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Ch.08 Adapting Organizations to Today’s Market

Economies of scale
The situation in which companies can reduce their production costs of they can purchase raw materials in bulk; the average cost goes down as productions levels increase.
A system in which one person is at the top of the organization and there is a ranked or sequential ordering from the top down of managers who are responsible to that person.
Chain of command
The line of authority that moves from the top of hierarchy to the lowest level.
An organization with many layers of managers who set rules and regulations and oversee all decisions.
Centralized Authority
An organization structure in which decision making authority is maintained at the top level of management.
Decentralized Authority
An organization structure in which decision-making authority is delegated to lower-level managers more familiar with local conditions than headquarters management could be.
Span of control
The optimal number of subordinates a manager supervises or should supervise.
Tall organization structure
An organization structure in which the pyramidal organization chart would be quite tall because of the various levels of management.
Flat organization structure
An organization structure that has few layers of management and a broad span of control.
The dividing of organizational functions into separate units.
Line organization
An organization that has direct two-way lines of responsibility, authority, and communication running from the top to the bottom of the organization, with all people reporting to only one supervisor.
Line personnel
Employees who are part of the chain of command that is responsible for achieving organizational goals.
Staff personnel
Employees who advise and assist line personnel in meeting their goals.
Matrix organization
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.
Cross-functional self-managed teams
Groups of employees from different departments who work together on a long-term basis.
Using communications technology and other means to link organizations and allow them to work together on common objectives.
Real time
The present moment or the actual time in which something takes place.
Virtual corporation
A temporary networked organization made up of replaceable firms that join and leave as needed.
Comparing an organization’s practice’s, processes, and products against the world’s best.
Core competencies
Those functions that the organization can do as well as or better than any other organization in the world.
Digital natives
Young people who have grown up using the internet and social networking.
Redesigning an organization so that it can more effectively and efficiently serve its customers.
Inverted organization
An organization that has contact people at the top and the chief executive officer at the bottom of the organization chart.
Organizational (or corporate) culture
Widely shared values within an organization that provide unity and cooperation to achieve common goals.
Formal organizational
The structure that details lines of responsibility, authority, and positions, that is, the structure shown on the organization charts.
Informal organization
the system that develops spontaneously as employees meet and form cliques, relationships, and lines of authority outside the formal organization.
According to the text the key to success for organizations is:
The success of a firm often depends on management’s ability to identify each worker’s strengths and assign the right tasks to the right person.
Describe: Division of labor:
Setting up teams or departments to do specific tasks (like production and accounting)
Describe: Job specialization:
Dividing tasks into smaller jobs. For example, you might divide mowing into smaller tasks, such as mowing, trimming, and raking.
Structuring and organization consists of:
a) Devising a division of labor
b) Setting up teams or departments to do specific tasks
c) Assigning responsibility and authority to people
d) allocating resources
e) assigning specific tasks
f) establishing procedures for accomplishing organizational objectives
What does and organization chart show?
Relationships amoung people: who is accountable for the completition of specific work, and who reports to whom.
wHat has created so much change in organizatitions?
Competitors and what customers are demanding.
Identify and briefly describe 10 of Fayol’s “principles” of organizing.
a) Unity of command: Each worker is to report to one and only one boss.
b) Hierarchy of authority: All workers should know to whom they report.
c) Division of labor: Functions are to be divided into areas of specialization such as production, marketing, and finance.
d) Subordination of individual interests to the general interest: Workers are to think of themselves as a coordinated team.
e) Authority: Managers have the right to give orders and the power to enforce obedience.
f) Degree of centralization: The amount of decision-making power vested in top management should vary by circumstances.
g) Clear communication channels: All workers should be able to reach others in the firm quickly and easily.
h) Order: Materials and people should be placed and maintained in the proper location
i) Equity: A manager should treat employees and peers with respect and justice
j) Espirit de corps: A spirit of pride and loyalty should be created among people in the firm.
The process of rule making often led to…
rather rigid organizations that haven’t always responded quickly to consumer requests.
Identify four characteristics of Max Weber’s bureaucracy.
a) Job descriptions
b) Written rules, decisions, guidelines, and detailed records
c) Consistent procedures, regulations, and policies
d) Staffing and promotion based on qualifications
How do workers today differ from those during the time that Weber was writing, and how did that affect management?
Workers during Weber’s time were much less educated and trained than today’s workers. Weber felt that a firm would do well if employees would do what managers told them to do. The less decision making employees had to do, the better.
In a company with many layers of management, what is the process for an employee to introduce a work change? What did Weber mean by the term “bureaucrat”?
The chain of command, this is the line of authority that moves from the top of the hierarchy to the lowest level.
When employees have to ask their manager for permission to make a change…
the process may take so long that customers become annoyed.
How are companies reorganizing to make customers happy?
Companies are reorganizing to let employees make decisions in order to please customers no matter what.
What are the advantages and disadvantages of having centralized authority?
a) Greater top-management control
b) More efficiency
c) Simpler distribution system
d) Stronger brand/corporate image

