4. organizing - amazon simple storage service · pdf fileaccounting functional ... theory x -...

4. Organizing

4.1 Organizational Charts and Designs

4.2 Centralized and Decentralized Organization

4.3 Span of Control

4.4 Authority and Unity of Command

4.5 Incentives and Motivation Tools

4.6 Maslow’s Hierarchy of Needs

4.7 McGregor’s Theory X and Theory Y

4.8 Expectancy Theory

4.9 Equity Theory

4.10 Herzberg’s 2 Factor Theory

4.11 Job Design

4.1 Organizational Charts and Designs

Organization How we bring people, resources, and information together to perform a task

Organization Chart The best way to show an organizational design

CEO

VP VP VP

HR Mgr

Middle Mgr Middle Mgr Middle Mgr Middle Mgr

Workers, employees, non-managerial personnel

Middle Mgr

Classic Line and Staff Organization

Organization Charts • Show connections

of positions and lines of authority

• Show general structure

• Do NOT show quality of managers or the nature of the work being done

CEO

Functional Organization

Production Marketing Finance

Mfg Quality Advertising Sales Accounting

Functional Organization

CEO

Product Organization

Paint &Primer Div.

CleaningCompounds

HomeProducts

Production

Marketing

Accounting

Production

Marketing

Accounting

Production

Marketing

Accounting

Product Organization

CEO

Geographic Organization

NorthAmericanDiv.

EuropeanDiv.

AsianDiv.

Production

Marketing

Accounting

Production

Marketing

Accounting

Production

Marketing

Accounting

Geographic Organization

Organization comes from planning. Design the way you plan to compete.

4.2 Centralized and Decentralized Organization

Centralization

Where in the organization key decisions are made

Centralization Centralized Organizations = Key decisions are made at the top

Decentralized Organizations = Key decisions are made at many levels

You cannot tell the degree of centralization by looking at the org chart

A Centralized Organization

CEO

Functional Organization

Production Marketing Finance

Mfg Quality Advertising Sales Accounting

Functional Organization

A Decentralized Organization

CEO

Paint &Primer Div.

CleaningCompounds

HomeProducts

Production

Marketing

Accounting

Production

Marketing

Accounting

Production

Marketing

Accounting

Large dispersed organizations often use a decentralized structure

CEO

Geographic Organization

NorthAmericanDiv.

EuropeanDiv.

AsianDiv.

Production

Marketing

Accounting

Production

Marketing

Accounting

Production

Marketing

Accounting

Geographic Organization

Centralized Organizations • Tend to reduce costs

by being efficient and standardized

• Most popular when you make only a few product types

• Not very flexible and may not work in unstable periods

Decentralized Organizations • More flexible and

better able to adapt to changing circumstances

• Popular when you make lots of different products or serve lots of different customer groups

• Typically higher costs than centralized

As the degree of centralization changes, an organization may need different managers.

4.3 Span of Control

Span of Control

How many people report directly to a manager

You can increase span of control when: • The manager can

easily monitor employees

• The employees have similar jobs

• The employees are well-trained and formally organized into teams

Span of Control = 3

VP

CEO

VP VP

CEO

VP

Span of Control = 6

CEO

Span of Control = 9

CEOVP

CEO

VP VP

Flattening the Organization

Tall (Vertical)

Flat (Horizontal)

The appropriate span of control depends on how much supervision employees need

Flattening Organizations

Flat Organization = Lower costs and better up/down communications

Tall Organization = Higher costs but managers have more time to plan and analyze

Always make your organization as flat as you can without losing control.

4.4 Authority and Unity of Command

Organizations have both formal and informal authorities. Both affect how things work

You can increase span of control when: • The manager can

easily monitor employees

• The employees have similar jobs

• The employees are well-trained and formally organized into teams

Line of Authority (Chain of Command)

VP

CEO

VP VP

Line of Authority

Unity of Command Each person should

be responsible to one clear superior who

directs them

Matrix Organization Poor Unity of Command

CEO

Paint &Primer

CleaningCompounds

HomeProducts

Production

Marketing

Accounting

Production

Marketing

Accounting

Production

Marketing

Accounting

Production

Marketing

Accounting

Formal and Informal Authority

Formal Authority = Based on organizational structure and policy

Informal Authority = Based on technical ability, seniority, reputation, and personal influence

All organizations have some degree of informal authority. Always that person whom everyone turns to

Informal Communications

“I heard it on the grape vine!”

