of Business What does organizational design have to do with business success? Reading: Karakowsky & Guriel, Chapter 4
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Learning Objectives 1. Identify four broad trends in the changing nature of organizational design. 2. Discuss the relevance of metaphors used to describe organizations. 3. Identify the elements of organizational structure. 4. Explain the concept of reengineering. 5. Describe the notion of the virtual organization. 6. Discuss the phenomenon of downsizing and its rationale, methods, and objectives.
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The Changing Nature of Organizations Traditional Modern Bureaucracy Organizations Tall/hierarchical Flat Rigid, rule-oriented Fluid Buffered from the Integrated environment Narrow market Global Copyright 2015 Pearson Canada Inc. 3 Modern Organizations 1. Flat increase decision-making speed. react faster to environmental changes. allow more responsibility to employees. provide lower-level employees more decision-making power.
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Modern Organizations 2. Fluid adaptable to change. suitable in dynamic environments. a trait of organic structures.
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Modern Organizations 3. Integrated Cross-functional teams Self-managing teams Information sharing Alliances outside the organization
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Modern Organizations 4. Global Greater competition. Better access to new markets. Increased networking opportunities.
Think Pair Share: What type of structure do you think is suitable for Facebook? Refer to the article: Facebook, when your friends are worth a billion! (page 36)
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Think Pair Share: Suggested Answer Facebook: Organic Work specialization wide Centralization decentralized Span of control wide Formalization low
Reengineering The fundamental rethinking and radical redesigning of business processes to achieve dramatic improvements in measures of performance (cost, quality, service, speed).
Virtual organization What are the benefits and risks? Benefits: 1. Cost savings are significant. 2. Great alternative for entrepreneurs. 3. Fast way to develop and market new products. 4. Fast and flexible.
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Virtual organization What are the benefits and risks? Risks: 1. Losing control. 2. Lack of employee loyalty. 3. Potential sacrifice of competitive learning opportunities.
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Downsizing the planned reduction in the breadth of an organization’s operations.
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Methods of Downsizing 1. Across the board cutbacks. 2. Early retirement and voluntary severance. 3. Delayering by cutting a level or levels of the organization. 4. Contracting out work. 5. Dropping product lines.
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Potential Risks of Downsizing Efficient departments are hurt. Loss of corporate memory. Not guided by strategic plan. Loss of control over outsourced work. Pain is not shared.
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Why Downsizing Can Fail? Lack of strategic planning. Lack of involvement of employees. Removal of corporate memory.
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Why do managers then downsize? Constraining forces Cloning forces Learning forces
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Think Pair Share: Refer to this online article on Mattel and the drop in sales of Barbie dolls. Do you think Mattel should downsize its operations, why or why not? http://online.wsj.com/news/articles/SB1000142405270 2303973704579354322827442090
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Concept Application: Pixar: No Mickey Mouse Organization! Questions:
1. Do you think that Pixar most closely resembles an
organic or a mechanistic structure? Why?
2. Describe the nature of Pixar’s “contingencies” and
explain how they influence the suitability of Pixar’s structure.
3. How could Pixar be redesigned as a virtual organization?