Creating a Flexible Organization Chapter 7 Creating a Flexible Organization

Learning Objectives Understand what an organization is and identify its characteristics. Explain why job specialization is important. Identify the various bases for departmentalization. Explain how decentralization follows from delegation. Understand how the span of management describes an organization. Understand how the chain of command is established by using line and staff management. Describe the four basic forms of organizational structure: bureaucratic, matrix, cluster, and network. Summarize the use of corporate culture, intrapreneurship, committees, coordination techniques, informal groups, and the grapevine.

Organization …a group of two or more people working together to achieve a common set of goals.

Organization Chart …a diagram that represents the positions and relationships within an organization.

Figure 7.1: A Typical Organization Chart A company’s organization chart represents the positions and relationships within the organization and shows the managerial chains of command.

Chain of Command …the line of authority that extends from the highest to the lowest levels of an organization.

Reasons to Not Maintain Organizational Chart Difficult to chart positions Constant change

5 Steps for Organizing a Business Job Design Departmentalization Delegation Span of Management Chain of Command

Job Specialization …the separation of all organizational activities into distinct tasks and the assignment of different tasks to different people.

Rationale for Specialization Job too large for one person More efficient No lost time changing between operations More-specialized job makes it easier to design specialized equipment More specialized the job the easier the job training

Combating Job Specialization Boredom Job rotation Job enlargement Job enrichment

…process of grouping jobs into manageable units. Departmentalization …process of grouping jobs into manageable units.

Bases for Departmentalization Function Product Location Customer

…grouping jobs that relate to the same organizational activity. Function …grouping jobs that relate to the same organizational activity.

…grouping activities related to a particular product or service.

Location …grouping activities according to the defined geographic area in which they are performed.

Customer …grouping activities according to the needs of various customer populations.

Figure 7.2: Multibase Departmentalization for New-Wave Fashions, Inc. Most firms use more than one basis for departmentalization to improve efficiency and to avoid overlapping positions.

…assigning part of a manager’s work and power to other workers. Delegation …assigning part of a manager’s work and power to other workers.

Figure 7.3: Steps in the Delegation Process To be successful, a manager must learn how to delegate. No one can do everything alone.

…the duty to do a job or perform a task. Responsibility …the duty to do a job or perform a task.

Authority …the power, within an organization, to accomplish an assigned job or task.

…the obligation of a worker to accomplish an assigned job or task. Accountability …the obligation of a worker to accomplish an assigned job or task.

Barriers to Delegation Desire to ensure that the job gets done Fear that worker will do well and attract notice of higher-level managers Inability to plan and assign work effectively

Decentralized Organization …an organization in which management consciously attempts to spread authority widely in the lower levels.

Centralized Organization …an organization that systematically works to concentrate authority at the upper levels.

Factors Influencing Decentralization Complexity/predictability of external environment Risk/importance of decision Abilities of lower-level managers Past practice

…the number of workers who report directly to one manager. Span of Management …the number of workers who report directly to one manager. Wide vs. Narrow Flat vs. Tall

Figure 7.4: The Span of Management

Organizational Height …the number of layers, or levels, of management in a firm.

Tall Organizations Administrative costs high because of layers of management Communication among levels distorted

Wide Organizations Managers perform more administrative duties Managers spend more time supervising and working with subordinates

Line Management Position …a position that is part of the chain of command and that includes direct responsibility for achieving the goals of the organization.

Staff Management Position …a position created to provide support, advice, and expertise within an organization.

Line managers = line/direct authority Staff managers Line vs. Staff Line managers = line/direct authority Staff managers Advisory authority Functional authority Conflicts To line from staff More formal education Younger To staff from line ─ ignored

Figure 7.5: Line and Staff Management

Table 7.1: Five Characteristics of Organizational Structure

Bureaucratic Structure …a management system based on a formal framework of authority that is outlined carefully and followed precisely.

Characteristics of a Bureaucracy Departmentalization by function Formal patterns of delegation High degree of centralization Narrow span of management = tall organization Clearly defined line/staff positions with formal relationships between the two

Matrix Structure …an organizational structure that combines vertical and horizontal lines of authority, usually by superimposing product departmentalization on a functionally departmentalized organization.

Cross-Functional Team …a group of employees from different departments who work together on a specific project.

Figure 7.6: A Matrix Structure

Advantages of Matrix Structure Flexibility Increased productivity Raises morale Nurtures creativity and innovation Employees experience personal development

Disadvantages of Matrix Structure Reporting to 1+ supervisor = confusion Longer to resolve problems Personality clashes Poor communication Undefined individual roles Unclear responsibilities Ways to reward individual/team performance Expense to maintain

Cluster Structure …an organization that consists primarily of teams with no or very few underlying departments.

Team or Collaborative Organization Team members work together on a project until finished Team may remain intact when assigned another project Or Team members may be reassigned to different teams

Cluster Structure Flexibility Try new techniques Explore new ideas Strengths Flexibility Try new techniques Explore new ideas Weaknesses Lack of job security Increased stress Rapid changes

Network Structure …an organization in which administration is the primary function, and most other functions are contracted out to other firms.

No manufacturing of product it sells Few permanent employees Network Structure No manufacturing of product it sells Few permanent employees Top management Hourly clerical Leased facilities/equipment Temporary workers Limited formal structure

Strengths/Challenges of Network Structure Strength = flexibility Challenges Quality control Low morale/high turnover Vulnerability to outside contractors

…the inner rites, rituals, heroes, and values of a firm. Corporate Culture …the inner rites, rituals, heroes, and values of a firm.

Corporate Culture Indicators Physical setting What company says about culture How guests greeted How employees spend their time

Figure 7.7: Types of Corporate Cultures

Organizations of the Future Small, task-oriented work groups Control over own activities Computer coordinated Strong corporate culture Supports trust and risk taking

Intrapreneur …an employee who pushes an innovative idea, product, or process through an organization.

Committees Ad Hoc ─ created for a specific short-term purpose Standing ─ permanent and charged with performing some recurring task Task Force ─ created to investigate a major problem/pending decision

Coordination Techniques Managerial Hierarchy ─ provides increased authority at higher levels of management Informal Organization ─ stems from personal rather than official relationships Informal group Grapevine

Chapter Quiz Solid vertical lines on an organization chart indicate relationships among staff positions. employees. delegated positions. the chain of command. line and staff positions.

Chapter Quiz (cont.) The systematic shifting of employees from one job to another is called job specialization. rotation. sharing. enlargement. enrichment.

Chapter Quiz (cont.) Grouping all activities according to the geographic area in which they are located is departmentalization by function. employee. product. customer. location.

Chapter Quiz (cont.) In a __________ organization, administrative costs are higher because more managers are needed. long flat tall short broad

Chapter Quiz (cont.) The power to accomplish an assigned job is called authority. accountability. responsibility. delegation. obligation.