The Changing Organization

BUILDING AN ORGANIZATION FROM THE BOTTOM UP

 Changing Organization

• Change is due to evolving business environments

– More global competition.
– Declining economy.
– Faster technological change.
 Changing Organization

– Pressure to protect the environment.

– Customer expectations
• Consumers want high-quality products with fast, friendly, and inexpensive
service .
Changing Organization
THE DEVELOPMENT OF ORGANIZATION DESIGN
 Development of Organization Design

• Mass production.
• Economies of scale.
• Fayol's principle of organization.
• Max Weber and organizational theory.
 Mass Production and Economies of Scale

• Mass production
– Led to complexities in organizing businesses.
– Average cost of goods decreases as production levels rise.
• Economies of scale: Companies can reduce their production
costs by purchasing raw materials in bulk.
 Fayol's Principle of Organization

• Employees have no more than one boss.

• Organizations should have:
– Unity of command.
– Hierarchy of authority.
– Division of labour.
– Subordination of individual interests to the general interest.
– Degree of centralization.
 Fayol's Principle of Organization

• Organizations are rigid and rarely respond to customers

quickly.

• Fayol's Principle of Organization

– Clear communication channels
– Order
– Equity
– Esprit de corps
 Max Weber and Organizational Theory

• Employees need to do as told.

• In addition to Fayol’s principles, Weber emphasized on:
– Job descriptions.
– Written rules, decision guidelines, and detailed records.
– Consistent procedures, regulations, and policies.
– Staffing and promotion based on qualifications.
 Turning Principles into Organization Design

• Hierarchy
• Chain of command
• Organizational chart
• Bureaucracy
• Empowerment
 Turning Principles into Organization Design

• Hierarchy: System where one person is at the top of an

organization
– Ranked or sequential ordering from the top down.
• Chain of command: Line of authority that moves from the top
of the hierarchy to the lowest level.
• Organizational chart: Visual display of the organizational
structure.
Organizational Charts - The Evolution of a Clothing Store
 Turning Principles into Organization Design

• Bureaucracy: Organization with many layers of managers who

set rules and regulations and oversee all decisions
– Can take weeks or months to have information passed down to
lower-level employees.
• Empowerment: Organizations give employees the authority to
make decisions on their own without consulting a manager.
 Everyone's Reorganizing

• Adjusting to changing markets is normal in capitalist

economies
– Seen with firms in decline.
• Companies must:
– Go back to basic organizational principles.
– Firm up the foundation.
 Building an Organization from the Bottom Up

• Creating a division of labour.

• Setting up teams or departments.
• Allocating resources and tasks.
• Establishing procedures.
• Adjusting to new realities.