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Chapter 08 – Structuring Organizations for Today’s Challenges
chapter
8
.
Structuring Organizations
for Today’s Challenges
what’s new in this edition 8.3
brief chapter outline and learning objectives 8.5
lecture outline and lecture notes 8.7
PowerPoint slide notes 8.51
lecture enhancers 8.76

lecture enhancer 8-1: SMITH’S FOLLY 8.76
lecture enhancer 8-2: STARBUCKS REINVENTS TO STAY RELEVANT 8.77
lecture enhancer 8-3: INCREASING COLLABORATION WITH BOSSLESS OFFICES 8.77
lecture enhancer 8-4: CHOOSING THE RIGHT SPAN OF CONTROL 8.78
lecture enhancer 8-5: THE MANHATTAN PROJECT 8.79
lecture enhancer 8-6: GREATER EFFICIENCY, FEWER JOBS 8.79
lecture enhancer 8-7: A NEW KIND OF OUTSOURCING 8.80
lecture enhancer 8-8: PIVOTING FROM ONE BUSINESS PLAN TO ANOTHER 8.81
lecture enhancer 8-9: SETTING UP SHOP ON FACEBOOK 8.81
lecture enhancer 8-10: EMPLOYER ICEBREAKING RITUALS 8.82
8-1
critical thinking exercises 8.83

critical thinking exercise 8-1: BUILDING AN ORGANIZATION CHART 8.83
critical thinking exercise 8-2: HOW DO ORGANIZATIONS GROUP 8.86
ACTIVITIES?
bonus cases 8.88

bonus case 8-1: STRUCTURAL COLLAPSE: RESPONSIBILITY AND 8.88
ACCOUNTABILITY
bonus case 8-2: CREATING CROSS-FUNCTIONAL TEAMS 8.90
bonus case 8-3: OFFICE ALUMNI 8.92
8-2
what’s new in
this edition
additions to the 11th edition:

 Getting to Know Jenna Lyons of J. Crew
 Name That Company: UPS
 Spotlight on Small Business: Cutting Back While Cutting Costs
 Adapting to Change: When Open Communication is Should Not Be So Open
 Video Case: Whole Foods
revisions to the 11th edition:

 Making Ethical Decisions: Would You Sacrifice Safety for Profits?
 Statistical data and examples throughout the chapter were updated to reflect current information.
deletions from the 10th edition:

 Getting to Know Ursula Burns
 Name That Company: K2 Skis
 Spotlight on Small Business
 Social Media in Business
8-3
8-4
brief chapter outline

and learning objectives
CHAPTER 8
STRUCTURING ORGANIZATIONS FOR TODAY’S CHAL-
LENGES
 Getting to Know JENNA LYONS, of J. Crew
 LEARNING OBJECTIVE 1
Outline the basic principles of organization management.
I. EVERYONE’S REORGANIZING
A. Building an Organization from the Bottom Up
Compare the organizational theories of Fayol and Weber.
II. THE CHANGING ORGANIZATION

A. The Development of Organization Design
B. Turning Principles into Organization Design
Evaluate the choices managers make in structuring organizations.
III. DECISIONS TO MAKE IN STRUCTURING ORGANIZATIONS

A. Choosing Centralized or Decentralized Authority
B. Choosing the Appropriate Span of Control
C. Choosing between Tall and Flat Organization Structures
D. Weighing the Advantages and Disadvantages of Departmentalization
8-5
Contrast the various organizational models.
IV. ORGANIZATIONAL MODELS

A. Line Organizations
B. Line-and-Staff Organizations
C. Matrix-Style Organizations
D. Cross-Functional Self-Managed Teams
E. Going Beyond Organizational Boundaries
Identify the benefits of interfirm cooperation and coordination.
V. MANAGING THE INTERACTIONS AMONG FIRMS

A. Transparency and Virtual Organizations
B. Benchmarking and Core Competencies
VI. ADAPTING TO CHANGE

A. Restructuring for Empowerment
Explain how organizational culture can help businesses adapt to
change.
VII. CREATING A CHANGE-ORIENTED ORGANIZATIONAL CULTURE

A. Managing the Informal Organization
VIII. SUMMARY
8-6
This company maintains strict written rules and decision guidelines. Those rules enable the
firm to deliver packages quickly because employees don't have to pause to make decisions –
procedures are clearly spelled out for them. Name that company.
(Students should read the chapter before guessing the company’s name: UPS.)
Getting to Know JENNA LYONS of J. CREW

Jenna Lyons combined her fierce fashion sense and compassionate management
style to transform J. Crew into a chic clothing company.
 learning objective 1
Outline the basic principles of organization management.
I. EVERYONE’S REORGANIZING
A. MANY COMPANIES ARE REORGANIZING.
1. The text discusses how Procter & Gamble has
reorganized to become an innovation leader.
2. Other firms are declining—banks, automobile
companies, and home-building companies.
3. ADJUSTING TO CHANGING MARKETS is a
normal function in a capitalist economy.
4. The key to success is to REMAIN FLEXIBLE and
to adapt to the changing times.
5. The text uses the example of Starbucks expand-
ing its menu, then reducing it when customers
were unhappy with the smell.
B. BUILDING AN ORGANIZATION FROM THE BOT-
TOM UP
1. ORGANIZING THE BUSINESS
a. The text uses the example of starting a lawn-
8-7
CHAPTER 8
PPT 8-1
Chapter Title Structuring
Organizations for
Today’s
Challenges
McGraw-Hill/Irwin Copyright © 2015 by the McGraw-Hill Companies, Inc. All rights reserved.
PPT 8-2 LEARNING OBJECTIVES
Learning Objectives
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 organizational culture can help businesses
adapt to change.
8-2
PPT 8-3 JENNA LYONS

J. Crew
Jenna Lyons • Joined J. Crew in 1990 as a junior

designer.
• Worked her way up the ladder by

emphasizing her commitment to
quality.
• Her management style is

compassionate and understanding.
8-3
PPT 8-4 NAME that COMPANY
Name That Company This company maintains strict written rules and
decision guidelines. Those rules enable the firm
to deliver packages quickly because employees
don’t have to pause to make decisions –
procedures are clearly spelled out for them.
Name that company!
8-4
(See complete PowerPoint slide notes on page 8.51.)
PPT 8-5 REORGANIZATION is for

EVERYONE
LO 8-1
• Many companies are reorganizing, especially those
Reorganization Is for Everyone in decline. Including:

- Auto makers
- Homebuilders
- Banks
• Adjusting to changing markets is normal in capitalist
economies.
• Companies must go back to basic organizational
principles and firm up the foundation.
8-5
A lesson in accountability from Kenneth Olsen, founder of Digi-

lecture enhancer 8-1 tal Equipment Corporation (now part of Hewlett-Packard). (See
SMITH’S FOLLY the complete lecture enhancer on page 8.76 of this manual.)
lecture enhancer 8-2 Some of Starbucks’ recent actions caused some to wonder if it’s
a dying company. (See the complete lecture enhancer on page
STARBUCKS REINVENTS TO STAY
8.77 of this manual.)
RELEVANT
8-8
mowing business.
b. A first step is ORGANIZING (or STRUC-
TURING), deciding what work needs to be
done and then dividing up tasks (called DI-
VISION OF LABOR).
c. Dividing tasks into smaller jobs is called JOB
SPECIALIZATION.
2. As the business grows, the entrepreneur will hire
more workers and will need to organize them in-
to teams or departments.
a. The process of setting up departments to do
specialized tasks is called DEPARTMEN-
TALIZATION.
b. Finally, you need to ASSIGN AUTHORITY
AND RESPONSIBILITY to people so you
can control the process.
3. STRUCTURING AN ORGANIZATION consists
of:
a. Devising a division of labor
b. Setting up teams or departments to do spe-
cific tasks
c. Assigning responsibility and authority to
people
4. An ORGANIZATION CHART shows relation-
ships—who is accountable for tasks and who
reports to whom.
5. The entrepreneur must monitor the environment
to see what competitors are doing and what cus-
8-9
lecture enhancer 8-3 In this company, tasks are determined and divided by the em-
ployees. (See the complete lecture enhancer on page 8.77 of
INCREASING COLLABORATION
this manual.)
WITH BOSSLESS OFFICES
bonus case 8-1 Because of engineering errors and poor planning, the skywalks
of a newly constructed hotel collapsed, killing over 100 peo-
STRUCTURAL COLLAPSE: ple. (See the complete case, discussion questions, and suggest-
RESPONSIBILITY AND
ed answers beginning on page 8.88 of this manual.)
ACCOUNTABILITY
PPT 8-6 STRUCTURING an ORGANIZATION

LO 8-1
Structuring an Organization • Create a division of labor

• Set up teams or departments
• Allocate resources
• Assign tasks
• Establish procedures
• Adjust to new realities
8-6
critical thinking
This exercise gives a list of employees and asks students to
create an organization chart showing a possible chain of com-
exercise 8-1
mand. (See the complete exercise on page 8.83 of this manu-
BUILDING AN ORGANIZATION al.)
CHART
MAKING
ethical WOULD YOU SACRIFICE
SAFETY for PROFITS?
decisions You own a lawn-mowing business and are aware of

the hazards in the job. But you’ve seen other
companies save money by eliminating safety
equipment. You’d also like to make more money.
• What do you do?

• Save money with less
safety precautions?
PPT 8-7 • What are the

consequences?
8-7
Would You
Sacrifice Safety
for Profits?
8-10
tomers are demanding.
Compare the organizational theories of Fayol and Weber.
II. THE CHANGING ORGANIZATION

A. Never before has business changed so quickly, in-
cluding major changes in the business environment.
1. Managing change has become a critical mana-
gerial function.
2. In the past, organizations were designed to
make management easier rather than to please
the customer.
3. This reliance on rules is called BUREAUCRA-
CY.
B. THE DEVELOPMENT OF ORGANIZATION DE-
SIGN
1. Until the 20th century, organizations were small
and organized simply.
a. After the introduction of MASS PRODUC-
TION, business organizations grew complex
and difficult to manage.
b. The bigger the plant, the more efficient pro-
duction became.
c. ECONOMIES OF SCALE describes the sit-
uation in which companies can reduce their
production costs if they can purchase raw
materials in bulk; the average cost of goods
8-11
PPT 8-8 THE CHANGING ORGANIZATION

LO 8-2
• Often change in organizations is due to evolving
The Changing Organization business environments:

- More global competition
- Declining economy
- Faster technological change
- Pressure to protect the environment
• Customer expectations have also changed --

Consumers today want high-quality products with
fast, friendly service and all at low cost.
8-8
PPT 8-9 HOW MUCH CHANGES

in a DECADE?
LO 8-2
How Much Changes in a Decade? What?

Amount of cell phone use
Number of active blogs
Amount of reality shows
2000
34%
12,000
4
2010
89%
141,000,000
320
Daily emails sent 12 billion 247 billion
Number of hours spent online per week 2.7 18
Number of daily newspapers 1,480 1,302
Number of daily letters mailed 207 billion 175 billion
Amount of books published 282,242 1,052,803
iTunes downloads 0 10 billion
Percentage of obese Americans 26% 34%
Source: Fast Company, www.fastcompany.com, accessed March 2014. 8-9
PPT 8-10 PRODUCTION CHANGED

ORGANZIATION DESIGN
LO 8-2
Production Changed Organization • Mass production of goods led to complexities in

organizing businesses.
• Economies of Scale --
Companies can reduce
Design their production costs by

purchasing raw materials
in bulk.
• The average cost of

goods decreases as
production levels rise.
8-10
8-12
goes down as production levels increase.

2. The text discusses two major ORGANIZATION
THEORISTS and their publications.
a. HENRI FAYOL (Administration Industrielle
et Generale in France in 1919)
b. MAX WEBER (The Theory of Social and
Economic Organizations in Germany about
the same time)
3. FAYOL’S PRINCIPLES OF ORGANIZATION
a. Fayol introduced principles such as:
i. UNITY OF COMMAND: Each worker is
to report to only one boss.
ii. HIERARCHY OF AUTHORITY: One
should know to whom to report.
iii. DIVISION OF LABOR: Functions should
be divided into areas of specialization.
iv. SUBORDINATION OF INDIVIDUAL IN-
TERESTS TO THE GENERAL INTER-
ESTS: Goals of the organization should
be considered more important than per-
sonal goals.
v. AUTHORITY: Managers should give or-
ders and expect them to be carried out.
vi. DEGREE OF CENTRALIZATION: The
amount of decision-making power vested
in top management should vary by cir-
cumstances.
8-13
PPT 8-11 FAYOL’S PRINCIPLES

LO 8-2
Fayol’s Principles • Unity of command
• Hierarchy of authority
• Degree of
centralization
• Clear communication
• Division of labor channels
• Subordination of • Order
individual interests to
• Equity
the general interest
• Esprit de corps
• Authority
8-11
8-14
vii. CLEAR COMMUNICATION CHAN-

NELS
viii. ORDER: Materials and people should be
placed in the proper location.
ix. EQUITY: A manager should treat em-
ployees and peers with respect and jus-
tice.
x. ESPRIT DE CORPS: A spirit of pride
and loyalty should be created.
b. For years, these principles have been linked
to management.
c. This led to RIGID ORGANIZATIONS.
d. The text uses the example of consumer dis-
satisfaction with government-run DMVs.
4. MAX WEBER AND ORGANIZATIONAL THE-
ORY
a. Max Weber’s book The Theory of Social and
Economic Organizations appeared in the
U.S. in the 1940s.
b. Weber promoted the PYRAMID-SHAPED
ORGANIZATION STRUCTURE.
i. Weber put great trust in managers and
felt the less decision making employees
had to do, the better.
ii. This approach makes sense when deal-
ing with uneducated and untrained
workers.
8-15
PPT 8-12 ORGANIZATIONS BASED on

FAYOL’S PRINCIPLES
LO 8-2
Organizations Based on Fayol’s • Organizations in which

employees have no more
than one boss; lines of
Principles authority are clear.
• Rigid organizations that often

don’t respond to customers
quickly.
8-12
PPT 8-13 WEBER’S PRINCIPLES

LO 8-2
Weber’s Principles
• Employees just need to do what
they’re told.
• In addition to Fayol’s principles,

Weber emphasized:
- Job descriptions
- Written rules, decision guidelines
and detailed records
- Consistent procedures,
regulations and policies
- Staffing and promotion based on
qualifications 8-13
8-16
c. WEBER’S PRINCIPLES were similar to

