Mosley7e ch04

© 2008 Thomson/South-Western© 2008 Thomson/South-Western All rights reserved. All rights reserved.

PowerPoint Presentation by Charlie CookPowerPoint Presentation by Charlie CookThe University of West AlabamaThe University of West Alabama

Part 2Planning and Organizing

Mosley Mosley • Pietri• Pietri

Chapter 4

Fundamentals of Organizing

© 2008 Thomson/South-Western. All rights reserved. 4–2

Learning ObjectivesLearning Objectives

1.1. Understand the stages of organization growth.Understand the stages of organization growth.2.2. Identify the advantages and disadvantages of the Identify the advantages and disadvantages of the

functional, product, and matrix departmentalization functional, product, and matrix departmentalization approaches.approaches.

3.3. Explain the principles of unity of command and span of Explain the principles of unity of command and span of control.control.

4.4. Describe the difference between line and staff.Describe the difference between line and staff.5.5. Understand how to avoid excessive conflict between line Understand how to avoid excessive conflict between line

and staff.and staff.6.6. Explain the three types of authority found in organizations.Explain the three types of authority found in organizations.

After reading and studying this chapter, you should After reading and studying this chapter, you should be able to:be able to:


Learning Objectives (cont’d)Learning Objectives (cont’d)

7.7. Distinguish between centralization and Distinguish between centralization and decentralization.decentralization.

8.8. Discuss the benefits and costs of downsizing.Discuss the benefits and costs of downsizing.

9.9. Understand the relationship between management Understand the relationship between management philosophy, strategy, and newer forms of organization.philosophy, strategy, and newer forms of organization.

After reading and studying this chapter, you should After reading and studying this chapter, you should be able to:be able to:


The Importance of OrganizationThe Importance of Organization• Failing to properly organize can lead to:Failing to properly organize can lead to:

Excessive violation of the unity of command principle.Excessive violation of the unity of command principle. Failure to develop additional departments or work Failure to develop additional departments or work

groups when needed.groups when needed. Unclear and improper assignment of duties and Unclear and improper assignment of duties and

responsibilities to new employees.responsibilities to new employees. Ineffective use of organizational units and inadequate Ineffective use of organizational units and inadequate

development of human resources because of development of human resources because of improper decentralization of authority.improper decentralization of authority.

Conflicts between departments and between line Conflicts between departments and between line supervisors and staff personnel.supervisors and staff personnel.


Stages in the Growth of an Stages in the Growth of an OrganizationOrganization• Stage 1:Stage 1: The One-Person OrganizationThe One-Person Organization

One person alone performs all of the basic activities One person alone performs all of the basic activities common to organizations.common to organizations.

• Stage 2: The Organization with Assistants Stage 2: The Organization with Assistants AddedAdded

Several persons perform different activities within the Several persons perform different activities within the organization.organization.

Roles and responsibilities are becoming defined.Roles and responsibilities are becoming defined. The span of control is widening, increasing the The span of control is widening, increasing the

challenge of managing the organization.challenge of managing the organization.


EXHIBIT 4.1 John Moody’s One-Person Organization


EXHIBIT 4.2 John Moody Hires Assistants


Stages in the Growth of an Stages in the Growth of an OrganizationOrganization• Stage 3: The Line OrganizationStage 3: The Line Organization

Each person in the organization has clearly defined Each person in the organization has clearly defined responsibilities and reports to an immediate responsibilities and reports to an immediate supervisor designated to manage specific activities.supervisor designated to manage specific activities.

Lines of responsibility and authority are clearly Lines of responsibility and authority are clearly defined.defined.

Authority is centralized, allowing for quick response to Authority is centralized, allowing for quick response to opportunities and problems.opportunities and problems.


EXHIBIT 4.3 John Moody’s Organization after Two Years


EXHIBIT 4.4 The Span of Control in John Moody’s Line Organization


Stages in the Growth of an Stages in the Growth of an OrganizationOrganization• Stage 4: The Line-and-Staff OrganizationStage 4: The Line-and-Staff Organization

The firm evolves to an organization structure in which The firm evolves to an organization structure in which staff positions are added to serve the basic line staff positions are added to serve the basic line departments and help them accomplish the departments and help them accomplish the organization objectives more effectively.organization objectives more effectively.


EXHIBIT 4.5 John Moody’s Line Organization after Ten Years


EXHIBIT 4.6 John Moody’s Line-and-Staff Organization


DepartmentalizationDepartmentalization• DepartmentalizationDepartmentalization

The organizational process of determining how The organizational process of determining how activities are to be grouped.activities are to be grouped.

