Chapter 8
Organizing
Designing Jobs, Departments,
and the Overall Organization
© 2015 YOLO Learning Solutions
The Nature of Organizing
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An organization is a group of individuals working
together to achieve goals or objectives that would be
difficult or impossible for them to achieve individually.
Organizing is the process of creating an organization.
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Organizational Culture
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Organizational culture consists of the shared values,
beliefs, norms, rules, behaviors, and philosophies in an
organization.
Formal expressions of organizational culture include the
company vision and mission statement, codes of ethics,
ceremonies, meetings, and more.
Informal expressions include dress codes, extracurricular
activities, and stories or legends.
Every organization has an organizational culture,
whether or not managers actively choose to influence it.
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Formal and Informal Relationships
of Organizational Structure
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An organizational chart is a graphic display of the official
lines of authority and communication.
Vertical lines between positions indicate lines of authority;
horizontal lines represent lines of communication.
Positions at higher levels of the chart have authority over
positions lower in the chart.
The organizational chart shows the structure of the formal
organization (the arrangement of the positions that
dictates which work activities are completed, where
decisions should be made, and the flow of information)
but does not designate the informal relationships.
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© 2015 YOLO Learning Solutions
Formal and Informal Relationships
of Organizational Structure (continued)
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The informal organization refers to the relationships
among positions that are not connected by the
organizational chart.
These relationships occur either because the nature of
the work forces the people occupying those positions
to interact to complete the work more efficiently or
because they have developed a friendship.
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The Process of Organizing
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All organizing efforts typically involve several activities:
◦ Grouping tasks into jobs
◦ Grouping jobs into departments
◦ Determining authority and channels of communication
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© 2015 YOLO Learning Solutions
Grouping Tasks into Jobs
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Job specialization is the division of work into smaller,
distinct tasks.
Division of labor results from assigning these distinct
tasks to different workers.
Job design is the process of grouping tasks into jobs.
Two schools of job design are classical job design and
behavioral job design.
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Classical Job Design
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The classical approach to job design is based on the
principles of division of labor and specialization.
When jobs are divided, they are reduced in complexity
and operations until the activities of a single worker
can be repeated with ease.
Advantages of specialization:
◦ Workers assigned to only one small part of the work process
become very knowledgeable about that part very quickly.
◦ Specialized tools and equipment can be developed.
◦ More product can be made more quickly and for less cost.
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Classical Job Design (continued)
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Disadvantages of specialization:
◦ Performing the exact same task over and over becomes
boring, which can affect quality.
◦ Workers combat monotony by being absent and tardy.
◦ Repetitive movements result in fatigue injuries.
◦ Specialization allows managers to replace workers fairly
quickly and relatively inexpensively, which often makes
workers feel insecure.
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The Behavioral Approach to Job Design
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The behavioral approach to job design is based on the
view that workers are independent parts of the
production process whose individual characteristics
should be taken into account in forming jobs.
Behavioral approaches include:
◦ Job enlargement―Focuses on increasing the number of tasks
that comprise a job
◦ Job rotation―Involves a deliberate plan to move workers to
various jobs on a consistent, scheduled basis
◦ Job enrichment―Focuses on increasing the number of similar
tasks involved, especially tasks that require information
processing and decision making
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© 2015 YOLO Learning Solutions
Determining Authority Relationships
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Another activity involved in organizing is determining
authority relationships among employees.
Usually, these authority relationships flow down an
organizational chart, from high positions down to the
lower levels of the organization.
One major purpose of establishing authority
relationships is to make it easier for the organization to
achieve its goals.
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Authority and Responsibility
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Authority is the right to give work orders to all directly
connected lower positions in the organization.
Responsibility refers to the accountability an individual
or group is given for the attainment of goals.
Authority must accompany responsibility.
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Authority Relationships
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Authority relationships are partly defined by the type
of departmentalization the organization uses:
◦ Product departmentalization
◦ Functional departmentalization
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Authority also is affected by span of control―the
actual number of subordinates over which a position
has authority.
Chain of command ensures that all positions are
directly linked in some way to top management.
◦ Unity of command
◦ Scalar chain
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Balancing Authority and Responsibility
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There are two major methods of distributing authority:
delegation and decentralization.
Delegation is the assignment of work activities and
authority to a subordinate.
Though managers delegate work activities and the
authority to complete them to subordinates, managers
still are responsible for subordinates’ performance and
the work activities themselves.
Centralization is the pattern of concentrating authority
in a relatively few, high-level positions.
© 2015 YOLO Learning Solutions
© 2015 YOLO Learning Solutions
Balancing Authority and Responsibility (continued)
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Decentralization is when authority is dispersed to
several positions at various levels in the organization.
Decentralization
◦ Frees managers from some tasks
◦ Provides opportunities for employees to develop new skills
and master additional tasks
◦ Speeds information processing and decision making because
fewer levels of employees are involved
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Most organizations are neither completely centralized
nor decentralized.
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Organizational Structure
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Organizational structure is the way that managers
group jobs into departments and departments into
divisions.
Departmentalization is the grouping of related jobs to
form an administrative unit—department, area, or
center.
Departmentalization is a normal stage in an
organization’s growth.
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Functional Structure
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An organization with departments like accounting,
marketing, and engineering has a functional structure.