Fayol’s with the addition of:
i. Job descriptions
ii. Written rules, decision guidelines, and
detailed records
iii. Consistent procedures, regulations, and
policies
iv. Staffing and promotions based on quali-
fications
d. Weber believed large organizations need
clearly established rules and guidelines, or
BUREAUCRACY.
e. Weber’s emphasis on bureaucracy eventual-
ly led to RIGID POLICIES AND PROCE-
DURES.
f. Some organizations today, such as UPS, still
thrive on rules and guidelines.
g. In other organizations, bureaucracy has not
been effective.
C. TURNING PRINCIPLES INTO ORGANIZATION
DESIGN
1. Managers used the concepts of Fayol and We-
ber to design organizations so that managers
could CONTROL WORKERS.
a. 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 respon-
sible to that person.
8-17
PPT 8-14 HIERARCHIES and COMMAND

LO 8-2
Hierarchies and Command • When following Fayol and Weber, managers

control workers.
• Hierarchy -- A system in which one person is at the

top of an organization and there is a ranked or
sequential ordering from the top down.
• Chain of Command -- The line of authority that

moves from the top of the hierarchy to the lowest
level.
8-14
8-18
b. The CHAIN OF COMMAND is the line of au-

thority that moves from the top of a hierarchy
to the lowest level.
c. The ORGANIZATION CHART is a visual
device that shows relationships among peo-
ple and divides work.
d. Some organizations have a dozen LAYERS
OF MANAGEMENT between the chief ex-
ecutive officer and the lowest-level employ-
ee.
2. BUREAUCRACY is an organization with many
layers of managers who set rules and regula-
tions and oversee all decisions.
3. In a bureaucracy, decision making may take too
long to satisfy customers.
4. To make customers happy, firms are reorganiz-
ing to give employees more power to make de-
cisions on their own, known as EMPOWER-
MENT.
Evaluate the choices managers make in structuring organizations.
III. DECISIONS TO MAKE IN STRUCTURING OR-

GANIZATIONS
A. CHOOSING CENTRALIZED OR DECENTRALIZED
AUTHORITY
1. CENTRALIZED AUTHORITY is an organizing
structure in which decision-making authority is
8-19
PPT 8-15 ORGANIZATIONAL CHARTS

LO 8-2
Organizational Charts • Organization Chart --

A visual device that
shows relationships
among people and
divides the organization’s
work; it shows who
reports to whom.
7-15
PPT 8-16 TYPICAL ORGANIZATION CHART

LO 8-2
Typical Organization Chart
8-16
TEXT FIGURE 8.1

PPT 8-17 BUREAUCRATIC ORGANIZATIONS

LO 8-2
Bureaucratic Organizations • Bureaucracy -- An organization with many layers of

managers who set rules and regulations and oversee
all decisions.
• It can take weeks or months to have information

passed down to lower-level employees.
• Bureaucracies can annoy customers.
8-17
test TEST PREP
• What do the terms division of labor and job
prep specialization mean?
• What are the principles of management outlined

by Fayol?
• What did Weber add to the principles of Fayol?
PPT 8-18 8-18
Progress Assessment
8-20
maintained at the top level of management at

the company’s headquarters (text examples:
McDonald’s and Target).
2. However, today’s rapidly changing markets tend
to favor decentralization and delegation of au-
thority.
3. DECENTRALIZED AUTHORITY is an organi-
zation structure in which decision-making au-
thority is delegated to lower-level managers
more familiar with local conditions than head-
quarters management could be (text example:
Macy’s).
B. CHOOSING THE APPROPRIATE SPAN OF CON-
TROL
1. SPAN OF CONTROL refers to the optimum
number of subordinates a manager supervises
or should supervise.
a. At lower levels, a WIDE SPAN OF CON-
TROL is possible.
b. The appropriate span narrows at higher lev-
els of the organization.
2. The span of control VARIES WIDELY.
a. The trend now is to expand the span of con-
trol as organizations get rid of middle man-
agers.
b. The span of control can be increased
8-21
PPT 8-19 CENTRALIZATION or

DECENTRALIZATION?
LO 8-3
Centralization or Decentralization? • Centralized Authority -- When decision-making is

concentrated at the top level of management.
• Decentralized
Authority -- When
decision-making is
delegated to lower-level
managers and employees
more familiar with local
conditions than
headquarters is.
8-19
PPT 8-20 CENTRALIZATION and

DECENTRALIZATION
LO 8-3
Centralization and Decentralization

TEXT FIGURE 8.2
Advantages and Disadvantages of 8-20
Centralized versus Decentralized

Management
PPT 8-21 SPAN of CONTROL

LO 8-3
• Span of Control -- The optimal number of
Span of Control subordinates a manager supervises or should

supervise.
• When work is standardized, broad spans of

control are possible.
• Appropriate span narrows at higher levels of the

organization.
• The trend today is to reduce middle managers

and hire better low-level employees.
8-21
lecture enhancer 8-4 Several factors affect the number of people a manager can ef-
fectively supervise. (See the complete lecture enhancer on
CHOOSING THE RIGHT SPAN OF
page 8.78 of this manual.)
CONTROL
8-22
through empowerment and the use of tech-

nology.
C. CHOOSING BETWEEN TALL AND FLAT ORGAN-
IZATION STRUCTURES
1. A TALL ORGANIZATION STRUCTURE is one
in which the pyramidal organization chart would
be quite tall because of the various levels of
management.
a. Tall organizations have MANY LAYERS OF
MANAGEMENT.
b. Communication is distorted as it flows
through these layers.
c. The cost of all these managers and support
people is high.
2. Because of these problems, organizations have
moved toward flatter organizations.
3. A FLAT ORGANIZATION STRUCTURE is an
organization structure that has few layers of
management and a broad span of control.
a. These structures are much MORE RE-
SPONSIVE TO CUSTOMER DEMANDS
because decision-making power may be
given to lower-level employees.
b. The FLATTER organizations became, the
larger the SPAN OF CONTROL became.
D. WEIGHING THE ADVANTAGES AND DISAD-
VANTAGES OF DEPARTMENTALIZATION
8-23
PPT 8-22 ORGANIZATIONAL STRUCTURES

LO 8-3
Organizational Structures • Structures determine the way the company

responds to employee and customer needs.
• Tall Organization Structures -- An organizational

structure in which the organization chart would be tall
because of the various levels of management.
• Flat Organization Structures -- An organizational

structure that has few layers of management and a
broad span of control.
8-22
PPT 8-23 FLAT ORGANIZATIONAL

STRUCTURE
LO 8-3
Flat Organizational Structure

TEXT FIGURE 8.3
A Flat Organization Structure 8-23
PPT 8-24 ADVANTAGES and DISADVANTAGES of

the DIFFERENT SPANS of CONTROL
LO 8-3
Advantages and Disadvantages of

the Different Spans of Control
TEXT FIGURE 8.4 8-24
Advantages and Disadvantages of a

Narrow versus a Broad Span of Control
8-24
1. DEPARTMENTALIZATION is dividing organiza-

tional functions into separate units.
a. The traditional way to departmentalize is by
function.
b. FUNCTIONAL STRUCTURE is the grouping
of workers into departments based on simi-
lar skills, expertise, or resource use.
2. ADVANTAGES of functional departmentaliza-
tion:
a. Workers can specialize and work together
more effectively.
b. It may save costs (efficiency).
c. Skills can be developed in depth.
d. Resources can be centralized to allow for
economies of scale.
e. There is good coordination within the func-
tion.
3. DISADVANTAGES of departmentalization:
a. Departments may not communicate well.
b. Employees identify with the department ra-
ther than the total organization.
c. Response to external change is slow.
d. Employees may not be trained in different
management responsibilities and become
narrow specialists.
e. People in the same department tend to think
alike (engage in GROUPTHINK) and need
8-25
PPT 8-25 DEPARTMENTALIZATION

LO 8-3
• Departmentalization -- Divides organizations into
Departmentalization separate units.
• Workers are grouped by skills and expertise to

specialize their skills.
8-25
PPT 8-26 ADVANTAGES of

DEPARTMENTALIZATION
LO 8-3
Advantages of Departmentalization 1) Employees develop skills and progress within a

department as they master skills.
2) The company can achieve economies of scale.
3) Employees can coordinate work within the

function and top management can easily direct
activities.
8-26
PPT 8-27 DISADVANTAGES of

DEPARTMENTALIZATION
LO 8-3
1) Departments may not communicate well.
Disadvantages of 2) Employees may identify with their department’s

goals rather than the organization’s.
3) The company’s response to external changes may
Departmentalization be slow.
4) People may not be trained to take different
managerial responsibilities, instead they become
specialists.
5) Department members may engage in groupthink and
may need outside input.
8-27
8-26
outside input to become creative.

4. LOOKING AT ALTERNATIVE WAYS TO DE-
PARTMENTALIZE
a. By PRODUCT (A book publisher might have
departments for trade books, textbooks, and
technical books.)
b. By CUSTOMER GROUP (A pharmaceutical
company might have separate departments
that focus on the consumer market, on hos-
pitals, and on doctors.)
c. By GEOGRAPHIC LOCATIONS (There may
be operations in Asia, Europe, and South
America.)
d. 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.)
e. Some firms use a COMBINATION of de-
partmental techniques, called HYBRID
FORMS.
Contrast the various organizational models.
IV. ORGANIZATIONAL MODELS

A. There are several ways to structure an organization
to accomplish goals.
1. Traditional organizational models are giving way
to new structures, although there may be prob-
lems.
2. Some newer models violate traditional man-
agement principles.
8-27
PPT 8-28 WAYS to DEPARTMENTALIZE

LO 8-3
Ways to Departmentalize
TEXT FIGURE 8.5
Ways to Departmentalize 8-28
PPT 8-29 WAYS to DEPARTMENTALIZE

LO 8-3
8-29
critical thinking
This exercise asks students to search the websites of several
organizations to identify the primary method of departmentali-
exercise 8-2
zation. (See the complete exercise on page 8.86 of this manu-
HOW DO ORGANIZATIONS GROUP al.)
ACTIVITIES?
test TEST PREP
• Why are organizations becoming flatter?
prep • What are some reasons for having a narrow span

of control in an organization?
• What are the advantages and disadvantages of

departmentalization?
• What are the various ways a firm can

departmentalize?
PPT 8-30 8-30
Progress Assessment
8-28
B. LINE ORGANIZATIONS
1. A LINE ORGANIZATION is an organization that
has direct two-way lines of responsibility, author-
ity, and communication running from the top to
the bottom of the organization, with all people
reporting to only one supervisor (i.e., the military
and small businesses).
a. The line organization has no specialists for
management support.
b. Line managers can issue orders and enforce
discipline.
2. DISADVANTAGES IN LARGE ORGANIZA-
TIONS:
a. Too inflexible
b. Few specialists to advise line employees
c. Lines of communication too long
d. Unable to handle complex decisions
3. Such organizations usually become line-and-
staff organizations.
C. LINE-AND-STAFF ORGANIZATIONS
1. Line-and-staff organizations have both line and
staff personnel.
2. LINE PERSONNEL are employees who are part
of the chain of command that is responsible for
achieving organizational goals.
3. STAFF PERSONNEL are employees who ad-
vise and assist line personnel in meeting their
goals.
4. Line personnel have FORMAL AUTHORITY to
8-29
PPT 8-31 FOUR WAYS to STRUCTURE an

ORGANIZATION
LO 8-4
Four Ways to Structure an 1. Line Organizations
2. Line-and-Staff
Organizations
Organization 3. Matrix-Style
Organizations
4. Cross-Functional Self-
Managed Teams
8-31
PPT 8-32 LINE ORGANIZATIONS

LO 8-4
Line Organizations • Line Organization -- Has direct two-way lines of

responsibility, authority and communication running
from the top to the bottom. Everyone reports to one
supervisor.
• There are no specialists, legal, accounting,

human resources or information technology
departments.
• Line managers issue orders, enforce discipline

and adjust the organization to changes.
8-32
To build the world’s first atomic bomb, the military turned to

lecture enhancer 8-5 General Leslie Groves, known for his administrative ability,
THE MANHATTAN PROJECT organizational skill, and decisiveness. (See the complete lec-
ture enhancer on page 8.79 of this manual.)
Line jobs are not always safe. As Campbell’s employees saw,

lecture enhancer 8-6 with greater efficiency there was less need for large staffs.
GREATER EFFICIENCY, FEWER (See the complete lecture enhancer on page 8.79 of this manu-
JOBS al.)
PPT 8-33 LINE PERSONNEL

LO 8-4
• Line Personnel -- Workers responsible for directly
Line Personnel achieving organizational goals, and include

production, distribution and marketing employees.
• Line personnel have authority to make policy

decisions.
8-33
PPT 8-34 STAFF PERSONNEL

LO 8-4
• Staff Personnel -- Employees who advise and assist
Staff Personnel line personnel in meeting their goals, and include

marketing research, legal advising, IT and human
resource employees.
8-34
PPT 8-35 SAMPLE LINE-and-STAFF

ORGANIZATION
LO 8-4
Sample Line-and-Staff
Organization
A Sample Line-and-Staff Organization
8-30
make policy decisions; staff have the AUTHOR-

ITY TO ONLY ADVISE line personnel.
5. ADVANTAGES OF LINE-AND-STAFF OR-
GANIZATION:
a. Have access to expert advice
b. Staff positions strengthen the line personnel
D. MATRIX-STYLE ORGANIZATIONS
1. Both line and line-and-staff organizations can
become INFLEXIBLE.
a. Both structures work well in organizations
with relatively unchanging environments and
slow product development.
b. However, high-growth industries now domi-
nate the economy.
c. In such industries, emphasis is on new
product development, creativity, rapid com-
munication, and interdepartmental team-
work.
2. A MATRIX ORGANIZATION is an organization
in which specialists from different parts of the
organization are brought together to work on
specific projects, but still remain part of a line-
and-staff structure.
a. Matrix organization structures were devel-
oped in the aerospace industry.
b. The structure is now used in banking, man-
agement consulting firms, ad agencies, and
school systems.
8-31
PPT 8-34 MATRIX ORGANIZATIONS

LO 8-4
Matrix Organizations • Matrix Organization -- Specialists from different

parts of the organization work together temporarily on
specific projects, but still remain part of a line-and-staff
structure.
• Emphasis is on
product development,
creativity, special
projects,
communication and
teamwork.
8-36
PPT 8-35 SAMPLE MATRIX

