Management and Organizing, Summaries of Business Ethics

Download Management and Organizing and more Summaries Business Ethics in PDF only on Docsity!

E N G R. R A L P H A N T H O N Y YA N Z A

Coordinating Functions and Divisions

At the functional level, the manufacturing

function typically has a short-term view; its major goal is to keep costs under control and get the product out the factory door on time.

Product development function has a long-term

viewpoint because developing a new product is a relatively slow process and high product quality is seen as more important than low costs.

At the divisional level, in a company with a product structure, employees may become concerned more with

making their division’s products a success than with the profitability of the entire company. They may refuse, or simply not see, the need to cooperate and share information or knowledge with other divisions.

The problem of linking and coordinating the activities of different functions and divisions

becomes more acute as the number of functions and divisions increases.

We look first at how managers design the hierarchy of authority to coordinate functions

and divisions, so they work together effectively. Then we focus on integration and examine

the different integrating mechanisms managers can use to coordinate functions and

divisions.

Designing Organizational Structure

A simplified picture of the hierarchy of authority and the span of control of managers in McDonald’s in 2011. Skinner is the manager who has ultimate responsibility for McDonald’s performance, and he has the authority to decide how to use organizational resources to benefit McDonald’s stakeholders. Don Thompson, next in line, is president and COO and is responsible for overseeing all of McDonald’s global restaurant operations. Unlike the other managers, Bensen is not a line manager, someone in the direct line or chain of command who has formal authority over people and resources. Rather, Bensen is a staff manager, responsible for one of McDonald’s specialist functions, finance. Worldwide chief operations officer Jeff Stratton is responsible for overseeing all functional aspects of McDonald’s overseas operations, which are headed by the presidents of world regions: Europe; Canada, and Latin America; and Asia/Pacific, Middle East, and Africa. Jan Fields is president of McDonald’s U.S. operations and reports to Thompson. Below Fields are the other main levels or layers in the McDonald’s domestic chain of command—executive vice presidents of its West, Central, and East regions, zone managers, regional managers, and supervisors. A hierarchy is also evident in each company- owned McDonald’s restaurant. At the top is the store manager; at lower levels are the first assistant, shift managers, and crew personnel. McDonald’s managers have decided that this hierarchy of authority best allows the company to pursue its business-level strategy of providing fast food at reasonable prices—and its stock price exploded in the 2000 s as its performance increased.

Designing Organizational Structure

TALL AND FLAT ORGANIZATIONS

A tall organization has many levels of authority relative to company size; a flat organization has fewer levels relative to company

size. As a hierarchy becomes taller, problems that make the organization’s structure less flexible and slow managers’ response to changes in the organizational environment may result.

Designing Organizational Structure

CENTRALIZATION AND DECENTRALIZATION OF AUTHORITY

Another way in which managers can keep the organizational hierarchy flat is by decentralizing authority—that is, by giving lower- level managers and nonmanagerial employees the right to make important decisions about how to use organizational resources.

If managers at higher levels give lower-level employees the responsibility of making important decisions and only manage by

exception, then the problems of slow and distorted communication noted previously are kept to a minimum. Moreover, fewer

managers are needed because their role is not to make decisions but to act as coaches and facilitators and to help other employees

make the best decisions.

Decentralizing authority allows an organization and its employees to behave in a flexible way even as the organization grows and becomes taller. This is why managers are so interested in empowering employees, creating self-managed work teams, establishing cross-functional teams, and even moving to a product team structure. These design innovations help keep the organizational architecture flexible and responsive to complex tasks and general environments, complex technologies, and complex strategies. Although more and more organizations are taking steps to

decentralize authority, too much decentralization has certain disadvantages.

Designing Organizational Structure

CENTRALIZATION AND DECENTRALIZATION OF AUTHORITY

Also, too much decentralization can cause a lack of communication among functions or divisions; this prevents the synergies of cooperation from ever materializing, and organizational performance suffers. Top managers must seek the balance between centralization and decentralization of authority that best meets the four major contingencies an organization faces. If managers are in a stable environment, are using well-understood technology, and are producing stable kinds of products (such as cereal, canned soup, or books), there is no pressing need to decentralize authority, and managers at the top can maintain control of much of organizational decision making. However, in uncertain, changing environments where high-tech companies are producing state-of-the-art products, top managers must often empower employees and allow teams to make important strategic decisions so the organization can keep up with the changes taking place. No matter what its environment, a company that fails to control the balance between centralization and decentralization will find its performance suffering. If divisions, functions, or teams are given too much decision-making authority, they may begin to pursue their own goals at the expense of organizational goals. Managers in engineering design or R&D, for example, may become so focused on making the best possible product they fail to realize that the best product may be so expensive few people are willing or able to buy it.

