Organizing

Lecture 8

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Principles of OrganizationUnity of Command and DirectionChain of CommandSpan of Management (flat and tall organizations)Division of Labor (specialization, departmentalization, integration)CoordinationBalanced Responsibility and AuthorityDelegationFlexibility*Exhibit 62

Balanced Responsibility and AuthorityResponsibilityThe obligation to achieve objectives by performing required activities.AuthorityThe right to make decisions, issue orders, and use resources.AccountabilityThe evaluation of how well individuals meet their responsibilities.*

Balanced Responsibility and Authority (contd)DelegationThe process of assigning responsibility and authority for accomplishing objectives.FlexibilityThe ability to adapt to exceptions to the rules, policies, and procedures of the organization.*

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AuthorityFormal Authority (or Structure)The organizationally-sanctioned way of getting the job done.Organizational charts illustrate formal lines of authority in firms. Informal AuthorityThe patterns of relationships and communication that evolve as employees interact and communicate that is not sanctioned by the organization.*

Levels of AuthorityAuthority to InformInform a superior of action alternatives and the superior makes the decision.Authority to RecommendList alternatives/actions and recommend one action; superior makes action decision.Authority to ReportSelect and implement a course of action, reporting action to superior.Full AuthorityActing independently without supervision.*

Line and Staff AuthorityLine AuthorityThe responsibility to make decisions and issue orders down the chain of command.Staff AuthorityThe responsibility to advise and assist line and other personnel.Functional authorityThe right of staff personnel to issue orders to line personnel in established areas of responsibility.Dual line and staff authorityStaff personnel exercise line authority within their own departments.*

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Line and Staff Authority (contd)General staffWork for only one manager and help the manager in any way needed. Specialist staffHelp anyone in the organization who needs it.*

Centralized and Decentralized AuthorityCentralized AuthorityImportant decisions are made by top managers.Decentralized AuthorityImportant decisions are made by middle and first-line managers.

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Organization DesignContingency Factors Affecting StructureEnvironment (mechanistic versus organic)Production technologyStrategy (structure follows strategy)Size of the organization (larger = more formal)Organization ChartA graphic illustration of the organizations management hierarchy and departments and their working relationships.Management level, chain of command, division and type of work, and departmentalization.*

Organization Chart*Exhibit 65

DepartmentalizationDepartmentalizationThe grouping of related activities into units.Functional departmentalizationBased on the internal operations or functions that the employees perform and the resources needed to accomplish that work.External, or output, departmentalizationBased on activities or factors outside the organization: product, customer, or territory.Multiple DepartmentalizationHybrid structure: matrix and divisional (SBUs)*

Types of Departmentalization*Exhibit 66

Types of Departmentalization (contd)*Exhibit 66 contd

Multiple DepartmentalizationHybrid structures using combinations of functional and product departmentalizationMatrix DepartmentalizationUnity of commandCoordination issuesDivisional DepartmentalizationStrategic business units (SBUs)Conglomerate structures: profit centers*

Matrix Departmentalization*Exhibit 67

New Approaches to DepartmentalizationHorizontal Team OrganizationHas an all-directional focus to increase speed of response, individual accountability, flexibility, knowledge sharing, and coordination.NetworksBoundaryless interrelationships among different organizations.Virtual OrganizationA continually evolving group of companies that unite temporarily to exploit specific opportunities or to attain strategic advantages and then disband when objectives are met.*

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