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ORGANIZATIONAL DEVELOPMENT ANDCHANGE
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Organization coming together people andresources to form a unit.
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Organizational Environment:those forcesoutside its boundaries that can impact it. Forces can change over time and are made up
of Opportunities and Threats. Opportunities:openings for managers toenhance revenues or open markets.
New technologies, new markets and ideas. Threats:issues that can harm anorganization.
economic recessions, oil shortages.
Managers must seek opportunities and avoidthreats.
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Distributors
Firm
TaskEnvironment
Suppliers
CompetitorsCustomers
GeneralEnvironment
EconomicForcesGlobalForces
SocioculturalForces
DemographicForces
TechnologicalForces
Political &Legal Forces
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Management
InternalEnvironment
Cmptos
Customers
LbMak
GeneralEnvironment
TaskEnvironment
Technological
Suppliers
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6
General environmentaffects indirectly
Task environment- Affects directly- Influences operations and performances
Internal environmentelements within theorganizations boundaries
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Consists of the wide economic,technological, demographic andsimilar issues. Managers usually cannot impact or control
these. Forces have profound impact on the firm.
Economic forces:affect the nationaleconomy and the organization.
Includes interest rate changes,unemployment rates, economic growth. When there is a strong economy, people
have more money to spend on goods andservices.
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ec no og ca orces:s s equ pmenused in design, production anddistribution. Result in new opportunities or threats to
managers. Often make products obsolete very quickly. Can change how we manage.
Socialcultural forces:result from changesin the social or national culture ofsociety. Social structure refers to the relationships
between people and groups. Different societies have vastly different social
structures.
National culture includes the values thatcharacterize a society. Values and norms differ widely throughout the
world. These forces differ between cultures and over
time.
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Demographic forces:result fromchanges in the nature, composition anddiversity of a population. These include gender, age, ethnic origin, etc.
For example, during the past 20 years, women
have entered the workforce in increasingnumbers.
Currently, most industrial countries are aging.
This will change the opportunities for firms
competing in these areas. New demand for health care, assisting living
can be forecast.
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Political-legal forces:result fromchanges in the political arena. These are often seen in the laws of a society. Today, there is increasing deregulation of
many state-run firms.
Global forces:result from changes ininternational relationships betweencountries. Perhaps the most important is the increase in
economic integration of countries.
Free-trade agreements (GATT, NAFTA, EU)decreases former barriers to trade. Provide new opportunities and threats to
managers.
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Task Environment:forces from suppliers,distributors, customers, and competitors. Suppliers:provide organization with
inputs
Managers need to secure reliable input sources. Suppliers provide raw materials, components, and
even labor. Working with suppliers can be hard due to
shortages, unions, and lack of substitutes.
Suppliers with scarce items can raise the price andare in a good bargaining position.
Managers often prefer to have many, similarsuppliers of each item.
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Distributors:organizations that helpothers to sell goods. Compaq Computer first used special computer
stores to sell their computers but later soldthrough discount stores to reduce costs.
Some distributors like Wal-Mart have strongbargaining power.
They can threaten not to carry your product.
Customers:people who buy the goods. Usually, there are several groups of customers.
For Compaq, there are business, home, &government buyers.
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Competitors:other organizations thatproduce similar goods. Rivalry between competitors is usually the
most serious force facing managers.
High levels of rivalry often means lower prices. Profits become hard to find.
Barriers to entry keep new competitors out andresult from:
Economies of scale: cost advantages due tolarge scale production.
Brand loyalty: customers prefer a givenproduct.
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Labor Market Forces Affecting Organizations
today Growing need for computer literate information
technology workers
Necessity for ongoing investment in humanresources recruitment, education, training
Effects of international trading blocks,automation, outsourcing, shifting facilitylocations upon labor dislocations
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Birth Growth Shakeout Maturity Decline
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Reflects the changes that take placein an industry over time. Birth stage:firms seek to develop awinning technology.
VHS vs. Betamax in video, or 8-track vs.cassette in audio.
Growth stage:Product gainscustomer acceptance and growsrapidly. New firms enter industry, production
improves, distributors emerge.
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Shakeout stage:at end of growth,there is a slowing customer demand. Competitor rivalry increases, prices fall. Least efficient firms fail and leave industry.
Maturity stage:most customers havebought the product, growth is slow. Relationships between suppliers, distributors
more stable. Usually, industry dominated by a few, large
firms. Decline stage:falling demand for theproduct.
Prices fall, weaker firms leave the industry.
