7
Creating a Flexible
Organization
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Learning Objectives
7-1
Understand what an organization is and
identify its characteristics.
7-2
Explain why job specialization is important.
7-3
Identify the various bases for
departmentalization.
7-4
Explain how decentralization follows from
delegation.
7-5
Understand how the span of management
describes an organization.
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Learning Objectives (continued)
7-6
Describe the four basic forms of organizational
structure.
7-7
Describe the effects of corporate culture.
7-8
Understand how committees and task forces
are used.
7-9
Explain the functions of the informal
organization and the grapevine in a business.
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Why Do Companies Reorganize?
 Lower operating costs
 Providing high-quality products to ensure
customer satisfaction
 Focused consumer targeting
 Specialized products
 Other reasons?
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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 diagram that represents the positions and
relationships within 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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Chain of Command
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Major Considerations for
Organizing a Business
 Organizing a firm focuses on:
•
•
•
•
•
Job design
Departmentalization
Delegation
Span of management
Chain of command
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Job Design
 Job specialization is 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
 Train new workers
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Job Specialization:
Risks and Alternatives
Risks:




Boredom
Higher absence rate
Low effort
Sabotage
Alternatives:

Job rotation
• Retain interest
• Learn new skills
• Identify new roles


Job enlargement
Job enrichment
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Departmentalization
 Departmentalization is the process of
grouping jobs into manageable units
 Most firms use one or more of the following:
•
•
•
•
By function
By product
By location
By customer
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Departmentalization Bases
Basis
Type of Firm
Advantages
Disadvantages
Function
Smaller and newer
Simplified
supervision and
coordination
Slow decision-making
Emphasizes
department over
company
Product
Older and larger
Easier decisionmaking
Integration of
related activities
Duplication of
specialized activities
Emphasizes product
over company
Location
Decentralized with
regional needs
Can respond to
unique demands
Large administrative
staff and control
system
Customer
Service-based or
market-specific
Can deal efficiently Larger-than-usual
with unique
administrative staff
customers
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Multibase Departmentalization
 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
• Steps in Delegation
 Responsibility—the duty to do a job or perform a task
 Authority—the power, within an organization, to accomplish
an assigned task
 Accountability—the obligation to accomplish an assigned
job or task
• Barriers to Delegation
 Fear the work will not get done
 Fear the work will be done too well
 Inability to plan and assign work effectively
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Delegation Process
1.
2.
3.
Responsibility is the
duty to do a job or
perform a task
Authority is the power,
within the organization,
to accomplish an
assigned job or task
Accountability is the
obligation of a worker
to accomplish an
assigned job or task
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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
 Span of management (or span of control) is
the number of workers who report directly to
one manager
 Wide span
•
Large number of subordinates to one manager
 Narrow span
•
Only a few subordinates to one manager
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The Span of Management:
Wide and Narrow
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Organizational Height
 Organizational height—number of layers, or
levels, of management in a firm
• 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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Forms of Organizational Structure:
Line Structure
 Line Structure
• The chain of command goes directly from person to
person throughout the organization
• Simplicity allows for quick decision making and
direct accountability
• Most suitable for small organizations with lower
volume of activities than medium or large
organizations
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Forms of Organizational Structure:
Line-and-Staff Structure
 Line-and-Staff Structure
• Utilizes the chain of command from a line structure
in combination with the assistance of staff managers
• Line managers make decisions and give orders to
subordinates
 Line authority—line managers can make decisions and
issue directives related to organizational goals
• Staff managers provide support, advice, and
expertise
 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 Managers
 A line manager has direct responsibility for achieving the
company’s goals and is in the direct chain of command
 A staff manager supports and advises the line managers
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Forms of Organizational Structure:
Line-and-Staff Structure (continued)
 Line-and-Staff Structure (cont’d)
• Reasons for conflict between line and staff managers




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 between line and staff managers
 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:
Matrix Structure
 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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The Matrix Structure
Source: Ricky W. Griffin, Fundamentals of Management, 8th ed. Copyright © 2016,
p. 180 by South-Western/Cengage Learning, Mason, OH. Adapted with permission.
 A matrix is a complex structure in which employees
have more than one supervisor
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The Matrix Structure:
Advantages and Disadvantages
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:
Network Structure
 Network Structure (Virtual Organization)
• Administration is the primary function, and most
other functions 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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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)
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Types of Corporate Cultures
 Networked culture
• Trust and friendship among employees
• Strong commitment to the organization
• 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 product; success is celebrated by all
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Corporate Cultures and Personalities
Source: “Types of Corporate Culture,” in Rob Goffee and Gareth Jones, The Character of a Corporation (New York: HarperCollins, 1998). Copyright © 1998 by
Rob Goffee and Gareth Jones. Permission granted by Rob Goffee and Gareth Jones.
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Corporate Culture: When to Change
Cultural change is needed when:
A company’s environment changes
The industry becomes more competitive
Company performance is mediocre
The company is growing or becomes a large
firm
 Examples:




•
•
•
•
Goldman Sachs
General Mills
Alcoa
Aetna
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Committees and Task Forces
 An ad hoc committee is created for a specific
short-term purpose
• Example: Reviewing employee benefits plan
• Disbands when work is finished
 A standing committee is a relatively
permanent committee charged with performing
a recurring task
• Example: Budget review committee
 A task force is a committee established to
investigate a major problem or pending
decision
• Example: Assessing pros and cons of a merger
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Committees:
Advantages and Disadvantages
Advantages
• Members bring different
knowledge and skills to
task
• Tend to make accurate
decisions
• Transmit results through
the organization more
effectively
Disadvantages
• Deliberations take
longer
• Unnecessary
compromise may take
place
• One person may
dominate
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The Informal Organization
Pattern of behavior and interaction that stems
from personal rather than official relationships
 Informal groups
• Formed by the members themselves to accomplish goals
that may or may not be relevant to the organization
• Can be powerful forces in organizations exerting positive
as well as negative influences
 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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