a) Less responsiveness to customers
b) Less empowerment
c) Inter organizational conflict
d) Lower morale away from headquarters

What are the advantages and disadvantages of decentralized authority?
a) Better adaptation to customer wants
b) More empowerment of workers
c) Faster decision making
d) Higher morale

a) Less efficiency
b) Complex distribution system
c) Less top-management control
d) Weakened corporate image

Why does span of control narrow at higher levels of the organization?
Because work becomes less standardized and managers need more face-to-face communication.
What is the trend in today’s organizations regarding span of control?
The trend today is to expand the span of control as organizations adopt empowerment, reduce the number of middle managers, and hire more talented and better educated lower-level employees.
Compare span of control in tall and flat organizational structures.
In a tall organization there are many levels of management, and span of control is small. In a flat organization, there are fewer layers of management, and the span of control gets broader.
Why can flat structures respond more readily to customer demands?
Flat structures can respond more readily to customer demands because lower-level employees have authority and responsibility for making decisions.
What are the advantages and disadvantages of the traditional functional structure?
1) Employees can develop skills in depth and progress within a department as they master more skills.
2) The company can achieve economies of scale by centralizing all the resources it needs and locate various experts in that area.
3) Employees can coordinate work within the function, and top-management can easily direct and control various departments’ activities.

1) Departments may not communicate well. for example, production may be so isolated from marketing that it does not get needed feedback from customers.
2) Employees may identify with their department’s goal 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; rather, they tend to become narrow specialists.
5) Department members may engage in groupthink (they think alike) and may need input from outside to become more creative.

What are five methods of grouping, or departmentalizing, workers?
1) By product
2) By function
3) By customer group
4) By geographical location
5) By process
The decision about which way to departmentalize depends on…
the nature of the product and the customers.
A hybrid form of departmentalization is being used when….
firms use a combination of departmentalization. Ex: a company could departmentalize by function, geographic location, and customer groups.
Name four types of organizational structures.
1) Line organizations
2) Line-and-staff organizations
3) matrix-style organizations
4) cross-functional self-managed teams
What are the disadvantages of a line organization, for a larger organization?
a) Being too inflexible
b) Having few specialists or experts to advise people along the line
c) having lengthly lines of communications
d) May be unable to handle complex decisions relating to thousands of products and tons of paperwork
What is the difference between line and staff personnel?
Line personnel are responsible for directly achieving organizational goals and include production workers, distribution people, and marketing personnel. Staff personnel advise and assist line personnel in meeting their goals, and include those in marketing research, legal advising, information technology, and human resource management.
In a matrix system, a product manager can:
borrow people from different departments to help design and market new product ideas.
This us important in industries in which the emphasis is on…
This is important in industries where competition is stiff, and the life cycle of new ideas is short, and where the emphasis is on new product development, creativity, special projects, rapid communication, and interdepartmental teamwork.
What are the advantages and disadvantages of a matrix structure?
a) It gives managers flexibility in assigning people to projects
b) It encourages inter organizational cooperation and teamwork
c) It can produce creative solutions to product development problems
d0 it makes efficient use of organizational resources

a) It’s costly and complex
b) It can confuse employees about where their loyalty belongs- with the project manager or with their functional unit
c) It requires good interpersonal skills as well as cooperative employees and managers to avoid communication problems.
d) It may only be a temporary solution to a long-term problem

