MNG2602 - Summary for Exam

CHAPTER 3 FEATURES OF CONTEMPORARY ORGANISATIONS AND NEW MANAGEMENT CHALLENGES 3.1 The changing face of contemporary organisations The Information Revolution and the emergence of globalisation are two factors that forced organisations to change The key features of emerging ‘new’ organisations are that they are flatter and leaner, flexible, networked internally and externally, diverse, and global in orientation and operations 3.2 Variables influencing contemporary organisations to change Organisations, as open systems, are in continuous interaction with their environment Organisations worldwide have to deal with a number of variables in their environment that emerged during the last decade or so, including: 3.2.1 Globalisation and the global economy Being global means operating without the constraints or traditions of national boundaries, and seeking to compete in any high-potential marketplace on Earth Globalisation refers to the worldwide integration of markets, and cultures, the removal of legal and political barriers to trade, ‘the death of distance’ as a factor of limiting material and cultural exchanges 3.2.2 Advances in technology Modern managers need to appreciate and understand the power of technology and must be able to use it in the best interests of the organisations where they work 3.2.3 Radical transformation of the world of work The world of work has transformed – moving from the total quality management efforts (TQM) through the re-engineering of the 1990’s to the radical transformation of the workplace itself in the 2000’s Organisations have moved from focusing on reducing defects and streamlining business processes to focusing on managing continuous and radical change 3.2.4 Increased power and demands of the customer Consumers’ awareness of possible products and services has increased because of global competition Consumers are now able to choose the products and services they want according to the criteria they set in terms of following:  Cost, quality, time, service, innovation and customisation 3.2.5 The growing importance of intellectual capital and learning The critical factors of production previously were land, labour and raw materials Intellectual capital has become the critical resource for the organisation today – fewer people are doing physical work and more are doing knowledge-based work Intellectual capital is the sum and synergy of the knowledge, relationships, experience, discoveries, processes, innovations, market presence, and influence of an organisation on the community Three major categories of intellectual capital are as follows:  Structural capital the accumulated knowledge and expertise of the organisation, represented by its copyrights, trademarks and patents  Customer capital the value of established relationships with suppliers and customers  Human capital the combined skills and knowledge of the employees 3.2.6 New roles and expectations of workers As society moves from the Industrial Era to the Knowledge Era, job requirements are changing Industrial Era Knowledge Era Repetitive skills Knowledge to deal with the unexpected Depending on memory and facts Being spontaneous and creative Risk avoidance Risk taking Focusing on politics and procedures Collaborating with people 3.3 The classic model of the formal organisation The traditional model of organisation has many strong points, including its predictability and reliance, impartiality, expertise through specialisation and clear lines of control The expected benefits of a bureaucracy are efficiency and consistency Bureaucracies also have many weaknesses, such as rigid rules and red tape, the protection of authority, slow-decision making, incompatibility with changing technology and incompatibility with workers’ values 3.4 The new organisation model The new organisation model has characteristics that differ substantially from those embedded in the bureaucracy See Table 3.2 (p57) – Differences between traditional and ‘new’ organisations 3.4.1 Global The new organisation is effective at operating in an increasingly global economy The global business environment is more complex than the domestic environment and managers of organisations operating in the international marketplace have to deal with a much broader set of environmental forces Management challenges: The managers of organisations competing in the complex global environment require global leadership skills, e.g. managers should establish networks with suppliers and customers in other countries in order to compete worldwide and that requires international management skills 3.4.2 Networked There is interdependence between individuals, groups and sub-units within the contemporary organisation:  Teams are emphasised as fundamental units of activity, rather than individual jobs  Cross-functional teams develop, comprising people from different departments or sections  Information is widely shared Management challenges: Network organisations rely on teams, meaning that individual managers must develop their skills as team members and as team leaders; skills that include understanding the dynamics of team interaction, developing observation skills to examine team dynamics and learning how to diagnose team problems 3.4.3 Flatter and leaner The most common characteristic of the new organisation is that it is flat, which is considered the best practise today – for large organisations to remove several layers of management, resulting in a much flatter organisation By employing fewer people (becoming leaner) and by improving their turnover is sales, organisations can significantly improve productivity Management challenges: In the flat organisation, managers must develop negotiating skills to enable them to negotiate win-win situations for all involved in the different organisational processes 3.4.4 Flexibility Organisations need to respond to changes in their environment, changing customer needs, intense competition and the needs of a diverse workforce Flexible organisations have fewer rules and standard operating procedures Part of the flexibility in new organisations is the growing use of temporary or contingent workers, which relates to diversity in the workforce Management challenges: Managers in flexible organisations need to work on more than one project simultaneously, and are also members of various teams at any given time – multi-tasking 3.4.5 Workforce diversity Workforce diversity is a term that describes the fact that organisations are becoming more heterogeneous in terms of gender, race and ethnicity Management challenges: Managers need to shift their philosophy from treating everyone alike to acknowledging differences and responding to those differences in ways that will ensure employee retention and greater productivity People with different needs and expectations present challenges to the human resources policies of organisations, e.g. working parents – adaptations to work schedules, disabled people – special access to buildings, etc. The global environment adds another layer of complexity to workforce diversity To be effective, managers should understand cultural differences around the world