Understanding Business Operations

• Organizations are judged by the performance of their operations.
• Operations encompass a wide range of responsibilities, drawing from various functions within the organization, not limited to a specific department.

Defining Operations

• Operations convert basic inputs (materials, energy, customer requirements, information, skills, finance) into outputs for the end customer.

Basic Operations System

• Involves inputs, processes, outputs, and feedback.
• Inputs: Materials and customer Information.
• Transformation: Includes Capital, technology, energy, know-how and experience that add value throughout the entire process of transforming basic inputs to finished goods and services
• Outputs include tangible and intangible elements, combining physical and psychological effects and benefits for the customer in the final transaction.

Leader/Stakeholder Theory and Value Creation

• Entrepreneurs or managers create value by capturing the jointness of the stakeholders' interests .
• Stakeholder Theory: An idea about how business works.

Creating Value

• Businesses create value for customers, suppliers, employees, communities, financiers, shareholders, and banks.
• Social value satisfies many stakeholders through collaboration, not a single factor.
• Stakeholders seek value when they engage with an organization.
• Value creation starts by creating goods that consumers value, meeting consumer needs.
• Key responsibilities of senior-level managers include making the best use of resources and implementing processes for competitive advantage.

Why Design an Organization?

• (Johnson, 2013): Organization arranges people and jobs to meet its goals.
• Organizational Structure is defined Graphically via an organizational chart.
• Assignment of responsibilities include accountability, reporting structures, communication channels and relationships.
• Organizational components are included

Components of Organizational Design

• Units, relationships, and hierarchy
• Distribution of formal authority and power
• Identity and role for employees
• Position grouping
• Reporting sequence
• Individual and unit responsibilities

Types of Organizational Structures

• The best structure depends on factors like: type of work, skilled labor, size, revenue, geographic dispersion, range of business diversification.
• Two main types: Vertical (Tall) and Horizontal (Flat).

Vertical Structure

• Chain of management: CEO at the top, delegating to lower-level managers
• Power originates from the top
• There is a well-defined chain of command.
• Employees report to their direct supervisor.
• Each person has specific responsibilities.
• Advantages: efficiency and quick decision-making

Advantages of Vertical Structures

• Efficiency: Quick decision-making.
• Responsibility is held by people at the top of the chain of command.
• Specialized tasks with little need to learn new skills.
• Easier to designate tasks with well-defined employee responsibilities.
• Generally easier to manage.

Disadvantages of Vertical Structures

• Can be rigid with many rules.
• Dependent on a strong leader; weak upper management causes frustration.
• Lacks transparency.
• Some employees may feel stifled; their input is not valued.

Horizontal Structure

• Less-defined chain of command; employees have similar input
• Employees form teams, with input from all members
• Employees may perform different functions and report to several supervisors
• High-level managers handle day-to-day tasks.
• Almost no middle managers

Advantages of Horizontal Structure

• Fewer rules.
• More power for employees increases satisfaction.
• Stronger sense of identification with the company.

Disadvantages of Horizontal Structure

• Less efficient, takes more time and resources to make decisions.
• Requires more skills from workers
• Harder to implement than vertical, because The business must foster a culture of teamwork.
• Employees may be less secure about roles, and project managers lack authority.

Horizontal vs Vertical

• Frank Ostroff( 2013): Companies are becoming more horizontal as the world globalizes.
• Businesses should implement the best of both structures.
• New companies and small businesses opt for horizontal structures.

Emerging Trends

• Interdependence of departments.
• Response to rapid changing environments.
• Streamline the organization to improve communication and decision-making.
• The rapid rise of technology creates virtual, boundary-less operations.
• Emergence of self-directed work teams as basic production groups.
• Motivation: expanding the scope of jobs, involving workers in problem solving and planning, and fostering open communications

Need to Restructure

• Designing Organizations to Create Value (2003): A poor design can lead to lost profits and failure.
• Need to cut costs: removing layers of bureaucracy.
• Response to competition.
• Response to Jit (Just In Time manufacturing).

Characteristics of Leadership

• Flexibility, Tenaciousness, Empathy
• Transparency, Compassion, Communication
• Decisiveness
• Clear vision, Passion, Protection
• Understanding, Problem solving
• Conflict resolution
• Negotiation