Is authority based on expertise that usually involves counseling and advising line managers

Business Essentials, 11e (Ebert/Griffin)

Chapter 6 Organizing the Business

1) Which term refers to the specification of jobs to be done within an organization and the ways

in which those jobs relate to one another?

A) Delegation

B) A mission statement

C) Job specialization

D) Role responsibility

E) Organizational structure

Answer: E

Explanation: E) Organizational structure refers to the jobs undertaken within an organization

and how these jobs are related to one another.

Difficulty: Easy

AACSB: Application of knowledge

Objective: 6.1: Discuss the factors that influence a firm's organizational structure.

2) Which of the following clarifies structure and shows employees where they fit into a firm's

operations?

A) Delegation

B) Departmentalization

C) Organization charts

D) Mission statement

E) Job descriptions

Answer: C

Explanation: C) An organization chart is a diagram showing the structure and employee

placement in terms of operations.

Difficulty: Easy

AACSB: Application of knowledge

Objective: 6.1: Discuss the factors that influence a firm's organizational structure.

3) What do the solid lines on an organization chart show in reporting relationships within a

company?

A) Mission statement

B) Chain of command

C) Job specialization

D) Grapevine activity

E) Market share

Answer: B

Explanation: B) The chain of command is shown on an organization chart as a solid line.

Difficulty: Easy

AACSB: Application of knowledge

Objective: 6.1: Discuss the factors that influence a firm's organizational structure.

Presentation on theme: "Organizing the Business"— Presentation transcript:

1 Organizing the Business
6 Copyright © 2015 Pearson Education, Inc.

2 Discuss some concepts regarding organizational structure.
Explain specialization and departmentalization as two of the building blocks of organizational structure. Describe centralization and decentralization, delegation, and authority as the key ingredients in establishing the decision-making hierarchy. Explain the differences among functional, divisional, matrix, and international organizational structures and describe the most popular new forms of organizational design. Describe the informal organization and discuss intrapreneuring.

3 Organizational Concepts
Organizational Structure specification of the jobs to be done within an organization and the ways in which they relate to one another. Organization Chart diagram depicting a company’s structure and showing employees where they fit into its operations. Chain of Command reporting relationships within a company We can define organizational structure as the specification of the jobs to be done within an organization and the ways in which those jobs relate to one another. Perhaps the easiest way to understand structure is in terms of an organization chart.

4 The Organization Chart
Figure 6.1 is an organization chart for Contemporary Landscape Services, a small but thriving business in Bryan, Texas. Each box in the chart represents a job.

5 The Building Blocks of Organizational Structure
The third major building block of organizational structure is the establishment of a decision-making hierarchy. This is usually done by formalizing reporting relationships. In a centralized organization, most decision making authority is held by upper-level managers. As a company gets larger and more decisions must be made, the company tends to adopt decentralized organization, in which much decision-making authority is delegated to levels of management at various points below the top.

6 The Building Blocks of Organizational Structure
1- Job Specialization determining who will do what. 2- Departmentalization determining how people performing certain tasks can best be grouped together. 3- Establishment of decision-making Hierarchy Deciding who will be empowered to make which decisions and who will have authority over others. The process of identifying the specific jobs that need to be done and designating the people who will perform them leads to job specialization. After jobs are specialized, they must be grouped into logical units, which is the process of departmentalization. Departmentalized companies benefit from this division of activities; control and coordination are narrowed and made easier, and top managers can see more easily how various units are performing.

7 1- Job Specialization The process of identifying the specific jobs that need to be done and designating the people who will perform them. Specialized jobs can be learned and filled more easily and performed more efficiently than nonspecialized jobs. In a very small organization, the owner may perform every job. As the firm grows, however, so does the need to specialize jobs that others can perform them.

8 2- Departmentalization
After jobs are specialized, they must be grouped into logical units. Accordingly, departmentation is process of grouping jobs into logical units. Departmentation allows the firm to treat each department as a profit center – a separate company unit responsible for its own costs and profits. Departmentation may occur along product, process, functional, customer, geographic lines (or any combination of these).

