9-1

Cha

pter

Cha

pter

Organizational AgilityOrganizational Agility

99

McGrawMcGraw--Hill/IrwinHill/IrwinManagement, 7/eManagement, 7/e Copyright Copyright ©© 2007 The McGraw2007 The McGraw--Hill Companies, Inc. All rights reserved.Hill Companies, Inc. All rights reserved.

9-3

Learning Objectives

After Studying Chapter 9, You will knowWhy it is critical for organizations to be responsive.The advantages of an organic organization structure.The strategies and dynamic organizational concepts that can be used to improve an organization’s responsiveness.How a firm can be both big and small.How firms organize to meet customer requirements.How firms organize around different types of technology.

9-4

Organizational Agility

It is change, continuing change, inevitable change, that is the dominant fact in society today. No sensible decision can be made any longer without taking into account not only the world as it is, but the world as it will be.

- Isaac Asimo

9-5

The Responsive Organization

In today’s fast-changing business environment, responsiveness – quickness, agility, the ability to adapt to changing demands – is vital to a firm’s survivalTwo broad forms of organizational structure include

Mechanistic organization – seeks to maximize internal efficiencyOrganic structure – an organizational form that emphasizes flexibility

9-6

The Responsive OrganizationMechanistic Organization Organic Structure

9-7

Strategy and Organizational Agility

Certain strategies, and the structures, processes, and relationships that accompany them, seem particularly well suited to improving an organization’s ability to respond quickly and effectively to the challenges it facesThese strategies and structures are based on:

Core competenciesStrategic AlliancesThe organization’s ability to learnThe organization’s ability to engage all its people in achieving organizational objectives

9-8

Organizing around Core Competencies

Core competence is the capability—knowledge, expertise, skill—that underlies a company’s ability to be a leader in providing a range of specific goods or servicesSuccessfully developing a world-class core competence opens the door to a variety of future opportunities; failure means being foreclosed from many markets

9-9

Organizing around Core Competencies

Using the core competency model effects the organization

Strategically it means the organization should commit to excellence and leadership in competencies before they commit to winning market shareOrganizationally this means that the corporation should be viewed as a portfolio of competencies, not just a portfolio of specific businesses

9-10

Organizing around Core Competencies

Managers who want to strengthen their firms’ competitiveness via core competencies need to focus on several related issues:

Identify existing core competenciesAcquire or build core competencies that will be important for the futureKeep investing in competencies so that the firm remains world-class and better than competitorsExtend competencies to find new applications and opportunities for the markets of tomorrow.

9-11

Strategic Alliances

A strategic alliance is a formal relationship created with the purpose of joint pursuit of mutual goalsIn a strategic alliance, individual organizations share administrative authority, form social links, and accept joint ownership

9-12

Strategic Alliances

Companies form strategic alliances to develop new technologies, enter new markets, and reduce manufacturing costsAlliances are often the fastest, most efficient way to achieve objectives

9-13

Strategic Alliances

9-14

The Learning Organization

Being responsive requires continually changing and learning new ways to actLearning faster than the competition is the only sustainable advantage according to some expertsA learning organization is an organization skilled at creating, acquiring, and transferring knowledge, and at modifying its behavior to reflect new knowledge and insights

9-15

The Learning Organization

There are 5 key ingredients to a learning organization

Their people engage in disciplined thinking and attention to details, making decisions based on data and evidence rather than guesswork and assumptionsThey search constantly for new knowledge, looking for expanding horizons and opportunities rather than quick fixes to current problems

9-16

The Learning Organization

5 key ingredients to a learning organizationThey carefully review both successes and failures, looking for lessons and deeper understandingLearning organizations benchmark—they identify and implement the best business practices of other organizations, stealing ideas shamelesslyThey share ideas throughout the organization via reports, information systems, informal discussions, site visits, education, and training