Informal authority and communications are usually considered important in an organization.

4.5 Incentives and Motivation Tools

Once we put people in our organization, we have to motivate them do the work we need done

Motivation = “The intention of achieving a goal, leading to goal directed behavior” Columbia Encyclopedia

Incentive = “Something that incites or has a tendency to incite to determination or action” Merriam Webster Dictionary

Theories of Motivation

Needs Based = Motivation is the result of individuals trying to satisfy their own needs

Process Based = Motivation is a rational process where individuals make choices based on their own situation

Carrots and Sticks

Rewards and Punishments

Positive Reinforcement Positive action = Reward

Punishment Negative action = Punishment

Negative Reinforcement Positive action = Nothing bad

Extinction Negative action = Nothing good

Reinforcement Theory

Rewards can be either intrinsic or extrinsic - from the inside or the outside

Intrinsic Motivation We do something because we gain a sense of achievement and accomplishment Fun, challenge, or a sense of personal satisfaction

Extrinsic Motivation We do something because we want to earn an external reward A bonus, a certificate, praise from peers, or recognition from management

Human beings are incredibly complex. No single theory of motivation can explain us completely.

4.6 Maslow’s Hierarchy of Needs

Of all the needs-based theorists, Abraham Maslow is the most commonly used

Maslow’s Hierarchy

We are motivated by the lowest unmet need

Maslow’s Hierarchy

We are motivated by the lowest unmet need

S.A.

Esteem

Social

Security/Safety

Physiological

Physiological = Basic needs for food, water, air, and shelter

Safety/security = Need for protection and confidence in survival in the future

Social = Need for friendship, respect, and acceptance

Esteem = Need for recognition of our unique personal worth

Self Actualization = When someone has meet all their lower-level needs and now seeks only intrinsic motivators

Safe, comfortable work area

Salary, health insurance

Team-building and office parties

Titles, parking spots, recognition

Opportunities for growth and experience S.A.

Esteem

Social

Security/Safety

Physiological

Maslow is easy to understand and intuitive, but too simple to be really useful

ERG Theory A more complex interpretation of needs and motivation than Maslow provides Developed by Clayton Alderfer

Existence = Maslow’s Physiological and Safety needs. May also be known as “Deficiency Needs”

Relatedness = Maslow’s Social needs

Growth = Maslow’s Esteem and Self-Actualization needs

Relatedness and Growth may also be known as “Growth Needs”

ERG Theory Needs are NOT hierarchal and we can be motivated by different needs at the same time

If we cannot meet one set of needs, we may focus on another set

Maslow is more familiar and easier to understand for most managers, but ERG is better at explaining real people.

4.7 McGregor’s Theory X and Theory Y

Douglas McGregor describes motivational approaches based on manager’s beliefs about employees

Theory X - Authoritarian Approach Employees only work for extrinsic rewards and must be watched and pushed

Theory Y - Participative Approach Employees seek satisfaction in work and should be included in managerial decisions

Theory X Managers Assume that: • Employees need

constant reward and punishment

• Employees cannot be trusted and need constant supervision

• Employees hate their jobs and only work for the money

Theory Y Managers Assume that: • Employees view

work as fulfilling and satisfying

• Employees can be trusted to work well without supervision

• Employees have the ability to solve problems creatively on their own

Theory X Organizations:

• Small spans of control and lots of managers/levels

• Emphasis on rewards and punishments to motivate

• Lots of micromanagement and high employee turnover

Theory Y Organizations: • Large spans of control

and few managers • Emphasis on team-

work and cooperation to motivate

• Frequent promotion opportunities

Theory X

Scientific management, needs-based motivation theories, and higher costs

Theory Y

Professional management, process-based motivation theories, and lower costs

Theory Y can be a more difficult and scary motivational approach but it is usually worth it.

4.8 Expectancy Theory

Expectancy theory is process-based and tells us what kinds of incentives will really motivate people

Expectancy theory is the result of rational analysis where people ask themselves 3 questions about a possible reward…

The 3 Questions of Expectancy Theory 1. Will hard work lead to

the right outcome? “Do I Expect to be able to reach this goal?”

2. Will reaching the goal deliver the reward? “Do I expect my success to be rewarded?”

3. Will the reward be valuable? “Is this worth all the work it will take to get it?”

Expectancy Theory Terms

InstrumentalityExpectancy Valence

Do I expect to be able to reach the goal?

