Copyright © 2004 Pearson Education Canada, Inc. All rights reserved.8–1 Introduction to Management Bob Fast Chapter 8 – Fundamentals of Organizing Week 5A October Fall 2011

Copyright © 2004 Pearson Education Canada, Inc. All rights reserved.8–2 Road map for tonight…. Quiz #2 – Chapters 5, 6, 7, 8 Review Reading Assessment Guidelines Ch 8 – Fundamentals of Organization Guest – Don Streuber (President – Bison Transport)

PowerPoint Presentation by Clive Cook and Dale Dilamarter Gary Dessler Frederick A. Starke Gary Dessler Frederick A. Starke Principles and Practices for Tomorrow’s Leaders Second Canadian Edition Principles and Practices for Tomorrow’s Leaders Second Canadian Edition Part Three: Organizing Management Copyright © 2004 Pearson Education, Inc. All rights reserved. Fundamentals of Organizing Fundamentals of Organizing 8 CHAPTER

Copyright © 2004 Pearson Education Canada, Inc. All rights reserved.8–4 Chapter Objectives After studying this chapter and the case exercises at the end, you should be able to: 1.Develop a workable organization chart for a company. 2.Draw the company’s current organization chart, and list its pros and cons. 3.Describe and draw examples of the basic alternatives for creating departments. 4.Explain why there is a trend away from geographic departmentalization and toward product departmentalization. 5.Show how a company could install a network organization. 6.Reorganize a company’s tasks to make it a horizontal organization.

Copyright © 2004 Pearson Education Canada, Inc. All rights reserved.8–5 What Is Organizing? Organizing  Arranging the activities of the enterprise in such a way that they systematically contribute to the enterprise’s goals.

Copyright © 2004 Pearson Education Canada, Inc. All rights reserved.8–6 Depicting the Organization Organization Chart  A chart that shows the structure of the organization including the title of each manager’s position and, by means of connecting lines, who is accountable to whom and who has authority for each area.

Copyright © 2004 Pearson Education Canada, Inc. All rights reserved.8–7 Authority and the Chain of Command Chain of Command  The path that a directive and/or answer or request should take through each level of an organization; also called a scalar chain or the line of authority. Authority  The person’s legal right or power.

Copyright © 2004 Pearson Education Canada, Inc. All rights reserved.8–8 Line and Staff Authority Line Manager  A manager who is (1) in charge of essential activities such as sales and (2) authorized to issue orders to subordinates down the chain of command. Staff Manager  A manager without the authority to give orders down the chain of command (except in his or her own department); generally can only assist and advise line managers in specialized areas such as human resources management.

Copyright © 2004 Pearson Education Canada, Inc. All rights reserved.8–9 Line and Staff Authority Functional Authority  Staff managers can issue orders to line managers within the very narrow limits of the staff manager’s special expertise.

Copyright © 2004 Pearson Education Canada, Inc. All rights reserved.8–10 The Informal Organization Informal Organization  The network of interpersonal relationships and the informal way of doing things that inevitably develops in organizations.

Copyright © 2004 Pearson Education Canada, Inc. All rights reserved.8–11 Departmentalization: Creating Departments Departmentalization  The process by which the manager groups the enterprise’s activities together and assigns them to subordinates.

Copyright © 2004 Pearson Education Canada, Inc. All rights reserved.8–12 Organizing Departments by Function Functional Departmentalization  Grouping activities around the enterprise’s core functions such as manufacturing, sales, and finance.

Copyright © 2004 Pearson Education Canada, Inc. All rights reserved.8–13 Functional Departmentalization

Copyright © 2004 Pearson Education Canada, Inc. All rights reserved.8–14 Organizing Departments by Self- Contained Divisions/Purposes Product Departmentalization  Grouping departments around a firm’s products or services, or each family of products or services; also referred to as a “divisional” organization. Customer Departmentalization  Self-contained departments are organized to serve the needs of specific groups of customers.

Copyright © 2004 Pearson Education Canada, Inc. All rights reserved.8–15 Divisional Organization for a Pharmaceuticals Company

Copyright © 2004 Pearson Education Canada, Inc. All rights reserved.8–16 Departmentalization by Customer

Copyright © 2004 Pearson Education Canada, Inc. All rights reserved.8–17 Organizing Departments by Self- Contained Divisions/Purposes (cont’d) Marketing-channel Departmentalization  Departments focus on particular marketing channels, such as drugstores or grocery stores. Geographic (Territorial) Departmentalization  Separate departments are established for each of the territories in which the enterprise does business.

Copyright © 2004 Pearson Education Canada, Inc. All rights reserved.8–18 Marketing Channel Departmentalization

Copyright © 2004 Pearson Education Canada, Inc. All rights reserved.8–19 Creating Matrix Organizations Matrix Organization  An organization structure in which employees are permanently attached to one department but also simultaneously have ongoing assignments to project, customer, product, or geographic unit heads.

Copyright © 2004 Pearson Education Canada, Inc. All rights reserved.8–20 FIGURE 8–7 Matrix Organization Departmentalization

Copyright © 2004 Pearson Education Canada, Inc. All rights reserved.8–21 Matrix Organizations Advantages Access to expertise. Stability and benefits of belonging to permanent departments. Allows focus on specific projects, products, or customers. Disadvantages Confusion of command. Power struggles and conflicts. Lost time in coordinating. Excess overhead for dual sets of managers.