ORGANIZATION
LO 8-4
Sample Matrix Organization

TEXT FIGURE 8.7
A Matrix Organization 8-37
8-32
3. ADVANTAGES OF MATRIX ORGANIZATIONS

a. Flexibility in assigning people to projects
b. Encourage interorganizational cooperation
and teamwork
c. Can give more creative solutions to prob-
lems
d. More efficient use of organizational re-
sources
4. DISADVANTAGES OF MATRIX ORGANIZA-
TIONS
a. Are costly and complex
b. Create confusion in employee loyalties
c. Require good interpersonal skills and coop-
erative employees and managers
d. May be only a temporary solution to a long-
term problem
5. Although matrix organizations seem to violate
some traditional managerial principles, the sys-
tem functions relatively effectively.
a. The matrix organization has been adopted in
high-tech firms because of its effectiveness.
b. A potential problem is that the project teams
ARE NOT PERMANENT and there is little
chance for cross-functional learning.
E. CROSS-FUNCTIONAL SELF-MANAGED TEAMS
1. One solution to the disadvantage of temporary
teams is to establish long-lived teams.
2. CROSS-FUNCTIONAL SELF-MANAGED
TEAMS are groups of employees from different
8-33
PPT 8-38 ADVANTAGES of the

MATRIX STYLE
LO 8-4
Advantages of Matrix Style • Managers have flexibility in assigning people to

projects.
• Interorganizational cooperation and teamwork is

encouraged.
• Creative solutions to product development

problems are produced.
• Efficient use of organizational resources.
8-38
PPT 8-39 DISADVANTAGES of the

MATRIX STYLE
LO 8-4
• It’s costly and complex.
Disadvantages of the Matrix Style • Employees may be confused about where their
loyalty belongs.
• Good interpersonal skills and cooperative
employees are a must.
• It’s a temporary
solution to a possible
long-term problem.
• Teams are not
permanent.
8-39
PPT 8-40 CROSS-FUNCTIONAL

SELF-MANAGED TEAMS
LO 8-4
Cross-Functional Self-Managed • Cross-Functional Self-Managed Teams --

Groups of employees from different departments who
work together on a long-term basis.
Teams • A way to fix the problem of matrix-style teams is

to establish long-term teams.
• Empower teams to work closely with suppliers,

customers and others to figure out how to create
better products.
8-40
The Direct Response Group instigated organizational change

bonus case 8-2
to make its people more responsive to the customer. (See the
CREATING CROSS-FUNCTIONAL complete case, discussion questions, and suggested answers
TEAMS beginning on page 8.90 of this manual.)
8-34
departments who work together on a long-term

basis (as opposed to the temporary teams es-
tablished in matrix-style organizations).
a. Usually the teams are EMPOWERED to
make decisions on their own without seeking
the approval of management.
b. Self-managed teams reduce the barriers be-
tween design, engineering, marketing, and
other functions.
c. Cross-functional teams work best when
leadership is shared.
F. GOING BEYOND ORGANIZATIONAL BOUNDA-
RIES
1. Cross-functional teams work best when custom-
ers’ input is included.
2. Some go beyond organizational boundaries to
include customers, suppliers, and distributors.
3. Some cross-functional teams share information
across national boundaries and may be encour-
aged by the government.
Identify the benefits of interfirm cooperation and coordination.
V. MANAGING THE INTERACTIONS AMONG

FIRMS
A. NETWORKING is using communications technology
and other means to link organizations and allow
them to work together on common objectives.
8-35
PPT 8-41 GOING BEYOND

ORGANIZATIONAL BOUNDARIES
LO 8-4
Going Beyond Organizational • Cross-functional teams work best when the voice
of the customer is heard.
• Teams that include customers, suppliers and
Boundaries distributors go beyond organizational boundaries.
• Government coordinators may assist in sharing

market information beyond national boundaries.
8-41
PPT 8-42 BUILDING SUCCESSFUL TEAMS

Important Conditions for Small Teams
LO 8-4
Building Successful Teams • Clear purpose

• Clear goals
• Correct skills
• Mutual accountability
• Shift roles when
appropriate
Source: CIO Magazine, www.cio.com, accessed November 2014. 8-42
test TEST PREP
• What’s the difference between line and staff
prep
personnel?
• What management principle does a matrix-style

organization challenge?
• What’s the main difference between a matrix-

style organization’s structure and the use of
cross-functional teams?
PPT 8-43 8-43
Test Prep
8-36
B. TRANSPARENCY AND VIRTUAL ORGANIZA-

TIONS
1. The Internet links organizations so closely that
each can see what the others are doing in real
time.
a. REAL TIME is the present moment or the
actual time in which something takes place.
b. TRANSPARENCY is a concept that de-
scribes a company being so open to other
companies working with it that the once-solid
barriers between them become see-through,
and electronic information is shared as if the
companies were one.
c. Using this integration, two companies can
work together as closely as two departments
once did.
2. Most organizations are no longer self-sufficient,
but are part of a vast network of global business-
es.
3. A modern organization chart should show peo-
ple in different organizations and how they are
networked together.
4. Organization structures tend to be flexible and
changing.
5. A VIRTUAL CORPORATION is a temporary
networked organization made up of replaceable
firms that join and leave as needed.
a. This concept is very different from traditional
8-37
PPT 8-44 REAL-TIME BUSINESS

LO 8-5
Real-Time Business • Networking -- Using communications technology to

link organizations and allow them to work together.
• Most companies are no longer self-sufficient;

they’re part of a global business network.
• Real Time -- The present moment or actual time in

which something takes place.
8-44
PPT 8-45 TRANSPARENCY and VIRTUAL

CORPORATIONS
LO 8-5
Transparency and Virtual Corpora- • Transparency -- When a company is so open to

other companies that electronic information is shared
as if the companies were one.
tions • Virtual Corporation -- A temporary networked

organization made up of replaceable firms that join
and leave as needed.
8-45
PPT 8-46 A VIRTUAL CORPORATION

LO 8-5
A Virtual Corporation
TEXT FIGURE 8.8
A Virtual Corporation 8-46
SPOTLIGHT ON CUTTING BACK WHILE

CUTTING COSTS
small
• Hiring workers is a major
expense for small business
owners.
• This has led to more offshore

outsourcing.
business • The increase can be partly

attributed to the presence of
online job marketplaces like
ODesk.
8-47
PPT 8-47
Cutting Back
While Cutting
Costs
8-38
organizations.
b. Traditional managers often have trouble
adapting to rapidly changing structures.
C. BENCHMARKING AND CORE COMPETENCIES
1. In the past, each organization had a separate
department for each function.
a. Organizations are now benchmarking each
function against the best in the world.
b. BENCHMARKING is comparing an organi-
zation’s practices, processes, and products
against the world’s best (example: K2
benchmarked Piezo’s technology).
c. Companies can also study the best practices
of unrelated industries (example: Wyeth
Pharmaceuticals benchmarked the aero-
space industry’s project management).
d. Benchmarking can be used in a direct com-
petitive way, as when Target compared itself
with Walmart.
2. If the organization can’t do as well as the best, it
can OUTSOURCE the function to an organiza-
tion that is the best.
a. OUTSOURCING is assigning functions—
such as accounting, production, security,
and legal work—to outside organizations.
b. Overseas outsourcing is controversial.
c. Some functions, such as information man-
agement and marketing, may be too im-
8-39
PPT 8-48 BENCHMARKING and

CORE COMPETENCIES
LO 8-5
Benchmarking and Core • Benchmarking -- Compares an organization’s

practices, processes and products against the
world’s best.
Competencies • Core Competencies -- The functions an

organization can do as well as or better than any
other organization in the world.
• K2 Skis researched other companies’ practices

in order to create the best possible skis and
snowboards.
8-48
PPT 8-49 BENEFITS and CONCERNS of

HEALTHCARE OUTSOURCING
LO 8-5
Benefits and Concerns of Benefits

• Provides enough
staff to operate the
Concerns
• Lower employee
morale
facility
Healthcare Outsourcing • Cost savings • Liability

• Should patients be
informed
• Confidentiality and
security
Source: Healthcare Financial Management. 8-49
Some communities are finding relief from the very companies

lecture enhancer 8-7 that outsourced their old jobs. (See the complete lecture en-
A NEW KIND OF OUTSOURCING hancer on page 8.80 of this manual.)
PPT 8-50 WHICH JOBS are most often

OUTSOURCED?
LO 8-5
Which Jobs Will Be Outsourced

Next?
Source: USA Today. 8-50
8-40
portant to outsource.
3. CORE COMPETENCIES are those functions
that the organization can do as well or better
than any other organization in the world.
a. Nike’s core competencies are designing and
marketing athletic shoes, but it outsources
manufacturing.
b. Dell has reversed its outsourcing practices to
include call centers in North America.
VI. ADAPTING TO CHANGE

A. The organization structure must be ADAPTED TO
CHANGES in the market.
1. Introducing change into an organization is one of
the toughest challenges for managers.
2. It is difficult for some companies to reinvent
themselves in response to changes in the com-
petitive environment.
3. Painful changes may be necessary—such as
U.S. automakers closing plants and reducing
staff.
4. Companies must coordinate the efforts of tradi-
tional departments and their Internet staff.
5. To reach DIGITAL NATIVES (individuals who
grew up with the Internet), companies must re-
train older workers in the new technologies (ex-
amples: YouTube, Facebook, Twitter, RSS).
6. Target uses a “creative cabinet” to help react ef-
8-41
PPT 8-51 ADAPTING to

MARKET CHANGES
LO 8-5
Adapting to Market Changes • Change isn’t easy.

Employees like to do
things the way they
always have.
• Get rid of old, inefficient
facilities and equipment.
• Use the Internet to get to
know your customers and
sell directly to them.
8-51
lecture enhancer 8-8 Some ideas don't work as well as we’d like to believe at the
start. Michael Garritty rolled with those punches. (See the
PIVOTING FROM ONE BUSINESS
complete lecture enhancer on page 8.81 of this manual.)
PLAN TO ANOTHER
PPT 8-52 KEEP in TOUCH

Amazon and its Customer Database
LO 8-5
Keep in Touch Amazon uses information stored in databases to

reach out to customers. The company emails
customers letting them know about music, DVDs
or books they might like based on past purchases.
• Have you ever received an email like this from Amazon or another
company?
• What benefits would a database of personal information, like past

purchases, provide Amazon?
• Do you think these databases are helpful for both companies and
consumers or are they an invasion of privacy?
8-52
PPT 8-53 MAKING the CHANGE

LO 8-5
Making the Change • Digital Natives --

Young people who
have grown up using
the Internet and
social networking.
Photo Credit: Marc Wathieu
8-53
8-42
fectively to changes in consumer preferences.

B. RESTRUCTURING FOR EMPOWERMENT
1. To implement empowerment, firms often must
reorganize dramatically.
2. RESTRUCTURING is redesigning an organiza-
tion so that it can more effectively and efficiently
serve its customers.
3. A few organizations have turned the traditional
organizational structure upside down.
a. An INVERTED ORGANIZATION is an or-
ganization that has contact people at the top
and the chief executive officer at the bottom
of the organization chart.
b. There are few layers of management, and
their job is to assist and support frontline
people.
c. Companies using the inverted structure sup-
port frontline personnel with internal and ex-
ternal databanks, advances communication
systems, and professional assistance.
d. Frontline people now have to be better edu-
cated, better trained, and better paid than in
the past.
e. In more progressive organizations, everyone
SHARES INFORMATION, giving everyone
power.
8-43
Companies are catering to digital natives by opening up shop

lecture enhancer 8-9 on Facebook. (See the complete lecture enhancer on page 8.81
SETTING UP SHOP ON FACEBOOK of this manual.)
WHEN OPEN COMMUNICATION

SHOULD NOT BE SO OPEN
ADAPTING TO • The blending of mobile
technology and work has been
change
helpful to business.
• However, it also has encroached
on the traditional work-life
boundaries.
• Over 1/3 of surveyed employees
responded that receive work-
related emails after hours, many
complain it affects quality of life.
PPT 8-54 8-54
When Open
Communication
Should Not Be
So Open
PPT 8-55 RESTRUCTURING

LO 8-5
Restructuring • Restructuring -- Redesigning an organization so it

can more effectively and efficiently serve its
customers.
• Inverted Organization -- An organization that has

contact people at the top and the CEO at the bottom
of the organizational chart.
• The manager’s job is to assist and support

frontline workers, not boss them.
8-55
PPT 8-56 TRADITIONAL and INVERTED

ORGANIZATIONS
LO 8-5
Traditional and Inverted

Organizations
Comparison of an Inverted Organi-

zational Structure and a Traditional
Organizational Structure
8-44
Explain how organizational culture can help businesses adapt to change.
VII. CREATING A CHANGE-ORIENTED ORGANI-

ZATIONAL CULTURE
A. Organizational change always causes some RE-
SISTANCE.
1. Firms that adjust best have a change-oriented
organizational culture.
2. ORGANIZATIONAL (OR CORPORATE) CUL-
TURE is the widely shared values within an or-
ganization that provide unity and cooperation to
achieve common goals.
a. An organization’s culture is reflected in sto-
ries, traditions, and myths.
b. For example, McDonald’s culture emphasiz-
es quality, service, cleanliness, and value.
c. An organization’s culture can be negative, as
with an organization in which no one cares
about quality.
3. The very best organizations have cultures that
emphasize SERVICE TO CUSTOMERS.
a. The atmosphere is one of friendly, caring
people who enjoy working together.
b. Those companies have LESS NEED FOR
CLOSE SUPERVISION of employees.
c. The key to productive culture is MUTUAL
TRUST.
8-45
PPT 8-57 ORGANIZATIONAL CULTURE

LO 8-6
• Organizational or Corporate
Organizational Culture Culture -- The widely shared

values within an organization that
foster unity and cooperation to
• Some of the best organizational

cultures emphasize service.
• Culture is shown in stories,

traditions and myths.
8-57
lecture enhancer 8-10 Each organizational culture is different. Foot Levelers has its
own practices. (See the complete lecture enhancer on page
EMPLOYER ICEBREAKING RITU-
8.82 of this manual.)
ALS
8-46
4. The formal organization structure is just one el-

ement of the total organizational system.
B. MANAGING THE INFORMAL ORGANIZATION
1. All organizations have two systems.
a. The FORMAL ORGANIZATION is the struc-
ture that details lines of responsibility, au-
thority, and position; that is, the structure
that appears on the organization chart.
b. The INFORMAL ORGANIZATION is the
system that develops spontaneously as em-
ployees meet and form cliques, relation-
ships, and lines of authority outside the for-
mal organization; that is, the human side of
the organization that does not appear on any
organization chart.
2. No organization can operate effectively without
BOTH TYPES of organization.
a. The FORMAL ORGANIZATION can be slow
and bureaucratic, while the INFORMAL
ORGANIZATION can generate creative so-
lutions.
b. The informal organization is TOO UN-
STRUCTURED AND EMOTIONAL for deci-
sion making, while the formal organization
provides guidelines and lines of authority.
3. It is wise to learn quickly who the important peo-
ple are in the informal organization.
4. The nerve center of the informal organization is
8-47
PPT 8-58 FORMAL ORGANIZATION

LO 8-6
Formal Organization • Formal Organization -- Details lines of

responsibility, authority and position.
• The formal system is often slow and

bureaucratic, but it helps guide the lines of
authority.
• No organization can be effective without formal

and informal organization.
8-58
PPT 8-59 INFORMAL ORGANIZATION

LO 8-6
Informal Organization • Informal Organization -- The system of

relationships that develop spontaneously as
employees meet and form relationships.
• Informal organization
helps foster
camaraderie and
teamwork among
employees.
8-59
PPT 8-60 LIMITATIONS of INFORMAL

ORGANIZATIONS
LO 8-6
Limitations of Informal • The informal system is

too unstructured and
emotional on its own.
Organizations • Informal organization

may also be powerful in
resisting management
directives.
8-60
PPT 8-61 GROUP NORMS

Examples of Informal Group Norms
LO 8-6
• Do your job but don’t produce more than the rest
Group Norms of your group.
• Don’t tell off-color jokes or use profanity.
• Everyone is to be clean and organized at the

workstation.
• Respect and help your fellow group members.
• Drinking is done off the job – NEVER at work.