9-17

The High-Involvement Organization

Participative management is becoming increasingly popular as a way to create a competitive advantageHigh-Involvement Organizations are a type of organization in which top management ensures that there is consensus about the direction in which the business is heading

9-18

The High-Involvement Organization

Task forces, study groups, and other techniques are used to foster participation in decisions that affect the entire organizationContinual feedback to participants regarding how they are doing compared to the competition and how effectively they are meeting the strategic agenda is also fundamental to this type of organization

9-19

Organizational Size and Agility

One of the most important characteristics of an organization—and one of the most important factors influencing its ability to respond effectively to its environment—is its sizeLarge organizations

Are typically more bureaucraticJobs become more specializedAre more complex, which increases the need for control

9-20

The Case for Big

Alfred Chandler noted that big companies were the engine of economic growth throughout the 20th centurySize creates

Scale economies – lower costs per unit of productionEconomies of scope – materials and processes employed in one product can be used to make other related products

9-21

The Case for Small

Smaller companies canMove fastProvide quality goods and services to targeted market nichesInspire greater involvement from their people

Nimble, small firms frequently outmaneuver big bureaucracies; they introduce new and better products, and they steal market share

9-22

Being Big and Small

The challenge is to e both big and small and capitalize on the advantages of each

Small is beautiful for unleashing energy and speedSize offers market power when buying and selling

To regain the responsiveness of a small company some larger firms have had to downsize/rightsize

9-23

Customers and the Responsive Organization

The point of structuring a responsive, agile organization lies in enabling it to meet and exceed the expectations of its customersPerhaps no other aspect of the environment has had a more profound impact on organizing than a focus on customers All business units must take into account three key players

The companyThe competitionThe customer

9-24

Customers and the Responsive Organization

9-25

Customer Relationship Management

Customer relationship management (CRM) is a multifaceted process, typically mediated by a set of information technologies, that focuses on creating two-way exchanges with customers so that firms have an intimate knowledge of their needs, wants, and buying patternsCRM helps companies understand and anticipate the needs of current and potential customers

9-26

Customer Relationship Management

Customers want quality goods and service, low cost, innovative products, and speed; they are learning that somewhere an organization exists that will provide it allWorld class companies have learned that to provide customers with what they want they will need to continuously improve their process because the competition will catch up

9-27

Value Chain

The word customer now refers to the next process, or wherever the work goes nextThe value chain is a deeper way to understand how organizations can add customer value to their products and services

A value chain is the sequence of activities that flow from raw materials to the delivery of a product or service, with additional value created at each step

When the total value created—that is, what customers are willing to pay—exceeds the cost of providing the product or service, the result is the organization’s profit margin

9-28

Value Chain

9-29

Total Quality Management

Total Quality Management (TQM) is an integrative approach to management that supports the attainment of customer satisfaction through a wide variety of tools and techniques that result in high-quality goods and servicesTQM has been impacted greatly by

The work of W. Edwards DemingSix Sigma

9-30

ISO 9000

ISO 9000 is a series of quality standards developed by a committee working under the International Organization for Standardization to improve total quality in all businesses for the benefit of producers and consumers

9-31

Reengineering

Extending from TQM and a focus on organizing around customer needs, organizations also have embraced the notion of reengineering Key organizational systems and processes are examined in light of the answer to the following question:

If you were the customer, how would you like us to operate?

9-32

Technology and Organizational Agility

Broadly speaking technology can be viewed as the methods, processes, systems, and skills used to transform resources (inputs) into products (outputs)

9-33

Types of Technology Configurations

There are three basic technologies characterize how work is done

Small batch technologies will produce goods and services in low volumesLarge batch technologies produce goods and services in high volumeContinuous process technologies are processes that are highly automated and have continuous production flow

9-34

Organizing for Flexible Manufacturing

Mass customization is production of varied, individually customized products at the low cost of standardized, mass-produced productsTo accomplish mass customization companies organize around a dynamic network of relatively independent operating units

