ORGANIZATIONAL DEVELOPMENT AND CHANGE

Organization coming together people and resources to form a unit.

Organizational Environment: those forces

outside its boundaries that can impact it. Forces can change over time and are made up of Opportunities and Threats. Opportunities: openings for managers to enhance revenues or open markets. New technologies, new markets and ideas. Threats: issues that can harm an organization. economic recessions, oil shortages. Managers must seek opportunities and avoid threats.

General Environment
Technological Forces Global Forces

Task Sociocultural Environment

Competitors
Forces

Supplier s

Firm

Economic Customers
Forces

Distributors Political & Legal Forces Demographic Forces

Technologica l Customers Labor Market Competitors

General Environment

Task Environment

Management

Suppliers

Internal Environment

General environment affects indirectly

Task environment
- Affects directly - Influences operations and performances

Internal environment elements within the

organizations boundaries

Consists of the wide economic, technological, demographic and similar issues.

Economic forces: affect the national

economy and the organization.

Managers usually cannot impact or control these. Forces have profound impact on the firm. Includes interest rate changes, unemployment rates, economic growth. When there is a strong economy, people have more money to spend on goods and services.

Technological forces: skills & equipment

used in design, production and distribution.

Socialcultural forces: result from changes

in the social or national culture of society.

Result in new opportunities or threats to managers. Often make products obsolete very quickly. Can change how we manage.

Social structure refers to the relationships between people and groups. Different societies have vastly different social structures. National culture includes the values that characterize a society. Values and norms differ widely throughout the world. These forces differ between cultures and over time.

Demographic forces: result from

changes in the nature, composition and diversity of a population.

These include gender, age, ethnic origin, etc. For example, during the past 20 years, women have entered the workforce in increasing numbers. 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.

Political-legal forces: result from

changes in the political arena.

Global forces: result from changes in

international relationships between countries.

These are often seen in the laws of a society. Today, there is increasing deregulation of many state-run firms.

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.

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 and are in a good bargaining position. Managers often prefer to have many, similar suppliers of each item.

Distributors: organizations that help

others to sell goods.

Customers: people who buy the goods.

Compaq Computer first used special computer stores to sell their computers but later sold through discount stores to reduce costs. Some distributors like Wal-Mart have strong bargaining power. They can threaten not to carry your product. Usually, there are several groups of customers. For Compaq, there are business, home, & government buyers.

Competitors: other organizations that

produce 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 and result from: Economies of scale: cost advantages due to large scale production. Brand loyalty: customers prefer a given product.

Labor Market Forces Affecting Organizations today

Growing need for computer literate information technology workers

Necessity for ongoing investment in human resources recruitment, education, training Effects of international trading blocks, automation, outsourcing, shifting facility locations upon labor dislocations

14

Birth

Growth Shakeout Maturity Decline

Reflects the changes that take place in an industry over time. Birth stage: firms seek to develop a winning technology.

Growth stage: Product gains

VHS vs. Betamax in video, or 8-track vs. cassette in audio.

customer acceptance and grows rapidly.

New firms enter industry, production improves, distributors emerge.

Shakeout stage: at end of growth,

there is a slowing customer demand.

Maturity stage: most customers have

bought the product, growth is slow.

Competitor rivalry increases, prices fall. Least efficient firms fail and leave industry.

Decline stage: falling demand for the

product.

Relationships between suppliers, distributors more stable. Usually, industry dominated by a few, large firms.

Prices fall, weaker firms leave the industry.

Managers must measure the complexity of the environment and rate of environmental change. Environmental complexity: deals with the number and possible impact of different forces in the environment.

The more forces, the more complex the mangers job becomes.

Managers must pay more attention to forces with larger impact. Usually, the larger the organization, the greater the number of forces managers must oversee.

Managers can counter environmental threats by reducing the number of forces.

All levels of managers should work to minimize the potential impact of environmental forces.

Many firms have sought to reduce the number of suppliers it deals with which reduces uncertainty.

Examples include reduction of waste by first line managers, determining competitors moves by middle managers, or the creation of a new strategy by top managers.

Managers can create new organizational structures to deal with change.

Managers also create mechanistic or organic structures.

Many firms use specific departments to respond to each force. Mechanistic structures have centralized authority. Roles are clearly specified. Good for slowly changing environments. Organic structures authority is decentralized. Roles overlap, providing quick response to change.

Managers must gain access to information needed to forecast future issues.

Boundary spanning is the practice of relating to people outside the organization.

Rod Canions forecast of Compaqs future was wrong due to his incorrect view of the environment. 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.

Figure 3.5

Managers in boundary spanning roles feedback information to other managers

Environmental scanning is an important boundary spanning activity.

Gatekeeping: the boundary spanner decides what information to allow into organization and what to keep out.

Includes reading trade journals, attending trade shows, and the like.

Interorganizational Relations: firms need alliances globally to best utilize resources.

Must be careful not to let bias decide what comes in.

Managers can become agents of change and impact the environment.

Change in Environment affects

Environment

Organization

Managerial actions impact

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 effectively direct? Where does decision-making authority lie? To what degree will there be rules and regulations to direct employees and managers?

