Fundamentals of Organizing hapter Ten Fundamentals of Organizing © 2000 by Harcourt, Inc. All rights reserved. Requests for permission to make copies of any part of the work should be mailed to the following address: Permissions Department, Harcourt, Inc., 6277 Sea Harbor Drive, Orlando, Florida 32887-6777.

Organizing The deployment of organizational resources to achieve strategic goals The deployment of resources is reflected in the organization Division of labor Formal lines of authority and mechanisms

Organization Structure Defines how tasks are divided, resources are deployed, and departments are coordinated The set of formal tasks Formal reporting relationships The design of systems to ensure effective coordination of employees across departments Organizing process leads to the creation of organization structure

Four Points About The Organization Chart Visual representation Set of formal tasks The Home Depot Formal reporting relationships Framework for vertical control

Work Specialization Tasks are subdivided into individual jobs Division of labor concept Employees perform only the tasks relevant to their specialized function Jobs tend to be small, but they can be performed efficiently

Chain of Command Unbroken line of authority that links all persons in an organization Shows who reports to whom Associated with two underlying principles Unity of Command Scalar Principle

Authority Formal and legitimate right of a manager to make decisions and issue orders Allocate resources to achieve organizationally desired outcomes Authority is distinguished by three characteristics Authority is vested in organizational positions, not people Authority is accepted by subordinates Authority flows down the vertical hierarchy

Responsibility The duty to perform the task or activity an employee has been assigned Managers are assigned authority commensurate with responsibility

Accountability Mechanism through which authority and responsibility are brought into alignment People are subject to reporting and justifying task outcomes to those above them in the chain of command Can be built into the organization structure

Process managers use to transfer authority and responsibility Delegation 1 Process managers use to transfer authority and responsibility 2 Organization encourage managers to delegate authority to lowest possible level

Techniques for Delegation Give thorough instructions Maintain feedback Evaluate and reward performance Techniques for Delegation Delegate the whole task Ensure that authority equals responsibility Select the right person

Centralization versus Decentralization Greater change and uncertainty in the environment are usually associated with decentralization The amount of centralization or decentralization should fit the firm’s strategy In times of crisis or risk of company failure, authority may be centralized at the top

Span of Management/ Span of Control Number of employees who report to a supervisor Traditional view, about seven subordinates per manager Many lean organizations today have 30, 40, or even higher subordinates When supervisors must be closely involved with subordinates, the span should be small Supervisors need little involvement with subordinates, it can be large

Factors Associated With Less Supervisor Involvement Work is stable and routine Subordinates perform similar work tasks Subordinates are concentrated in a single location Subordinates are highly trained Rules and procedure defining task activities are available Support systems and personnel are available for the manager Little time is required in nonsupervisory activities Managers’ preferences and styles favor a large span

Tall versus Flat Structure Span of Control used in an organization determines whether the structure is tall or flat Tall structure has a narrow span and more hierarchical levels Flat structure has a wide span, is horizontally dispersed and fewer hierarchical levels The trend has been toward wider spans of control

Centralization and Decentralization The hierarchical level at which decisions are made NASA

Centralization All facilities at one location Decision authority is located near the top of the organization 17

Decentralization Facilities at different locations Decision authority is pushed down the chain of command to lower levels 18

Decentralization Tends To--- Make greater use of human resources Reduce burdens of top managers Cause decisions to be made close to the action Permit rapid response to changes 19

Factors that Influence Centralization/Decentralization Amount of change and uncertainty Corporate culture Size of organization Cost and risk of failure Efficiency of communication and control systems 20

Departmentalization The basis on which individuals are grouped into departments Five structural alternatives Vertical functional approach. People are grouped together in departments by common skills. Divisional approach. Grouped together based on a common product, program, or geographical region. Horizontal matrix approach. Functional and divisional chains of command. Some employees report to two bosses Team-based approach. Created to accomplish specific tasks Network approach. Small, central hub electronically connected to their other organizations that perform vital functions. Departments are independent, and can be located anywhere.

Advantages of Functional Approach Efficient use of resources In-depth skill specialization Career progress within the department Top manager has direction and control Excellent coordination High-quality problem solving Simplifies training 24

Disadvantages of Functional Approach Poor communication among functional departments Slow response to external changes Centralized decision making Responsibility for problems difficult to identify Employees have limited view Limited general management training 25

Divisional Approach Departments are grouped together based on organizational outputs Diverse departments are brought together to produce a single organizational output Encourages decentralization 26

Advantages of Geographic Divisions Responsive in an unstable environment Shows concern for customer Coordinates across functional departments Identifies responsibility for product Emphasizes overall product and division goals Develops general management skills Minimizes travel costs 28

Disadvantages of Geographic Divisions Duplication of resources across divisions Less specialization in divisions Poor coordination across divisions Less top management control Competition for resources among divisions More managers needed 29

Matrix Approach General Electric Functional and divisional chains of command simultaneously Dual lines of authority Functional hierarchy of authority runs vertically Divisional hierarchy runs laterally Violates the unity of command concept 31

Advantages of Matrix More efficient use of resources than single hierarchy Adaptable to changing environment Development of both general and specialists management skills Expertise available to all divisions Enlarged tasks for employees 32

Disadvantages of Matrix Dual chain of command High conflict between two sides of matrix Many meetings to coordinate activities Need for human relations training Power domination by one side of matrix 33

Team Approach Cross-functional teams consist of employees from various functional departments Interdisciplinary approach to management Permanent team solve ongoing problems Reengineering radical redesign for improvements in cost, quality, service and speed 34

Advantages of Teams Same advantages as functional structure Reduced barriers among departments Quicker response time Better morale Reduced administrative overhead 35

Disadvantages of Teams Dual loyalties and conflict Time and resources spent on meetings Unplanned decentralization 36

Network Approach Organization divides major functions into separate companies brokered by a small headquarters organization "Where is the organization?" Especially appropriate for international operations Held together with phones, faxes, and other electronic technology 37

Advantages of Network Approach Global competitiveness Work force flexibility Reduced administrative overhead 38

Disadvantages of Network Approach No hands-on control Loss of part of the organization severely impacts remainder of organization Employee loyalty weakened 39