Page 678 - Business Principles and Management

Chapter 25 • Developing an Effective Organization

25.1 The Changing Organizational Environment

Goals Terms
• Describe challenges facing • job security • organizational
businesses that require major • free-trade development
organizational changes. agreements • career development
• Discuss the two important
components of an organizational
development program.

The New Employment Environment

In the last part of the 20th century, many companies faced global competitive
pressures unlike those they had seen before. That competition forced companies
to reconsider their organizational size, structure, and operations. Many were
forced to downsize their operations by cutting the number of employees, reducing
product offerings, or cutting costs in other ways. Other companies restructured
their operations to work and use resources more efficiently. Some large companies
reduced employment by thousands of people. Like the problem facing James Lane
with Alliance Industries, employees who had spent many years with the same
company (some nearing retirement) suddenly found themselves without a job.
Many employees who lost their jobs when businesses cut back have been
unable to find satisfying employment. Some have had to accept lower-level jobs
or jobs that pay less or offer fewer benefits. Those who were able to keep their
jobs are not certain of their job security, the likelihood of being employed by the
same company in the future. They may distrust their employer, believing that the
actions of businesses today demonstrate a lack of commitment to employees.

ECONOMIC AND POLITICAL CHANGES

Now, in the 21st century, the focus is on developing a whole new generation of
businesses. The Internet has led to the creation of many new organizations that
look quite different from traditional businesses. They may have only a few em-
ployees, and the employees may not work in the same building or even in the
same city. Internet companies may rely on other businesses to perform many of
the traditional business functions, and the owners may have more skill and expe-
rience with technology than with organizing and managing a business. As tradi-
tional businesses observed the impact of the Internet, most began to experiment
with the new technology and integrate Internet services and resources into their
own companies. The new Internet businesses were forced to become more effec-
tive in both business operations and management or they were forced out of
business. Today, few businesses rely on the Internet only, and most have incorpo-
rated some Internet-based operations within their more traditional operations.
International competition has grown dramatically as large firms expand into
new markets, develop cooperative agreements with foreign firms, or purchase
competing businesses that allow them to expand their operations for greater

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