Chapter 6 Organizing The Business

6chapter

Business Essentials, 7th EditionEbert/Griffin

© 2009 Pearson Education, Inc.

Organizing for the Business

Instructor Lecture PowerPointsPowerPoint Presentation prepared by

Carol Vollmer Pope Alverno College

What Is Organizational Structure?

• Organizational Structure– The specification of the jobs to be done

within an organization and the ways in which those jobs relate to one another

• Organizational Charts– Clarify structure and show employees

where they fit into a firm’s operations– Show the chain of command, or reporting

relationships, within a company



FIGURE 6.1 The FIGURE 6.1 The Organizational Chart Chart

Determinants of Organizational Structure

External EnvironmentExternal Environment

Internal EnvironmentInternal Environment

SizeSize

StrategyStrategy

MissionMission

Organizational structure is usually quite fluid!© 2009 Pearson Education, Inc.

The Building Blocks of Organizational Structure

• Specialization– Division of work: job specialization

• Departmentalization– Product, process, functional, customer, or geographic

• Establishment of a decision-making hierarchy– Distributing authority:

• Delegation: assigning tasks• Centralization: upper management retains authority• Decentralization: lower-level managers make decisions


Planning Departments

• Once jobs have been specialized, they need to be grouped into logical units.– This is called departmentalization.– Here are some areas of departmentalization:

• Product departmentalization• Process departmentalization• Functional departmentalization• Customer departmentalization• Geographic departmentalization• Multi forms (combinations) of departmentalization


FIGURE 6.2 Multiple Forms of Departmentalization


Establishing the Decision-Making Hierarchy

Centralized OrganizationCentralized Organization

Decentralized OrganizationDecentralized Organization

Lower-level managers hold Lower-level managers hold significant decision-making significant decision-making authorityauthority

Top managers hold most Top managers hold most decision-making authoritydecision-making authority


Tall and Flat Organizations

• Flat Organizational Structure– Common in decentralized organizations– Fewer layers of management– Rapid communication– Wide spans of control

• Tall Organizational Structure– Common in centralized organizations – Multiple layers of management– Slower communication– Narrower spans of control


Figure 6.3 Organizational Structure and Span of Control


The Delegation Process

• Delegation– The process through which a manager allocates work

to subordinates

• Delegation Entails:– Assignment of responsibility—the duty to perform an

assigned task– Granting of authority—the power to make decisions

necessary to complete the task– Creation of accountability—the obligation of

employees to successfully complete the task


Why Managers Won’t Delegate

• The fear that subordinates don’t really know how to do the job

• The desire to keep as much control as possible over how things are done

• The fear that a subordinate might “show the manager up” in front of others by doing a superb job

• A simple lack of ability as to how to effectively delegate to others


Forms of Authority

• Line Authority– The type of operational authority that flows up and

down the chain of command

• Staff Authority– Authority based on special expertise and usually

involves counseling and advising line managers

• Committee and Team Authority– Authority granted to committees or work teams

that play central roles in the firm’s daily operations


Figure 6.4 Line and Staff Organization


Forms of Organizational Structure• Functional Structure

– Form of business organization in which authority is determined by the relationships between group functions and activities

– Used by most small- to medium-sized firms structured around basic business functions (marketing, operations, finance)

– Advantages:• Specialization and smoother internal coordination

– Disadvantages:• Centralization, poor cross-functional coordination, and

lack of accountability


Figure 6.5 Functional Structure


Forms of Organizational Structure (cont’d)

• Divisional Structure– Based on departmentalization by product, with each

division managed as a separate enterprise– Organizations using this approach are typically

structured around several divisions—departments that resemble separate businesses in that they produce and market their own products

– Advantages:• Increased product-focus and internal coordination

– Disadvantages:• Duplication of efforts and competition between

divisions


Figure 6.6 Divisional Structure



• Matrix Structure– Organized along two dimensions, instead of just

one, by combining, for example, functional and divisional structures

– Advantages:• Highly flexible, focused on a single problem, access to

resources and expertise– Disadvantages:

• Loss of command and control, lack of accountability, impermanent existence


FIGURE 6.7 Matrix Organization at Martha Stewart’s Omnimedia



• International Structures– Developed in response to the need to manufacture,

purchase, and sell in global markets– Department, division, or geographic

• Global Structure– Acquiring resources (including capital), producing goods

and services, engaging in research and development, and selling products in whatever local market is appropriate, without any consideration of national boundaries


FIGURE 6.8 International Division Structure


Organizational Design for the 21st Century• Team Organization

– Relies almost exclusively on project-type teams, with little or no underlying functional hierarchy

• Virtual Organization– Has little or no formal structure, few permanent

employees, a very small staff, and a modest administrative facility

• Learning Organization– Integrates continuous improvement and employee

learning and development while transforming itself to respond to changing demands and needs


FIGURE 6.9 The Virtual Organization


Informal Organization

• Informal Organization– Everyday social interactions among employees

that transcend formal jobs and job interrelationships

– Advantages:• May reinforce the formal organization

– Disadvantages:• Can reinforce office politics that put the interests of

individuals ahead of those of the firm• May communicate distorted or inaccurate information


Informal Organization (cont’d)• Informal Groups

– Groups of people who decide to interact among themselves, sometimes about business

• Organizational Grapevine– The informal communication network that runs

throughout the organization• Intrapreneuring

– Creating and maintaining the innovation and flexibility of a small-business environment within the confines of a large, bureaucratic structure


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Chapter 6 Organizing The Business