foundations of business 3e

Foundations of Business 3e

Pride, Hughes, & Kapoor

© 2013 South-Western, a part of Cengage Learning. All rights reserved. Chapter 7 | Slide 2

Creating a Flexible Organization

Chapter

7

Henry Cheek

Hi Joanne: Sorry, I couldn't figure out how to format the picture so that it includes the white border. There is a "to come" in the image, bottom right corner, where the credit should be. The credit, from the PDF, is: © Mozgova/Shutterstock


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 an organization.

6. Describe the four basic forms of organizational structure.

7. Describe the effects of corporate culture.

8. Understand how committees and task forces are used.

9. Explain the functions of the informal organization and the grapevine in a business.

Learning Objectives


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

What Is an Organization?


A Typical Corporate Organization Chart


Job design Departmentalization Delegation Span of management Chain of command

Major Considerations for Organizing a Business


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.

Job Design


Alternatives to job specialization• Job rotation systematically shifts employees from

one job to another• Job enlargement• Job enrichment

Job Design (cont.)

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Grouping jobs into manageable units Common bases for departmentalization

• By function• By product• By location• By customer• Combinations

Departmentalization


Multibase Departmentalization forNew-Wave Fashions, Inc.


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

Delegation, Decentralization, and Centralization


The manager assigns responsibility.

The subordinate is empowered to do the task.

Ultimate accountability remains with the manager.

Steps in the Delegation Process


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


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

The Span of Management


The Span of Management (cont.)


The Span of Management (cont.)

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


Forms of Organizational 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


Forms of Organizational Structure (cont.)

Line-and-staff structure• Utilizes the chain of command from a line structure

in combination with the assistance of staff managers


Line and Staff Managers



Line-and-staff structure (cont.)• 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 issue directives within their area of expertise



Line-and-staff structure (cont.)• 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.


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



A Matrix Structure



• 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

Matrix Structure (cont.)

Advantages Disadvantages



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


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)


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 the product; success is celebrated by all


Corporate Culture (cont.)


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

Corporate Culture (cont.)


Committees and Task Forces

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• Differences with individual action

– Advantages– Members bring more information and knowledge;

more accurate decisions; results communicated more effectively

– Disadvantages– Decision making takes longer; may reach unnecessary

compromises; one person may dominate


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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