BUSI 1800 Ch.9 Structuring Organizations for Today’s Challenges
Structuring an organization consists of
-​ Devising a division of labor
-​ Setting up teams or departments to do specific tasks
-​ Assigning responsibility and authority to people
-​ Allocating resources
-​ Assigning specific tasks
-​ Establishing procedures for accomplishing the organizational objectives
-​ Developing an organization chart
-​ Monitoring the environment
-​ Adjusting to new realities
Fayol’s principles of organization
-​ Unity of command
-​ Hierarchy of authority
-​ Division of labor
-​ Subordination of individual interests to the general interest
-​ Authority
-​ Degree of centralization
-​ Clear communication channels
-​ Order
-​ Equity
-​ Esprit de corps
Max Weber and organizational theory
-​ Similar to Fayol, plus:
-​ Job descriptions
-​ Written rules, decision guidelines, and detailed records
-​ Consistent procedures, regulations, and policies
-​ Staffing and promotions based on qualification
Turning principles into Organizational Design
Hierarchy: A system in which one person is at the top of an organization, and there is a ranked
or sequential ordering from the top down of managers who are responsible to that person
Chain of command: the line of authority that moves from the top of a hierarchy to the bottom
Bureaucracy: an organization with many layers of managers who set rules and regulations and
oversee all decisions
When designing responsive organizational structures, firms have to deal with several issues
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centralization vs decentralization of authority
Span of control
Tall vs flat organizational design
Departmentalization
Advantages of centralized management
-​ Greater top-management control
-​ More efficiency
-​ Simpler distribution system
-​ Stronger brand/corporate image
Disadvantages
-​ Less responsiveness to customers
-​ Less empowerment
-​ Interorganizational conflict
-​ Lower morale away from headquarters
Advantages of decentralized management
-​ Better adaptation to customer wants
-​ More empowerment of workers
-​ Faster decision making
-​ Higher morale
Disadvantages of decentralized management
-​ Less efficiency
-​ Complex distribution system
-​ Less top-management control
-​ Weakened corporate image
Choosing appropriate span of control
Span of control: the optimum number of subordinates a manager supervises or should
supervise
Variables:
-​ Capabilities of the manager
-​ Capabilities of the subordinates
-​ Geographical closeness
-​ Functional similarity
-​ Need for coordination
-​ Planning demands
-​ Functional complexity
The flatter the organization the wider the span of control
Advantages of narrow span of control
-​ More control by top management
-​ More chances for advancement
-​ Greater specialization
-​ Closer supervision
Disadvantages of narrow span of control
-​ Less empowerment
-​ Higher costs
-​ Delayed decision making
-​ Less responsiveness to customers
Advantages of wide span of control
-​ Reduced costs
-​ More responsiveness to customers
-​ Faster decision making
-​ More empowerment
Disadvantages of wide span of control
-​ Fewer chances for advancement
-​ Overworked managers
-​ Loss of control
-​ Less management expertise
Choosing between tall and flat organizational structures
Tall organization structure: an organization structure in which the pyramidal organization chart
would be quite tall because of the various levels of management.
Flat organizational structure: An organization structure that has few layers of management and
a broad span of control
Advantages of Departmentalization
-​ In depth skills development of employees
-​ Economies of scale by centralizing all the resource needs and locating various experts in
that area
-​ Better coordination of activity
Disadvantages
-​ Lack of communication
-​ Employees identify with department goals instead of company
-​ Slow response to external demands
-​ Narrow specialists
-​ May engage in groupthink (they think alike) which hinders creativity
Organizational models
-​ Line organizations
-​ Line and staff organizations
-​ Matrix style organizations
-​ Cross-functional self-managed teams
Alternative ways to departmentalize
-​ By product
-​ By function
-​ By customer group
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By geographic location
By process
A sample line and staff organization
A matrix organization
Types of Organizations
Advantages
Line
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Clarifies responsibility and
authority
Simplifies structure and easy to
understand
Establishes one supervisor for
each person
Disadvantages
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Line and Staff
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Matrix
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Provides expert advice from staff
to line personnel
Establishes lines of authority
Encourages cooperation and
better communication at all levels
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Is flexible
Encourages cooperation among
department
Produces creative solutions to
problems
Allows organization to take on
new projects without adding the
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Is too flexible
Limits number of
specialists to advise
workers
Extends lines of
communication
Hinders ability to
quickly handle
complex questions
Risks overstaffing
Risks overanalyzing
Blurs lines of
communication
Increases staff
frustrations because
of lack of authority
Is costly and complex
Confuses employees
Requires effective
interpersonal skills
and co-operative
managers and
employees
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Cross-functional,
Self-Managed
Teams
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organizational structure
Provides for more efficient use of
organizational resources
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Inhibits employee
evaluation and reward
systems
Enhances interdepartmental
coordination and co-operation
Enables quicker response to
customers and market conditions
Increases employee motivation
and morale
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Confuses
responsibility and
authority
Generates a
perceived loss of
control by
management
Inhibits employee
evaluation and reward
systems
Requires
self-motivated and
highly trained workers
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Managing interactions among firms
Networking among firms: Using communications technology and other means to link
organizations and allow them to work together on common objectives
Real time: the present moment or the actual time in which something takes place
Virtual corporation: a temporary networked organization made up of replaceable firms that join
and leave needed
Benchmarking and Core competencies
Benchmarking: comparing an organization’s practices, processes, and products against the
world’s best
Core Competencies: those functions that an organization can do as well as or better than any
other organizations in the world
Adapting to change
-​ Introducing change is a major challenge for managers
-​ Change is necessary in order to be more competitive
-​ The internet has created opportunities for companies to change how they relate to
customers and how they market their products
-​ Digital natives: young people who grew up using technology including internet and
electronic devices such as cell phones
Restructuring for Empowerment
Restructuring: redesigning an organization so that it can more effectively and efficiently serve its
customers
Inverted Organization: an organization that has contact people at the top and the chief executive
officer at the bottom of the organizational chart