8-48
the GRAPEVINE.
5. Successful managers learn to WORK WITH
THE INFORMAL ORGANIZATION and use it to
the organization’s advantage.
6. The informal organization can also be very pow-
erful in resisting management directives.
VIII. SUMMARY
8-49
Many businesses have set up social networking sites for their

bonus case 8-3 “alumni” as the recession takes its toll on American jobs. (See
OFFICE ALUMNI the complete lecture enhancer on page 8.92 of this manual.)
test TEST PREP
• What is an inverted organization?
prep • Why do organizations outsource functions?
• What is organizational culture?
PPT 8-62 8-62
Progress Assessment
8-50
PowerPoint slide notes
PPT 8-1
Chapter Title
CHAPTER 8
Structuring
Organizations for
Today’s
Challenges
McGraw-Hill/Irwin Copyright © 2015 by the McGraw-Hill Companies, Inc. All rights reserved.
PPT 8-2
Learning Objectives
LEARNING OBJECTIVES
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 organizational culture can help businesses
adapt to change.
8-2
PPT 8-3
Jenna Lyons
JENNA LYONS
J. Crew
• Joined J. Crew in 1990 as a junior

designer.
• Worked her way up the ladder by

emphasizing her commitment to
quality.
• Her management style is

compassionate and understanding.
8-3
8-51
PPT 8-4
Company: UPS
Name That Company
NAME that COMPANY
This company maintains strict written rules and

decision guidelines. Those rules enable the firm
to deliver packages quickly because employees
don’t have to pause to make decisions –
procedures are clearly spelled out for them.
Name that company!
8-4
PPT 8-5
Changing economic times require businesses to alter their
Reorganization Is for Everyone approach via reorganization. Using organizational princi-
ples is an important aspect to this reorganization.
REORGANIZATION is for LO 8-1
EVERYONE
• Many companies are reorganizing, especially those

in decline. Including:
- Auto makers
- Homebuilders
- Banks
• Adjusting to changing markets is normal in capitalist
economies.
• Companies must go back to basic organizational
principles and firm up the foundation.
8-5
PPT 8-6
Structuring an Organization
LO 8-1
STRUCTURING an ORGANIZATION
• Create a division of labor

• Set up teams or departments
• Allocate resources
• Assign tasks
• Establish procedures
• Adjust to new realities
8-6
8-52
PPT 8-7
Would You Sacrifice Safety for Profits?
WOULD YOU SACRIFICE

SAFETY for PROFITS?
You own a lawn-mowing business and are aware of

the hazards in the job. But you’ve seen other
companies save money by eliminating safety
equipment. You’d also like to make more money.
• What do you do?

• Save money with less
safety precautions?
• What are the
consequences?
8-7
PPT 8-8
The Changing Organization
LO 8-2
THE CHANGING ORGANIZATION
• Often change in organizations is due to evolving

business environments:
- More global competition
- Declining economy
- Faster technological change
- Pressure to protect the environment
• Customer expectations have also changed --

Consumers today want high-quality products with
fast, friendly service and all at low cost.
8-8
PPT 8-9 1. This slide shows just how much our country has
How Much Changes in a Decade? changed since 2000.
HOW MUCH CHANGES LO 8-2
2. Clearly the digital revolution is shown here with the
in a DECADE? amount of blogs, cell usage, emails sent, etc. Ask stu-
dents: Do you expect these numbers to continue to
What?
Amount of cell phone use
2000
34%
2010
89%
grow? What may this table look like in 2020?
Number of active blogs 12,000 141,000,000
Amount of reality shows 4 320
3. The number of daily newspapers and letters sent has
Daily emails sent
Number of hours spent online per week
12 billion
2.7
247 billion
18
dropped. Ask students: Do you think we will lose
Number of daily newspapers 1,480 1,302 more daily newspapers? What about letters? How
Number of daily letters mailed 207 billion 175 billion
Amount of books published 282,242 1,052,803
many still receive letters/cards from grandparents op-
iTunes downloads 0 10 billion posed to emails or Facebook posts?
Percentage of obese Americans 26% 34%
Source: Fast Company, www.fastcompany.com, accessed March 2014. 8-9
8-53
PPT 8-10
Production Changed Organization
Design
PRODUCTION CHANGED LO 8-2
ORGANZIATION DESIGN
• Mass production of goods led to complexities in

organizing businesses.
• Economies of Scale --
Companies can reduce
their production costs by
purchasing raw materials
in bulk.
• The average cost of

goods decreases as
production levels rise.
8-10
PPT 8-11
This slide presents Fayol’s principles of organization.
Fayol’s Principles Fayol published General and Industrial Management in
1919. Unity of command and hierarchy of authority sug-
LO 8-2
gest that each employee reports to one and only one boss.
Management courses throughout the world teach these
principles, and organizations are designed accordingly.
• Unity of command • Degree of When these principles become rules, policies, and regula-
centralization
• Hierarchy of authority tions, they create inflexibility which hampers organiza-
• Division of labor
• Clear communication
channels
tions’ ability to respond quickly to situations. An example
• Subordination of • Order
of this inflexibility or a slower response time can be seen
individual interests to
• Equity in FEMA’s response to Hurricane Katrina.
the general interest
• Esprit de corps
• Authority
8-11
PPT 8-12
Organizations Based on Fayol’s
Principles
ORGANIZATIONS BASED on LO 8-2
• Organizations in which
employees have no more
than one boss; lines of
authority are clear.
• Rigid organizations that often

don’t respond to customers
quickly.
8-12
8-54
PPT 8-13
Weber, a German sociologist and economist, wrote The
Weber’s Principles Theory of Social and Economic Organizations. Weber’s
principles were similar to Fayol’s. He emphasized job de-
LO 8-2
scriptions, written rules, consistent policies, regulations,
WEBER’S PRINCIPLES
and procedures, and staffing and promotions based on
• Employees just need to do what
qualifications. Weber was in favor of bureaucracy and
they’re told. believed that these principles were necessary for large
• In addition to Fayol’s principles, organizations’ effective functioning. However, in today’s
Weber emphasized: corporate world, these rules and bureaucracy do not nec-
- Job descriptions essarily work. Organizations need to respond to customers
- Written rules, decision guidelines
and detailed records and other environmental factors quickly which calls for a
- Consistent procedures, creative, flexible, and a quick decision-making process
regulations and policies
contrary to a bureaucratic process.
- Staffing and promotion based on
qualifications 8-13
PPT 8-14
Hierarchies and Command
LO 8-2
HIERARCHIES and COMMAND
• When following Fayol and Weber, managers

control workers.
• Hierarchy -- A system in which one person is at the

top of an organization and there is a ranked or
sequential ordering from the top down.
• Chain of Command -- The line of authority that

moves from the top of the hierarchy to the lowest
level.
8-14
PPT 8-15
Organizational Charts
LO 8-2
ORGANIZATIONAL CHARTS
• Organization Chart --
A visual device that
shows relationships
among people and
divides the organization’s
work; it shows who
reports to whom.
7-15
8-55
PPT 8-16
LO 8-2
TYPICAL ORGANIZATION CHART
8-16
PPT 8-17
Bureaucratic Organizations
LO 8-2
BUREAUCRATIC ORGANIZATIONS
• Bureaucracy -- An organization with many layers of

managers who set rules and regulations and oversee
all decisions.
• It can take weeks or months to have information

passed down to lower-level employees.
• Bureaucracies can annoy customers.
8-17
8-56
PPT 8-18 1. Division of labor is dividing tasks among workers to

Test Prep complete a job. Job specialization is dividing tasks
into smaller jobs.
TEST PREP 2. Fayol’s principles of management are:
-Unity of command
• What do the terms division of labor and job
specialization mean? -Hierarchy of authority
• What are the principles of management outlined -Division of labor
by Fayol?
-Subordination of individual interests to the general
• What did Weber add to the principles of Fayol? interest
-Authority
8-18
-Degree of centralization
-Clear communication channels
-Order
-Equity
-Esprit de corps
3. Weber added:
-Job descriptions
-Written rules, decision guidelines, and detailed rec-
ords
-Consistent procedures, regulations, and policies
-Staffing and promotion based on qualifications
8-57
PPT 8-19 Centralization can be defined as an organizational struc-

Centralization or Decentralization? ture that focuses on retaining control of authority with
higher level managers. One of the disadvantages of this
CENTRALIZATION or LO 8-3
type of management style is slower decisions because of
DECENTRALIZATION?
layers of management. Ask the students: What specific
problems do you see with this type of management?
• Centralized Authority -- When decision-making is
concentrated at the top level of management. (Slower decision-making means the company is less re-
• Decentralized
sponsive to both internal an external customers needs.)
Authority -- When Share with the students a simple rule to follow when
decision-making is
delegated to lower-level
dealing with centralized authority: Decisions regarding
managers and employees overall company policy and establishment of goals and
more familiar with local
conditions than strategies should be made at the top.
headquarters is.
8-19
Decentralization is an organizational structure that fo-
cuses on delegating authority throughout the organiza-
tion to middle and lower-level managers. The most sig-
nificant advantage of this form of management style is
the empowerment of the employees. Statistics indicate
when delegation is practiced in a company, absenteeism,
injuries, loyalty and production improve. Share with the
students a simple rule to follow when dealing with de-
centralized authority: The closer an employee interacts
with the customer, the more decentralized the decision-
making should be. For example, a customer service
manager must have the authority to make a decision that
will satisfy a customer immediately, not wait until the
home office makes a decision.
PPT 8-20
Centralization and Decentralization
CENTRALIZATION and LO 8-3
DECENTRALIZATION
8-20
8-58
PPT 8-21
Span of Control
LO 8-3
SPAN of CONTROL
• Span of Control -- The optimal number of

subordinates a manager supervises or should
supervise.
• When work is standardized, broad spans of

control are possible.
• Appropriate span narrows at higher levels of the

organization.
• The trend today is to reduce middle managers

and hire better low-level employees.
8-21
PPT 8-22
Many organizations have moved from tall organizations to
Organizational Structures flat organizations in an effort to increase nimbleness in the
marketplace.
LO 8-3
ORGANIZATIONAL STRUCTURES
• Structures determine the way the company

responds to employee and customer needs.
• Tall Organization Structures -- An organizational

structure in which the organization chart would be tall
because of the various levels of management.
• Flat Organization Structures -- An organizational

structure that has few layers of management and a
broad span of control.
8-22
PPT 8-23
Flat Organizational Structure
8-59
PPT 8-24
Advantages and Disadvantages of the
Different Spans of Control
ADVANTAGES and DISADVANTAGES of LO 8-3
the DIFFERENT SPANS of CONTROL
8-24
PPT 8-25
Departmentalization
LO 8-3
DEPARTMENTALIZATION
• Departmentalization -- Divides organizations into

separate units.
• Workers are grouped by skills and expertise to

specialize their skills.
8-25
PPT 8-26
Advantages of Departmentalization
ADVANTAGES of LO 8-3
DEPARTMENTALIZATION
1) Employees develop skills and progress within a

department as they master skills.
2) The company can achieve economies of scale.
3) Employees can coordinate work within the

function and top management can easily direct
activities.
8-26
8-60
PPT 8-27
Disadvantages of Departmentalization
DISADVANTAGES of LO 8-3
DEPARTMENTALIZATION
1) Departments may not communicate well.

