Chapter © 2008The McGraw-Hill Companies, Inc. All rights reserved. Creating Effective Organizations 17 McGraw-Hill/IrwinCopyright © 2008 by The McGraw-Hill.

Cha

pter

© 2008The McGraw-Hill Companies, Inc. All rights reserved.

Creating Effective Organizations

17

McGraw-Hill/Irwin Copyright © 2008 by The McGraw-Hill Companies, Inc. All rights reserved.

© 2008 The McGraw-Hill Companies, Inc. All rights reserved.

17-2

Ch. 17 Learning Objectives

1. Describe the four characteristics common to all organizations, and explain the difference between closed and open systems.

2. Define the term learning organization.3. Describe horizontal, hourglass, and virtual

organizations.4. Describe the four generic organizational

effectiveness criteria, and discuss how managers can prevent organizational decline.

5. Explain what the contingency approach to organization design involves.


17-3

Ch. 17 Learning Objectives

6. Describe the relationship between differentiation and integration in effective organizations.

7. Discuss Burns and Stalker’s findings regarding mechanistic and organic organizations.

8. Define and briefly explain the practical significance of centralization and decentralization.

9. Discuss the effective management of organizational size.


17-4

Characteristics Common to All Organizations

Hierarchy of authority

Division of labor

Common goal

Coordination of effort

Figure 17-1

Organization: System of consciously coordinated activities of two or more people.


17-5

Organization Charts

Exam ple of Hospital's O rganization Chart

Director ofH um an

R esources

D irector ofAdm issions

D irector ofAccounting

D irector ofN utritionand FoodServices

Ex ecutiveAdm in istrative

D irector

D irector ofX-R ay andLaboratory

Services

D irector ofSurgery

D irector ofPharm acy

C h iefPhysician

Ex ecutiveM edicalD irector

President

C h ief Ex ecutiveO ffi cer

Board of D irectorsType title here

Strategic Planning Officer

Legal Counsel

Cost-Containment

Staff

Director of Patient and

Public Relations

Director of Outpatient Services

Figure 17-2


17-6

Organizational Structure Terms

Span of control•The number of people reporting directly

to a given manager

Staff Personnel – denoted by dotted lines•Provide research, advice, and

recommendations to line managers

Line managers – denoted by solid lines•Have authority to make organizational

decisions


17-7

Test Your Knowledge

True (A) or False (B)1. The ideal span of control is 10.2. Wider spans of control complement

employee empowerment trends.3. Narrower spans of control save costs

and are administratively efficient.4. With wider spans of control, inadequate

supervision and less coordination may result


17-8

Closed Vs. Open Systems

Closed System a relatively self-sufficient entity

Open System organism that must constantly interact with its environment to survive


17-9

The Organization as an Open System

Goals and Values Subsystem

Technical Subsystem

Psychological Subsystem

Structural Subsystem

Managerial Subsystem

Feedback

Inputs Material

Money

Human effort

Information

Outputs Products Services Human

satisfactionOrganiz-

ational

survival and

growth Social

benefit

Figure 17-3


17-10

Learning OrganizationLearning Organization proactively creates, acquires, and transfers knowledge throughout the organization


17-11

Profiles of the New-Style and Old-Style Organizations

Job requirements orientedCustomer oriented

HierarchicalLateral/networked

Command/control orientedInvolvement oriented

Individual orientedTeam oriented

FunctionalProduct/customer oriented

LargeSmall and large

LocalGlobal

Information is scarceInformation rich

StableDynamic, learning

OldNew

Job orientedSkill oriented

Table 17-1


17-12

The Horizontal Organization

New product

development process

teams

Order fulfillment

process teams

Account management process

teams

Strategic and Administrative Process Managers

Customer Needs

Customer Satisfaction

Figure 17-4


17-13

The Hourglass OrganizationFigure 17-4


17-14

The Virtual OrganizationFigure 17-4


17-15

Test Your Knowledge

Regardless of the specific type, to be effective tomorrow’s organizations will require:a.Rigidityb.Short-term thinkingc. Internal focusd.Flexibility and adaptability


