Chapter 7 Creating a Flexible Organization 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 an organization. 6. Understand how the chain of command is established by using line and staff management. 7. Describe the four basic forms of organizational structure: bureaucratic, matrix, cluster, and network. 8. Summarize the use of corporate culture, intrapreneurship, committees, coordination techniques, informal groups, and the grapevine. Copyright © Cengage Learning. All rights reserved. Chapter 7 | Slide 2 Organization …a group of two or more people working together to achieve a common set of goals. Copyright © Cengage Learning. All rights reserved. Chapter 7 | Slide 3 Organization Chart …a diagram that represents the positions and relationships within an organization. Copyright © Cengage Learning. All rights reserved. Chapter 7 | Slide 4 Figure 7.1: A Typical Organization Chart A company’s organization chart represents the positions and relationships within the organization and shows the managerial chains of command. Copyright © Cengage Learning. All rights reserved. Chapter 7 | Slide 5 Chain of Command …the line of authority that extends from the highest to the lowest levels of an organization. Copyright © Cengage Learning. All rights reserved. Chapter 7 | Slide 6 Reasons to Not Maintain Organizational Chart Difficult to chart positions Constant change Copyright © Cengage Learning. All rights reserved. Chapter 7 | Slide 7 5 Steps for Organizing a Business 1. Job Design 2. Departmentalization 3. Delegation 4. Span of Management 5. Chain of Command Copyright © Cengage Learning. All rights reserved. Chapter 7 | Slide 8 Job Specialization …the separation of all organizational activities into distinct tasks and the assignment of different tasks to different people. Copyright © Cengage Learning. All rights reserved. Chapter 7 | Slide 9 Rationale for Specialization Job too large for one person More efficient No lost time changing between operations More-specialized job makes it easier to design specialized equipment More specialized the job the easier the job training Copyright © Cengage Learning. All rights reserved. Chapter 7 | Slide 10 Combating Job Specialization Boredom Job rotation Job enlargement Job enrichment Copyright © Cengage Learning. All rights reserved. Chapter 7 | Slide 11 Departmentalization …process of grouping jobs into manageable units. Copyright © Cengage Learning. All rights reserved. Chapter 7 | Slide 12 Bases for Departmentalization Function Product Location Customer Copyright © Cengage Learning. All rights reserved. Chapter 7 | Slide 13 Function …grouping jobs that relate to the same organizational activity. Copyright © Cengage Learning. All rights reserved. Chapter 7 | Slide 14 Product …grouping activities related to a particular product or service. Copyright © Cengage Learning. All rights reserved. Chapter 7 | Slide 15 Location …grouping activities according to the defined geographic area in which they are performed. Copyright © Cengage Learning. All rights reserved. Chapter 7 | Slide 16 Customer …grouping activities according to the needs of various customer populations. Copyright © Cengage Learning. All rights reserved. Chapter 7 | Slide 17 Figure 7.2: Multibase Departmentalization for New-Wave Fashions, Inc. Most firms use more than one basis for departmentalization to improve efficiency and to avoid overlapping positions. Copyright © Cengage Learning. All rights reserved. Chapter 7 | Slide 18 Delegation …assigning part of a manager’s work and power to other workers. Copyright © Cengage Learning. All rights reserved. Chapter 7 | Slide 19 Figure 7.3: Steps in the Delegation Process To be successful, a manager must learn how to delegate. No one can do everything alone. Copyright © Cengage Learning. All rights reserved. Chapter 7 | Slide 20 Responsibility …the duty to do a job or perform a task. Copyright © Cengage Learning. All rights reserved. Chapter 7 | Slide 21 Authority …the power, within an organization, to accomplish an assigned job or task. Copyright © Cengage Learning. All rights reserved. Chapter 7 | Slide 22 Accountability …the obligation of a worker to accomplish an assigned job or task. Copyright © Cengage Learning. All rights reserved. Chapter 7 | Slide 23 Barriers to Delegation Desire to ensure that the job gets done Fear that worker will do well and attract notice of higher-level managers Inability to plan and assign work effectively Copyright © Cengage Learning. All rights reserved. Chapter 7 | Slide 24 Decentralized Organization …an organization in which management consciously attempts to spread authority widely in the lower levels. Copyright © Cengage Learning. All rights reserved. Chapter 7 | Slide 25 Centralized Organization …an organization that systematically works to concentrate authority at the upper levels. Copyright © Cengage Learning. All rights reserved. Chapter 7 | Slide 26 Factors Influencing Decentralization Complexity/predictability of external environment Risk/importance of decision Abilities of lower-level managers Past practice Copyright © Cengage Learning. All rights reserved. Chapter 7 | Slide 27 Span of Management …the number of workers who report directly to one manager. Wide vs. Narrow Flat vs. Tall Copyright © Cengage Learning. All rights reserved. Chapter 7 | Slide 28 Figure 7.4: The Span of Management Copyright © Cengage Learning. All rights reserved. Chapter 7 | Slide 29 Organizational Height …the number of layers, or levels, of management in a firm. Copyright © Cengage Learning. All rights reserved. Chapter 7 | Slide 30 Tall Organizations Administrative costs high because of layers of management Communication among levels distorted Copyright © Cengage Learning. All rights reserved. Chapter 7 | Slide 31 Wide Organizations Managers perform more administrative duties Managers spend more time supervising and working with subordinates Copyright © Cengage Learning. All rights reserved. Chapter 7 | Slide 32 Line Management Position …a position that is part of the chain of command and that includes direct responsibility for achieving the goals of the organization. Copyright © Cengage Learning. All rights reserved. Chapter 7 | Slide 33 Staff Management Position …a position created to provide support, advice, and expertise within