Foundations of Business 3e

1. Foundations of Business 3e Pride, Hughes, & Kapoor

2. Creating a Flexible Organization Chapter 7

3. Learning Objectives • Understand what an organization is and identify its characteristics. • Explain why job specialization is important. • Identify the various bases for departmentalization. • Explain how decentralization follows from delegation. • Understand how the span of management describes an organization. • Describe the four basic forms of organizational structure. • Describe the effects of corporate culture. • Understand how committees and task forces are used. • Explain the functions of the informal organization and the grapevine in a business.

4. What Is an Organization? • A group of two or more people working together to achieve a common set of goals • Developing organization charts • Organization chart • A diagram that represents the positions and relationships within an organization • Chain of command • The line of authority that extends from the highest to the lowest levels of the organization • Staff (advisory) positions • Jobs that are not part of the direct chain of command in the organization

5. A Typical Corporate Organization Chart

6. Major Considerations for Organizing a Business • Job design • Departmentalization • Delegation • Span of management • Chain of command

7. Job Design • Job specialization • The separation of activities into distinct tasks and the assignment of different tasks to different people • Rationale for specialization • The “job” of the organization is too large for one person to accomplish. • A worker learning only a specific, highly specialized task should be able to learn to do it efficiently. • Workers do not lose time switching from one operation to another. • Specialization makes it easier to design machinery to assist those who do the job. • Specialization makes it easier to train new workers.

8. Job Design (cont.) • Alternatives to job specialization • Job rotation systematically shifts employees from one job to another • Job enlargement • Job enrichment Needs photo credit

9. Departmentalization • Grouping jobs into manageable units • Common bases for departmentalization • By function • By product • By location • By customer • Combinations

10. Multibase Departmentalization forNew-Wave Fashions, Inc.

11. Delegation, Decentralization, and Centralization • Delegation—assigning part of a manager’s work and power to other workers • Steps in delegation • Responsibility—the duty to do a job or perform a task • Authority—the power, within an organization, to accomplish an assigned task • Accountability—the obligation to accomplish an assigned job or task • Barriers to delegation • Fear the work will not get done • Fear the work will be done too well • Inability to plan and assign work effectively

12. Steps in the Delegation Process • The manager assigns responsibility. • The subordinate is empowered to do the task. • Ultimate accountability remains with the manager.

13. Decentralization of Authority • Decentralized organization • Management consciously attempts to spread authority widely in the lower levels of the organization • Centralized organization • Authority is concentrated at the upper levels of the organization • Factors favoring decentralization • A complex and unpredictable business environment • Decisions that carry low risk or that are unimportant • Highly capable lower-level managers with strong decision-making skills • Past practices of the firm in decentralizing its structure and decision-making processes

14. The Span of Management • The number of workers who report directly to one manager • Wide span • Large number of subordinates to one manager • Narrow span • Only a few subordinates to one manager

15. The Span of Management (cont.)

16. The Span of Management (cont.) • Organizational height—number of layers, or levels, of management in a firm • Flat organizations • Have wider spans of management and fewer levels • Require managers to perform more administrative tasks and to spend more time supervising subordinates • Tall organizations • Have narrow spans of management and many levels • Have higher administrative costs (more managers) • May distort internal communications during passage of the communications through the multiple levels of organization

17. Forms of Organizational Structure • Line structure • The chain of command goes directly from person to person throughout the organization • Simplicity allows for quick decision making and direct accountability • Most suitable for small organizations with lower volume of activities than medium or large organizations

18. Forms of Organizational Structure (cont.) • Line-and-staff structure • Utilizes the chain of command from a line structure in combination with the assistance of staff managers

19. Line and Staff Managers

20. Forms of Organizational Structure (cont.) • Line-and-staff structure (cont.) • Line managers make decisions and give orders to subordinates. • Line authority—line managers can make decisions and issue directives related to organizational goals • Staff managers provide support, advice, and expertise. • Advisory authority—the expectation that line managers will consult with staff managers before making decisions • Functional authority—staff managers’ authority to make decisions and issue directives within their area of expertise

21. Forms of Organizational Structure (cont.) • Line-and-staff structure (cont.) • Reasons for conflict between line and staff managers • Staff managers often have more formal education. • Staff managers are sometimes younger and more ambitious. • Line managers may perceive staff managers as a threat. • Staff managers may become angry if their recommendations are not adopted. • Minimizing conflict between line and staff managers • Integrate line and staff managers into one team. • Ensure that responsibilities are clearly defined. • Hold both line and staff managers accountable for results.

22. Forms of Organizational Structure (cont.) • Matrix structure • A structure that combines vertical and horizontal lines of authority, usually by superimposing product departmentalization on functional departmentalization • Authority flows both down and across • Employees on cross-functional teams report to both the project manager in charge of the team and to their superiors in their home-base functional department

23. A Matrix Structure

24. Forms of Organizational Structure (cont.) Matrix Structure (cont.) • Added flexibility • Increased productivity • Higher morale • Increases in creativity and innovation • Personal development of team members Advantages Disadvantages • Chain of command conflicts • May take longer to resolve problems and reach solutions • Personality clashes • Poor communications • Undefined individual roles • Unclear responsibilities • Difficulty in determining how to reward individual and team performance

25. Forms of Organizational Structure (cont.) • Network structure (virtual organization) • Administration is the primary function, and most other functions are contracted out to other firms. • Strength • Flexibility allows the organization to adjust quickly to changes • Weaknesses • Difficulty controlling the quality of work by other organizations • Low morale and high turnover of hourly workers • Vulnerability of relying on outside contractors

26. Corporate Culture • The inner rites, rituals, heroes, and values of a firm • Indicators of corporate culture • The physical setting (e.g., building and office layout) • Corporate statements about itself • How the company greets its guests • How employees spend their time at work (alone or in groups)

27. Types of Corporate Cultures • Networked culture • Trust and friendship among employees • Strong commitment to the organization • Informal environment • Mercenary culture • Passion, energy, sense of purpose, excitement for work • Intense, focused, determined to win • Fragmented culture • Employees not friends; work “at” (not “for”) organization • Employees have autonomy, flexibility, equality • Communal culture • Friendship, commitment, focus on performance, high energy • Lives revolve around the product; success is celebrated by all

28. Corporate Culture (cont.)

29. Corporate Culture (cont.) • Cultural change is needed when • A company’s environment changes • The industry becomes more competitive • Company performance is mediocre • The company is growing or becomes a large firm

30. Committees and Task Forces • Committees • Types • Ad hoc—created for a specific short-term purpose • Standing—relatively permanent; charged with performing some recurring task • Task force—established to investigate a major problem or pending decision • Differences with individual action • Advantages • Members bring more information and knowledge; more accurate decisions; results communicated more effectively • Disadvantages • Decision making takes longer; may reach unnecessary compromises; one person may dominate

31. The Informal Organization • Pattern of behavior and interaction that stems from personal rather than official relationships • Informal groups • Formed by the members themselves to accomplish goals that may or may not be relevant to the organization • Can be powerful forces in organizations, exerting positive as well as negative influences • The grapevine • Informal communication network within an organization that is completely separate from—and sometimes faster than—the organization’s formal communication channels • May be accurate or distorted; managers should be aware and use appropriately