRIX-STYLE ORGANIZATIONS.

Show how matrix-style organizations and cross-functional teams help companies become more customer oriented.

1. Both line, and line and staff organization structures suffer from a certain inflexibility.
1. Both have established lines of authority and communication and work well in organizations with relatively unchanging environments and slow product development.
2. Today’s economic scene is dominated by high-growth industries.
3. In such organizations, emphasis is on new product development, creativity, and interdepartmental teamwork.
4. The economic, technological, and competitive environments are rapidly changing.
2. MATRIX ORGANIZATIONS bring specialists from different parts of the organization together to work on specific projects, but still remain part of a line-and-staff structure.
1. Matrix organization structures were developed in the aerospace industry.
2. The structure is now used in banking, management consulting firms, ad agencies, and school systems.
3. ADVANTAGES OF MATRIX ORGANIZATIONS CONCEPT CHECK :
1. FLEXIBILITY.
2. ENCOURAGES INTERORGANIZATIONAL COOPERATION AND TEAMWORK
3. CAN RESULT IN CREATIVITY.
4. MORE EFFICIENT USE OF ORGANIZATIONAL RESOURCES.
4. DISADVANTAGES OF MATRIX ORGANIZATIONS:
1. COSTLY AND COMPLEX.
2. CONFUSION IN EMPLOYEE LOYALTIES.
3. REQUIRES GOOD INTERPERSONAL SKILLS AND COOPERATIVE EMPLOYEES AND MANAGERS.
4. It can be only a temporary solution to a long-term problem.
5. Matrix organizations seem to violate some traditional managerial principles, but the system functions relatively effectively.
6. The potential problem with matrix management is that the project teams are NOT PERMANENT.
1. There is little chance for cross-functional learning.
2. The newest trend is to develop permanent teams and empower them to work closely with others to quickly and efficiently bring out new projects.
5. CROSS-FUNCTIONAL, SELF-MANAGED TEAMS.
1. CROSS-FUNCTIONAL TEAMS are groups of employees from different departments who work together on a semi-permanent basis (as opposed to the temporary teams established in matrix-style organizations).
2. Often the teams are empowered to make decisions on their own without seeking the approval of management.
3. Self-managed teams reduce the barriers between design, engineering, marketing, and other functions.
4. Technology is increasing the trend toward cross-functional teams in that employees from different departments can work simultaneously on the same project using computers.
4. GOING BEYOND ORGANIZATIONAL BOUNDARIES.

Defend the use of various organizational tools and techniques such as networking, reengineering, and outsourcing.