9 Departmentalization (cont.)
Functional Departmentalization dividing an organization according to groups’ functions or activities Product Departmentalization dividing an organization according to specific products or services being created Process Departmentalization dividing an organization according to production processes used to create a good or service. Customer Departmentalization dividing an organization to offer products and meet needs for identifiable customer groups Geographic Departmentalization dividing an organization according to the areas of the country or the world served by a business

10 Multiple Forms of Departmentalization
The company illustrated in Figure 6.2 uses functional departmentalization at the top level. At the middle level, production is divided along geographic lines. At a lower level, marketing is departmentalized by product group.

11 3- Establishment of a Decision-Making Hierarchy
a. Distributing Authority: Centralization and decentralization Flat and tall organizational structure Span of control b. The delegation process c. Forms of authority The third major building block of organizational structure is the establishment of a decision-making hierarchy. This is usually done by formalizing reporting relationships. In a centralized organization, most decision making authority is held by upper-level managers. As a company gets larger and more decisions must be made, the company tends to adopt decentralized organization, in which much decision-making authority is delegated to levels of management at various points below the top.

12 a. Distributing Authority Centralization and Decentralization
Centralized Organization organization in which most decision-making authority is held by upper-level management. Centralized firms require multi layers of management and thus have tall organizational structures. Decentralized Organization organization in which a great deal of decision-making authority is delegated to levels of management at points below the top. Decentralized firms tend to have fewer layers of management, resulting in a flat organizational structure. The third major building block of organizational structure is the establishment of a decision-making hierarchy. This is usually done by formalizing reporting relationships. In a centralized organization, most decision making authority is held by upper-level managers. As a company gets larger and more decisions must be made, the company tends to adopt decentralized organization, in which much decision-making authority is delegated to levels of management at various points below the top.

13 Distributing Authority Flat and Tall Organizations
Flat Organizational Structure Decentralized firms tend to have relatively fewer layers of management, resulting in a flat organizational structure like that of the hypothetical law firm shown in Figure 6.3(a).

14 Tall and Flat Organizations (cont.)
Tall Organizational Structure Centralized firms typically require multiple layers of management and thus tall organizational structures, as in the U.S. Army example in Figure 6.3(b).

15 Distributing Authority Span of Control
The distribution of authority in an organization also affects the number of people who work for any individual manager. Span of Control number of people supervised by one manager. In tall organizations, span of control tends to be narrower. In flat organizations, span of control is usually wide. As you can see in Figure 6.3, the distribution of authority in an organization also affects the number of people who work for any individual manager. In a flat organizational structure, the number of people directly managed by one supervisor, the manager’s span of control, is usually wide. In tall organizations, span of control tends to be narrower.

16 b. The Delegation Process
process through which a manager allocates work to subordinates. This process involves: Assigning responsibility - the duty to perform an assigned task. Granting authority - the power to make the decisions necessary to complete the task. Creating accountability - the obligation employees have for the successful completion of the task. Delegation is the process through which a manager allocates work to subordinates. In general, the delegation process involves: Assigning responsibility, the duty to perform an assigned task. Granting authority, or the power to make the decisions necessary to complete the task. Creating accountability, the obligation employees have for the successful completion of the task.

17 Learning to Delegate Effectively
Table 6.1 lists some common obstacles that hinder the delegation process, along with strategies for overcoming them.

18 c. Forms of Authority Line Authority
organizational structure in which authority flows in a direct chain of command from the top of the company to the bottom. Staff Authority authority based on expertise that usually involves counseling and advising line managers. Staff Members advisers and counselors who help line departments in making decisions but who do not have the authority to make final decisions. The type of authority that flows up and down the chain of command is line authority. Most companies rely heavily on line departments linked directly to the production and sales of specific products. Some companies also rely on staff authority, which is based on special expertise and usually involves advising line managers in areas such as law, accounting, and human resources. A corporate attorney, for example, may advise the marketing department as it prepares a new contract with the firm’s advertising agency, but will not typically make decisions that affect how the marketing department does its job. Staff members help line departments make decisions but do not usually have the authority to make final decisions.