Designing Organizational Structure

Integrating and Coordinating Mechanisms

Designing Organizational Structure

Integrating and Coordinating Mechanisms

LIAISON ROLES Managers can increase coordination among functions and divisions by establishing liaison roles. When the volume of contacts between two functions increases, one way to improve coordination is to give one manager in each function or division the responsibility for coordinating with the other. These managers may meet daily, weekly, monthly, or as needed. A liaison role is illustrated; the small dot represents the person within a function who has responsibility for coordinating with the other function. Coordinating is part of the liaison’s full-time job, and usually, an informal relationship develops among the people involved, greatly easing strains between functions. Furthermore, liaison roles provide a way of transmitting information across an organization, which is important in large organizations whose employees may know no one outside their immediate function or division. TASK FORCES When more than two functions or divisions share many common problems, direct contact and liaison roles may not provide sufficient coordination. In these cases, a more complex integrating mechanism, a task force, may be appropriate. One manager from each relevant function or division is assigned to a task force that meets to solve a specific, mutual problem; members are responsible for reporting to their departments on the issues addressed and the solutions recommended.

Task forces are often called ad hoc committees because they

are temporary; they may meet on a regular basis or only a few times. When the problem or issue is solved, the task force is no longer needed; members return to their normal roles in their departments or are assigned to other task forces. Typically task force members also perform many of their normal duties while serving on the task force.

Designing Organizational Structure

Strategic Alliances, B2B Network Structures, and IT

Strategic alliance An agreement in which managers pool or share their organization’s resources and knowhow with a foreign company and the two organizations share the rewards and risks of starting a new venture. Network structure A series of strategic alliances that an organization creates with suppliers, manufacturers, and/or distributors to produce and market a product. Outsource To use outside suppliers and manufacturers to produce goods and services. Boundaryless Organization An organization whose members are linked by computers, faxes, computer-aided design systems, and video teleconferencing and who rarely, if ever, see one another face-to-face. Knowledge Management System A company-specific virtual information system that allows workers to share their knowledge and expertise and find others to help solve ongoing problems. Business-to business (B 2 B) network A group of organizations that join together and use IT to link themselves to potential global suppliers to increase efficiency and effectiveness.

Organizational Motivation

‘Motivation’ often receives no precise conceptual definition, and implicit and

explicit meanings of the term commonly differ. The concept, however, covers at

least one area of meaning:

‘Motivation refers to the degree of readiness of an organism to pursue some

designated goal and implies the determination of the nature and locus of the forces

inducing the degree of readiness.’

Considering all of these factors together must be underscored, particularly since the

common emphasis has been on motivating behavior with a specific direction, such

as high satisfaction or high output. The danger is that all low producers are

considered unmotivated, when they may be highly motivated towards goals

other than, for example, high output.

The point is essential in practice because altering the direction of intense desire

presents a whole different set of issues than motivating the phlegmatic. Similarly, it

has frequently been considered that the focus of motivational factors is on the formal

organization or the person. As will be shown, the assumption is overly limiting.

Organizational Motivation

Characteristics of Motivation

Some important characteristics of motivation are:

1. Individuals differ in their motivation

2. Motivation is highly situational

3. Motivation change

4. Motivation is expressed differently

5. Sometimes the individual himself is not aware of his motivation

6. Motivation is complex

Performance Management and Appraisal

A. Target Setting

An employee’s targets could be stated in terms of achieving a certain standard

➢ Ongoing performance criteria, such as a specified departmental staff attendance rate or the attainment of minimum quality levels

that is to be maintained indefinitely; or as an ad hoc goal

Performance Management and Appraisal

There is forced coordination of activities—between

departments, between junior and senior management,

and between short-term and long-term goals. The

targets set should adhere to the following guidelines:

A. Targets should be precise, unambiguous and, if

possible, expressed numerically. Generic objectives

such as ‘increase profits’ or ‘cut costs are not

acceptable.

B. Targets should relate to the crucial and primary

elements of employees’ jobs and not too trivial matters.

C. Targets should be consistent.

D. Each target should be accompanied by a statement of

how it is to be achieved, by when, the resources

necessary, and how and where these will be acquired.

A good way to assess the usefulness of objectives is to ask

whether they pass the SMART test,

i.e., targets need to be:

S pecific

M easurable

A greed between boss and worker

R ealistic

T ime related

Both parties should share a

common perspective on the

situation intended to exist

after the achievement of

objectives and on how soon

results may reasonably be

expected.

Performance Management and Appraisal

B. Appraisal

A successful appraisal is one that results in:

▪ Reasonable targets which are mutually agreed upon, not arbitrarily determined.

▪ Recognition of the employee’s achievements.

▪ Clear identification of obstacles to improved performance (organizational problems as well as individual difficulties).

▪ Enthusiastic pursuit of measurable objectives.

▪ Two-way communication between boss and worker.

Appraisal reviews are usually categorized into three types:

1. Performance reviews - which analyze employees’ past successes and failures with a view to improving future performance.

2. Potential reviews - which assess subordinates’ suitability for promotion and/or further training.

3. Reward reviews for determining pay rises. It is a well-established principle that salary assessments should occur well after the

performance and potential reviews have been completed, for two reasons:

• Performance reviews examine personal strengths and weaknesses in order to improve efficiency. If salary matters are discussed during

these meetings, they might dominate the conversation.

• Ultimately, salary levels are determined by market forces of supply and demand for labour. Staff shortages could cause the firm to pay

high wages quite independent of the objective worth of particular workers.