A potential problem with the teams created by matrix management is…
the project teams are not permanent. They form to solve a problem and then break up. There is little chance for cross-functional learning, because teams work together so briefly.
An answer to the disadvantage of the teams created my matrix management is:
to establish long-lived teams and empower them to work closely with suppliers, customers, and others to quickly and efficiently bring out new, high-quality products while giving great service.
Describe the characteristics of cross-functional teams.
Cross- functional teams consist of groups of employees from different departments who work together on a long term basis. These teams are empowered to make decisions without having to seek the approval of management. Barriers between functions fall when these interdepartmental teams are created.
Why should cross functional teams include customers, suppliers and distributors?
A cross-functional team that includes customers, suppliers, and distributors goes beyond organizational boundaries. When suppliers and distributors are in other countries, cross-functional teams may share market information across national boundaries.
What is meant by the concept of transparency?
Transparency occurs when a company is so open to other companies that electronic information is shared as if the companies were one company.
How have the networking, real time and the concept of transparency, changed the way information is shared between organizations?
Organizations are so closely linked via networking that each organization knows what the others are doing, in real time. Since data is so readily available to organizational partners, companies are so open to one another that the solid walls between them have become transparent. Because of this integration, two companies can now work together so closely that they operate as two departments within one company.
Most organizations are no longer self-sufficient or self-contained. Many modern organizations are part of a vast network of global businesses. An organizational chart showing what people do within any one organization may not be complete because the company is actually part of a larger system of firms.
What is the result of those changes on organizational design and structure?
Organizational structures tend to be flexible and changing. Experts from one company may work for one company one year, and another the next year. Organizations deal with each other on a temporary basis and the ties between organizations are no longer permanent. These are often called virtual corporations because they are made up of replaceable firms or individuals that join the network and leave it as needed.
How does benchmarking lead to outsourcing, and ultimately to a firm’s core competencies?
If an organization can’t do as well as the best, it will try to outsource the function to an organization that specializes in that function. When a firm ha s completed its outsourcing process, the remaining functions are its core competencies, those functions it can do as well as or better than any other organization in the world.
Why is introducing change in an organization difficult?
Over time, an organization can get stuck in its ways. Employees have a tendency to say, “That’s the way we’ve always done things. It it isn’t broken, don’t fix it.” Managers also get complacent.
How are companies using the Internet to help adapt to changes?
36. The Internet has created new opportunities to ask customers questions and provide them with information. Companies are coordinating the efforts of traditional departments with their Internet staff to create easy-to-manage interactions. Companies are also training older employees to be more tech savvy to become familiar with social networking sites such as Facebook and Twitter as well as other applications.
Illustrate and describe an inverted organization
Empowerment frontline workers
(Often in teams)

Support personnel

Top management

An inverted organization has contact people at the top and the chief executive officer at the bottom. There are few layers of management.

What is a manager’s job in an inverted organization?
To assist and support frontline people, not boss them around.
How does the inverted organization support front line personnel? how does this change the requirements for front-line personnel?
Companies based on this organization structure frontline personnel with internal and external databases, advanced communication systems, and professional assistance.

Naturally, this means frontline people have to be better educated, better trained, and better paid than in the past.

