Business Essentials, 7 th Edition Ebert/Griffin

1. Organizing for the Business Business Essentials, 7th EditionEbert/Griffin Instructor Lecture PowerPoints PowerPoint Presentation prepared by Carol Vollmer Pope Alverno College © 2009 Pearson Education, Inc.

2. 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 firm’s operations • Show the chain of command, or reporting relationships, within a company © 2009 Pearson Education, Inc.

3. FIGURE 6.1 The Organizational Chart © 2009 Pearson Education, Inc.

4. Determinants of Organizational Structure Mission Strategy Size Internal Environment External Environment Organizational structure is usually quite fluid! © 2009 Pearson Education, Inc.

5. 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 © 2009 Pearson Education, Inc.

6. 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 © 2009 Pearson Education, Inc.

7. FIGURE 6.2 Multiple Forms of Departmentalization © 2009 Pearson Education, Inc.

8. Establishing the Decision-Making Hierarchy Centralized Organization Top managers hold most decision-making authority Decentralized Organization Lower-level managers hold significant decision-making authority © 2009 Pearson Education, Inc.

9. 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 © 2009 Pearson Education, Inc.

10. Figure 6.3 Organizational Structure and Span of Control © 2009 Pearson Education, Inc.

11. The Delegation Process • Delegation • The process through which a manager allocates work to subordinates • Delegation Entails: • Assignment of responsibility—the duty to perform an assigned task • Granting of authority—the power to make decisions necessary to complete the task • Creation of accountability—the obligation of employees to successfully complete the task © 2009 Pearson Education, Inc.

12. Why Managers Won’t Delegate • The fear that subordinates don’t 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 © 2009 Pearson Education, Inc.

13. 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 firm’s daily operations © 2009 Pearson Education, Inc.

14. Figure 6.4 Line and Staff Organization © 2009 Pearson Education, Inc.

15. 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 © 2009 Pearson Education, Inc.

16. Figure 6.5 Functional Structure © 2009 Pearson Education, Inc.

17. Forms of Organizational Structure (cont’d) • Divisional Structure • Based on departmentalization by product, with each division managed as a separate enterprise • Organizations using this approach are typically structured around several divisions—departments 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 © 2009 Pearson Education, Inc.

18. Figure 6.6 Divisional Structure © 2009 Pearson Education, Inc.

19. Forms of Organizational Structure (cont’d) • 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 © 2009 Pearson Education, Inc.

20. FIGURE 6.7 Matrix Organization at Martha Stewart’s Omnimedia © 2009 Pearson Education, Inc.

21. Forms of Organizational Structure (cont’d) • 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 © 2009 Pearson Education, Inc.

22. FIGURE 6.8 International Division Structure © 2009 Pearson Education, Inc.

23. 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 © 2009 Pearson Education, Inc.

24. FIGURE 6.9 The Virtual Organization © 2009 Pearson Education, Inc.

25. 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 © 2009 Pearson Education, Inc.

26. Informal Organization (cont’d) • 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 © 2009 Pearson Education, Inc.