2) Employees may identify with their department’s
goals rather than the organization’s.
3) The company’s response to external changes may
be slow.
4) People may not be trained to take different
managerial responsibilities, instead they become
specialists.
5) Department members may engage in groupthink and
may need outside input.
8-27
PPT 8-28
LO 8-3
WAYS to DEPARTMENTALIZE
8-28
PPT 8-29
LO 8-3
WAYS to DEPARTMENTALIZE
8-29
8-61
PPT 8-30 1. Over the last 25 years businesses have adopted flatter or-
Test Prep ganizations with fewer layers of management and a broad-
er span of control in order to quickly respond to customer
demands. A flatter organization gives lower-level employ-
TEST PREP
ees the authority and responsibility to make decisions di-
rectly affecting customers.
• Why are organizations becoming flatter?
2. Span of control refers to the number of subordinates a
• What are some reasons for having a narrow span manager supervises. Generally, the span of control nar-
of control in an organization?
rows at higher levels of the organization, because work be-
• What are the advantages and disadvantages of comes less standardized and managers need more face-to
departmentalization? face communication.
• What are the various ways a firm can 3. The advantages of departmentalization include: Depart-
departmentalize? mentalization may reduce costs, since employees should be
8-30 more efficient; employees can develop skills in depth and
progress within a department as they master more skills;
the company can achieve economies of scale by centraliz-
ing all the resources it needs and locating various experts
in that particular area; employees can coordinate work
within the function; and top management can easily direct
and control various departments’ activities. The disad-
vantages of departmentalization include: Communication
is inhibited; employee’s may identify with their depart-
ment’s goals rather than the organization’s; the company’s
response may be slowed by departmentalization; employ-
ees tend to be narrow specialists; department members may
engage in groupthink and may need input from the outside
to become more competitive.
An organization can elect to departmentalize in the fol-
lowing ways: customer group, product, functional, geo-
graphic, process, and hybrid.
8-62
PPT 8-31
Traditional business models, such as line organizations
Four Ways to Structure an and line-and-staff organizations, are giving way to new
Organization structures.
FOUR WAYS to STRUCTURE an LO 8-4
ORGANIZATION
1. Line Organizations
2. Line-and-Staff
Organizations
3. Matrix-Style
Organizations
4. Cross-Functional Self-
Managed Teams
8-31
PPT 8-32
Line Organizations
LO 8-4
LINE ORGANIZATIONS
• Line Organization -- Has direct two-way lines of

responsibility, authority and communication running
from the top to the bottom. Everyone reports to one
supervisor.
• There are no specialists, legal, accounting,

human resources or information technology
departments.
• Line managers issue orders, enforce discipline

and adjust the organization to changes.
8-32
PPT 8-33
Line Personnel
LO 8-4
LINE PERSONNEL
• Line Personnel -- Workers responsible for directly

achieving organizational goals, and include
production, distribution and marketing employees.
• Line personnel have authority to make policy

decisions.
8-33
8-63
PPT 8-34
Staff Personnel
LO 8-4
STAFF PERSONNEL
• Staff Personnel -- Employees who advise and assist

line personnel in meeting their goals, and include
marketing research, legal advising, IT and human
resource employees.
8-34
PPT 8-35
Sample Line-and-Staff Organization
SAMPLE LINE-and-STAFF LO 8-4
ORGANIZATION
8-35
PPT 8-36
The creation of matrix organizations was in response to
Matrix Organizations the inflexibility of other more traditional organizational
structures. This structure brings specialists from different
LO 8-4
parts of the organization to work together temporarily on
MATRIX ORGANIZATIONS
specific projects.
• Matrix Organization -- Specialists from different
parts of the organization work together temporarily on
specific projects, but still remain part of a line-and-staff
structure.
• Emphasis is on
product development,
creativity, special
projects,
communication and
teamwork.
8-36
8-64
PPT 8-37
Sample Matrix Organization
SAMPLE MATRIX LO 8-4
ORGANIZATION
8-37
PPT 8-38
Advantages of the Matrix Style
ADVANTAGES of the LO 8-4
MATRIX STYLE
• Managers have flexibility in assigning people to

projects.
• Interorganizational cooperation and teamwork is

encouraged.
• Creative solutions to product development

problems are produced.
• Efficient use of organizational resources.
8-38
PPT 8-39
Disadvantages of the Matrix Style
DISADVANTAGES of the LO 8-4
MATRIX STYLE
• It’s costly and complex.

• Employees may be confused about where their
loyalty belongs.
• Good interpersonal skills and cooperative
employees are a must.
• It’s a temporary
solution to a possible
long-term problem.
• Teams are not
permanent.
8-39
8-65
PPT 8-40
Cross-Functional Self-Managed Teams
CROSS-FUNCTIONAL LO 8-4
SELF-MANAGED TEAMS
• Cross-Functional Self-Managed Teams --

Groups of employees from different departments who
work together on a long-term basis.
• A way to fix the problem of matrix-style teams is

to establish long-term teams.
• Empower teams to work closely with suppliers,

customers and others to figure out how to create
better products.
8-40
PPT 8-41
Going Beyond Organizational
Boundaries
GOING BEYOND LO 8-4
ORGANIZATIONAL BOUNDARIES
• Cross-functional teams work best when the voice

of the customer is heard.
• Teams that include customers, suppliers and

distributors go beyond organizational boundaries.
• Government coordinators may assist in sharing

market information beyond national boundaries.
8-41
PPT 8-42 1. This slide presents five important conditions for gar-
Building Successful Teams nering the maximum benefits of small teams, accord-
ing to Jon Katzenbach, co-author of The Wisdom of
BUILDING SUCCESSFUL TEAMS LO 8-4
Teams.
Important Conditions for Small Teams
2. Ask the students: Which of these five conditions do

• Clear purpose
you believe would be most important in your team
• Clear goals
experience? Why? (The most critical factor of these
• Correct skills
five conditions, according to Katzenbach, is a clear
• Mutual accountability
performance purpose for the team.)
• Shift roles when
appropriate
8-66
PPT 8-43 1. Line personnel are responsible for directly achieving

Test Prep organizational goals. Line personnel include produc-
tion workers, distribution people, and marketing per-
TEST PREP sonnel. Staff personnel advise and assist line person-
nel in meeting their goals.
• What’s the difference between line and staff 2. The flexibility inherent in the matrix-style organiza-
personnel?
tion directly challenge the rigid line and line-and-staff
• What management principle does a matrix-style organization structures.
organization challenge?
3. The main difference between matrix-style organiza-
• What’s the main difference between a matrix- tion and cross-functional teams is that cross-
style organization’s structure and the use of
cross-functional teams? functional teams tend to be long-lived as compared to
the temporary and fluid nature of teams in a matrix-
8-43
style organization.
PPT 8-44
Real-Time Business
LO 8-5
REAL-TIME BUSINESS
• Networking -- Using communications technology to

link organizations and allow them to work together.
• Most companies are no longer self-sufficient;

they’re part of a global business network.
• Real Time -- The present moment or actual time in

which something takes place.
8-44
PPT 8-45
Transparency and Virtual Corporations
TRANSPARENCY and VIRTUAL LO 8-5
CORPORATIONS
• Transparency -- When a company is so open to

other companies that electronic information is shared
as if the companies were one.
• Virtual Corporation -- A temporary networked

organization made up of replaceable firms that join
and leave as needed.
8-45
8-67
PPT 8-46 1. This slide illustrates the concept of a virtual corpora-

A Virtual Corporation tion as an organizational model that could propel
American businesses into the next century.
LO 8-5
A VIRTUAL CORPORATION
2. The theory behind the virtual corporation can be un-
derstood by picturing a company stripped to its core
competencies. All other business functions will be
accomplished by:
• Forming joint ventures
• Forming temporary alliances with other vir-
tual companies with different areas of exper-
tise
8-46
• Hiring consulting services
• Outsourcing or subcontracting services
3. Share with the students some other interesting con-
cepts of a virtual corporation:
• On-demand knowledge workers who operate
independently
• Skill-selling professionals such as engineers,
accountants, and human resource experts
who manage your projects from their homes
through worldwide telecommunications
Team-building will change as companies hire individuals
with expertise in various areas to solve business prob-
lems. As a solution is identified, the team will cease to
exist.
PPT 8-47
Cutting Back While Cutting Costs
CUTTING BACK WHILE

CUTTING COSTS
• Hiring workers is a major

expense for small business
owners.
• This has led to more offshore

outsourcing.
• The increase can be partly

attributed to the presence of
online job marketplaces like
ODesk.
8-47
8-68
PPT 8-48
Benchmarking and Core Competencies
BENCHMARKING and LO 8-5
CORE COMPETENCIES
• Benchmarking -- Compares an organization’s

practices, processes and products against the
world’s best.
• Core Competencies -- The functions an

organization can do as well as or better than any
other organization in the world.
• K2 Skis researched other companies’ practices

in order to create the best possible skis and
snowboards.
8-48
PPT 8-49 1. This slide identifies the benefits and concerns of

Benefits and Concerns of Healthcare healthcare outsourcing.
Outsourcing
2. Have the students identify the possible countries to
BENEFITS and CONCERNS of LO 8-5
which health care can be outsourced. (India is used by
HEALTHCARE OUTSOURCING many hospitals and health care organizations due to
availability of knowledge workers.)
Benefits Concerns 3. Ask the students: Why do you think these countries
• Provides enough • Lower employee
staff to operate the morale represent a threat to U.S. jobs? (Lower wages will re-
facility
sult in lower costs.)
• Cost savings • Liability
• Should patients be
informed
4. Ask the students: What could be outsourced to South
• Confidentiality and Africa? Why? (South Africa is considered a good
security
choice for customer service centers for French-, Eng-
Source: Healthcare Financial Management. 8-49
lish-, and German-speaking customers. The work-
force is trained to speak several different languages
while wages are low. As a global company dealing
with consumer inquiries, the central location of a call
center may reduce costs significantly.)
8-69
PPT 8-50 1. This slide supports the previous discussion of out-

Which Jobs Will Be Outsourced Next? sourcing by identifying the most common functional
areas for which U.S. companies plan on hiring out-
WHICH JOBS are most often LO 8-5
side organizations. The results are from the TEC In-
OUTSOURCED?
ternational’s survey of 1,091 CEOs.
2. As mentioned in previous discussions, the number
one reason companies outsource is to reduce costs.
This slide shows Manufacturing, Information Tech-
nology, and Customer Support/Sales as the largest
planned outsourced business categories.
3. Ask the students, Why do you think these categories
are outsourced more often? (Manufacturing can be
Source: USA Today. 8-50
done a lot cheaper in a country with lower wages. IT
and customer support represent functional areas that
provide basic or routine types of job performance,
unlike sales and marketing, where specific strategies
are closely aligned to meet specific customer needs.)
PPT 8-51
Adapting to Market Changes
ADAPTING to LO 8-5
MARKET CHANGES
• Change isn’t easy.

Employees like to do
things the way they
always have.
• Get rid of old, inefficient
facilities and equipment.
• Use the Internet to get to
know your customers and
sell directly to them.
8-51
8-70
PPT 8-52 1. Information technology has allowed companies like

Keep in Touch Amazon to better understand customer needs.
KEEP in TOUCH LO 8-5

2. Use the three questions on this slide to start a discus-
Amazon and its Customer Database sion with students in class.
Amazon uses information stored in databases to

reach out to customers. The company emails
customers letting them know about music, DVDs
or books they might like based on past purchases.
• Have you ever received an email like this from Amazon or another
company?
• What benefits would a database of personal information, like past

purchases, provide Amazon?
• Do you think these databases are helpful for both companies and
consumers or are they an invasion of privacy?
8-52
PPT 8-53
Making the Change
LO 8-5
MAKING the CHANGE
• Digital Natives --
Young people who
have grown up using
the Internet and
social networking.
Photo Credit: Marc Wathieu
8-53
PPT 8-54
When Open Communication Should
Not Be So Open
WHEN OPEN COMMUNICATION

SHOULD NOT BE SO OPEN
• The blending of mobile

technology and work has been
helpful to business.
• However, it also has encroached
on the traditional work-life
boundaries.
• Over 1/3 of surveyed employees
responded that receive work-
related emails after hours, many
complain it affects quality of life.
8-54
8-71
PPT 8-55
Restructuring
LO 8-5
RESTRUCTURING
• Restructuring -- Redesigning an organization so it

can more effectively and efficiently serve its
customers.
• Inverted Organization -- An organization that has

contact people at the top and the CEO at the bottom
of the organizational chart.
• The manager’s job is to assist and support

frontline workers, not boss them.
8-55
PPT 8-56 1. The inverted organization structure is an alternative to

Traditional and Inverted Organizations the traditional management layers. The critical idea
behind the inverted organization structure is that the
TRADITIONAL and INVERTED LO 8-5
managers’ job is to support and facilitate the jobs of
ORGANIZATIONS
the frontline people, not boss them around.
2. Ask the students: What type of organization structure
would they prefer to work under: traditional or invert-
ed? Why?
8-56
PPT 8-57
When you search for a job, make sure the organizational
Organizational Culture culture is one you can thrive in.
LO 8-6
ORGANIZATIONAL CULTURE
• Organizational or Corporate
Culture -- The widely shared
values within an organization that
foster unity and cooperation to
• Some of the best organizational

cultures emphasize service.
• Culture is shown in stories,

traditions and myths.
8-57
8-72
PPT 8-58
Formal Organization
LO 8-6
FORMAL ORGANIZATION
• Formal Organization -- Details lines of

responsibility, authority and position.
• The formal system is often slow and

bureaucratic, but it helps guide the lines of
authority.
• No organization can be effective without formal

and informal organization.
8-58
PPT 8-59
Informal Organization
LO 8-6
INFORMAL ORGANIZATION
• Informal Organization -- The system of

relationships that develop spontaneously as
employees meet and form relationships.
helps foster
camaraderie and
teamwork among
employees.
8-59
PPT 8-60
Limitations of Informal Organizations
LIMITATIONS of INFORMAL LO 8-6
ORGANIZATIONS
• The informal system is

too unstructured and
emotional on its own.
may also be powerful in
resisting management
directives.
8-60
8-73
PPT 8-61 1. Group norms are an interesting topic to discuss in

Group Norms teaching organizational structure. This slide illus-
trates some informal group norms.
GROUP NORMS LO 8-6
Examples of Informal Group Norms 2. Ask the students: Have you ever felt pressure to con-
form to such informal norms? If you gave in to group
• Do your job but don’t produce more than the rest
of your group. pressure not to produce more than the rest of the
group, did you feel good about yourself? (Focus on
• Don’t tell off-color jokes or use profanity.
the self-gratification feeling of a job well done and
• Everyone is to be clean and organized at the the corresponding compensation.)
workstation.
• Respect and help your fellow group members.