17-16

Ways to Assess Organizational Effectiveness

Goal Accomplishment

Resource Acquisition

Strategic Constituencies

Satisfaction

Internal Processes

Figure 17-5


17-17

Identifying Strategic Constituencies

Financial community

Environmentalists

PressStockholders

OPEC Competitors U.S., Foreign

State and Local Government

Customers

Federal Government

Auto Dealers

Consumer activistsCongress

Executive Branch

Government regulators

Suppliers

Employees

Unions

Figure 17-6

Major Auto Manufacturer


17-18

Test Your Knowledge

1. Goal Accomplishment2. Resource Acquisition3. Internal Processes4. Strategic constituencies

a. Team work is important contributor to success

b. Goals are clear and measurable

c. Powerful stakeholders can significantly impact the organization

d. Inputs are directly related to accomplishing objectives

Match the Effectiveness Criteria on the left with the situation in which it would be most appropriate.


17-19

Early-Warning Signs of Decline 1) Excess personnel2) Tolerance of incompetence3) Cumbersome

administrative procedures4) Disproportionate staff

power5) Replacement of substance

with form6) Scarcity of clear goals and

decision benchmarks7) Fear of embarrassment and

conflict


17-20

Early-Warning Signs of Decline Cont.

8) Loss of effective communication

9) Outdated organizational structure

10) Increased scapegoating by leaders

11) Resistance to change12) Low morale13) Special interest groups are

more vocal14) Decreased innovation


17-21

Contingency Approach

Assessing Environmental Uncertainty

UnstableModerately stable

Highly stable4) How stable is the demand for the organization’s product or service?

UnreliableOccasional, predictable shortages

Reliable3) How reliable are resources and supplies?

FrequentOccasionalInfrequent2) How frequent are technological breakthroughs in the industry?

IntenseModerateMinimal1) How strong are social, political, and economic pressures on the organization?

HighModerateLow

Figure 17-7


17-22

Differentiation and Integration are Opposing Structural Forces

th u isa d fjhk

ta th kha d fa f

ta ts ta t

T y pe n am e he reT y pe t i t le he re

a ta t

a ta s t

a ts t

T y pe n am e he reT y pe t i t le he re

T y pe t i t le he re

Differentiation Fragments the

organization through specialization of labor

Integration

Pulls the organization together through the coordination of

specialists

Figure 17-8


17-23

Characteristics of Mechanistic and Organic Organizations

4) Specification of techniques, obligations, and rights

3) Task flexibility

2) Linkage between individual’s contribution and organization’s purpose

1) Task definition and knowledge required

Organic Organizations

Mechanistic Organizations

Characteristic

Broad; generalNarrow; technical

Clear or directVague or indirect

Flexible; variedRigid; routine

GeneralSpecific

Table 17-2


17-24

Characteristics of Mechanistic and Organic Organizations

8) Emphasis on obedience and loyalty

7) Primary decision-making style

6) Primary communication pattern

5) Degree of hierarchal control

Organic Organizations

Mechanistic Organizations

Characteristic

LowHigh

LateralTop-down

Democratic; participative

Authoritarian

LowHigh

Table 17-2 cont.


17-25

Test Your Knowledge

1. Which decision-making approach tends to be used in mechanistic organizations?

a. Decentralizedb. Centralized

2. Which decision-making approach tends to be used in unstable and uncertain environments?

a. Decentralizedb. Centralized


17-26

The Effect of Technology on Structure

The more the technology requires interdependence between individuals and/or groups, the greater the need for coordination “As technology moves from routine to nonroutine, subunits adopt less formalized and centralized structures”


17-27

Test Your Knowledge

True (A) or False (B)

1. Larger organizations tended to be less productive

2. The larger the organization, the less efficient.

3. Smaller organizations enjoy less turnover.


17-28

Relationship Between Strategic Choice and Organizational Structure

Organizational objectives

Environmental constraints

Strategic decisions made by dominant coalition

Organizational Strategies

Target markets Capital

sources/uses Human

resources Technology Total quality

management

Decision maker’s personal beliefs,

attitudes, values, and

ethics

Organizational structure

Organizational

effectiveness

Corrective action

Figure 17-9

Cha

pter

© 2008The McGraw-Hill Companies, Inc. All rights reserved.