19 Forms of Authority (cont.)
Committee and Team Authority authority granted to committees or teams involved in a firm’s daily operations Work Team At the operating level, many firms today use work teams - groups of operating employees who are empowered to plan and organize their own work and to perform that work with a minimum of supervision. Recently, more organizations have started to grant committee and team authority to groups that play central roles in daily operations. A committee, for example, may consist of top managers from several major areas. If the work of the committee is especially important and if the committee members will be working together for an extended time, the organization may grant it committee and team authority, special authority as a decision-making body beyond the individual authority possessed by each of its members. At the operating level, many firms today use work teams that are empowered to plan, organize, and perform their work with minimal supervision and often with special authority as well. Most U.S. companies today use teams in at least some areas; some make widespread use of teams throughout every area of their operations.

20 Line and Staff Organization
Typically, the separation between line authority and staff responsibility is clearly delineated and is usually indicated in organization charts by solid lines (line authority) and dotted lines (staff responsibility), as shown in Figure 6.4.

21 Basic Forms of Organizational Structure
The third major building block of organizational structure is the establishment of a decision-making hierarchy. This is usually done by formalizing reporting relationships. In a centralized organization, most decision making authority is held by upper-level managers. As a company gets larger and more decisions must be made, the company tends to adopt decentralized organization, in which much decision-making authority is delegated to levels of management at various points below the top.

22 Functional Structure organization structure in which authority is determined by the relationships between group functions and activities Under a functional structure, relationships between group functions and activities determine authority. Functional structure is used by most small to medium-sized firms, which are usually structured around basic business functions: a marketing department, an operations department, and a finance department. The benefits of this approach include specialization within functional areas and smoother coordination among them.

23 Divisional Structure organizational structure in which corporate divisions operate as autonomous businesses under the larger corporate umbrella A divisional structure relies on product departmentalization. Organizations using this approach are typically structured around several product-based divisions that resemble separate businesses in that they produce and market their own products. The head of each division may be a corporate vice-president or, if the organization is large enough, a divisional president. In addition, each division usually has its own identity and operates as a relatively autonomous business under the larger corporate umbrella.

24 Matrix Structure organizational structure created by superimposing one form of structure onto another. In some companies, the matrix organization is a temporary measure installed to complete a specific project and affecting only one part of the firm. Ford, for example, used a matrix organization to design a new car model. A design team composed of people with engineering, marketing, operations, and finance. After its work was done, the team members moved back to their permanent functional jobs. Sometimes a matrix structure, a combination of two separate structures, works better than either simpler structure alone. This structure gets its matrix-like appearance, when shown in a diagram, by using one underlying “permanent” organizational structure (say, the divisional structure flowing up-and-down in the diagram), and then super-imposing a different organizing framework on top of it (e.g., the functional form flowing side-to-side in the diagram). This highly flexible and readily adaptable structure was pioneered by NASA for use in developing specific space programs.

25 Matrix Structure Figure 6.7 shows how Martha Stewart Living Omni media has created a permanent matrix organization for its lifestyle business. As you can see, the company is organized broadly into media and merchandising groups, each of which has specific product and product groups.

26 International Organizational Structures
approaches to organizational structure developed in response to the need to manufacture, purchase, and sell in global markets Several different international organizational structures have emerged in response to the need to manufacture, purchase, and sell in global markets.

27 Organizational Design for the Twenty-first Century
The third major building block of organizational structure is the establishment of a decision-making hierarchy. This is usually done by formalizing reporting relationships. In a centralized organization, most decision making authority is held by upper-level managers. As a company gets larger and more decisions must be made, the company tends to adopt decentralized organization, in which much decision-making authority is delegated to levels of management at various points below the top.

28 Organizational Design for the Twenty-first Century
Team organization relies almost exclusively on project-type teams, with little or no underlying functional hierarchy. Learning organization works to facilitate the lifelong learning and personal development of all of its employees while continually transforming itself to respond to changing demands and needs. Team organization relies almost exclusively on project type teams, with little or no underlying functional hierarchy. People float from project to project as dictated by their skills and the demands of those projects. As the term suggests, team authority is the underlying foundation of organizations that adopt this organizational structure. The so-called learning organization works to integrate continuous improvement with continuous employee learning and development.

