Chapter 6
Organizing the
Business
Enterprise
Day two
PowerPoint Presentation by Charlie Cook
Copyright © 2005 Prentice Hall, Inc.
All rights reserved.
Key Topics
• Organizational structure
• Specialization and departmentalization
• Responsibility, authority, delegation, and
accountability
• Functional, divisional, matrix, and international
organizational structures
• The informal organization and intrapreneuring
Copyright © 2005 Prentice Hall, Inc. All rights reserved.
6–3
The Management Process
• Planning
• Organizing
 What are we?
 How are we put
together?
 Who does what?
• Directing
• Controlling
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6–4
Organizational Structure
• Specification of the jobs to be done within an
organization and how those jobs relate to one
another
Inputs
Customers with
wind power
generators
There are a lot of questions to
answer as to what happens in
the black box that is our
company
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?
6–5
What Elements Influence Organizational
Structure?
Purpose
Mission
Strategies
Size & Growth
Technology
External vs. Internal Focus
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Is our
structure
intentional?
“the living
room effect”?
The customercentric
organization
6–6
The Organization Chart & Influences in
its Development
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Figure 6–1
6–7
The Building Blocks of Organizational
Structure
SPECIALIZATION:
What jobs need done, and who will do them?
DEPARTMENTALIZATION OPTIONS
Grouping jobs into logical units (groups)
More
customercentric
Customer
Functional
Product
Process
Geographic
Other ?
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More
Businesscentric
6–8
Multiple Forms of Departmentalization in
an organization chart
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Figure 6–2
6–9
Specialization & Departmentalization Effects
on the Customer / Wholesaler Relationship
• Organized By
Function
Technical
service
Customer
credit
Marketing
resources
The
Customer
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• Organized By
Customer
Sales
Customer
Representative
The
Customer
6–10
The Decision-Making Hierarchy
Assigning Tasks
Responsibility & Authority
Which is easier to delegate?
Performing Tasks
Delegation & Accountability
Do you want accountable without authority?
Distributing Authority
Centralized vs. Decentralized
How does this decision effect management’s ability to plan?
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6–11
Tall Organization: United States Army
Centralized
Top managers hold most
decision-making authority.
What types of goal
setting does each
layer focus on?
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Figure 6–3b
6–13
Flat Organization: Typical Law Firm
Decentralized
Lower level managers hold
significant decision-making
authority.
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Figure 6–3a
6–14
Let’s see how this works:
• Team competition:
• Two airplane manufacturers
• One tall organization with centralized authority
• One flat with decentralized authority
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6–16
Tall airplane manufacture
• Tall organization
• Functional
departmentalization
• Centralized authority
President
VP
Production
VP
Purchasing
VP Sales
Purchasing
Manager
Line Manager
Materials
Fabrication
Line Manager
Major
Assembly
Line Manager
Finish
Assembly
Sales
Manager
Purchasing
Agent
Materials
Fabrication
Workers
Major
Assembly
Workers
Finish
Assembly
Workers
Sales
Person
The
Supplier
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The
6–17
Customer
Flat airplane manufacture
• Flat organization
• Customer
Departmentalization
• Decentralized
decision making
Director
authority
President
Director
Type B
Customers
Type A
Customers
Purchasing
Agent
Materials
Fabrication
Worker
Major
Assembly
Worker
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Finish
Assembly
Worker
Sales
Person
Type A
Customer
Finish
Purchasing
Materials
Major
Sales
Assembly
Agents
Fabrication
Assembly
People
Workers
Workers
Workers
Type
6–18B
Customer
The Goal: Make what the customer
wants in the quantity they need
• Your customer provides product specifications to
the sales person.
 quantity expected to purchase
 what the airplane should look like
 Sample plane for each sales person
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6–20
Tall Organization:
• Lay out your facility to look like your org. chart
• You may only communicate with people in your
work group, AND one level up/down in your org
chart.
 Strictly obey your reporting relationships!
• There is no other communication possible outside
of your work group
• President makes all decisions
• Middle managers: Pass information up and down
• Workers: Do what you are told, handle any
feedback through your chain of command.
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6–21
Flat Organization:
• Set up your facility to look like your org chart.
• Production & purchasing workers position as
one work group.
• Communication is possible within this work
group.
• Work groups are delegated decision making
authority.
• Communicate outside your work group only
through your director.
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6–22
Production Round One:
• Customer: Place forecasts (talk w/instructor)
• Organizations: Take forecasts and communicate through
your proper channels to set up production
• Start: Once teams are ready we will begin production all
together.
• End: When the instructor says so
• Tally:
 Units produced,
 Units sold,
 ending inventory
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6–23
Production Round Two:
• Customer: Place requests (talk w/instructor first)
• Organizations: Take requests and communicate through
your proper channels to set up production
• Start: Begin production when your team is ready
 Do not wait for a go ahead from the instructor!
• End: When the instructor says so
• Tally:




Units produced,
Units sold,
ending inventory
Customer satisfaction
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6–24
Customer Instructions
• Provide one sample product to each company.
• Pad your forecast to make sure you have
access to enough product when you need it.
 You will be shorted on your actual product received in
the first round
• Purchase the product based on first production
finished. Take delivery upon completion.
• Change spec as directed for round two
• Do not accept any non-spec product, ever.
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6–25
Instructor Instructions
• Tell customer to order 10 airplanes from each team for
round 1.
• During round 1, instruct presidents on future market
trends (upcoming change to product specifications).
Note: Tall org. President may be too busy to meet. (note:
delegating daily operations allows the CEO more time for strategic planning – like talking to the
customer)
• Stop round 1 leaving plenty of unfinished inventory,
expect more in the Tall org.
• Round 2: Allow production & sales right when order is
placed to emphasize any speed-to-change differences in
Tall vs. Short organizations.
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6–26
Lessons from Production Contest:
• SWOT for Tall organizations




Strengths
Weaknesses
Opportunities
Threats
• SWOT for Flat organizations




Strengths
Weaknesses
Opportunities
Threats
• Describe the types of organizations for which each
option is appropriate. Give detailed examples.
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6–27
The Globally Integrated Enterprise
Samuel Palmisano – CEO IBM
- U.S. News & World Report
•
•
•
•
•
•
•
Corporate evolution
Hub & spoke system is obsolete
1980’s: little replicas around the world
New: distributed centers of excellence
Stimulates collaboration and knowledge growth
Command & Control & replication doesn’t measure up
Issues? Quality, job-shifting, growing the pie
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6–30
Matrix
Organization
at Martha
Stewart
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Figure 6–5
6–31
Basic Forms of Organizational Structure
Functional
Organization
Divisional
Organization
International
Organization
Matrix
Organization
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6–35
International Division Structure
Why is that international book cheaper?
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Figure 6–6
6–36
The Virtual Organization
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Figure 6–7
6–37
The Informal Organization: A Powerful
Dynamic
• Informal Groups
• The Grapevine
• Intrapreneuring
Copyright © 2005 Prentice Hall, Inc. All rights reserved.
6–39
Chapter Review
•
Discuss the elements of organizational structure.
•
Explain specialization and departmentalization.
•
Describe when tall vs. flat organizations are
appropriate, and what characteristics they are likely to
bring to an organization. How does the matrix fit in?
•
Explain decision-making in centralized vs.
decentralized organizations.
•
Understand the importance of the informal
organization.
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6–40