Chapter Eight Creating a Flexible Organization. Copyright © Houghton Mifflin Company. All rights reserved.8 - 2 Learning Objectives 1.Understand what

Chapter Eight

Creating a Flexible Organization

Copyright © Houghton Mifflin Company. All rights reserved. 8 - 2

Learning Objectives

1. Understand what an organization is and identify its characteristics.

2. Explain why job specialization is important.3. Identify the various bases for

departmentalization.4. Explain how decentralization follows from

delegation.5. Understand how the span of management

describes the organization.6. Understand how the chain of command is

established by using line and staff management.


Learning Objectives (cont’d)

7. Describe the four basic forms of organizational structure: bureaucratic, matrix, cluster, and network team.

8. Summarize the use of corporate culture, intrapreneurship, committees, coordination techniques, informal groups, and the grapevine.


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 representation of the positions and relationships in 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


A Typical Corporate Organization Chart


Five Steps to Organizing a Business

1. Job Design• Divide the work into separate parts and assign

those parts to positions

2. Departmentalization• Group the positions into manageable units

3. Delegation• Distribute responsibility and authority

4. Span of Management• Determine the number of subordinates who will

report to each manager

5. Chain of Command• Designate the positions with direct authority and

those that are support positions


Job Design

• Job Specialization– The separation of activities into distinct tasks and the

assignment of different tasks to different people

• The 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


Job Design (cont’d)

• Alternatives to Job Specialization– Job rotation

• The systematic shifting of employees from one job to another to reduce boredom and dissatisfaction

– Job enlargement• Adding tasks to a job to increase the variety of

a worker’s activities

– Job enrichment• Increasing the autonomy workers have in

deciding how to do their jobs


Departmentalization

• Grouping jobs into manageable units

• Common bases for departmentalization

1. By function

2. By product

3. By location

4. By customer


Departmentalization by Function• Grouping jobs that relate to the same activity

(marketing, production, etc.)• Small and newer organizations tend to base their

departmentalization on function• Disadvantages

– Slows down the decision-making process– Focuses attention on the department and not on the

organization as a whole


Departmentalization by Product• Grouping jobs related to particular products or services• Used by firms that produce a variety of products• Advantages

– Decision making is easier– All activities related to the product or service are integrated

• Disadvantages– Duplication of specialized activities– Focuses attention on the product rather than the organization


Departmentalization by Location• Grouping activities according to the defined

geographic area in which they are performed• Advantage

– Allows the organization to respond to localized demands or requirements

• Disadvantage– Complexity of administration and control in many locations


Departmentalization by Customer• Grouping activities according to the needs of various

customer populations• Advantage

– The capability to deal efficiently with unique customer groups

• Disadvantage– Larger-than-usual administrative staff


Departmentalization: Combinations of Bases

• Multibase Departmentalization for New-Wave Fashions, Inc.– Most firms use more than one basis for departmentalization

to improve efficiency and to avoid overlapping positions.


Delegation, Decentralization, and Centralization

• Delegation– Assigning part of a manager’s work and

power to other workers– Responsibility

• The duty to do a job or perform a task

– Authority• The power within the organization to

accomplish an assigned task.

– Accountability• The obligation to accomplish an assigned job or

task


Steps in the Delegation Process

• The manager assigns responsibility

• The subordinate is empowered to do the task

• Ultimate accountability remains with the manager


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


The Span of Management

• Wide and Narrow Spans of Control


The Span of Management (cont’d)

• Organizational Height– 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


Chain of Command: Line and Staff Management

• Line Management Position– A position that is part of the chain of command; includes

direct responsibility for achieving the goals of the organization

• Line authority—the authority line managers have to make decisions and issue directives related to organizational goals

• Staff Management Position– A position created to provide support, advice, and expertise

within an organization• Advisory authority—the expectation that line managers will

consult with staff managers before making decisions

• Functional authority—staff managers’ authority to make decisions and issues directives within their area of expertise


Line and Staff Management


Line-Staff Conflict

• Reasons for conflict– 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– Integrate line and staff managers into one team– Ensure that responsibilities are clearly defined– Hold both line and staff managers accountable for

results


Forms of Organizational Structure• The Bureaucratic Structure

– A management system based on a formal framework of authority that is carefully outlined and precisely followed

– Characteristics1. A high level of job specialization2. Departmentalization by function3. Formal patterns of delegation4. A high degree of centralization5. Narrow spans of management, resulting in a tall organization6. Clearly defined line and staff positions

– Advantages• Inflexibility helps ensure fair and equitable treatment

– Disadvantages• Inflexibility creates problems in adapting to dynamic business

environments


Forms of Organizational Structure (cont’d)• The 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


A Matrix Structure

Source: Management, Sixth Edition by Ricky W. Griffin. Copyright © 1999 by Houghton Mifflin Company. Adapted with permission.


The Matrix Structure (cont’d)

Advantages• Added flexibility• Increased productivity• Higher morale• Increases in creativity and

innovation• Personal development of

team members

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


Forms of Organizational Structure (cont’d)

• The Cluster Structure– An organization that consists primarily of teams

with no or very few underlying departments– Also called “team” or “collaborative” structures– Teams may move on to other projects or individual

members may be reassigned to different teams and projects

– Strengths• Small teams allows for flexibility to change direction

quickly and try new things

– Weaknesses• Employees may be concerned about job security• Increased stress due to rapid changes


Forms of Organizational Structure (cont’d)

• The Network Structure (Virtual Organization)– An organization in which administration is the

primary function performed and most other functions such as engineering, production, and marketing 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


Additional Factors That Influence an Organization

• 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)

– Cultural change is needed when• The business environment changes• Company performance is mediocre• The company is growing or becomes a large firm


Types of Corporate Cultures

• Networked Culture– Trust and friendship among employees– Strong commitment and loyalty to the organization– Relaxed, 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


Additional Factors That Influencean Organization (cont’d)

• Intrapreneurship– Intrapreneur—an employee who pushes an

innovative idea, product, or process through the organization while using the organization’s resources for idea development



• 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

– Positive aspects• Members bring more information and knowledge; more

accurate decisions; results communicated more effectively

– Negative aspects• Decisions making takes longer; may reach unnecessary

compromises; one person may dominate



• Coordination Techniques– Managerial hierarchy

• The arrangement that provides for increasing authority at higher levels of management

– Rules and procedures– Liaison to coordinate the activities of

groups– Committee to integrate complex

coordination



• The Informal Organization– Patterns of behavior and interactions that stem

from personal, rather than official, relationships in the organization

– Informal Groups• Formed by the members themselves to accomplish goals

that may or may not be relevant to the organization• Reasons for joining: the need for affiliation; agreement

with the goals of the group; desire to be accepted

– 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

Documents

Chapter Eight Creating a Flexible Organization. Copyright © Houghton Mifflin Company. All rights reserved.8 - 2 Learning Objectives 1.Understand what