29 Organizational Design for the Twenty-first Century (cont.)
Virtual organization has little or no formal structure. has only a handful of permanent employees, a very small staff, and a modest administrative facility. As the needs of the organization change, its managers bring in temporary workers, lease facilities, and outsource basic support services to meet the demands of each unique situation. The virtual organization exists only in response to its own needs. Closely related to the team organization is the virtual organization. A virtual organization has little or no formal structure. Typically, it has only a handful of permanent employees, a small staff, and a modest administrative facility. As the needs of the organization change, its managers bring in temporary workers, lease facilities, and outsource basic support services to meet the demands of each unique situation. As the situation changes, the temporary workforce changes in parallel, with some people leaving the organization and others entering. Facilities and the subcontracted services also change. In other words, the virtual organization exists only in response to its own needs.

30 Informal Organization
The third major building block of organizational structure is the establishment of a decision-making hierarchy. This is usually done by formalizing reporting relationships. In a centralized organization, most decision making authority is held by upper-level managers. As a company gets larger and more decisions must be made, the company tends to adopt decentralized organization, in which much decision-making authority is delegated to levels of management at various points below the top.

31 Informal Organization and Groups
network, unrelated to the firm’s formal authority structure, of everyday social interactions among company employees Informal groups groups of people who decide to interact among themselves. The structure of a company, however, is by no means limited to the formal organization as represented by the organization chart and the formal assignment of authority. Frequently, the informal organization, everyday social interactions among employees that transcend formal jobs and job interviews. Informal groups are simply groups of people who decide to interact among themselves. They may be people who work together in a formal sense or who just get together for lunch, during breaks, or after work. They may talk about business, the boss, or non-work related topics such as families, movies, or sports. Their impact on the organization may be positive (if they work together to support the organization), negative (if they work together in ways that run counter to the organization’s interests), or irrelevant (if what they do is unrelated to the organization) relationships, effectively alters a company’s formal structure.

32 Grapevine and Intrapreneuring
informal communication network that runs through an organization, which allows the informal groups to develop. By maintaining open channels of communication and responding vigorously to inaccurate information, managers can minimize the damage the grapevine can cause. Intrapreneuring process of creating and maintaining the innovation and flexibility of a small-business environment within the confines of a large organization. This is because, historically, Most innovations have come from individuals in small businesses. The grapevine is an informal communication network that can permeate an entire organization. Grapevines are found in all organizations except the smallest, but they do not always follow the same patterns as, nor do they necessarily coincide with, formal channels of authority and communication. Research has identified two kinds of grapevines. Many firms, including Rubbermaid, Dreamworks, 3M, and Xerox, support intrapreneuring, creating and maintaining the innovation and flexibility of a small-business environment within a large, bureaucratic structure. This is because, historically, Most innovations have come from individuals in small businesses. Grapevine is an informal channel of business communication. It is called so because it stretches throughout the organization in all directions irrespective of the authority levels. Man as we know is a social animal. Despite existence of formal channels in an organization, the informal channels tend to develop when he interacts with other people in organization. It exists more at lower levels of organization. Grapevine generally develops due to various reasons. One of them is that when an organization is facing recession, the employees sense uncertainty. Also, at times employees do not have self-confidence due to which they form unions. Sometimes the managers show preferential treatment and favour some employees giving a segregated feeling to other employees. Thus, when employees sense a need to exchange their views, they go for grapevine network as they cannot use the formal channel of communication in that case. Generally during breaks in cafeteria,the subordinates talk about their superior’s attitude and behaviour and exchange views with their peers. They discuss rumours about promotion and transfer of other employees. Thus, grapevine spreads like fire and it is not easy to trace the cause of such communication at times.

In which type of organization is decision

Is the line of authority that links all employees in the organization?

Which of the following is the obligation employees have to their manager for the successful completion of an assigned task?

What type of management process function is being used when a manager motivates?