• Types of DepartmentalizationTypes of Departmentalization FunctionFunction ProductProduct ServiceService ProcessProcess TerritoryTerritory CustomerCustomer MatrixMatrix


Types of Departmentalization Types of Departmentalization • Functional DepartmentalizationFunctional Departmentalization

Grouping together common functions or similar Grouping together common functions or similar activities to form an organizational unit.activities to form an organizational unit. Example: production, sales, and finance.Example: production, sales, and finance.

• Advantages of Functional DepartmentalizationAdvantages of Functional Departmentalization Maintains power and prestige of the major functionsMaintains power and prestige of the major functions Creates efficiency through the principles of Creates efficiency through the principles of

specializationspecialization Centralizes the organization’s expertise, and permits Centralizes the organization’s expertise, and permits

tighter top-management control of the functions.tighter top-management control of the functions. Minimizes duplications of personnel and equipment.Minimizes duplications of personnel and equipment.


EXHIBIT 4.7 Functional Departmentalization at the Top Management Level


Types of Departmentalization (cont’d) Types of Departmentalization (cont’d) • Functional Departmentalization DisadvantagesFunctional Departmentalization Disadvantages

Total performance responsibility rests only at the top.Total performance responsibility rests only at the top.

Narrow functional focus limits training and experience Narrow functional focus limits training and experience of lower-lever managers to take over the top position.of lower-lever managers to take over the top position.

Coordination between and among functions becomes Coordination between and among functions becomes complex and more difficult as the organization grows complex and more difficult as the organization grows in size and scope (“silo effect”).in size and scope (“silo effect”).

Individuals identify with their narrow functional Individuals identify with their narrow functional responsibilities, causing subgroup loyalties, responsibilities, causing subgroup loyalties, identification, and tunnel vision.identification, and tunnel vision.


Types of Departmentalization (cont’d) Types of Departmentalization (cont’d) • Product DepartmentalizationProduct Departmentalization

Grouping together all the functions associated with a Grouping together all the functions associated with a single product line.single product line.

• Product Departmentalization AdvantagesProduct Departmentalization Advantages Attention is increased on specific product lines or Attention is increased on specific product lines or

services.services. Coordination of functions at the division level is Coordination of functions at the division level is

improved.improved. Profit responsibility can be better placed.Profit responsibility can be better placed. Easier to obtain or develop executives who have Easier to obtain or develop executives who have

broad managerial experience in running a total entity.broad managerial experience in running a total entity.


Types of Departmentalization (cont’d) Types of Departmentalization (cont’d) • Product Departmentalization DisadvantagesProduct Departmentalization Disadvantages

Requires more personnel and material resourcesRequires more personnel and material resources May cause unnecessary duplication of resources andMay cause unnecessary duplication of resources and equipmentequipment Top management assumes a greater burden of Top management assumes a greater burden of

establishing effective coordination and control.establishing effective coordination and control. Top management must use staff support to create Top management must use staff support to create

and oversee policies that guide and limit the range of and oversee policies that guide and limit the range of actions taken by its divisions.actions taken by its divisions.


Types of Departmentalization (cont’d) Types of Departmentalization (cont’d) • Matrix DepartmentalizationMatrix Departmentalization

A hybrid type of departmentalization in which A hybrid type of departmentalization in which personnel from several specialties are brought personnel from several specialties are brought together to complete limited-life tasks.together to complete limited-life tasks.

• Matrix Departmentalization AdvantagesMatrix Departmentalization Advantages Hierarchy permits open communication and Hierarchy permits open communication and

coordination of activities among the relevant coordination of activities among the relevant functional specialists.functional specialists.

Hierarchical flexibility enables the organization to Hierarchical flexibility enables the organization to respond rapidly to the need for change.respond rapidly to the need for change.


EXHIBIT 4.8 Example of Matrix Departmentalization


Types of Departmentalization (cont’d) Types of Departmentalization (cont’d) • Matrix Departmentalization DisadvantagesMatrix Departmentalization Disadvantages

The lack of clarity and coordination in assigned roles The lack of clarity and coordination in assigned roles for team members.for team members.

Conflicts that may occur between the project team Conflicts that may occur between the project team and the home office.and the home office.

Conflicts in allocating team members’ time due to the Conflicts in allocating team members’ time due to the assignment of members to more than one project.assignment of members to more than one project.

Uncertainty about who will decide on the members’ Uncertainty about who will decide on the members’ advancement and promotion.advancement and promotion.

The lack of “roots” for team members assigned The lack of “roots” for team members assigned repeatedly to multiple temporary assignments.repeatedly to multiple temporary assignments.