Copyright © 2004 Pearson Education Canada, Inc. All rights reserved.8–22 Departmentalization in Practice: A Hybrid Why mix the types of departmentalization?  Hierarchical considerations  The relationship of top level departments to their subsidiary departments.  Efficiency  Product, customer, and territorial departments tend to result in duplicate sales, manufacturing, and other functional departments.  Common sense  Departmentalizing is still more an art than a science.

Copyright © 2004 Pearson Education Canada, Inc. All rights reserved.8–23 Combination Departmentalization

Copyright © 2004 Pearson Education Canada, Inc. All rights reserved.8–24 Functional vs. Divisional Organizations  Functional Organization Advantages 1.It is simple, obvious, and logical. 2.It fosters efficiency. 3.It can simplify executive hiring and training. 4.It can facilitate the top manager’s control.  Functional Organization Disadvantages 1.It increases the workload on the executive to whom the functional department heads report. 2.It may reduce the firm’s sensitivity to and service to the customer. 3.It produces fewer general managers.

Copyright © 2004 Pearson Education Canada, Inc. All rights reserved.8–25 Functional vs. Divisional Organizations (cont’d)  Divisional Organization Advantages 1.The product or service gets the single-minded attention of its own general manager and unit, and its customers may get better, more responsive service. 2.It’s easier to judge performance. 3.It develops general managers. 4.It reduces the burden for the company’s CEO.

Copyright © 2004 Pearson Education Canada, Inc. All rights reserved.8–26 Functional vs. Divisional Organizations (cont’d)  Divisional Organization Disadvantages 1.It duplicates effort. 2.It may diminish top management’s control. 3.It requires more managers with general management abilities. 4.It can breed compartmentalization.

Copyright © 2004 Pearson Education Canada, Inc. All rights reserved.8–27 Tall And Flat Organizations and the Span Of Control Span of Control  The number of subordinates reporting directly to a supervisor.  Wide spans: larger number of direct reports.  Narrow spans: fewer number of direct reports. Tall vs. Flat Organizations  Tall organizations: more management layers and more hierarchical controls.  Flat organizations: fewer management layer and decision making closer to the customer.

Copyright © 2004 Pearson Education Canada, Inc. All rights reserved.8–28 FIGURE8–10 Spans of Control in Country-Based Organization

Copyright © 2004 Pearson Education Canada, Inc. All rights reserved.8–29 Network-Based Organizations Organizational Network  A system of interconnected or cooperating individuals. Informal Organizational Network  Informal relationships between workers that help get work accomplished.

Copyright © 2004 Pearson Education Canada, Inc. All rights reserved.8–30 Network-Based Organizations (cont’d) Formal Organizational Network  A recognized group of managers or other employees assembled by the CEO and the other senior executive team, drawn from across the company’s functions, business units, geography, and levels. Electronic Networking  Networking through technology-supported devices such as , video-conferencing, and collaborative computing software.

Copyright © 2004 Pearson Education Canada, Inc. All rights reserved.8–31 FIGURE8–11 How Networks Reshape Organizations

Copyright © 2004 Pearson Education Canada, Inc. All rights reserved.8–32 Network-Based Organizations (cont’d) Team-Based Organizations  Team  A group of people who work together and share a common work objective. Horizontal Corporations  A structure that is organized around customer- oriented processes performed by multidisciplinary cross-functional teams rather than by formal functional departments.

Copyright © 2004 Pearson Education Canada, Inc. All rights reserved.8–33 The Horizontal Corporation

Copyright © 2004 Pearson Education Canada, Inc. All rights reserved.8–34 The Horizontal Corporation (cont’d)

Copyright © 2004 Pearson Education Canada, Inc. All rights reserved.8–35 FIGURE 8–13 How to Create a Horizontal Corporation Source: Source: Reprinted from the December 20, 1993, issue of Business Week by special permission. Copyright © 1993 by the McGraw-Hill Companies, Inc.

Copyright © 2004 Pearson Education Canada, Inc. All rights reserved.8–36 Other Organization Types Federal Organization  An organization in which power is distributed among a central unit and a number of constituents, but the central unit’s authority is intentionally limited. Virtual Organization  A temporary network of independent companies linked by information technology to share skills, costs, and access to one another’s markets.  Its success depends on each of the individual firms’ responsibility and self-interest to accomplish the network’s purpose.

Copyright © 2004 Pearson Education Canada, Inc. All rights reserved.8–37 FIGURE 8–14 TGC’s Cellular Organization Source: Reprinted with permission of the Academy of Management Executive, from “Organizing in the Knowledge Age: Anticipating the Cellular Form,” Raymond Miles, vol. 11, no. 4, © 1997; permission conveyed through Copyright Clearance Center, Inc.

Copyright © 2004 Pearson Education Canada, Inc. All rights reserved.8–38 Next week: Oct 18 th  no class! Next Class  Oct 25 th -Hand out RA 2 -Review RA 1 -Lecture on Chapters 9 & 10

Copyright © 2004 Pearson Education Canada, Inc. All rights reserved.8–39 Next Up: Don Streuber….