Each process or task is called a module

9-35

Organizing for Flexible Manufacturing

9-36

Organizing for Flexible Manufacturing

Computer-integrated manufacturing (CIM) encompasses a host of computerized production efforts linked together to optimize the production processFlexible factories are manufacturing plants that have short production runs, are organized around products, and use decentralized schedulingLean Manufacturing means an operation that is both efficient and effective; it strives to achieve the highest possible productivity and total quality, cost-effectively, by eliminating unnecessary steps in the production process and continually striving for improvement

9-37

Organizing for speed: Time-Based Competition

Time is emerging as the key competitive advantage that can separate market leaders from followersTime-based competition refers to strategies aimed at reducing the total time needed to deliver the product or service

Logistics is the movement of the right goods in the right amount to the right place at the right timeJust in Time is a system that calls for subassemblies and components to be manufactured in very small lots and delivered to the next stage of the production process just as they are neededSimultaneous engineering is a design approach in which all relevant functions cooperate jointly and continually in a maximum effort aimed at producing high-quality products that meet customers’ needs

9-38

Final thoughts

Successful organizations—and that includes the successful managers within them—do not sit

still. They do not follow rigid models but maintain structures, systems, organizational designs, and relationships that are adaptive—

always sensitive to changes in their environment and able to respond quickly, efficiently, and

effectively to them. Their managers focus constantly on exceeding customer expectations

and on continuous quality improvement, designing their systems and structures to help

them do just that.

9-39

Looking Ahead

Chapter 10: Human Resource ManagementHow companies use human resources management to gain competitive advantage.Why companies recruit both internally and externally for new hires.The various methods available for selecting new employees.Why companies spend so much on training and development.How to determine who should appraise an employee’s performance.How to analyze the fundamental aspects of a reward system.How unions influence human resources management.How the legal system influences human resources management.

9-40

Organic Structure

Jobholders have broader responsibilities that change as the need arisesCommunication occurs through advice and information rather than through orders and instructionsDecision making and influence are more decentralized and informalExpertise is highly valuedJobholders rely more heavily on judgment than on rulesObedience to authority is less important than commitment to the organization’s goalsEmployees depend more on one another and relate more informally and personally

Return

9-41

Downsizing and Rightsizing

Downsizing is the planned elimination of positionsRightsizing is a successful effort to achieve an appropriate size at which the company performs most effectivelyHow to ease the pain of downsizing

Avoid excessive hiring Choose positions to be eliminated by engaging in careful analysis and strategic thinkingTrain people to cope with the new situationIdentify and protect talented peopleGive special attention and help to those who have lost their jobsCommunicate constantly with people about the processEmphasize a positive future and people’s new roles in attaining it Return

9-42

Deming’s 14 Points

Create constancy of purpose—strive for long-term improvement rather than short-term profitAdopt the new philosophy—don’t tolerate delays and mistakesCease dependence on mass inspection—build quality into the process on the front endEnd the practice of awarding business on price tag alone—build long-term relationshipsImprove constantly and forever the system of production and service—at each stage

9-43

Deming’s 14 Points

Institute training and retraining—continual updating of methods and thinkingInstitute leadership—provide the resources needed for effectivenessDrive out fear—people must believe it is safe to report problems or ask for helpBreak down barriers among departments—promote teamworkEliminate slogans, exhortations, and arbitrary targets—supply methods, not buzzwords

9-44

Deming’s 14 Points

Eliminate numerical quotas—they are contrary to the idea of continuous improvementRemove barriers to pride in workmanship—allow autonomy and spontaneityInstitute a vigorous program of education and retraining—people are assets, not commoditiesTake action to accomplish the transformation—provide a structure that enables quality

Return

9-45

Six Sigma

An approach to total quality management that utilizes statistical tools to analyze the causes of product defectsAt Six Sigma a product or process is defect-free 99.99966 percent of the time

This is equivalent to less than 3.4 defects or mistakes per million

Return