Chapter Eight
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 the organization.
6. Understand how the chain of command is
established by using line and staff
management.
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Learning Objectives (cont’d)
7. Describe the four basic forms of
organizational structure: bureaucratic,
matrix, cluster, and network team.
8. Summarize the use of corporate culture,
intrapreneurship, committees, coordination
techniques, informal groups, and the
grapevine.
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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 representation of the positions and
relationships in 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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Five Steps to Organizing a Business
1. Job design
•
Divide the work into separate parts and
assign those parts to positions
2. Departmentalization
•
Group the positions into manageable
units
3. Delegation
•
Distribute responsibility and authority
4. Span of management
•
Determine the number of subordinates
who will report to each manager
5. Chain of command
•
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Designate the positions with direct
authority and those that are support
positions
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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
• The systematic shifting of employees from one
job to another to reduce boredom and
dissatisfaction
– Job enlargement
• Adding tasks to a job to increase the variety of
a worker’s activities
– Job enrichment
• Increasing the autonomy workers have in
deciding how to do their jobs
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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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Finagle A Bagel’s
Organizational Structure
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Departmentalization:
Combinations of Bases
• Multibase Departmentalization 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
– Responsibility
• The duty to do a job or perform
a task
– Authority
• The power within the
organization to accomplish an
assigned task.
– Accountability
• The obligation to accomplish
an assigned job or task
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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
• Wide and narrow spans of control
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The Span of Management (cont’d)
• Organizational height
– 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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Chain of Command:
Line and Staff Management
• Line management position
– A position that is part of the chain of command;
includes direct responsibility for achieving the goals of
the organization
• Line authority—the authority line managers have to make
decisions and issue directives related to organizational
goals
• Staff management position
– A position created to provide support, advice, and
expertise within an organization
• 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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Line and Staff Management
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Line-Staff Conflict
• Reasons for conflict
– 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
– 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
•
Bureaucratic structure
– A management system based on a formal framework of
authority that is carefully
outlined and precisely followed
– Characteristics
1. A high level of job specialization
2. Departmentalization by function
3. Formal patterns of delegation
4. A high degree of centralization
5. Narrow spans of management, resulting in a tall
organization
6. Clearly defined line and staff positions
– Advantages
• Inflexibility helps ensure fair and equitable treatment
– Disadvantages
• Inflexibility creates problems in adapting to dynamic
business environments
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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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A Matrix Structure
Source: Management, Eighth Edition by Ricky W. Griffin. Copyright © 2005 by Houghton Mifflin Company. Adapted with permission.
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The Matrix Structure (cont’d)
Advantages
Disadvantages
Added flexibility
Increased productivity
Higher morale
Increases in creativity and
innovation
• Personal development of team
members
• 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
•
•
•
•
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Forms of Organizational Structure (cont’d)
• Cluster structure
– An organization that consists primarily of teams with no
or very few underlying departments
– Also called “team” or “collaborative” structures
– Teams may move on to other projects or individual
members may be reassigned to different teams and
projects
– Strengths
• Small teams allows for flexibility to change direction
quickly and try new things
– Weaknesses
• Employees may be concerned about job security
• Increased stress due to rapid changes
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Forms of Organizational Structure (cont’d)
• Network structure (virtual organization)
– An organization in which administration is the
primary function performed and most other
functions such as engineering, production, and
marketing 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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Additional Factors That Influence
an Organization
• 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)
– Cultural change is needed when
• The business environment changes
• Company performance is mediocre
• The company is growing or becomes a
large firm
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Finagle A Bagel’s Organizational Culture
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Types of Corporate Cultures
• Networked culture
– Trust and friendship among employees
– Strong commitment and loyalty to the organization
– Relaxed, 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 all
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Additional Factors That Influence
an Organization (cont’d)
• Intrapreneurship
– Intrapreneur—an
employee who pushes
an innovative idea,
product, or process
through the organization
while using the
organization’s resources
for idea development
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Additional Factors That Influence
an Organization (cont’d)
• 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
– Positive aspects
• Members bring more information and knowledge; more
accurate decisions; results communicated more
effectively
– Negative aspects
• Decisions making takes longer; may reach unnecessary
compromises; one person may dominate
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Additional Factors That Influence
an Organization (cont’d)
• Coordination techniques
– Managerial hierarchy
• The arrangement that provides
for increasing authority at
higher levels of management
– Rules and procedures
– Liaison to coordinate the
activities of groups
– Committee to integrate
complex coordination
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Additional Factors That Influence
an Organization (cont’d)
• Informal organization
– Patterns of behavior and interactions that stem from
personal, rather than official, relationships in the
organization
– Informal groups
• Formed by the members themselves to accomplish goals
that may or may not be relevant to the organization
• Reasons for joining: the need for affiliation; agreement
with the goals of the group; desire to be accepted
– 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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