1. A cross-functional team that includes customers, suppliers, and distributors goes beyond organizational boundaries.
2. NETWORKING AND VIRTUAL CORPORATIONS.
1. NETWORKING is using communications technology and other means to link organizations and allow them to work together on common objectives.
1. Organizations are so closely linked by the Internet that each can find out what the others are doing in real time.
2. REAL TIME means the present moment or actual time in which something takes place.
3. TRANSPARENCY occurs when a company is so open to other companies working with it that the once-solid barriers become "see through" and electronic information is shared.
4. Because of this integration, two companies can work together as closely as two departments once did.
2. Because of this integration, two companies can work together as closely as two departments once did.
3. A modern organization chart would show people in different organizations and how they are networked together.
4. The organization structures tend to be flexible and changing.
3. EXTRANETS AND INTRANETS.
1. An EXTRANET is an extension of the Internet that connects suppliers, customers, and other organizations via secure websites.
2. An INTRANET is a set of communication links within one company that travel over the Internet but are closed to public access.
3. Intranets link everyone in the firm electronically so they can communicate freely and work together on projects.
5. THE RESTRUCTURING PROCESS AND TOTAL QUALITY.
1. How you restructure an organization depends on the status of the present system.
2. TOTAL QUALITY MANAGEMENT (TQM)
1. TOTAL QUALITY MANAGEMENT is the practice of striving for customer satisfaction by ensuring quality from all departments in an organization.
2. CONTINUOUS IMPROVEMENT means constantly improving the way the organization does things so that customer needs can be better satisfied.
3. In bureaucratic organizations with many layers of management TQM is not suitable.
4. When an organization needs dramatic changes, only reengineering will do.
5. REENGINEERING is the fundamental rethinking and radical redesign of organizational processes to achieve dramatic improvements in critical measures of performance.
6. Example: IBM’s credit organization.
7. Reengineering may also be necessary to adapt an organization to fit into a virtual network.
8. In firms where reengineering is not feasible, RESTRUCTURING may do.
3. HOW RESTRUCTURING AFFECTS ORGANIZATIONAL DESIGN.
1. Many firms are discovering that the key to long-term success in a competitive market is to empower front-line people to respond quickly to customer wants and needs.
2. The most advanced service organizations have turned the traditional organizational structure upside down.
3. These INVERTED ORGANIZATIONS have contact people at the top and the chief executive officer at the bottom.
1. There are few layers of management, and their job is to assist and support front-line people.
2. Companies based on this structure support front-line personnel with internal and external databanks, advances communication systems, and professional assistance.
3. Companies based on this structure support front-line personnel with internal and external databanks, advances communication systems, and professional assistance.
4. FRONT-LINE PEOPLE HAVE TO BE BETTER EDUCATED, BETTER TRAINED, AND BETTER PAID than in the past.
5. In more progressive organizations, everyone shares information and that gives everyone power.
4. THE MOVEMENT TOWARD OUTSOURCING.
1. In the past, each organization had a separate department for each function such as accounting, marketing, and production.
1. Today’s organizations are benchmarking each function against the best in the world.
2. COMPETITIVE BENCHMARKING is rating an organization’s practices, processes, and products against the world’s best.
2. If the organization can’t do as well as the best, the idea is to outsource the function to an organization that is the best.
1. OUTSOURCING is assigning various functions, such as accounting and legal work, to outside organizations.
2. Some functions, such as information management and marketing, may be too important to outsource.
3. CORE COMPETENCIES are those functions that the organization can do as well or better than anyone else in the world.
6. ESTABLISHING A SERVICE-ORIENTED CULTURE.

Give examples to show how organizational culture and the informal organization can hinder or assist organizational change.

1. Organizational change is bound to cause some RESISTANCE, and should be accompanied by the establishment of an ORGANIZATIONAL CULTURE THAT FACILITATES SUCH CHANGE.
1. ORGANIZATIONAL CULTURE is the widely shared values within an organization that provide coherence and cooperation to achieve common goals.
1. The culture of an organization is reflected in stories, traditions, and myths.
2. Those companies have LESS NEED FOR CLOSE SUPERVISION of employees.
2. Good organizational culture emphasizes SERVICE TO CUSTOMERS.
1. Good organizational culture emphasizes SERVICE TO CUSTOMERS.
2. Those companies have LESS NEED FOR CLOSE SUPERVISION of employees.
3. Within that atmosphere, SELF-MANAGED TEAMS CAN DEVELOP AND FLOURISH.
4. The key to productive culture is MUTUAL TRUST.
5. The best organizational cultures stress HIGH MORAL AND ETHICAL VALUES.
3. The formal organization structure is just one element of the total organizational system.
2. THE INFORMAL ORGANIZATION.
1. All organizations have two systems.
1. The FORMAL ORGANIZATION appears on the organization chart.
2. The INFORMAL ORGANIZATION is the system of relationships among employees that develop outside the formal organization.
3. The FORMAL ORGANIZATION is the structure that details lines of responsibility, authority, and position.
4. The INFORMAL ORGANIZATION is the system of relationships that develop spontaneously as employees meet and form power centers.
2. No organization can operate effectively without both types of organization.
1. The FORMAL ORGANIZATION can be SLOW and BUREAUCRATIC, while the INFORMAL ORGANIZATION CAN ADAPT QUICKLY.
2. The INFORMAL ORGANIZATION is TOO UNSTRUCTURED AND EMOTIONAL for decision-making, while the FORMAL ORGANIZATION PROVIDES GUIDELINES AND LINES OF AUTHORITY.
3. It is wise to learn quickly who the important people are in the informal organization.
4. The center of the informal organization is the GRAPEVINE.
5. Successful managers learn to WORK WITH THE INFORMAL ORGANIZATION and use it to the organization’s advantage.