Unformatted text preview: AEM1200, Introduction to Business Management. AEM1200, Friday 1/30 Organizational Structure Types of organizational structure Principles of hierarchy and bureaucracy Alternatives to hierarchy and bureaucracy Functional Areas of Business Functional
Operations Finance Transformation of resources Transformation into goods and services; into The process of determining The customers’ wants and needs and then providing those customers with products or services that match or exceed their expectations; expressing to customers their value and about creating desire for product and a sense of reasonable transaction in the moment money is exchanged moment Marketing The process of acquisition The of funds for a firm and management of this funds within the firm; Human resources - function Research and development Research - function Public relations - legal dept Legal Etc… Others Others Divisional Structure Divisional
Organized based on functions; how do you manage so many people -Bureaucracy Fundaments of Bureaucracy: Fayol and Weber Fundaments BIG Q: How did big companies organize?
Unity of command Weber one person who makes final decisions one (he exists for every level of hierarchy) (he Hierarchy of authority Hierarchy Division of labor Division Everyone has to fit in their box and do Everyone what they are assigned to do what Subordination of individual interests to Subordination the general interest the Authority If you get an order you follow that If order. Decision making is centralized so that Decision there is somebody who has ultimate voice voice Job descriptions Job Written rules, decision Written guidelines, and policies guidelines, Consistent procedures, Consistent regulations, and policies regulations, Staffing and promotion based Staffing on qualification on Degree of centralization Degree Close communication channels Order Equity Everyone has to follow rules Sense of community Esprit de corps Fundamentals of Bureaucracy of Chain of Command Chain Always someone who has Always authority to make a decision authority A bureaucracy doesn’t work bureaucracy unless there is a clear defined set of rules, especially in cases when it’s unclear as to what to do what Boss Vice President Supervisor Employee Rules & Regulations Set Up by Function Communication Minimal = Communication because rules establish everything; everyone is just going at their job going Departmentalization Departmentalization (Put together people doing same job)
Advantages Disadvantages Skill Development Economies of Economies Scale Scale Good Coordination Lack of Communication
Hard to tackle new situations Employees Identify with Employees Department rather than w/ organization as a whole organization Slow Response to External Slow Demands Demands Narrow Specialists Narrow
This was very bad for General Motors Centralization vs. Decentralization Centralization Decentralization Increased Uniformity Less Duplication
using resources efficiently Taking advantage of Taking economies of scale; thus, cost per unit goes down cost Informed Decisions Worker Responsibility Few Layers/Faster Loss of Control Possible Duplication Maximum Control Lots of Policies & Lots Procedures Procedures Many Layers/Slower Span of Control Span
Optimum number of subordinates a manager Optimum supervises or should supervise; supervises Usually between 7 and 15; (8 is bad) Can be increased when Jobs are routine and/or low skilled Information technology Greater managerial experience Jobs are unique and/or highly skilled Jobs require extended periods of face-to-face Jobs communication communication Little managerial experience Must be reduced when Coordinating and separating roles Coordinating
Gatekeeper Someone who controls access to something Organizational members who link their organization Organizational with the external environment. Boundary spanning primarily concerns the exchange of information [Daft, 1989]. A boundary spanner is further defined as one who attempts to influence external environmental elements and processes. Thus, the fundamental task of a boundary-spanning strategist (BSS) is to make decisions concerning information gathered. Boundary spanners What does the bureaucratic, hierarchical paradigm do better? a.) Reduce costs b.) Increase sales Mechanistic vs. Organic Organizations Mechanistic
Bureaucracies are Mechanistic Organic organizations have: Bureaucracies organizations, which have: organizations, Broadly defined jobs and Broadly Specialized jobs and responsibilities; Specialized responsibilities; responsibilities; responsibilities; Loosely defined, frequently Loosely Precisely defined, unchanging roles; changing roles; changing A rigid chain of command Decentralized authority; Centralized authority Horizontal communication; Vertical communication Based on reciprocal Based Based on sequential and pooled interdependence Based pooled interdependence interdependence interdependence Task centered (project teams) Organization centered How to Improve How Organizational Structure
Break business into smaller units Build teamwork Impose autonomy Create meaningful incentives Outsource non-operating activities Share business capabilities across units Matrix Organization Matrix Outsourcing Outsourcing
+ Time to focus on Time company’s primary function function + Increased level of Increased expertise expertise + Cost effectiveness + Decreased overhead + Risk reduction + Flexibility + Technology - Less personal approach - Less control by owner in Less planning, implementing & carrying out company’s future future - Potential for competing Potential for the outsourcing firm’s time time Virtual Organizations Virtual
A temporary networked organization made up of temporary replaceable firms that join and leave as needed; replaceable Reduces fixed costs Obtains needed expertise quickly Promotes flexibility We act as an extension of your own business to manage all We aspects of your global supply chain. We take care of all vital aspects of the supply chain so that our customers - leading retailers and brands - can focus on their customers.” retailers Example: Li and Fung Takeaways Takeaways
Formal organizational structures (organizational Formal charts) help in establishing responsibility and control lines. However, they are very inflexible. very Some ways to improve flexibility include flattening the structure, outsourcing non-critical activities, and sharing capabilities across units. activities, Organizations are composed of people. To Organizations people To improve organizations beyond their structure, one must motivate and empower people. motivate empower ...
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