Ch.7 Creating a Flexible Organization

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 an organization.

⑥ Describe the four basic forms of organizational structure.

⑦ Describe the effects of corporate culture.

⑧ Understand how committees and task forces are used.

⑨ Explain the functions of the informal organization and the grapevine in a business.

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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

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A Typical Corporate Organization Chart

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Major Considerations for Organizing a Business

• Job design

• Departmentalization

• Delegation

• Span of management

• Chain of command

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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

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Job Design (cont’d)

• Alternatives to job specialization

• Job rotation systematically shifts employees from one job to another

• Job enlargement

• Job enrichment

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Departmentalization

• Grouping jobs into manageable units

• Common bases for departmentalization• By function

• By product

• By location

• By customer

• Combinations

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Multibase Departmentalization forNew-Wave Fashions, Inc.

• MultibaseDepartmentalization for New-Wave Fashions, Inc.• Most firms use more

than one basis for departmentalization to improve efficiency and to avoid overlapping positions.

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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

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Steps in the Delegation Process

• The manager assigns responsibility

• The subordinate is empowered to do the task

• Ultimate accountability remains with the manager

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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

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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

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The Span of Management (cont’d)

• Wide and narrow spans of management

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FIGURE 7-4

The Span of Management (cont’d)

• 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

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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

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Forms of Organizational Structure (cont’d)

• Line-and-Staff Structure• Utilizes the chain of command from a line structure in combination

with the assistance of staff managers

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FIGURE 7-5

Line and Staff Managers

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Forms of Organizational Structure (cont’d)

• Line-and-Staff Structure (cont’d)

• 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 issues directives within their area of expertise

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Forms of Organizational Structure (cont’d)

• Line-and-Staff Structure (cont’d)

• 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

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Forms of Organizational Structure (cont’d)

• 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

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FIGURE 7-6

A Matrix Structure

21Source: Ricky W. Griffin, Management, 10th ed. Copyright © 2011 by South-Western/Cengage Learning. Adapted with permission.

Forms of Organizational Structure (cont’d)

• Added flexibility

• Increased productivity

• Higher morale

• Increases in creativity and innovation

• Personal development of team members

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• 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

Matrix Structure (cont’d)

Advantages Disadvantages

Forms of Organizational Structure (cont’d)

• 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

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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)

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Corporate Culture (cont’d)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 all25

FIGURE 7-7

Corporate Culture (cont’d)

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Source: “Types of Corporate of Corporate Culture,” in Rob Goffee and Gareth Jones, The Character of a Corporation (New York: HarperCollins, 1998). Copyright © 1998 by Rob Goffee and Gareth Jones. Permission granted by Rob Goffee and Gareth Jones by arrangement with The Helen Rees Literary Agency.

Corporate Culture (cont’d)

• 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

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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

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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

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