Unity of CommandUnity of Command• Unity of Command PrincipleUnity of Command Principle

Is the idea that everyone should report to and be Is the idea that everyone should report to and be accountable to only one boss for performance of a accountable to only one boss for performance of a given activity.given activity.

Supports supervisors in evaluating performance, Supports supervisors in evaluating performance, passing down orders and information, and helping passing down orders and information, and helping subordinates to become better employees.subordinates to become better employees.

Tells employees who they should look to in the Tells employees who they should look to in the organization for guidance and direction in carrying out organization for guidance and direction in carrying out their tasks and responsibilities.their tasks and responsibilities.


Unity of CommandUnity of Command• The Importance of Unity of CommandThe Importance of Unity of Command

Prevents duplication and conflict when orders are Prevents duplication and conflict when orders are passed down.passed down.

Decreases confusion as everyone is accountable to Decreases confusion as everyone is accountable to only one person.only one person.

Provides a basis for supervisors and subordinates to Provides a basis for supervisors and subordinates to develop a knowledge of each other’s strengths and develop a knowledge of each other’s strengths and weaknesses.weaknesses.

Provides an opportunity for supervisors and Provides an opportunity for supervisors and employees to develop supportive relationships.employees to develop supportive relationships.

It promotes higher morale.It promotes higher morale.


EXHIBIT 4.9 Violating the Unity of Command Principle


Span of ControlSpan of Control• Span of Control PrincipleSpan of Control Principle

States that there is a limit to the number of people a States that there is a limit to the number of people a person can supervise effectively.person can supervise effectively.

• Narrower Span of Control at the TopNarrower Span of Control at the Top Top-level managers must solve a variety of different, Top-level managers must solve a variety of different,

nonrecurring problems.nonrecurring problems. Middle managers cannot afford to be tied down by Middle managers cannot afford to be tied down by

large number of people reporting directly to them.large number of people reporting directly to them. First-level managers are principally in direct contact First-level managers are principally in direct contact

with their immediate employees.with their immediate employees.


Span of Control (cont’d)Span of Control (cont’d)• Tendency toward Wider Spans of ControlTendency toward Wider Spans of Control

Improved abilities and capacities of both managers Improved abilities and capacities of both managers and employeesand employees

Effectiveness of general supervision over close Effectiveness of general supervision over close SupervisionSupervision

New developments in management have permitted New developments in management have permitted businesses to broaden their span of control and businesses to broaden their span of control and supervise by results, without losing control.supervise by results, without losing control.

Wider spans of control save the company money.Wider spans of control save the company money.


EXHIBIT 4.10 Narrow, Wide, and Very Wide Spans of Control


EXHIBIT 4.11 Factors Contributing to a Narrow or Wide Span of Control

Factors

• How physically close are the people performing the work?

• How complex is the work?

• How much supervision is required?

• How much nonsupervisory work is required of the supervisor?

• How much organizational assistance is furnished to the supervisor?


Relationships Between Line and StaffRelationships Between Line and Staff• Line PersonnelLine Personnel

Carry out the primary Carry out the primary activities of a business.activities of a business.

• Staff PersonnelStaff Personnel Have the expertise to assist Have the expertise to assist

line people and aid top line people and aid top management.management.


EXHIBIT 4.12 Line and Staff Contacts


EXHIBIT 4.13 Some Reasons for Conflict between Line and Staff Personnel

• Staff personnel give direct orders to line personnel.

• Good human relations are not practiced in dealings between line and staff personnel.

• Overlapping authority and responsibility confuse both line and staff personnel.

• Line people believe that staff people are not knowledgeable about conditions at the operating level.

• Staff people, because of their expertise, attempt to influence line decisions against line managers’ wishes.

• Top management misuses staff personnel or fails to use them property.

• Each department views the organization from a narrow viewpoint instead of looking at the organization as a whole.


Line and Staff: AuthorityLine and Staff: Authority• Advisory AuthorityAdvisory Authority

The authority of most staff The authority of most staff departments to serve and departments to serve and advise line departments.advise line departments.

• Line AuthorityLine Authority The power to directly The power to directly

command or exact command or exact performance from others.performance from others.

• Functional AuthorityFunctional Authority A staff person’s limited line A staff person’s limited line

authority over a given function.authority over a given function.


Decentralization versus CentralizationDecentralization versus Centralization• DecentralizationDecentralization

The extent to which authority is delegated from one The extent to which authority is delegated from one unit of the organization to another.unit of the organization to another.

• CentralizationCentralization The extent to which authority is retained by upper The extent to which authority is retained by upper

management in an organization.management in an organization.