Functional structure is the grouping of jobs according to
similar economic activities, such as finance, production
and operations, and marketing.
The functional structure is efficient and useful for
capturing economies of scale, but it can make
communication across departments difficult and costly.
Weaknesses of the functional structure include “turf
wars,” miscommunication, and working at crosspurposes.
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© 2015 YOLO Learning Solutions
Multidivisional Structure
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In a multidivisional structure, the organization groups
all the activities involved with a specific product,
geographic region, customer, or some other common
denominator together into a division.
This structure usually occurs when a firm grows so
large that functional departments become
cumbersome.
When a company uses its different products as the
basis for divisions, it is using a product division
structure.
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© 2015 YOLO Learning Solutions
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Multidivisional Structure (continued)
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A firm with a geographic division structure creates
divisions to support business operations in certain
geographic regions.
When a firm organizes divisions by customer, it is using
a customer division structure.
A holding company is an organization composed of
several very different kinds of businesses, each of
which is permitted to operate largely autonomously.
A hybrid structure is a combination of several different
structures and is the most common form of
organizational structure.
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© 2015 YOLO Learning Solutions
© 2015 YOLO Learning Solutions
© 2015 YOLO Learning Solutions
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Matrix Structure
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A matrix structure brings together employees from
different functional areas to act as project groups or
teams to complete a specific project.
This avoids duplication of effort and has the
efficiencies of the functional structure, but it means
that each employee has two supervisors.
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© 2015 YOLO Learning Solutions
Network Organizations/Outsourcing
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Network organizations do not make products
themselves, but contract to others the tasks of
producing, transporting, and selling the product
according to their designs and plans.
Outsourcing means that the organization makes critical
components, but contracts with other organizations to
manufacture less important parts.
A drawback of outsourcing is that it gives outsiders
access to potentially valuable strategic information
about the firm.
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© 2015 YOLO Learning Solutions
Team Structures and Virtual Organizations
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Team structures occur when groups of employees are
used to determine ways to allocate tasks and assign
responsibilities.
In a virtual organization, organizational members in
different geographic areas use information technology
to collaborate on projects and objectives.
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Latent Structures: What the
Organization Is Really Like
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The latent structure describes what the organization is
really like:
◦ Centralization describes an organization in which the entire
decision making process is concentrated in a relatively few,
high-level positions.
◦ Complexity describes the level of differentiation among
structural units, including the specialization of jobs,
geographical dispersion, and height of the firm.
◦ Formalization refers to the degree to which the organization’s
procedures, rules, and personnel requirements are written
down and enforced.
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Tall and Flat Organizations
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An organization with many layers of management is
known as tall, and the span of management within this
organizational structure is narrow.
Organizations with few layers are known as flat
organizations and have wide spans of management.
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Types of Latent Structures
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Latent structures can be classified along a continuum.
At one end of the continuum, mechanistic organizations
are highly formal, highly complex, and highly
centralized.
At the opposite end of the continuum, organic
organizations are less formal, fairly simple, and
decentralized.
Most organizations fall in between these two extremes.
An organization is likely to be more effective when its
formal and latent structures are in harmony.
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© 2015 YOLO Learning Solutions
Factors Affecting Organizational
Structure
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What structure is best for an organization depends on
organization size, organization life cycle, strategy,
environment, and technology.
Organization size―The larger an organization
becomes, the more complicated its structure.
Organization life cycle―The organization life cycle
usually has five stages: birth, growth, maturity, revival,
and decline. Each stage has characteristic features that
have implications for the structure of the firm.
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Factors Affecting Organizational
Structure (continued)
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Strategy―Different types of strategy are more
effectively implemented with different structures.
Environment―Different structures also respond in
different ways to varying levels of environmental
munificence/scarcity and turbulence/stability.
Technology―There are three basic levels of technology
in production, each of which influences an
organization’s structure:
◦ Small-batch technology
◦ Mass technology
◦ Continuous technology
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© 2015 YOLO Learning Solutions
Coordinating Different Parts
of the Organization
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Coordinating mechanisms are tools that can be used to
help reduce the disadvantages of any given
organizational structure design choice.
The major agents of coordination are:
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The organizational hierarchy
Rules and procedures
Committees
Task forces
Liaison personnel
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Configurations of Structural Types
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Companies tend to organize using one of five general
archetypes:
◦ Simple― A structure with few departments, arranged by
function, headed by an entrepreneur/owner, and with few
technical support staff
◦ Machine bureaucracy―A highly structured, formal
organization that emphasizes procedures and rules
◦ Professional bureaucracy―An organization that has a
functional structure, is medium sized, and works best in stable
environments, but has primarily professional employees and a
decentralized informal structure
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Configurations of Structural Types
(continued)
◦ Divisionalized form―A multidivisional structure or hybrid;
typically, a very large corporation that has organized its
departments into divisions
◦ Adhocracy―A centralized, informal, but complex organization
that tries to maintain flexibility in the face of rapid
environmental changes by using a matrix or network formal
structure
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Organizational structures change almost continually,
always evolving to meet the needs of changing
strategies, technologies, environments, and phases of
the life cycle.
© 2015 YOLO Learning Solutions
© 2015 YOLO Learning Solutions