6 chapter

Organizing for the Business

Business Essentials, 7th Edition Ebert/Griffin

Instructor Lecture PowerPoints

PowerPoint Presentation prepared by

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Carol Vollmer Pope Alverno College

What Is Organizational Structure?

Organizational Structure
The specification of the jobs to be done within an organization and the ways in which those jobs relate to one another

Organizational Charts
Clarify structure and show employees where they fit into a firms operations Show the chain of command, or reporting relationships, within a company

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FIGURE 6.1 The Organizational Chart

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Determinants of Organizational Structure

Mission Strategy Size

Internal Environment
External Environment

Organizational structure is usually quite fluid!

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The Building Blocks of Organizational Structure

Specialization
Division of work: job specialization

Departmentalization
Product, process, functional, customer, or geographic

Establishment of a decision-making hierarchy

Distributing authority:
Delegation: assigning tasks Centralization: upper management retains authority Decentralization: lower-level managers make decisions

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Planning Departments
Once jobs have been specialized, they need to be grouped into logical units.
This is called departmentalization. Here are some areas of departmentalization:
Product departmentalization Process departmentalization Functional departmentalization Customer departmentalization Geographic departmentalization Multi forms (combinations) of departmentalization
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FIGURE 6.2 Multiple Forms of Departmentalization

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Establishing the Decision-Making Hierarchy

Centralized Organization
Top managers hold most decision-making authority

Decentralized Organization
Lower-level managers hold significant decision-making authority

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Tall and Flat Organizations Flat Organizational Structure

Common in decentralized organizations Fewer layers of management Rapid communication Wide spans of control

Tall Organizational Structure

Common in centralized organizations Multiple layers of management Slower communication Narrower spans of control
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Figure 6.3 Organizational Structure and Span of Control

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The Delegation Process

Delegation
The process through which a manager allocates work to subordinates

Delegation Entails:
Assignment of responsibilitythe duty to perform an assigned task Granting of authoritythe power to make decisions necessary to complete the task Creation of accountabilitythe obligation of employees to successfully complete the task
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Why Managers Wont Delegate

The fear that subordinates dont really know how to do the job The desire to keep as much control as possible over how things are done

The fear that a subordinate might show the manager up in front of others by doing a superb job
A simple lack of ability as to how to effectively delegate to others
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Forms of Authority
Line Authority
The type of operational authority that flows up and down the chain of command

Staff Authority
Authority based on special expertise and usually involves counseling and advising line managers

Committee and Team Authority

Authority granted to committees or work teams that play central roles in the firms daily operations
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Figure 6.4 Line and Staff Organization

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Forms of Organizational Structure Functional Structure

Form of business organization in which authority is determined by the relationships between group functions and activities Used by most small- to medium-sized firms structured around basic business functions (marketing, operations, finance) Advantages:
Specialization and smoother internal coordination

Disadvantages:
Centralization, poor cross-functional coordination, and lack of accountability
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Figure 6.5 Functional Structure

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Forms of Organizational Structure (contd)

Divisional Structure Based on departmentalization by product, with each division managed as a separate enterprise Organizations using this approach are typically structured around several divisionsdepartments that resemble separate businesses in that they produce and market their own products Advantages: Increased product-focus and internal coordination Disadvantages: Duplication of efforts and competition between divisions

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Figure 6.6 Divisional Structure

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Forms of Organizational Structure (contd)

Matrix Structure
Organized along two dimensions, instead of just one, by combining, for example, functional and divisional structures Advantages:
Highly flexible, focused on a single problem, access to resources and expertise

Disadvantages:
Loss of command and control, lack of accountability, impermanent existence
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FIGURE 6.7 Matrix Organization at Martha Stewarts Omnimedia

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Forms of Organizational Structure (contd)

International Structures
Developed in response to the need to manufacture, purchase, and sell in global markets Department, division, or geographic

Global Structure
Acquiring resources (including capital), producing goods and services, engaging in research and development, and selling products in whatever local market is appropriate, without any consideration of national boundaries

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FIGURE 6.8 International Division Structure

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Organizational Design for the 21st Century

Team Organization
Relies almost exclusively on project-type teams, with little or no underlying functional hierarchy

Virtual Organization
Has little or no formal structure, few permanent employees, a very small staff, and a modest administrative facility

Learning Organization
Integrates continuous improvement and employee learning and development while transforming itself to respond to changing demands and needs

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FIGURE 6.9 The Virtual Organization

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Informal Organization
Informal Organization
Everyday social interactions among employees that transcend formal jobs and job interrelationships Advantages:
May reinforce the formal organization

Disadvantages:
Can reinforce office politics that put the interests of individuals ahead of those of the firm May communicate distorted or inaccurate information
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Informal Organization (contd)

Informal Groups Groups of people who decide to interact among themselves, sometimes about business Organizational Grapevine The informal communication network that runs throughout the organization Intrapreneuring Creating and maintaining the innovation and flexibility of a small-business environment within the confines of a large, bureaucratic structure

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