Supplemental Slides

17

17-29


17-30

Video Cases

1154 LillOne Smooth Stone


17-31

Management in the MoviesApollo 13 – “The Launch”

In this scene, Gene Kranz is moving through his checklist for a go-no-go for launch.Questions• What are the different departments involved in

making the launch happen?• How are these departments organized?


17-32

The Big Get Bigger

Wal-Mart- Largest US employer: 1.9 million workers (approximately the population of Houston, Texas)

Large Companies (2007):• Exxon-Mobil (#2) - $39.5

billion in profit• Ford (#7) – wants to

shrink• Starbucks (#310) –

concerned about increase in stores being a detriment to the “soul” of Starbucks

Can an organization get “too” big?Is scale an asset or liability?

“Our goal is not just to be big but to use our size to be great” ~ Jeff Immelt, GE Chairman

Source: The Big Get Bigger, Fortune, April 30, 2007


17-33

The Agony of Victory

Competency Trap•Focusing on what the org does well

•Problems:•Competitors learn how to do the same thing

•Environment changes making the competency less relevant

Source: Pfeffer, J. The Agony of Victory (2007, Jan/Feb), Business 2.0, Vol 8. pg. 62


17-34

The Agony of Victory

Avoiding the Competency Trap•Avoid excessive specialization•Develop peripheral vision – keep abreast of market changes

•Have mindset of continuous learning – relying too much on a strength can become a weakness

Source: Pfeffer, J. The Agony of Victory (2007, Jan/Feb), Business 2.0, Vol 8. pg. 62


17-35

5 Stages of Organizational LearningStage What

Organizations Do

Why They Do It

1. Defensive

Deny practices, outcomes, or responsibilities

To defend against attacks to their reputation that in the short term could affect sales, recruitment, productivity, and the brand

2. Compliance

Adopt a policy-based compliance approach as a cost of doing business

To mitigate the erosion of economic value in the medium term because of ongoing reputation and litigation risks


17-36

5 Stages of Organizational LearningStage What

Organizations Do

Why They Do It

3. Managerial

Embed the societal issue in their core management processes

To mitigate the erosion of economic value in the medium term and to achieve longer-term gains by integrating responsible business practices into their daily operations

4. Strategic

Integrate the societal issue into their core business strategies

To enhance economic value in the long term and to gain first mover advantage by aligning strategy and process innovations with the societal issue


17-37

5 Stages of Organizational Learning

Stage What Organization

s Do

Why They Do It

5. Civil Promote broad industry participation in corporate responsibility

To enhance long-term economic value by overcoming any first mover disadvantages and to realize gains through collective action


17-38

Pass it On…

General Mills values learning and developing its employeesGeneral Mills is also committed to aiding its community and non-profit institutionsPutting these values together, they established a free leadership forums for community leaders


17-39

The Evolution of Organizational Metaphors

Military/Mechanical Model

Closed Systems

Maximum economic efficiency through

planning and control

Survival through adaptation to

environmental constraints

Org.’s primary goal

Predictable Uncertain Assumption about org.’s environment

Precision military unit/well oiled

machine

Human BodyMetaphorical comparison

Biological Model


17-40

The Evolution of Organizational Metaphors

Cognitive Model

Open Systems

Growth and survival through environmental

scanning, interpretation, & learning

Growth and survival through opportunistic cooperation

and competition

Org.’s primary goal

Uncertain and ambiguous

Primary determinant of success/failure

Assumption about org.’s environment

Human Mind Natural Ecosystem; Darwin: survival of the fittest

Metaphorical comparison

Ecosystem Model


17-41

A Supportive Culture for Organizational Learning

Sensitive topics are freely discussedUpper-level managers are approachableInterpersonal interactions are frequent and meaningfulA collective responsibility for solving problemsFull recognition of expertise and appreciation of existing knowledgeKnowledge is freely shared rather than hoardedTeaching is highly valuedEveryone is committed to learning from mistakes


17-42

Conclusion

Questions for discussion

Chapter © 2008The McGraw-Hill Companies, Inc. All rights reserved. Creating Effective Organizations 17 McGraw-Hill/IrwinCopyright © 2008 by The McGraw-Hill.

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