Discuss the importance of informal groups in an
organization that become somewhat formal themselves
• Drinking is done off the job – NEVER at work.
(i.e., labor unions).
PPT 8-62 1. Some service-oriented organizations have elected to

Test Prep turn the traditional organizational structure upside
down. An inverted organization has employees who
TEST PREP come into contact with customers at the top of the or-
ganization and the chief executive officer at the bot-
tom. A manager’s job is to assist and support front-
• What is an inverted organization? line people, not tell them what to do.
• Why do organizations outsource functions? 2. In the past organizations have often tried to do all
functions themselves, maintaining departments for
• What is organizational culture? each function including: accounting, finance, market-
ing, and production. If an organization is not able to
efficiently perform the function themselves they will
8-62
outsource the function. Outsourcing is the process of
assigning various functions, such as accounting, pro-
duction, security, maintenance, and legal work, to an
outside firm. The goal is to retain the functions that
the organization considers its core competencies.
3. Organizational or corporate culture is the widely
shared values within an organization that create unity
and cooperation. Usually the culture of an organiza-
tion is passed to employees via stories, traditions, and
myths.
8-74
8-75
lecture
enhancers
“It is not the strongest of the species that survive, nor the most intelligent, but the
one most responsive to change.”
Charles Darwin
“Never tell people how to do things. Tell them what to do and they will surprise you
with their ingenuity.”
General George S. Patton
“When Alexander the Great visited Diogenes and asked whether he could do any-
thing for the famed teacher, Diogenes replied: ‘Only stand out of my light.’ Perhaps
some day we shall know how to heighten creativity. Until then, one of the best things
we can do for creative men and women is to stand out of their light.”
John W. Gardner
“The ability to learn faster than your competitors may be the only sustainable com-
petitive advantage.”
Arie De Geus, Head of Planning, Royal Dutch Shell
lecture enhancer 8-1

SMITH’S FOLLY
Kenneth H. Olsen, founder and CEO of Digital Equipment Corporation, was known for his auto-
cratic style. However, at the same time he strongly believed in delegating responsibility, something other
computer entrepreneurs have found it difficult to do.
In delegating responsibility, Olsen was always willing to forgive worker mistakes. John F. Smith,
Digital’s 12th employee and vice president for 20 years, recalls buying a $7,000 soldering machine, a
huge investment at the time, that proved unreliable. He says he came in nights and weekends to adjust it
so Olsen wouldn’t realize his error.
Ultimately, Smith bought a replacement machine, moved the lemon to a vacant storeroom, cov-
ered it with a canvas, and thought he had gotten away with it. He served as chief operating officer at Digi-
tal Equipment from 1986 through 1994. Much later he came across the machine and idly lifted the cover-
ing. He found a hand-lettered sign that read “Smith’s folly. [signed] Ken Olsen.”
8-76

STREAMLINING STARBUCKS
When Howard Schultz first joined Starbucks as marketing director in 1982, the small Seattle
company made most of its money selling coffee-making equipment. Once Schultz landed the CEO posi-
tion, however, matters changed drastically. Looking to bring the European café experience to American
shores, Schultz transformed the regional chain into an international behemoth within two decades.
Starbucks changed again when Schultz stepped down as CEO in 2000. After a rapid expansion
saw the company grow to more than 15,000 stores by 2007, executives began concentrating more on cut-
ting costs rather than creating atmosphere. Much to Schultz’s dismay, the brand became a symbol of
bland corporate ubiquity and convenience, the caffeinated equivalent to McDonald’s. In order to combat
these image issues, Schultz used his influence as chairman of the board in 2008 to reinstate himself as
CEO. With the company’s stock price plummeting 50 percent over the previous year, he responded harsh-
ly by laying off most of his top executives and closing 800 U.S. stores.
Some commentators at the time saw these extraordinary measures as the last actions of a dying
company. But Schultz was just getting started with Starbucks’ transformation. Along with cutting costs,
he also concentrated on building his staff’s skills by shutting down all stores for half a day so that baristas
could re-learn how to make espresso. Schultz also plunked down $30 million to bring more than 10,000
store managers to New Orleans for a morale-building vacation. Soon enough consumer interest began to
increase as products like the Pumpkin Spice latte brought in a whole new clientele. Now that the company
is stable once more, Schultz is preparing Starbucks for its next metamorphosis. This includes expansions
into lucrative global markets like China, as well as a push towards integrating mobile payments and other
technological advancements. What’s more, the company’s $620 million purchase of the beverage retailer
Teavana shows that Starbucks intends to do for tea what it did for coffee in the 1990s. And with no one
less than Oprah leading the marketing charge for the company’s new tea line, there’s a good chance that
the shape of Starbucks’ success will change yet again.i

INCREASING COLLABORATION WITH BOSSLESS OFFICES
The hierarchical structure of modern corporate offices can be traced back to 19th century railroad
companies. With vast networks of track stretched across the country, transportation magnates needed to desig-
nate clear lines of communication among their far-flung operations. A system of middle managers and regional
executives eventually rose to prominence and ensured that things ran smoothly. Over the course of the 20th
century, businesses of all stripes adopted this top-down structure as their own, eventually leading to the sea of
cubicles of today.
Some social scientists claim this ubiquitous method of hierarchy is an example of humanity’s natural
inclination to select a pecking order. But a growing number of entrepreneurs are fighting against this instinct
by experimenting with boss-less offices. For instance, the staff at the Michigan-based software developer
Menlo Innovations decides who gets hired and who gets fired. Employees work in rotating teams and are en-
couraged to guide the progress of their own projects, eliminating the need for middle managers. Co-founder
Rich Sheridan’s eight-year-old daughter provided the inspiration for this unusual office plan when she pointed
out during a visit that people constantly asked her dad to make decisions for them. “I realized that the organi-
zation couldn’t move any faster than me,” says Sheridan.
8-77
While he and business partner James Goebel develop Menlo’s overall strategy, day-to-day execution
of that work is completely determined by the staff. Employees speak openly in order to generate feedback and
are not required to grant the company’s founders any special treatment. They must also be capable of working
so closely with other people that they receive almost no personal kudos: every success is the result of the team,
not any individual in it. To this end, Menlo is not really the place for “corporate-ladder climbers,” as one staff-
er described them. The company’s attitude focuses on “kindergarten skills” like geniality, curiosity and gener-
osity. All this fits in with the profit sharing, all-for-one ethos of Menlo. The office environment is so transpar-
ent that there’s even a big board that lists the names of all the company’s employees along with their salaries.
Although at least one “Menlonian” described this practice as “liberating,” the motivational efficacy of this
chart is still under consideration by the company. Should CEO Sheridan ever want to get rid of it, though, he’d
have to ask his employees first.ii

CHOOSING THE RIGHT SPAN OF CONTROL
No formula exists for determining the ideal span of control. Several factors affect the number of
people a manager can effectively supervise. Variables in span of control include the following:
 Capabilities of the manager. The more experienced and capable a manager is, the broader
the span of control can be. (A large number of workers can report to that manager.)
 Capabilities of the subordinates. The more the subordinates need supervision, the narrower
the span of control should be. Employee turnover at fast-food restaurants, for example, is of-
ten so high that managers must constantly be training new people and thus need a narrow
span of control.
 Geographic closeness. The more concentrated the work area is, the broader the span of con-
trol can be.
 Functional similarity. The more similar the functions are, the broader the span of control
can be.
 Need for coordination. The greater the need for coordination, the narrower the span of con-
trol might be.
 Planning demands. The more involved the plan, the narrower the span of control might be.
 Functional complexity. The more complex the functions are, the narrower the span of con-
trol might be.
Other factors to consider include the professionalism of superiors and subordinates and the num-
ber of new problems that occur in a day. In business, the span of control varies widely. The number of
people reporting to a company president may range from 1 to 80 or more. The trend is to expand the span
of control as organizations reduce the number of middle managers and hire more educated and talented
lower-level employees. That is all included in the idea of empowerment. It’s possible to increase the span
of control as employees become more professional, as information technology makes it possible for man-
agers to handle more information, and as employees take on more responsibility for self-management.
8-78

THE MANHATTAN PROJECT
As early as 1939 Albert Einstein warned President Franklin Roosevelt that the new field of phys-
ics had opened up the possibility of extraordinarily powerful bombs. In the summer of 1942, the govern-
ment created the Manhattan Engineer District to meet the goal of producing an atomic weapon under the
pressure of ongoing global war. The project became known as the Manhattan Project. The story of the
bomb’s creation involved the extraordinary efforts of scientists, engineers, and military officials. But it is
also the story of a massive organizational endeavor.
The project was put under the direction of Brigadier General Leslie Groves of the Army Corps of
Engineers. Groves had impressed his superiors with this administrative ability, organizational skill, and
decisiveness. Previously Groves had successfully supervised the construction of the Pentagon. (Ironically,
construction on the Pentagon began on September 11, 1941.) When he was assigned to head the top secret
weapons project, Groves tried to get reassigned, preferring a posting overseas, but was unsuccessful.
Under Groves’s direction, secret atomic energy communities were created almost overnight in
Oak Ridge, Tennessee, at Los Alamos, New Mexico, and in Hanford, Washington, to house the workers
and gigantic new machinery needed to produce the bombs. The weapon itself would be built at the Los
Alamos laboratory, under the direction of physicist J. Robert Oppenheimer.
Groves made all the important decisions governing the Manhattan Project himself. He personally
recruited Oppenheimer and the other key organization members. Groves drew up the plans for the organi-
zation, construction, operation, and security of the project and took all necessary steps to put it into effect.
Reporting directly to Secretary of War Henry Stimson and General George Marshall, Groves routinely
bypassed traditional lines of authority to ensure the success of the project.
Groves’s aggressive management style and determination were key factors to the success of the
Manhattan Project. His detractors called him egotistical, brusque, manipulative, and overly authoritative.
However, he was decisive and able to cut through the red tape to accomplish his goals.
By the time the bombs were perfected, Germany had surrendered, and some scientists on the pro-
ject questioned whether to continue bomb development. The project ultimately built four atomic bombs:
“Gadget,” the test bomb exploded in the New Mexico desert, “Little Boy,” dropped on Hiroshima, “Fat
Man,” dropped on Nagasaki, and bomb no. 4, which was unused.
Based on figures from the Atomic Energy Commission archives, the costs of the project exceeded
$1.8 billion. The Oak Ridge gaseous diffusion plant (which obtained the needed uranium isotope) alone
cost $512,000,000. The Brookings Institute has translated these figures into current dollars. The four
bombs would today cost $20 billion, or $5 billion per bomb. The total value of all bombs, mines, and gre-
nades used in the entirety of World War II, in comparison, was $31.5 billion.iii

GREATER EFFICIENCY, FEWER JOBS
After slashing more than 8.2 million jobs during the recession, U.S. companies strived to do more
with less by becoming more efficient. Although many businesses’ performance still pales in comparison
to their pre-recession heydays, expansions abounded in early 2011 with 142 nonfinancial companies on
the S&P 500 raising their operating margins. Additionally, annual growth in productivity averaged 3.4%
8-79
as companies like UPS and Campbell made the most out of every work hour. As a result, employees of
these companies seem safe from layoffs for the foreseeable future.
Unfortunately, such efficiency improvements have all but closed the door on future hiring. A tep-
id economic recovery has forced many companies to operate in recession-mode for the long term, stress-
ing slimming costs instead of investment and expansion. Campbell, for instance, must find $80 million in
savings in order to stay profitable and offset inflation. So every day at its factories, floor employees meet
with managers to devise ways Campbell can implement its sweeping new efficiency measures. Though
these practices will keep jobs safe and the company afloat, they detract focus from innovative measures
that could allow Campbell to expand into the new decade. No less than former Fed chair Alan Greenspan
fears that this culture of cost cutting will run its course eventually and margins will shrink in its wake.
The story is similar for small businesses. Once the driving force of economic recovery, low de-
mand and tough competition has forced many small businesses to retain a core group of part-timers rather
than hiring workers for full salaries. One small Internet retailer said she would need to see a 50% im-
provement in sales before she could hire anyone full-time. Meanwhile, data gathered from various stock
indexes shows small companies that have significantly cut costs or labor are rewarded with greater inter-
est from investors. But like their bigger brethren, small businesses aren’t using their capital to innovate.
Instead, they’re cutting down on health care and payroll taxes by converting workers to contractors or
part-time employees rather than bringing in new blood.iv

A NEW KIND OF OUTSOURCING
With unemployment soaring in the double digits, local governments across the country are scrambling
for new ways to create jobs. Ironically, some communities are finding relief from the very companies that were
responsible for outsourcing their region’s jobs in the first place. For example, like many American cities, Cin-
cinnati lost scores of manufacturing jobs to cheap labor overseas. But Ohio Governor Ted Strickland didn’t let
bad blood get in the way while he was wooing the Indian tech company Tata Consultancy Services (TCS) to
set up offices just outside of Cincinnati. Encouraged by a promise of $19 million in tax credits, TCS agreed.
The branch has already hired 300 American employees and plans to employ as many as 1,000 Americans in
the future.
While TCS processes data for many American companies, laws prevent it from sending data about the
U.S. government or health care projects overseas. As a result, Indian companies like TCS and Wipro Technol-
ogies are adding American branches in order to tap into this market. Officials in cities like Dallas, Atlanta, and
Minneapolis have been all too happy to court these companies in the hopes of creating jobs for American
workers. The cost for setting up shop in the United States is high for Indian companies, with an employee in
Ohio making $50,000 a year versus $7,000 for a staffer in Bangalore. Nevertheless, American employees show
their value through their knowledge of cultural nuances and their abilities to help their Indian bosses compete
against rival American companies.
Still, this brand of domestic outsourcing has its downsides. Though TCS employs 1,300 American
workers, it also has 13,000 Indian staffers on work visas employed in the United States. This practice could
soon be outlawed, though, as proposed legislation could limit companies with more than 50 U.S.-based em-
ployees from using temporary visas for half their American workforce. Furthermore, TCS and Wipro both
have admitted that they most likely will not create large amounts of American jobs as the recession has stifled
much of their U.S. growth. Even so, as long as jobs are in short supply, expect local governments across the
country to continue soliciting Indian companies to set up shop in their regions.v
8-80