How is the culture of an organization reflected?
Usually the culture of an organization is reflected in its stories, traditions, and myths.
Describe the kind or organizational cultures that the best organizations have, including the key to a productive culture.
Some of the vest organizations have cultures that emphasize to others, especially customers. The atmosphere reflects friendly, caring people who enjoy working together to provide a good product at a reasonable price. They key to a productive culture is mutual trust.
What are two organizational systems that all companies have?
a) Formal organization
b) informal organization
What is a drawback of the formal organization? What is a benefit of the formal organization?
A drawback of the formal organization is that it is often too slow and bureaucratic to let the organization adapt quickly. A benefit of the formal organization is that it does provide helpful guides and lines of authority for routine situations.
What is the drawback of the informal organization? What is the benefit?
The drawback of informal organization is that it is often too unstructured and emotional to allow careful, reasoned decision making on critical matters. A benefit is that it is extremely effective in generating creative solutions to short -term problems and creating camaraderie and teamwork among employees.
Describe the importance of the “grapevine” in the organization.
The informal organization’s nerve center is the grapevine, the system through which unofficial information flows between and among managers and employees.
How have managers’ views toward the informal organization changed in the new more open organization?
In more open organizations, managers and employees work together to set objectives and design procedures. The informal organization is an invaluable managerial asset that can promote harmony among workers and establish the corporate culture.
A system in which one person is at the top of the organization and there is a ranked or sequential ordering from the top down of managers who are responsible to that person is called a(n)
The chain of command is the line of authority that moves from the ( ) of a hierarchy to the ( ) level.
Examples of employees considered to be staff personnel would include:
Legal advisers
information technology workers
Real time is the ( ) moment or the ( ) time in which something takes place.
present; actual
According to Fayol’s equity principle, a manager should treat employees and peers with ( ) and ( )
respect; justice
According to Fayol’s order principle, ( ) and ( ) should be placed and maintained in the proper location.
materials; people
According to Fayol, all workers should be able to reach each other quickly and easily though clear….
communication channels
A managers span of control can be narrow with few employees to supervise, or broad with more employees match the advantages to either a narrow or a broad span of control.
More control by top management – Narrow
Reduced costs – Broad
More sepsonsiveness to customers – broad
Closer supervision – Narrow
More empowerment – Broad
Line managers are those who have the authority to:
Adjust to changing conditions
Issue orders
Enforce dicipline
The Fayol principle esprit de corps indicates that a spirit of ( ) and ( ) should be created among people in the firm.
pride and loyalty
IN economies of scale, a company buys raw materials in bulk so that the average cost of goods goes ( ) as the production levels increase.
tHe organizational culture outlines a company’s widely shared ( ) and provides unity and cooperation.
The unity of command principle states that each person should report to only one manager in order to prevent ( ).
Because Nike is superior at designing and marketing athletic shoes, this is considered to be their:
Core competency
Identify the advantages and disadvantages to decentralized authority:
adaptation to customer wants – advantage
empowerment of workers – advantage
faster decision making – advantage
less efficiency – disadvantage
complex distribution system – disadvantage
weakend corporate image – disadvantage
If the structure of an organization is a tall pyramid, it would likely to have ( ) decision making.
Which of Fayol principle states that the amount of decision-making power vested in top management should vary by circumstances?
Degree of centralization
Under unity of command, each worker is to report to only ( ) boss.
The organization structure that puts less emphasis on top management and more emphasis on working employees is called a(n):
Inverted structure
When Fayol refers to the subordination of individual interests to the general interest, he believes that workers are to think of themselves as a(n):
coordinated team
The bureaucratic principles proposed by Fayol and Weber are most likely to apply to an organization that:
employs many unskilled workers
wants to eliminate decision making for lower level employees
An organization sets up rules and regulations to give its managers more control over employees. This type of organization manages by rules is often considered inefficient due to the levels of control and is known as a:
A bank has a department for customer accounts and another department for corporate accounts. The bank is departmentalizing by:
customer groups
A temporary networked organization made up of replaceable firms that join and leave as needed is called a(n):
virtural corporation
The concept that states all workers should know to whom they report to is referred to as the:
Hierarchy of authority
A self-managed team:
is empowered to make decisions withough management approval
What would exemplify employee empowerment?
an employee is able to offer free delivery to close a sale without manager approval
worker can approve a sale price withough management approval
an employee is able to take customer returns without manager approval
When isolation between the production and marketing departments is so much that the production does not get appropriate feedback it is an example of a(n):
disadvantage to departmentalization
A large organization might use a flat organization structure in order to:
match the friendliness of small firms
When designing responsive organizations, what decisions do firms have to make?
decide between centralization versus decentralization
decide the span of control
choose between tall or flat structures
An important driver of change is customer expectations. Consumers today expect ( ) products and fast, friendly ( ) at a reasonable cost.
high-quality; service
A surgical team has a various skilled personnel that work together on a long-term basis to accomplish daily surgeries. A group like this represent what type of organizational model?
Cross-functional self-managed teams
As effective as the informal organization may be in creating group cooperation, it can still be equally powerful in resisting management directives. Identify some examples of employee resistance.
Employees may spread incorrect rumors
being absent
employee theft
Innovations like the mass production of cars can create economies of scale. However, over time this benefit becomes less meaningful because:
other companies copy the process
When a firm like Target compares itself to Walmart to improve its practices or processes in order to become better than Walmart it is exemplifying benchmarking for a(n) ( ) purpose.
What elements are typical of an organizational chart?
first line supervisors
What would be a positive result of departmentalization by product?
it results in good customer service
Matrix organizations violate traditional managerial principles, yet can be more efficient. this contradiction can be attributed to:
it can produce creative solutions to problems
it encourgaes interorganizational coperation and teamwork

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