Turning Principles into Organizational Design
Following the concepts of theorists like Fayol and Weber, managers in the latter part of the 1900s began designing organizations so that managers could control workers. Most organizations are still organized that way, with everything set up in a hierarchy. A hierarchy is 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 and others who are responsible to that person. Since one person can’t keep track of thousands of workers, the top manager needs many lower-level managers to help. The chain of command is the line of authority that moves from the top of the hierarchy to the lowest level. Figure 8.1 >-P. 244-< shows a typical hierarchical organization structure.
Some organizations have a dozen or more layers of management between the chief executive officer (CEO) and the lowest-level employees. If employees want to introduce work changes, they ask a supervisor (the first level of management), who asks his or her manager, who asks a manager at the next level up, and so on. Eventually a decision is made and passed down from manager to manager until it reaches the employees. Such decisions can take weeks or months to be made. Max Weber used the word bureaucrat to describe a middle manager whose function was to implement top management’s orders. Thus, bureaucracy came to be the term used for an organization with many layers of managers who set rules and regulations and oversee all decisions.
When employees have to ask their managers for permission to make a change, the process may take so long that customers become annoyed. Such consumer discontent may happen either in a small organization such as a flower shop or in a major organization such as an automobile dealership or a large construction firm. The employee has to find the manager, get permission to make the requested change, come back to the customer, explain what the management decision was, and so on. Has this happened to you in a department store or some other organization? Since many customers want efficient service and they want it now slow service is simply not acceptable in many of todays competitive firms.3
To make customers happier, some companies are reorganizing to give employees power to make more decisions on their own. Rather than always having to follow strict rules and regulations, they are encouraged to please the customer no matter what. For example, at Nordstrom, a chain of upscale department stores, an employee can accept a return from a customer without seeking managerial approval, even if the garment was not originally sold at that store. As you read earlier, giving employees such authority and responsibility to make decisions and please customers is called empowerment >-P. 20-< Remember that empowerment works only when employees are given the proper training and resources to respond.
The Changing Organization
Never before in the history of business has so much change been introduced so quickly sometimes too quickly.1 As you learned in earlier chapters, much of that change is due to the changing business environment, including more global competition and faster technological change. Equally important to many businesses is the change in customer expectations.2 Consumers today expect high-quality products and fast, friendly service at a reasonable cost. Managing change, then, has become a critical managerial function. That sometimes includes changing the whole organizational structure. Many organizations in the past were designed more to facilitate management than to please the customer. Companies designed many rules and regulations to give managers control over employees.
We shall explore in brief the history of organizational design so that you can see what the foundations are. Then we shall explore the newest forms of organization, forms that are being designed to better serve today’s customer. Though often dramatic and disruptive, such changes keep companies competitive in today’s dynamic business environment.
- What do the terms division of labor and specialization mean?
- What are the principles of management outlined by Fayol?
- What did Weber add to the principles of Fayol?
Now that you have learned some of the basic principles of organization, pause and think of where you have already applied such concepts yourself or have been involved with an organization that did. Did you find that a division of labor was necessary and helpful? Were you assigned specific tasks or were you left on your own to decide what to do? Were promotions based strictly on qualifications, as Weber suggested? What other factors may have been considered? What problems seem to emerge when an organization gets larger?