EXHIBIT 4.14 Layers of Management Reflecting a Centralized versus a Decentralized Structure


Factors Affecting Decentralization Factors Affecting Decentralization • Top management philosophy Top management philosophy • History of the organization’s History of the organization’s

growthgrowth• Geographic location(s)Geographic location(s)• Quality of managersQuality of managers• Availability of controlsAvailability of controls• The economyThe economy• Mergers, acquisitions, and Mergers, acquisitions, and

joint venturesjoint ventures


DownsizingDownsizing• DownsizingDownsizing

The process of eliminating unnecessary levels of The process of eliminating unnecessary levels of management and employees.management and employees.

• Benefits of DownsizingBenefits of Downsizing Immediate cost reductionsImmediate cost reductions Speedier decision makingSpeedier decision making Improved communication in all directionsImproved communication in all directions Increased responsiveness to customers and faster Increased responsiveness to customers and faster

product deliveryproduct delivery Removal of justification for existence by close Removal of justification for existence by close

supervision and frequently requesting reportssupervision and frequently requesting reports


Downsizing (cont’d)Downsizing (cont’d)• Costs of DownsizingCosts of Downsizing

Loss of internal control as veteran supervisors leave.Loss of internal control as veteran supervisors leave. Morale problems for remaining employees due to lack Morale problems for remaining employees due to lack

of sensitivity in dismissing employees and threatened of sensitivity in dismissing employees and threatened job securityjob security

Increased workloadsIncreased workloads Diminished chances of promotionDiminished chances of promotion Social costs of disruptions in dismissed employees Social costs of disruptions in dismissed employees

lives.lives.


Downsizing (cont’d)Downsizing (cont’d)• Ways to Get Beyond DownsizingWays to Get Beyond Downsizing

Focus on the remaining employeesFocus on the remaining employeesDeveloping a strategy of support Developing a strategy of support

for survivors.for survivors. Focus on the futureFocus on the future

Create a strategic plan for growth Create a strategic plan for growth and development for the and development for the organization.organization.


Successful Reengineering Is ChangeSuccessful Reengineering Is Change• Work unitsWork units——functional departments to process teams.functional departments to process teams.• JobsJobs——simple tasks to multidimensional work.simple tasks to multidimensional work.• People’s rolesPeople’s roles——controlled to empowered.controlled to empowered.• Job preparationJob preparation——preparation to education.preparation to education.• Compensation focusCompensation focus——activity to results.activity to results.• Advancement criteriaAdvancement criteria——performance to ability.performance to ability.• ValuesValues——protective to productive.protective to productive.• ManagersManagers——supervisors to coaches.supervisors to coaches.• Organizational structureOrganizational structure——hierarchical to flat.hierarchical to flat.• ExecutivesExecutives——scorekeepers to leaders.scorekeepers to leaders.


EXHIBIT 4.15 Internal Systems Model

Causal Variables determine the course of developments within an organization and the results achieved by the organization. (Examples: skills, and behavior)Intervening Variables reflect the internal state and health of the organization. (Examples: loyalties, perceptions of organization members)

End-Result Variables are dependent variables that reflect the achievements of the organization. (Examples: productivity, costs, and earnings)


EXHIBIT 4.16 Creative Organizational Structure of IAF

Source: Graphic from The International Association of Facilitators (IAF) Website 2002—http://iaf-world.org. Reprinted by permission.


EXHIBIT 4.16 Creative Organizational Structure of IAF (cont’d)

Source: Graphic from The International Association of Facilitators (IAF) Website 2002—http://iaf-world.org. Reprinted by permission.


EXHIBIT 4.17 Nordstorm’s Inverted Pyramid

Source: Based on description found in Robert Spector and Patrick D. McCarthy, The Nordstrom Way: The Inside Story of America’s #1 Customer Service Company (New York: Wiley, 1996).


Important TermsImportant Terms

• advisory authorityadvisory authority• decentralizationdecentralization• departmentalizationdepartmentalization• downsizingdownsizing• functional authorityfunctional authority• functional departmentalizationfunctional departmentalization• inverted pyramidinverted pyramid• line-and-staff organizationline-and-staff organization• line authorityline authority

• line organizationline organization• line personnelline personnel• matrix departmentalizationmatrix departmentalization• product departmentalizationproduct departmentalization• reengineeringreengineering• span of control principlespan of control principle• staff personnelstaff personnel• unity of command principleunity of command principle• wagon wheelwagon wheel


Skill Builder 4-1 Proposed Change of Organization

Business

Mosley7e ch04