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Managers must measure thecomplexity of the environment andrate of environmental change. Environmental complexity:deals withthe number and possible impact ofdifferent forces in the environment. Managers must pay more attention to forces
with larger impact. Usually, the larger the organization, the
greater the number of forces managers must
oversee. The more forces, the more complexthe mangers job becomes.
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Managers can counter environmentalthreats by reducing the number offorces. Many firms have sought to reduce the
number of suppliers it deals with whichreduces uncertainty. All levels of managers should workto minimize the potential impact ofenvironmental forces.
Examples include reduction of waste by firstline managers, determining competitorsmoves by middle managers, or the creationof a new strategy by top managers.
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Managers can create new organizationalstructures to deal with change. Many firms use specific departments to respond
to each force. Managers also create mechanistic or
organic structures. Mechanistic structures have centralized
authority. Roles are clearly specified.
Good for slowly changing environments. Organic structures authority is decentralized.
Roles overlap, providing quick response tochange.
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Managers must gain access toinformation needed to forecast futureissues. Rod Canionsforecast of Compaqs future was wrong
due to his incorrect view of the environment.
Boundary spanning is the practice of relatingto people outside the organization. Seek ways to respond and influence stakeholder
perception. By gaining information outside, managers can make
better decisions about change. More management levels involved in spanning,
yields better overall decision making.
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Figure 3.5
Managers in boundaryspanning roles feedbackinformation to other managers
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Environmental scanningis an importantboundary spanning activity. Includes reading trade journals, attending
trade shows, and the like. Gatekeeping:the boundary spannerdecides what information to allow intoorganization and what to keep out.
Must be careful not to let bias decide whatcomes in.
Interorganizational Relations:firmsneed alliances globally to best utilizeresources. Managers can become agents of change and
impact the environment.
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Environment Organization
Change in Environment affects
Managerial actions impact
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To what degree are tasks subdivided into separate jobs?
On what basis will jobs be grouped together?
To whom do individuals and groups report?
How many individuals can a manager efficiently and effectivelydirect?
Where does decision-making authority lie?
To what degree will there be rules and regulations to direct
employees and managers?
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All businesses have to organisewhat they do
A clear structure makes it easier to see whichpart of the business does what
There are many ways
to structure a business
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By function: arranging the business accordingto what each sectionor department does
By product or activity: organising accordingto the different products made
By area: geographical or regional structure
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By customer: where different customergroups have different needs
By process: where products have to gothrough stages as they are made
What are the advantages/disadvantages of
different types of business structure?
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Strategy
Why Do
StructuresDiffer?
OrganizationSize
Technology Environment
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Organizational Chart of a Manufacturing FirmBoard
memberBoard
memberBoard
memberBoard
member
ChiefExecutive
OfficerLegal
counsel
President
IndustrialProductsDirector-Human
Resources
ConsumerProductsDirector-Human
Resources
WesternRegion
IndustrialProducts
SalesManager
EasternRegion
IndustrialProducts
SalesManager
WesternRegion
ConsumerProducts
SalesManager
EasternRegion
ConsumerProducts
SalesManager
etc. etc. etc. etc. etc. etc. etc. etc. etc. etc.
IndustrialProductsDirector-
Production
ConsumerProductsDirector-
Production
IndustrialProductsDirector-
R&D
ConsumerProductsDirector-
R&D
V.P Researchand Development
V.P Sales/Marketing
V.P HumanResources
V.PProduction
IndustrialProductsDirector-
Sales
ConsumerProductsDirector-
Sales
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This depends on the business type, size andstructure used
Lets look at a functional structure:
Production Marketing Accounts Personnel IT
Board of Directors
Chief Executive
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Advantages Specialisation each
department focuses
on its own work Accountability
someone isresponsible for the
section Clarity know your
and others roles
Disadvantages Closed
communicationcould lead to lack
of focus Departments can
become resistantto change
Coordination
may take too long Gap between top and
bottom
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A division is a collection of functions workingtogether to produce a product. Divisions create smaller, manageable parts of a firm.
Divisions develop a business-level strategy to compete.
A division has marketing, finance, and other functions.
Functional managers report to divisional managers who thenreport to corporate management.
Product structure:divisions created according to thetype of product or service.
Geographic structure:divisions based on the area of acountry or world served.
Market structure: divisions based on the types ofcustomers served.