PIVOTING FROM ONE BUSINESS PLAN TO ANOTHER
When Michael Garrity founded CommunityLend in 2010, he thought his company was in a per-
fect position to capture an untapped market. After all, the 2008 financial crisis made many banks wary of
lending too much cash, presenting a golden opportunity to non-traditional operations like Commu-
nityLend. Plus, the company's peer-to-peer model was the first of its kind in Garrity’s home country of
Canada, marking a major advantage for the startup.
Despite these benefits, though, CommunityLend had trouble finding qualified borrowers for their
service. With no one to lend money to, Garrity quickly realized his company would need to switch busi-
ness plans fast if it was going to stay afloat. Luckily, in its first months of operation CommunityLend
heard from many other potential clients besides those with bad credit. Garrity received calls from dozens
of small businesses checking to see if his company offered point-of-sale customer lending services like
installment plans. The recession had eliminated many of these lenders, leaving retailers desperate for ad-
ditional consumer financing options. Although Garrity initially brushed off these inquirers, he soon saw
their worth and began to call them back.
Next, he needed to convince investors that pivoting to a new concept was necessary for the com-
pany to thrive. Shareholders didn’t want to abandon CommunityLend entirely, though, so Garrity
launched his retail lending firm FinanceIt as a sister operation. Within months he signed up hundreds of
new clients for FinanceIt, leading him to the conclusion that the two firms could not feasibly coexist. Un-
fortunately, axing CommunityLend meant that many employees got shown the door. “We lost 80 percent
of our team as we moved from peer-to-peer lending to a point-of-sale financing company,” said Garrity.
“We did a big management change-out, because some hires made sense for CommunityLend but not for
FinanceIt.” Nevertheless, the difficult switch seems to have been worth it in the long run: FinanceIt has
processed more than $650 million in loan applications from more than 3,500 clients in Canada. With so
much domestic success, the company is now looking to expand its retail lending strategy to the U.S.vi

SETTING UP SHOP ON FACEBOOK
Nearly two decades ago the desktop computer reigned supreme as the must-have technological
tool. In time, though, the laptop overtook its stationary sister and thus the mobile age was born. Now con-
sumers have access to an array of smartphones and digital tablets that can send them into cyberspace no
matter where they stand. For social networks and retailers alike, the mobile market has already grown to a
gargantuan size with no signs that it’ll stop anytime soon.
Of its over 500 million users worldwide, Facebook says that more than 200 million people access
the site through mobile devices. Mobile stores as well have enjoyed tremendous growth. The online auc-
tion house eBay predicts that its mobile sales will double in 2011 to $4 billion. With Facebook’s formida-
ble user base and retailers’ growing mobile incomes, it was only a matter of time until the two camps
joined forces. In January 2011, the London-based retailer ASOS became the first company to set up shop
inside Facebook itself. ASOS (which stands for “As Seen on Screen”) owns no physical locations, operat-
ing solely online. With its new Facebook location, ASOS hopes to capture the interest of mobile Face-
bookers who may only use the Web on their phone to access the site.
8-81
Although many companies use social media to create awareness, this new trend of direct outlets
on social platforms could be the future of retail, not just mobile shopping. JCPenney and Delta Airlines
have been in talks for months about obtaining a direct presence on Facebook. In three to five years, econ-
omists estimate that as much as 15% of total consumer spending may go through social networking sites.
Though it’s too soon to deem ASOS’ Facebook experiment a success, with more than 465,000 “likes” to
its name the company seems poised for a fortune if all those friends turn into customers.vii

EMPLOYER ICEBREAKING RITUALS
For many fresh hires, a new office environment can seem alien and uninviting. Habits that were
commonplace at the employee’s previous job may be unacceptable in their new one. Initial interactions
with colleagues can be awkward or even hostile, sometimes leading to fissures in working relationships
that are difficult to mend. A clear understanding of a company’s culture is vital to every employee’s suc-
cess, and sometimes a simple orientation just isn’t enough. To help new hires effectively assimilate into
the workplace, some companies use initiation rituals to break in their new members. Besides working as
an icebreaker, such rituals create an instant bond by establishing the character of the company to the em-
ployee through various activities.
For example, at Foot Levelers, a manufacturer of chiropractic products, employees will occasion-
ally notice a sign on the conference room door reading “Rudy in Progress.” Inside the room, a group of
new hires eat snacks and watch the 1993 football drama Rudy, a movie about a tenacious student who
strives to play on the Notre Dame gridiron. After the movie ends, Foot Levelers CEO Kent Greenwault
collects everyone’s impressions on the film and together they compose a list of the traits Rudy utilized to
finally gain success. Employees are meant to emulate Rudy’s determination and ceaseless work ethic that
drove him on even in the bleakest moments. The ritual also clues staffers in on Greenwault’s favorite
management catchphrase. Whenever an employee comes to a manager with a work problem, the manager
will first ask them, “Did you Rudy that?”
Some companies use rituals to test the physical mettle of new staffers. At the Massachusetts-
based moving company Gentle Giant, CEO Larry O’Toole requires new hires to join him for a run up and
down the steps of Harvard Stadium. First of all, the ritual acts as an effective indicator of the employee’s
physical capabilities. O’Toole often won’t allow new hires onto a moving truck until he has observed
them on the steps. Symbolically, though, O’Toole hopes the run shows staffers how he expects them to
push themselves even in the most uncomfortable situations.viii
8-82
critical
thinking exercises
Name: ___________________________
Date: ___________________________
critical thinking exercise 8-1

BUILDING AN ORGANIZATION CHART
Dr. Rea Searge is president of Peabody Researchers, Inc., a pharmaceutical company. Peabody uses
a line-and-staff structure to organize its employees. In addition to Dr. Searge, Peabody has the following
employees:
A quality control officer

A vice president of production
150 research and development employees
A sales force of 100 people
A vice president of finance
Marketing managers for three regions
A vice president of marketing
A director of personnel
A vice president of research and development
Production managers for three product lines
An administrative assistant to the president
A production force of 600 people
On a separate sheet of paper, draw an organization chart for Peabody Researchers, Inc. Use solid
lines for line authority–responsibility relationships and dotted lines for staff authority–responsibility rela-
tionships. Use the diagram in your text as an example.
8-83
notes on critical thinking exercise 8-1
The following people are staff:
Director of personnel
Vice president of research and development
Administrative assistant to the president
Research and development department
Quality control officer
The rest have line positions.
Let the students draw the chart on the board with as little assistance as possible so they can think it
through. A possible solution is given on the following page.
8-84
Chapter 08 – Structuring Organizations for Today’s Challenges President Administrative
Assistant
NOTES ON CRITICAL THINKING EXERCISE 8-2 (continued)

Vice President Vice President Vice President Vice President Personnel Of-
Production Finance Marketing Research and ficer
Development
150 R&D
employees
Marketing Man- Marketing Man- Marketing Man-

ager— Region ager— Region ager—Region C
A B
30 sales 40 sales 30 sales

employees employees employees
Production Production Production Quality

Manager— Manager— Manager— Control
Product A Product B Product C Officer
200 pro- 200 pro- 200 pro-

duction duction duction
employees employees employees
PEABODY RESEARCHERS, INC.
Possible Organization Chart
8-85
Chapter 08 - Adapting Organizations to Today's Markets
Name: ___________________________
Date: ___________________________
critical thinking exercise 8-2

HOW DO ORGANIZATIONS GROUP ACTIVITIES?
The Internet has greatly increased access to information about organizations. Corporations use
their websites to communicate with investors, customers, and the general public. Just by visiting the com-
pany’s site you can usually discover the organization’s chain of command and approach to departmentali-
zation. Go to the websites for each organization below and identify the primary organizational units.
(Hint: Look for the “Corporate Information” or “Investor Relations” sections.) Based on that information,
speculate on the type of departmentalization used.ix
1. Coca-Cola Company
Primary Organizational Units:
Type of Departmentalization Used: __________________________________
2. The Walt Disney Company

3. The United Methodist Church

8-86
4. Kraft Foods
5. Boeing
8-87
bonus
cases
bonus case 8-1

STRUCTURAL COLLAPSE: RESPONSIBILITY AND ACCOUNTABILITY
To publicize its newly opened nightspot, a major hotel instituted weekly “tea dances” in the lobby
of the hotel. A local band played 1940s-era music while dancers competed in friendly contests. On a Fri-
day night in July, the band was playing Duke Ellington’s “Satin Doll” when two skywalks spanning the
lobby of the year-old hotel collapsed. Sixty-five tons of concrete, metal, glass, and dance spectators
plunged four floors to the sidewalk below, killing 114 persons and injuring 216 others.
The investigation after the collapse revealed that the collapse resulted from poor judgment and a
series of events that, in combination, produced a disastrous result. The study showed a history of over-
sights, misunderstandings, and safety problems plaguing the 40-story, 780-room luxury hotel during con-
struction and for months after its opening.
Mishaps aren’t uncommon on big projects, of course. But this huge project, which was built on an
accelerated schedule, encountered a series of accidents and near-accidents during construction. At one
point the building’s owner dismissed its general contractor and barred an inspection company from bid-
ding on future company projects.
The hotel was erected using the “fast-track” method, a fairly common procedure in which con-
struction proceeds before all drawings are complete. With a $40 million construction loan outstanding and
all building costs soaring, the owner wanted the hotel up and open as quickly as practical.
Design changes are common on fast-track projects, making clear communications more critical
than usual. The owners of the building had circulated a 27-page procedures manual explaining the proper
channels for design changes and approved drawings. But the procedures weren’t always followed, and
other mistakes slipped in. Because some connections were misplaced on the drawings, for instance, work-
ers installed a sweeping cantilevered stairway without fully attaching it to a wall.
The investigation found that the skywalks fell as a result of a design change made during a tele-
phone call between the structural engineering company and the steel fabricator. Stress calculations would
have shown that the redesigned skywalks were barely able to support their own weight, let alone the
weight of dozens of dance spectators. However, court depositions of the two engineers who made the tel-
ephone redesign indicate that each person assumed it was the other’s responsibility to make new calcula-
tions, and neither did.
Edward Pfrang, then chief of the structures division of the National Bureau of Standards and a
participant in the investigation, says, “One thing that’s clear after . . . [this] failure and a few others is that
there isn’t a clear-cut set of standards and practices defining who is responsible in the construction pro-
cess.”
discussion questions for bonus case 8-1
1. Who was responsible for the collapse? Explain.
2. Identify several key time points at which the problem could have been corrected.
8-88
3. Is this a failure of planning, organizing, leading, or controlling?
notes on discussion questions for bonus case 8-1
1. Who was responsible for the collapse? Explain.

Identifying who is to blame is the function of the legal system. Clearly, many people shared in the
blame, but not necessarily legally. Such a case shows the dangers of trying to get a project done quickly
instead of safely.
2. Identify several key time points at which the problem could have been corrected.
During construction, during the safety inspection, when the times were set for competition—
safety considerations don’t take place at any one time. They must be in mind at all times.
3. Is this a failure of planning, organizing, leading, or controlling?

This failure occurred at all three stages: (1) At the planning stage because the project was hurried.
(2) At the organization stage because responsibility was not made clear. (3) At the control stage because
periodic inspections should have found the flaws.
This case is based on the collapse of the skywalk at the Kansas City Hyatt Regency in 1981.
Hundreds of lawsuits were filed against its owner, Hallmark Cards Inc., its operator, Hyatt Hotels Corp,
and against the building companies involved. Millions of dollars in damage claims have been paid out.
8-89
bonus case 8-2

CREATING CROSS-FUNCTIONAL TEAMS
The Direct Response Group (DRG) at Capital Holding is a direct marketer of life, health, proper-
ty, and casualty insurance. In the past, it sold a mass-produced product to a mass market. Over time, how-
ever, sales slowed, profits eroded, and the company decided it had to refocus its efforts. That meant, for
one thing, selling to particular, identifiable customers and giving those customers a customized prod-
uct/service package that was world class, enabling the company to compete globally.
An analysis of the corporate culture showed that people were more concerned with pleasing their
bosses than pleasing the customer. People hoarded information instead of sharing information because the
people with information had power. The information system had to be changed to encourage sharing.
Organizational change began with a vision statement that emphasized caring, listening to, and sat-
isfying customers one-on-one. To accomplish that goal, the company formed a cross-functional team to
study the sales, service, and marketing processes and completely redesign those functional areas. The idea
was to have a world-class customer-driven company. That meant gathering as much information as possi-
ble about customers.
Frontline customer-contact people were empowered with user-friendly information systems that
made it possible for one contact person, working with a support team, to handle any question that custom-
ers had. Management used external databases to get detailed information on some 15 million consumers.
The combined internal and external databases were used to develop custom-made products for specific
customer groups.
The whole company was focused on satisfying customer wants and needs. That meant changing
processes within the firm so that they were geared toward the customer. For example, one case worker is
now attached to each customer, and that case worker is responsible for following an application through
the entire approval and product design process. Previously, many people handled the application, and no
one person was responsible for it.
A pilot program was started whereby a customer-management team was formed to serve 40,000
customers. The team consisted of 10 customer service representatives and their support team (a marketer,
an expert in company operations, and an information systems person). Employees are now rewarded for
performance, and merit raises are based on team performance to encourage team participation.
1. Are traditional bureaucracies set up to provide custom-made products to individual consumers?

Could they be, or is it always better to have customer-oriented teams design such products?
2. Anyone who has worked in team situations has discovered that some members of the team work
harder than others; nonetheless, the whole team is often rewarded based on the overall results, not
individual effort. How could team evaluations be made so that individual efforts could be recog-
nized and rewarded?
3. What service organizations, private or public, would you like to see become more customer ori-
ented? How could this case be used as a model for that organization?
4. What are some major impediments to implementing customer-oriented teams in service organiza-
tions?
8-90
1. Are traditional bureaucracies set up to provide custom-made products to individual consumers?