Will I get the reward if I do reach the goal?

Is it worth the effort?

Effort Performance Reward

An answer of “NO” to any question means the incentive offers no motivation at all

Desirability of Reward

Difficulty of Goal

Motivation

Motivation drops to zero when the goal becomes so difficult you can’t expect to each it

100 Units

Best week ever = 100 units

Units Produced

60 Units

50 Units

Goal = 50 100 120

Setting goals is the search for the Goldilocks zone, where the difficulty and rewards are “Just Right”

Management By Objective MBO Incentive system where managers and employees agree on goals and rewards. Challenge is in finding agreement and valence MBO systems align goal-setting and planning

The trick with Expectancy Theory is setting exactly the right goals. Usually takes experience.

4.9 Equity Theory

Equity theory is process-based and tells us how people REALLY judge the value of rewards

Equity theory says that we don’t judge value in absolute terms. We judge it in comparison to what others get

We look at a person or group of people and compare our treatment to theirs

Referent

Who is/are my referents?

They are people like you, with similar jobs and inputs.

If you are a clerk in accounting, you don’t compare yourself to the CEO

“Joe. Your work has been excellent. I am giving you a $10,000 bonus!”

“$10,000? That’s nice but you do know that everyone else got $15,000?”

Equity Theory is about justice, where things should be fair.

When we receive a reward, the next step is to compare it to the referent. “Is the reward fair?”

Inputs = Things I contribute:

- hard work - Loyalty - Education - Skills - Experience - Seniority

Outputs = Things I receive:

- Pay - Promotions - Recognition - Opportunities - Respect - Trust

Do I get the same outputs as my referents, when my inputs are as good or better?

Equity theory demands fairness but life is seldom fair. The best approach is to discourage people from sharing salaries.

4.10 Herzberg’s 2 Factor Theory

Frederick Herzberg tells us that what motivates us is very different than what satisfies us - or doesn’t satisfy us

Motivators

Hygiene Factors

Herzberg vs MaslowS.A.

Esteem

Social

Security/Safety

Physical/Physiological

Hygiene Factors - Environmental factors around the job that can cause dissatisfaction and demotivation

Motivators - Intrinsic factors of the job that cause employees to want to work harder and accomplish more

Hygiene FactorsCompany policiesSupervision and relationshipsWorking ConditionsSalarySecurity

MotivatorsAchievementRecognitionInteresting workIncreased responsibilityAdvancement and growth

The key point here:

Both hygiene factors and motivators affect motivation but not in the same ways

Once upon a time, there was a great company with terrible restrooms

Fixing hygiene factors can fix demotivation, but only motivators can really inspire employees to work

Herzberg on the Design of Jobs Job Enrichment Adding motivators like recognition, responsibility, achievement, and personal growth makes employees want to work harder

Herzberg’s ideas are most valuable when we apply them to the design of jobs.

4.11 Job Design

If organizations really want employees to work hard, managers need to pay attention to how employee’s jobs are designed

Herzberg tells us that motivators have almost unlimited potential to motivate employees.

MotivatorsAchievementRecognitionInteresting workIncreased responsibilityAdvancement and growth

Scientific Management and Job Specialization

Easy to train and manage but seriously boring

Easy to train and manage but seriously boring

As the nature of businesses changed, we needed more motivated employees

Job Design Approach EffectsJob Enrichment Adds responsibility and

gives workers more control over how they do their jobs. Increased motivation

Job Enlargement Adds a larger variety of tasks to a job. Makes the work less boring and gives workers a greater sense of satisfaction

Job Rotation Circulates workers through a number of different jobs over time. Reduces boredom and gives a broader range of skills

When enlarging and enriching jobs, it is critical to think about what kinds of tasks we add, as well as how many

Skill Variety Task Identity Task Significance Autonomy Feedback

Job Characteristics Model

Meaningfulness Responsibility Knowledge of results

Motivation Performance Satisfaction Absenteeism Turnover

Core Job Characteristics

Psychological States Outcomes

Once upon a time, I met 3 men cutting stone…1st - “I am earning 5$ an hour” 2nd - “I am a craftsman, carving the best blocks I can”

“I am building a cathedral”

The best source of long-term employee motivation is the design of jobs.