All businesses have to organise what they do A clear structure makes it easier to see which part of the business does what There are many ways to structure a business

By function: arranging the business according to what each section or department does By product or activity: organising according to the different products made By area: geographical or regional structure

By customer: where different customer groups have different needs By process: where products have to go through stages as they are made What are the advantages/disadvantages of different types of business structure?

Strategy

Organization Size

Why Do Structures Differ?

Technology Environment

Organizational Chart of a Manufacturing Firm

Board member Board member Board member Board member

Chief Executive Officer President V.P Sales/ Marketing

Industrial Products DirectorSales Consumer Products DirectorSales

Legal counsel

V.P Human Resources

Industrial Products DirectorHuman Resources Consumer Products DirectorHuman Resources

V.P Production
Industrial Products DirectorProduction Consumer Products DirectorProduction

V.P Research and Development

Industrial Products DirectorR&D Consumer Products DirectorR&D

Western Region Industrial Products Sales Manager

Eastern Region Industrial Products Sales Manager

Western Eastern Region Region Consumer Consumer Products Products etc. Sales Sales Manager Manager

etc.

etc. etc.

etc. etc.

etc. etc.

etc. etc.

This depends on the business type, size and structure used Lets look at a functional structure:
Chief Executive

Board of Directors

Production

Marketing

Accounts

Personnel

IT

Advantages Specialisation each department focuses on its own work Accountability someone is responsible for the section Clarity know your and others roles

Disadvantages Closed communication could lead to lack of focus Departments can become resistant to change Coordination may take too long Gap between top and bottom

A division is a collection of functions working together 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 then report to corporate management.

Product structure: divisions created according to the

type of product or service. Geographic structure: divisions based on the area of a country or world served. Market structure: divisions based on the types of customers served.

A Product Organization
Chief Executive Officer

President

Product Group 1

Product Group 2

Product Group 3

ProSales duction

R&D

Acctg.

ProSales duction

R&D

Acctg

ProSales duction

R&D

Acctg.

CEO Corporation

Corporate Managers

Washing Machine Division

Lighting Division

Television Division

Advantages Clear focus on market segment helps meet customers needs Positive competition between divisions Better control as each division can act as separate profit centre

Disadvantages Duplication of functions (e.g. different sales force for each division) Negative effects of competition Lack of central control over each separate division

CEO Corporation

Corporate Managers

Northern Region

Western Region

Southern Region

Eastern Region

CEO Corporation

Corporate Managers

Large Business Customers

Small Business Customers

Educational Institutions

Individual Customers

Advantages

Disadvantages

Serve local needs better Positive competition More effective communication between firm and local customers

Conflict between local and central management Duplication of resources and functions

Matrix structure: managers group people by function

and 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 cause problems.

Functional manager gives different directions than product manager and employee cannot satisfy both. Product Team Structure: no 2-way reporting and the members are permanently assigned to the team and empowered to bring a product to market.

CEO Func. Managers Sales Design Production

Team Managers

Product team A Product team B Product team C

Product Team

= two boss employee

CEO

Func. Managers
Sales Design Production

Manufacturing

Manufacturing

Manufacturing

= Product Team Manager

= Team member

Organisational design Choosing and implementing structures that best arrange resources to serve the organisations mission and objectives A problem-solving activity that should be approached from a contingency perspective Key directions in structural change:
Shift from vertical to horizontal

Shift from authority-driven to task-driven.

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44

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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45

 Contingency

perspective on bureaucracy asks the questions:

When is a bureaucratic form a good choice for an organisation? What alternatives exist when it is not a good choice?

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46

 The

environment determines the answers to these questions.

A mechanistic design works in a stable environment. An organic design works in a changing and uncertain environment.

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47

 Adaptive

organisations

Operate with a minimum of bureaucratic features Operate with cultures that encourage worker empowerment and participation.

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48

 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 of coordination.
Chapter 11 49

Environment

Strategy

Determine design or organizational structure

Technology

Human Resources

The environment: The quicker the environment

changes, the more problems face managers.

Structure must be more flexible when environmental change is rapid.

Usually need to decentralize authority. Strategy: Different strategies require the use of different structures.

A differentiation strategy needs a flexible structure, low cost may need a more formal structure. Increased vertical integration or diversification also requires a more flexible structure.

Technology: The combination of skills, knowledge, tools,

equipment, computers and machines used in the organization.

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.

Low task variety and high analyzability allow managers to rely on established procedures.

Flexible structure works best in these conditions.

 Small

one-of-a-kind products.

Batch Technology: produces small quantities of

Mass

Based on the skills of the workers who need a flexible structure.

make high volumes of standard products.

Production Technology: automated machines

Continuous

Workers perform repetitive tasks so a formal structure works well.

systems of automatic machines.

Process Technology: totally mechanized

Workers must watch for unexpected problems and react quickly. A flexible structure is needed here.

 Human

organizational structure.

Resources: the final factor affecting

Higher skilled workers who need to work in teams usually need a more flexible structure. Higher skilled workers often have professional norms (CPAs, physicians).

Managers must take into account all four factors (environment, strategy, technology and human resources) when designing the structure of the organization.

Thank you
and Good Day