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A Product Organization
Pro-duction
Acctg.Sales R&DPro-
ductionAcctg.Sales R&D
Pro-duction
AcctgSales R&D
ProductGroup 2
ProductGroup 1
ProductGroup 3
President
ChiefExecutive
Officer
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Washing Machine
Division
Lighting
Division
Television
Division
CorporateManagers
CEO
Corporation
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Advantages Clear focus on
market segment
helps meetcustomers needs
Positive competitionbetween divisions
Better control as eachdivision can act asseparate profit centre
Disadvantages Duplication of
functions (e.g.different sales forcefor each division)
Negative effects ofcompetition
Lack of centralcontrol over eachseparate division
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Northern
Region
Western
Region
Southern
Region
Eastern
Region
CorporateManagers
CEO
Corporation
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Large Business
Customers
Small Business
Customers
Educational
Institutions
Individual
Customers
Corporate
Managers
CEO
Corporation
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Advantages Serve local needs
better
Positive competition More effective
communicationbetween firm and local
customers
Disadvantages Conflict between local
and central
management Duplication of
resources andfunctions
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Matrix structure:managers group people by functionand product teams simultaneously.
Results in a complex network of reporting relationships.
Very flexible and can respond rapidly to change.
Each employee has two bosses which can causeproblems.
Functional manager gives different directionsthan product manager and employee cannotsatisfy both.
Product Team Structure:no 2-way reporting and themembers are permanently assigned to the team andempowered to bring a product to market.
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CEOFunc.Managers
Sales Design ProductionProductteam AProductteam B
Productteam CProduct Team
= two boss employeeTmMangs
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CEOFunc.Managers
Sales Design Production
Manufacturing Manufacturing Manufacturing
= Product Team Manager = Team member
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Chapter 11 44
Organisational design Choosing and implementing structures that best
arrange resources to serve the organisationsmission and objectives
A problem-solving activity that should beapproached from a contingency perspective
Key directions in structural change: Shift fromvertical to horizontal
Shift from authority-driven to task-driven.
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Chapter 11 45
Classical view of bureaucracy The ideal organisational form
Bureaucratic designs feature:
clear-cut division of labour strict hierarchy of authority
formal rules and procedures
promotion based on competency.
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Chapter 11 46
Contingency perspective on bureaucracyasks the questions: When is a bureaucratic form a good choice for an
organisation?
What alternatives exist when it is not a goodchoice?
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Chapter 11 47
The environment determines the answers tothese questions. A mechanistic design works in a stable
environment.
An organic design works in a changing anduncertain environment.
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Chapter 11 48
Adaptive organisations
Operate with a minimum of bureaucratic features
Operate with cultures that encourage worker
empowerment and participation.
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Chapter 11 49
Mechanistic designs: Centralised Many rules and
procedures
Narrow spans of control
Specialised tasks Few teams and task
forces Formal and impersonal
means of coordination.
Organic designs: Decentralised
Fewer rules and
procedures Wider spans of
control
Shared tasks
Many teams and task
forces More informal and
personal means ofcoordination.
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Environment
Strategy
HumanResources
Technologyetermine designor organizationalstructure
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The environment: The quicker the environmentchanges, the more problems face managers.
Structure must be more flexible when environmentalchange is rapid.
Usually need to decentralize authority.Strategy:Different strategies require the use ofdifferent structures.
A differentiation strategy needs a flexible structure,low cost may need a more formal structure.
Increased vertical integration or diversification alsorequires a more flexible structure.
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Technology:The combination of skills, knowledge, tools,equipment, computers and machines used in theorganization. More complex technology makes it harder for managers to
regulate the organization. Technology can be measured by:
Task Variety: new problems a manager encounters. Task Analyzability: programmed solutions available
to a manager to solve problems. High task variety and low analyzability present many unique
problems to managers.
Flexible structure works best in these conditions. Low task variety and high analyzability allow managers to
rely on established procedures.
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Small Batch Technology:produces small quantities ofone-of-a-kind products.
Based on the skills of the workers who need a flexiblestructure.
Mass Production Technology:automated machinesmake high volumes of standard products. Workers perform repetitive tasks so a formal structure
works well.
Continuous Process Technology:totally mechanizedsystems of automatic machines.
Workers must watch for unexpected problems and reactquickly. A flexible structure is needed here.
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Human Resources:the final factor affectingorganizational structure.
Higher skilled workers who need to work in teamsusually need a more flexible structure.
Higher skilled workers often have professionalnorms (CPAs, physicians).
Managers must take into account allfour factors (environment, strategy,technology and human resources)when designing the structure of theorganization.
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Thank youandGood Day