Could they be, or is it always better to have customer-oriented teams design such products?
Traditional bureaucracies are organizations that have many layers of management who set rules
and regulations and participate in all decisions. Such an organization, by definition, would be unable to
swiftly respond to customer needs. Decision making needs to be placed close to the customer, not in suc-
cessive layers of management.
2. Anyone who has worked in team situations has discovered that some members of the team work
harder than others; nonetheless the whole team is often rewarded based on the overall results,
not individual effort. How could team evaluations be made so that individual efforts could be rec-
ognized and rewarded?
Team contributions are team contributions and difficult to isolate as individual efforts. In fact, the
purpose of team organization is to combine the best efforts of many individuals rather than relying on on-
ly one. Team members exercise informal pressure to ensure continued quality effort. Such informal pres-
sure is much more effective than organizational efforts.
3. What service organizations, private or public, would you like to see become more customer ori-
ented? How could this case be used as a model for that organization?
The chances are that almost every student’s list will contain (1) the U.S. Postal Service and (2)
your school. This case shows that the entire organization must be committed to the customer-oriented
team approach for it to be effective. Such an approach would be difficult in a public organization such as
USPS. The potential for creating a customer-oriented school should be interesting to pursue.
4. What are some of the major impediments to implementing customer-oriented teams in service
organizations?
Service organizations are quite different from product-producing organizations in that there is no
distance between the production of the service and the customer. The service is created when the custom-
er receives it. Most service organizations already have a customer-oriented focus. This case shows, how-
ever, that much improvement can be made in the delivery of that service.
8-91
bonus case 8-3

OFFICE ALUMNI
While few people would describe getting laid off or fired as a “graduating” from their company,
many businesses have created social networking sites for their “alumni” as the poor economy continues to
take its toll on American jobs. Whether an employee leaves voluntarily or is shown the door with a pink
slip, companies like IBM, Lockheed-Martin, and Dow Chemical have created LinkedIn and Facebook
sites that allow former workers to keep in touch, even if they move on to competing companies.
Part of the draw of these alumni networks is to provide a centralized spot for “boomerang” em-
ployees (those who leave the company only to be hired again later). As the deepening recession forces
companies to continue laying off staff, alumni networks keep the connection between company and indi-
vidual alive. Even if a person does not end up boomeranging, alumni networks have other benefits. Ideas
and insights shared between employees new and old on the network can be mutually beneficial. Many
sites feature inside industry news and job leads. Some alumni networks even offer exclusive deals on
health insurance for former employees.
Many companies are drawn to private social networks because it allows them to track and study
the topics being discussed on the site’s forums. Using online tools and software, employers can effective-
ly map out the goings on of not only the company, but also the skills and interests of the network’s con-
tributors. These tracking methods often help companies find the proper employee to suit their needs. In
one such instance, an accounting firm used its tracking software to rehire 31 boomerangs.
As for the disgruntled employees who would rather defame their former employer rather than
boomerang back in, trolling and angry dissention appear to be rare occurrences on the alumni networks.
Many execs say that a company’s most outraged alums choose to air their grievances on sites that are not
controlled by the company.x
1. Will the presence of such alumni sites help the image of participating companies?
2. How do the alumni sites serve as a research base for participating companies?
1. Will the presence of such alumni sites help the image of participating companies?
It seems very likely that will be the net effect. The alumni sites are similar to a customer follow-
up so highly recommended in marketing.
2. How do the alumni sites serve as a research base for participating companies?
Companies are able to track and study topics discussed on the site’s forums. This puts them in touch
with the thoughts of employees and ex-employees concerning the company and its operations.
8-92
endnotes
i
Source: Davd A. Kaplan, “Starbucks: The Art of Endless Transformation,” Inc., June 2014.
ii
Source: Matthew Shaer, “The Boss Stops Here,” New York, June 16, 2013.
iii
Sources: “The Costs of the Manhattan Project,” The Brookings Institute, www.brook.edu; “The Manhattan Pro-
ject: A New and Secret World of Human Experimentation,” ACHRE Report, Department of Energy,
www.eh.doe.gov; Miguel A. Bracchini, “Appendix: Key Figures in the Manhattan Project,” University of Texas at
Austin, www.me.utexas.edu; Colonel Cole C. Kingseed, “Racing for the Bomb: General Leslie R. Goves, the Man-
hattan Project’s Indispensable Man,” Parameters, March 22, 2003; Phillip Morrison, “The Manhattan Project’s
Taskmaster,” American Scientist, November 1, 2003.
iv
Sources: Craig Torres and Anthony Field, “Campbell’s Quest for Productivity,” Bloomberg Businessweek, No-
vember 24, 2010; Vivien Lou Chen and Timothy R. Homan, “Small Businesses Keep a Lid on Hiring,” Bloomberg
Businessweek, January 6, 2011.
v
Source: Mehul Srivastava and Moira Herbst, “The Return of the Outsourced Job,” Bloomberg Businessweek,
January 11, 2010.
vi
Source: Liz Welch, “A Third Way to Pay,” Inc., July-August 2014.
vii
Source: Sarah Shannon, “Fashion Retailer ASOS Sets Up Shop on Facebook,” Bloomberg Businessweek, Febru-
ary 17, 2011.
viii
Source: Leigh Buchanan, “Bizarre Hiring Rituals,” Inc., March 1, 2010.
ix
The Internet is a dynamic, changing information source. Web links noted of this manual were checked at the time
of publication, but content may change over time. Please review the website before recommending it to your stu-
dents.
x
Source: Stephen Baker, “You’re Fired—But Stay in Touch,” BusinessWeek, May 4, 2009.
8-93
Another random document with
no related content on Scribd:
desde su entrada en la fúnebre capilla sintió que su magnánimo
corazón se arrugaba y comprimía.
—Sí, sí; perdono, perdono a todo el mundo —balbució el reo
fijando otra vez toda su atención en los ladrillos del piso—. Vamos ya..
¿No es hora?
Pero su ánimo, rápidamente abatido, forcejeó iracundo en las
tinieblas y se rehizo. Fue como si se hubiera dado un latigazo. La
dosis de energía que desplegara en aquel momento era tal, que solo
estando muerta hubiera dejado la mísera carne de responder a ella
Tenía Sarmiento entre las manos su pañuelo; y apretando los dedos
fuertemente sobre él y separando las manos, lo partió en dos pedazos
sin rasgarlo. Cerrando los ojos murmuraba:
—¡Cayo Graco!... ¡Lucas!... ¡Dios que diste la libertad al mundo...!
El verdugo mostró un saco negro. Era la hopa que se pone a los
condenados para hacer más irrisorio y horriblemente burlesco e
crimen de la pena de muerte. Cuando el delito era de alta traición, la
hopa era amarilla y encarnada. La de Sarmiento era negra
Completaba el ajuar un gorro también negro.
—Venga la túnica —dijo preparándose a ponérsela—. Reputo e
saco como una vestidura de gala y el gorro como una corona de
laurel.[4]
[4] Estas palabras las dijo el valeroso patriota ahorcado el 24 de
agosto de 1825. Su noble y heroico comportamiento en las últimas
horas, da en cierto modo carácter histórico al personaje ideal que es
protagonista de esta obra.
Después le ataron las manos y le pusieron un cordel a la cintura, a

cuyas operaciones no hizo resistencia, antes bien, se prestó a ellas
con cierta gallardía. Incapacitados los movimientos de sus brazos
llamó a Sola y le dijo:
—Hija mía, ven a abrazar por última vez a tu viejecillo bobo.
La huérfana lo estrechó en sus brazos, y regó con sus lágrimas e
cuello del anciano.
—¿A qué vienen esos lloros? —dijo este sofocando su emoción—
Hija de mi alma, nos veremos en la gloria, a donde yo he tenido la
suerte de ir antes que tú. De mi imperecedera fama en el mundo, tú
sola, tú serás única heredera, porque me asististe y amparaste en mis
últimos días. Tu nombre, como el mío, pasará de generación en
generación... No llores: llena tu alma de alegría, como lo está la mía
Hoy es día de triunfo; esto no es muerte, es vida. El torpe lenguaje de
los hombres ha alterado el sentido de todas las cosas. Yo siento que
penetra en mí la respiración de los ángeles invisibles que están a m
lado, prontos a llevarme a la morada celestial... Es como un fresco
delicioso..., como un aroma delicado... Adiós..., hasta luego, hija mía..
No olvides mis dos recomendaciones, ¿oyes? Vete con ese hombre...
¿oyes?..., los apuntes... Adiós, mi glorioso destino se cumple... ¡Viva
yo! ¡Viva Patricio Sarmiento!
Desprendieron a Sola de sus brazos; tomola en los suyos el alcaide
para prestarle algún socorro, y don Patricio salió de la capilla con paso
seguro.
El padre Alelí le ató un crucifijo en las manos, y Salmón quiso
ponerle también una estampa de la Virgen; pero opúsose a ello el reo
diciendo:
—Con mucho gusto llevaré conmigo la imagen de mi Redentor
cuyo ejemplo sigo; pero no esperen vuestras paternidades que yo
vaya por la carrera besando una estampita. Adelante.
Al llegar a la calle, presentáronle el asno en que había de montar, y
subió a él con arrogantes movimientos, diciendo:
—He aquí la más noble cabalgadura cuyos lomos han oprimido
héroes antiguos y modernos. Ya estoy en marcha.
Al llegar a la calle de la Concepción Jerónima y ver el inmenso
gentío que se agolpaba en las aceras y en los balcones, en vez de
amilanarse, como otros, se creció, se engrandeció, tomando
extraordinaria altitud. Revolviendo los ojos en todas direcciones, arriba
y abajo, decía para sí:
«Pueblo, pueblo generoso, mírame bien, para que ningún rasgo de
mi persona deje de grabarse en tu memoria. ¡Oh! ¡Si pudiera yo
hablarte en este momento!... Soy Patricio Sarmiento, soy yo, soy tu
grande hombre. Mírame y llénate de gozo, porque la libertad, por quien
muero, renacerá de mi sangre, y el despotismo que a mí me inmola
perecerá ahogado por esta misma sangre, y el principio que yo
consagro muriendo, lo disfrutarás tú viviendo, lo disfrutarás por los
siglos de los siglos».
El murmullo del pueblo crecía entre los roncos tambores, y a él le
pareció que toda aquella música se juntaba para exclamar:
—¡Viva Patricio Sarmiento!
El padre Alelí le mostraba el crucifijo que en su mano llevaba, y le
decía que consagrase a Dios su último pensamiento. Después e
venerable fraile rezaba en silencio, no se sabe si por el reo o por sus
jueces. Probablemente sería por estos últimos.
Al llegar a la plazuela, Sarmiento extendió la vista por aquel mar de
cabezas, y viendo la horca, dijo:
—¡Ahí está!... Ahí está mi trono.
Y al ver aquello, que a otros les lleva al postrer grado de
abatimiento, él se engrandeció más y más, sintiendo su alma llena de
una exaltación sublime y de entusiasmo expansivo.
—Estoy en el último escalón, en el más alto —dijo—. Desde aqu
veo al mísero género humano, abajo, perdido en la bruma de sus
rencores y de su ignorancia. Un paso más, y penetraré en la eternidad
donde está vacío mi puesto en el luminoso estrado de los héroes y de
los mártires.
Al pie de la horca, rogáronle los frailes que adorase al crucifijo, lo
que hizo muy gustoso, besándolo y orando en voz alta con entonación
vigorosa.
—Muero por la libertad como cristiano católico —exclamó—. ¡Oh
Dios a quien he servido, acógeme en tu seno!
Quisieron ayudarle a subir la escalera fatal; pero él
desprendiéndose de ajenos brazos, subió solo. El patíbulo tenía tres
escaleras: por la del centro subía el reo, por una de las laterales e
verdugo y por la otra el sacerdote auxiliante. Cada cual ocupó su
puesto. Al ver que el cordel rodeaba su cuello, Sarmiento dijo con
enfado:
—¿Y qué? ¿No me dejan hablar?
Los sacerdotes habían empezado el Credo. Callaron. Juzgando que
el silencio era permiso para hablar, el patriota se dirigió al pueblo en
estos términos:
—Pueblo, pueblo mío, contémplame y une tu voz a la mía para
gritar: ¡Viva la...!
Empujole el verdugo y se lanzó con él.
Cayeron de rodillas los sacerdotes que habían permanecido abajo
y elevando el crucifijo, exclamaron consternados:
—¡Misericordia, Señor!
La muchedumbre lanzó el trágico murmullo que indicaba su
curiosidad satisfecha y su fúnebre espanto consumado.
El padre Alelí dijo tristemente:
—Desgraciado, sube al limbo.
XXIX
¿Qué sabía él?... A pesar de ser fraile discreto y gran sabedor de

teología, ¿qué sabía él si su penitente había ido al limbo, o a otra
parte? ¿Quién puede afirmar a dónde van las almas inflamadas en
entusiasmo y fe? ¿Habrá quien marque de un modo preciso la esfera
donde el humano sentido merecedor de asombro y respeto, se trueca
en la enajenación digna de lástima? Siendo evidente que en aquella
alma se juntaban con aleación extraña la excelsitud y la trivialidad
¿quién podrá decir cuál de estas cualidades a la otra vencía?
Glorifiquémosle todos. Murió pensando en la página histórica que no
había de llenar, y en la fama póstuma que no había de tener. ¡Oh, Dios
poderoso! ¡Cuántos tienen esta con menos motivo, y cuántos ocupan
aquella habiendo sido tan locos como él, y menos, mucho menos
sublimes!
fin de «el terror de 1824»
Madrid, octubre de 1877.

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what’s new in this edition 8.3

brief chapter outline and learning objectives 8.5

lecture outline and lecture notes 8.7

PowerPoint slide notes 8.51

lecture enhancers 8.76

critical thinking exercises 8.83

bonus cases 8.88

additions to the 11th edition:

revisions to the 11th edition:

deletions from the 10th edition:

brief chapter outline

 Getting to Know JENNA LYONS, of J. Crew

II. THE CHANGING ORGANIZATION

III. DECISIONS TO MAKE IN STRUCTURING ORGANIZATIONS

IV. ORGANIZATIONAL MODELS

V. MANAGING THE INTERACTIONS AMONG FIRMS

VI. ADAPTING TO CHANGE

VII. CREATING A CHANGE-ORIENTED ORGANIZATIONAL CULTURE

Getting to Know JENNA LYONS of J. CREW

PPT 8-2 LEARNING OBJECTIVES

PPT 8-3 JENNA LYONS

Jenna Lyons • Joined J. Crew in 1990 as a junior

• Worked her way up the ladder by

• Her management style is

PPT 8-4 NAME that COMPANY

Name that company!

(See complete PowerPoint slide notes on page 8.51.)

PPT 8-5 REORGANIZATION is for

• Many companies are reorganizing, especially those

Reorganization Is for Everyone in decline. Including:

A lesson in accountability from Kenneth Olsen, founder of Digi-

PPT 8-6 STRUCTURING an ORGANIZATION

Structuring an Organization • Create a division of labor

decisions You own a lawn-mowing business and are aware of

• What do you do?

PPT 8-7 • What are the

tomers are demanding.

II. THE CHANGING ORGANIZATION

PPT 8-8 THE CHANGING ORGANIZATION

• Often change in organizations is due to evolving

The Changing Organization business environments:

• Customer expectations have also changed --

PPT 8-9 HOW MUCH CHANGES

How Much Changes in a Decade? What?

Source: Fast Company, www.fastcompany.com, accessed March 2014. 8-9

PPT 8-10 PRODUCTION CHANGED

Production Changed Organization • Mass production of goods led to complexities in

Design their production costs by

• The average cost of

goes down as production levels increase.

PPT 8-11 FAYOL’S PRINCIPLES

Fayol’s Principles • Unity of command

vii. CLEAR COMMUNICATION CHAN-