an organization. Copyright © Cengage Learning. All rights reserved. Chapter 7 | Slide 34 Line vs. Staff Line managers = line/direct authority Staff managers • Advisory authority • Functional authority Conflicts • To line from staff o More formal education o Younger • To staff from line ─ ignored Copyright © Cengage Learning. All rights reserved. Chapter 7 | Slide 35 Figure 7.5: Line and Staff Management Copyright © Cengage Learning. All rights reserved. Chapter 7 | Slide 36 Table 7.1: Five Characteristics of Organizational Structure Copyright © Cengage Learning. All rights reserved. Chapter 7 | Slide 37 Bureaucratic Structure …a management system based on a formal framework of authority that is outlined carefully and followed precisely. Copyright © Cengage Learning. All rights reserved. Chapter 7 | Slide 38 Characteristics of a Bureaucracy Departmentalization by function Formal patterns of delegation High degree of centralization Narrow span of management = tall organization Clearly defined line/staff positions with formal relationships between the two Copyright © Cengage Learning. All rights reserved. Chapter 7 | Slide 39 Matrix Structure …an organizational structure that combines vertical and horizontal lines of authority, usually by superimposing product departmentalization on a functionally departmentalized organization. Copyright © Cengage Learning. All rights reserved. Chapter 7 | Slide 40 Cross-Functional Team …a group of employees from different departments who work together on a specific project. Copyright © Cengage Learning. All rights reserved. Chapter 7 | Slide 41 Figure 7.6: A Matrix Structure Copyright © Cengage Learning. All rights reserved. Chapter 7 | Slide 42 Advantages of Matrix Structure Flexibility Increased productivity Raises morale Nurtures creativity and innovation Employees experience personal development Copyright © Cengage Learning. All rights reserved. Chapter 7 | Slide 43 Disadvantages of Matrix Structure Reporting to 1+ supervisor = confusion Longer to resolve problems Personality clashes Poor communication Undefined individual roles Unclear responsibilities Ways to reward individual/team performance Expense to maintain Copyright © Cengage Learning. All rights reserved. Chapter 7 | Slide 44 Cluster Structure …an organization that consists primarily of teams with no or very few underlying departments. Copyright © Cengage Learning. All rights reserved. Chapter 7 | Slide 45 Team or Collaborative Organization Team members work together on a project until finished Team may remain intact when assigned another project Or Team members may be reassigned to different teams Copyright © Cengage Learning. All rights reserved. Chapter 7 | Slide 46 Cluster Structure Strengths Flexibility Try new techniques Explore new ideas Copyright © Cengage Learning. All rights reserved. Weaknesses Lack of job security Increased stress Rapid changes Chapter 7 | Slide 47 Network Structure …an organization in which administration is the primary function, and most other functions are contracted out to other firms. Copyright © Cengage Learning. All rights reserved. Chapter 7 | Slide 48 Network Structure No manufacturing of product it sells Few permanent employees • Top management • Hourly clerical Leased facilities/equipment Temporary workers Limited formal structure Copyright © Cengage Learning. All rights reserved. Chapter 7 | Slide 49 Strengths/Challenges of Network Structure Strength = flexibility Challenges • Quality control • Low morale/high turnover • Vulnerability to outside contractors Copyright © Cengage Learning. All rights reserved. Chapter 7 | Slide 50 Corporate Culture …the inner rites, rituals, heroes, and values of a firm. Copyright © Cengage Learning. All rights reserved. Chapter 7 | Slide 51 Corporate Culture Indicators Physical setting What company says about culture How guests greeted How employees spend their time Copyright © Cengage Learning. All rights reserved. Chapter 7 | Slide 52 Figure 7.7: Types of Corporate Cultures Copyright © Cengage Learning. All rights reserved. Chapter 7 | Slide 53 Organizations of the Future Small, task-oriented work groups Control over own activities Computer coordinated Strong corporate culture Supports trust and risk taking Copyright © Cengage Learning. All rights reserved. Chapter 7 | Slide 54 Intrapreneur …an employee who pushes an innovative idea, product, or process through an organization. Copyright © Cengage Learning. All rights reserved. Chapter 7 | Slide 55 Committees Ad Hoc ─ created for a specific short-term purpose Standing ─ permanent and charged with performing some recurring task Task Force ─ created to investigate a major problem/pending decision Copyright © Cengage Learning. All rights reserved. Chapter 7 | Slide 56 Coordination Techniques Managerial Hierarchy ─ provides increased authority at higher levels of management Informal Organization ─ stems from personal rather than official relationships • Informal group • Grapevine Copyright © Cengage Learning. All rights reserved. Chapter 7 | Slide 57 Chapter Quiz 1. Solid vertical lines on an organization chart indicate relationships among a) b) c) d) e) staff positions. employees. delegated positions. the chain of command. line and staff positions. Copyright © Cengage Learning. All rights reserved. Chapter 7 | Slide 58 Chapter Quiz (cont.) 2. The systematic shifting of employees from one job to another is called job a) b) c) d) e) specialization. rotation. sharing. enlargement. enrichment. Copyright © Cengage Learning. All rights reserved. Chapter 7 | Slide 59 Chapter Quiz (cont.) 3. Grouping all activities according to the geographic area in which they are located is departmentalization by a) b) c) d) e) function. employee. product. customer. location. Copyright © Cengage Learning. All rights reserved. Chapter 7 | Slide 60 Chapter Quiz (cont.) 4. In a __________ organization, administrative costs are higher because more managers are needed. a) b) c) d) e) long flat tall short broad Copyright © Cengage Learning. All rights reserved. Chapter 7 | Slide 61 Chapter Quiz (cont.) 5. The power to accomplish an assigned job is called a) b) c) d) e) authority. accountability. responsibility. delegation. obligation. Copyright © Cengage Learning. All rights reserved. Chapter 7 | Slide 62